<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
ArrowPoint Communications, Inc.
- --------------------------------------------------------------------------------
(Name of Issuer)
Common Stock, $.001 Par Value
- --------------------------------------------------------------------------------
(Title of Class of Securities)
373656107
- --------------------------------------------------------------------------------
(CUSIP Number)
Larry R. Carter
170 West Tasman Drive
San Jose, CA 95134
(408) 526-4000
- --------------------------------------------------------------------------------
(Name, Address and Telephone Number of Person Authorized to
Receive Notices and Communications)
May 4, 2000
- --------------------------------------------------------------------------------
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to
report the acquisition which is the subject of this Schedule 13D, and is filing
this schedule because of Rule 13d-1(b)(3) or (4), check the following box [ ]
(Continued on following pages)
<PAGE> 2
SCHEDULE 13D
CUSIP No. 373656107
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Cisco Systems, Inc.
I.R.S. I.D. # 77-0059951
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) [ ]
(b) [ ]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
00
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e) [ ]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
State of California
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
6,974,047
NUMBER OF ----------------------------------------------------------
SHARES 8 SHARED VOTING POWER
BENEFICIALLY 13,269,966
OWNED BY ----------------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
REPORTING 6,974,047
PERSON ----------------------------------------------------------
WITH 10 SHARED DISPOSITIVE POWER
--
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
20,244,013
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [ ]
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 58%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
CO
- --------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE> 3
Neither the filing of this Schedule 13D nor any of its contents shall be deemed
to constitute an admission by Cisco Systems, Inc. that it is the beneficial
owner of any of the Common Stock of ArrowPoint Communications, Inc. referred to
herein for purposes of Section 13(d) of the Securities Exchange Act of 1934, as
amended (the "Act"), or for any other purpose, and such beneficial ownership is
expressly disclaimed.
<PAGE> 4
ITEM 1. SECURITY AND ISSUER.
This statement on Schedule 13D relates to the common stock, par value
$.001 per share (the "Issuer Common Stock"), of ArrowPoint Communications, Inc.,
a Delaware corporation (the "Issuer"). The principal executive offices of the
Issuer are located at 50 Nagog Park, Acton, Massachusetts 01720.
ITEM 2. IDENTITY AND BACKGROUND.
(a) The name of the person filing this statement is Cisco Systems, Inc.,
a California corporation ("Cisco").
(b) The address of the principal office and principal business of Cisco
is 170 West Tasman Drive, San Jose, California 95134.
(c) Cisco is a leading supplier of high-performance, multimedia,
multiprotocol internetworking solutions. Cisco technology is used to build
enterprise-wide networks that link geographically dispersed local-area and
wide-area networks to form a single information infrastructure. Cisco products
include software-based routers, bridges, workgroup systems, ATM switches, access
servers and router management applications. Set forth in Schedule A is the name
and present principle occupation or employment and the name, principal business
and address of any corporation or other organization in which such employment is
conducted, of each of Cisco's directors and executive officers, as of the date
hereof.
(d) During the past five years, neither Cisco nor, to Cisco's knowledge,
any person named in Schedule A to this Statement, has been convicted in a
criminal proceeding (excluding traffic violations or similar misdemeanors).
(e) During the past five years, neither Cisco nor, to Cisco's knowledge,
any person named in Schedule A to this Statement, was a party to a civil
proceeding of a judicial or administrative body of competent jurisdiction as a
result of which such person was or is subject to a judgment, decree or final
order enjoining future violations of or prohibiting or mandating activity
subject to Federal or State securities laws or finding any violation with
respect to such laws.
(f) Not applicable.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
Pursuant to an Agreement and Plan of Merger and Reorganization dated
as of May 4, 2000 (the "Reorganization Agreement"), by and among Cisco, Archer
Acquisition Corporation, a Delaware corporation and wholly owned subsidiary of
Cisco ("Merger Sub"), and the Issuer, and subject to the conditions set forth
therein (including approval by stockholders of the Issuer), Merger Sub will be
merged with and into the Issuer (the "Merger"), with each share of Issuer Common
Stock being converted into the right to receive 2.1218 shares of Acquiror Common
Stock (the "Exchange Ratio"). The Merger is subject to the approval of the
Reorganization Agreement by the Issuer's stockholders, the expiration of the
applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended, and any
1
<PAGE> 5
other required regulatory approvals, and the satisfaction or waiver of certain
other conditions as more fully described in the Reorganization Agreement. The
foregoing summary of the Merger is qualified in its entirety by reference to the
copy of the Reorganization Agreement included as Exhibit 1 to this Schedule 13D
and incorporated herein in its entirety by reference.
ITEM 4. PURPOSE OF TRANSACTION.
(a) - (b) As described in Item 3 above, this statement relates to the
Merger of Merger Sub, a wholly owned subsidiary of Cisco, with and into Issuer
in a statutory merger pursuant to the Delaware General Corporation Law. At the
effective time of the Merger, the separate existence of Merger Sub will cease to
exist and Issuer will continue as the surviving corporation and as a wholly
owned subsidiary of Cisco (the "Surviving Corporation"). Holders of outstanding
Issuer Common Stock will receive, in exchange for each share of Issuer Common
Stock held by them, 2.1218 shares of Cisco Common Stock. Cisco will assume the
Issuer's 1997 Stock Incentive Plan and 2000 Non-Employee Director Stock Option
Plan as well as the outstanding options issued under such plans and agreements.
As an inducement to Cisco to enter into the Reorganization Agreement,
certain stockholders of Issuer (collectively, the "Stockholder Agreement
Stockholders") have entered into a Stockholder Agreement, dated as of May 4,
2000 (the "Stockholder Agreement"), with Cisco and have, by executing the
Stockholder Agreement, irrevocably appointed Cisco (or any nominee of Cisco) as
his, hers or its lawful attorney and proxy. Such proxy gives Cisco the limited
right to vote each of the 13,269,966 shares of Issuer Common Stock beneficially
and collectively owned by the Stockholder Agreement Stockholders in all matters
related to the Merger. The shared voting power with the certain shareholders of
Issuer relates to 13,269,966 shares of Issuer Common Stock (the "Shares"). The
Stockholder Agreement Stockholders and the number of shares beneficially owned
by each of them is set forth on Schedule B hereto which is hereby incorporated
by this reference. The foregoing summary of the Stockholder Agreement is
qualified in its entirety by reference to the copy of the form of Stockholder
Agreement included as Exhibit 2 to this Schedule 13D and incorporated herein in
its entirety by reference.
In exercising its right to vote the Shares as lawful attorney and
proxy of the Stockholder Agreement Stockholders, Cisco (or any nominee of Cisco)
will be limited, at every Issuer stockholders meeting and every written consent
in lieu of such meeting to vote the shares in favor of approval of the Merger
and the Reorganization Agreement. The Stockholder Agreement Stockholders may
vote the Shares on all other matters. The Stockholder Agreement terminates upon
the earlier to occur of (i) such date and time as the Merger shall become
effective in accordance with the terms and provisions of the Reorganization
Agreement and (ii) the date of termination of the Reorganization Agreement.
In connection with the Reorganization Agreement, Cisco and Issuer
entered into a Stock Option Agreement, dated as of May 4, 2000 ("Option
Agreement"). The Option Agreement grants Cisco the right, under certain
conditions, to purchase up to 6,974,047 shares of Issuer Common Stock at a price
of $135.00 per share. Subject to certain conditions, the Option Agreement may be
exercised in whole or in part by Cisco after the occurrence of any of the events
described in Sections 7.3(b) of the Reorganization Agreement or if a Takeover
Proposal or Trigger Event (each as defined in the Reorganization Agreement) is
consummated as set forth
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<PAGE> 6
in Section 7.3(c) of the Reorganization Agreement. At any time during which the
Option Agreement is exercisable, Cisco shall have the right to sell to Issuer
and Issuer shall be obligated to repurchase from Cisco, and, subject to Section
8(a) of the Option Agreement, Issuer shall have the right to repurchase from
Cisco and Cisco shall be obligated to sell to Issuer, all or any portion of the
Issuer shares purchased by Cisco pursuant to the Option Agreement. The foregoing
summary of the Option Agreement is qualified in its entirety by reference to the
copy of the Option Agreement included as Exhibit 3 to this Schedule 13D and
incorporated herein in its entirety by reference.
(c) Not applicable.
(d) Upon consummation of the Merger, the directors of the Surviving
Corporation shall be Larry R. Carter, Michaelangelo Volpi and Daniel Scheinman.
The officers of the Surviving Corporation shall be the initial officers of
Merger Sub, until their respective successors are duly elected or appointed and
qualified.
(e) Other than as a result of the Merger described in Item 3 above,
not applicable.
(f) Not applicable.
(g) Upon consummation of the Merger, the Certificate of Incorporation
of Issuer shall be amended so as to read in its entirety as set forth in the
Certificate of Merger and as so amended shall be the Certificate of
Incorporation of the Surviving Corporation until thereafter amended as provided
by Delaware Law and such Certificate of Incorporation. Upon consummation of the
Merger, the Bylaws of Merger Sub, as in effect immediately prior to the Merger,
shall be the Bylaws of the Surviving Corporation until thereafter amended.
(h) - (i) If the Merger is consummated as planned, the Issuer Common
Stock will be deregistered under the Act and delisted from The Nasdaq Stock
Market's National Market.
(j) Other than described above, Cisco currently has no plan or
proposals which relate to, or may result in, any of the matters listed in Items
4(a) - (j) of Schedule 13D (although Cisco reserves the right to develop such
plans).
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
(a) - (b) The number of Shares covered by the Option is 6,974,047
which constitutes, based on the number of shares outstanding on May 4, 2000 as
represented by the Issuer in the Reorganization Agreement, approximately 19.90%
of the Issuer Common Stock.
Prior to exercise of the Option, the Reporting Person (i) is not
entitled to any rights as a stockholder of Issuer as to the Shares covered by
the Option and (ii) disclaims any beneficial ownership of the shares of Issuer
Common Stock which are purchasable by the Reporting Person upon exercise of the
Option because the Option is exercisable only in the limited circumstances as
set forth in the Option Agreement, none of which has occurred as of the date
hereof. If the Option were exercised, the Reporting Person would have the sole
right to vote and dispose of the shares of Issuer Common Stock issued as a
result of such exercise, subject to the terms and conditions of the Option
Agreement.
3
<PAGE> 7
As a result of the Stockholder Agreement, Cisco may be deemed to
be the beneficial owner of at least 13,269,966 shares of Issuer Common Stock.
Such Issuer Common Stock constitutes approximately 37.90% of the issued and
outstanding shares of Issuer Common Stock.
Cisco has shared power to vote all of the Shares for the limited
purposes described above. Cisco does not have the sole power to vote or to
direct the vote or to dispose or to direct the disposition of any shares of
Issuer Common Stock. However, the Reporting Person (i) is not entitled to any
rights as a stockholder of Issuer as to the Shares covered by the Stockholder
Agreement and (ii) disclaims any beneficial ownership of the shares of Issuer
Common stock which are covered by the Stockholder Agreement. To the best of
Cisco's knowledge, no shares of Issuer Common Stock are beneficially owned by
any of the persons named in Schedule A.
(c) Neither Cisco nor, to the knowledge of Cisco, any person named in
Schedule A, has affected any transaction in the Issuer Common Stock during the
past 60 days.
(d) Not applicable.
(e) Not applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH
RESPECT TO SECURITIES OF THE ISSUER.
As an inducement to Cisco to enter into the Reorganization Agreement,
certain affiliates of Isssuer (collectively, the "Affiliates") have entered into
a Company Affiliate Agreement, dated as of May 4, 2000 (the "Company Affiliate
Agreement"), with Cisco. In executing the Company Affiliate Agreement, the
Affiliates agree, among other things, not to engage in any sale, transfer or
other disposition of, or reduce their risk in respect of, shares of Issuer
Common Stock and options or warrants to purchase Issuer Common Stock
beneficially owned by such Affiliates or acquired after the execution of the
Company Affiliate Agreement, until such time as results covering at least 30
days of combined operations of Issuer and Cisco have been published by Cisco.
The foregoing summary of the Company Affiliate Agreement is qualified in its
entirety by reference to the copy of the form of Company Affiliate Agreement
included as Exhibit 4 to this Schedule 13D and incorporated herein in its
entirety by reference.
Other than the Reorganization Agreement, Stockholder Agreement,
Option Agreement and the Company Affiliate Agreement, to the knowledge of Cisco,
there are no contracts, arrangements, understandings or relationships (legal or
otherwise) among the persons named in Item 2 and between such persons and any
person with respect to any securities of the Issuer, including but not limited
to transfer or voting of any of the securities, finder's fees, joint ventures,
loan or option arrangements, puts or calls, guarantees of profits, division of
profits or loss, or the giving or withholding of proxies.
ITEM 7. MATERIALS TO BE FILED AS EXHIBITS.
The following documents are filed as exhibits:
4
<PAGE> 8
1. Agreement and Plan of Merger and Reorganization, dated as of May 4, 2000,
by and among Cisco Systems, Inc., a California corporation, Archer
Acquisition Corporation, a Delaware corporation and wholly owned
subsidiary of Cisco Systems, Inc., and ArrowPoint Communications, Inc., a
Delaware corporation.
2. Stockholder Agreement, dated as of May 4, 2000, by and among Cisco
Systems, Inc., a California corporation and certain stockholders of
ArrowPoint Communications, Inc., a Delaware corporation.
3. Stock Option Agreement, dated as of May 4, 2000, by and between Cisco
Systems, Inc., a California corporation, and ArrowPoint Communications,
Inc., a Delaware corporation.
4. Company Affiliate Agreement, dated as of May 4, 2000, by and between Cisco
Systems, Inc., a California corporation, and certain affiliates of
ArrowPoint Communications, Inc., a Delaware corporation
5
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SIGNATURE
After reasonable inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this statement is true,
complete and correct.
Dated: May 12, 2000 By: /s/ Larry R. Carter
---------------------------------------
Larry R. Carter, Senior Vice President,
Finance and Administration,
Chief Financial Officer and Secretary
6
<PAGE> 10
SCHEDULE A
DIRECTORS AND EXECUTIVE OFFICERS OF
CISCO SYSTEMS, INC.
<TABLE>
<CAPTION>
Present Principal
Occupation Including
Name and Title Name of Employer
-------------- --------------------
<S> <C>
Carol A. Bartz Director of Cisco Systems, Inc. and Chairman
and Chief Executive Officer of Autodesk,
Inc., 111 McInnis Parkway, San Rafael, CA
94903.
Larry R. Carter Vice President, Finance and Administration,
Chief Financial Officer and Secretary of
Cisco Systems, Inc.
John T. Chambers President, Chief Executive Officer and
Director of Cisco Systems, Inc.
Mary A. Cirillo Director of Cisco Systems, Inc. and Senior
Managing Director, Bankers Trust, 130
Liberty Street, New York, NY 10006.
Gary Daichendt Senior Vice President, Worldwide Operations
of Cisco Systems, Inc.
Judy Estrin Senior Vice President, Business and
Development and Chief Technical Officer of
Cisco Systems, Inc.
Dr. James F. Gibbons Director of Cisco Systems, Inc. and Dean,
School of Engineering, Stanford University,
Stanford, CA 94305.
Edward R. Kozel Director of Cisco Systems, Inc. and Senior
Vice President of Corporate Development of
Cisco Systems, Inc.
Donald J. Listwin Executive Vice President, Service Provider
and Consumer Lines of Business of Cisco
Systems, Inc.
James C. Morgan Director of Cisco Systems, Inc. and
President and Chief Executive Officer,
Applied Materials, 3050 Bowers Avenue, Santa
Clara, CA 95054
John P. Morgridge Chairman of the Board of Directors of Cisco
Systems, Inc.
</TABLE>
7
<PAGE> 11
<TABLE>
<S> <C>
Mario Mazzola Senior Vice President, Enterprise Line of
Business of Cisco Systems, Inc.
Robert L. Puette Director of Cisco Systems, Inc. and
President and Chief Executive Officer of
NetFRAME Systems, Inc., 1545 Barber Lane,
Milpitas, CA 95035.
Carl Redfield Vice President, Manufacturing of Cisco
Systems, Inc.
Arun Sarin Director of Cisco Systems, Inc. and
President and COO of AirTouch
Communications, Inc., One California Street,
San Francisco, CA 94110.
Masayoshi Son Director of Cisco Systems, Inc. and
President and Chief Executive Officer of
SOFTBANK Corporation, 3-42-3
Nihonbashi-Hamacho, Chuo-Ku, Tokyo 103.
Donald T. Valentine Director of Cisco Systems, Inc. and Partner
of Sequoia Capital, 3000 Sand Hill Road,
#4-280, Menlo Park, CA 94025.
Steve M. West Director of Cisco Systems, Inc. and
President of Hitachi Data Systems
Corporation, 750 Central Expressway, Santa
Clara, CA 95050.
</TABLE>
8
<PAGE> 12
SCHEDULE B
<TABLE>
<CAPTION>
STOCKHOLDER SHARES BENEFICIALLY OWNED
- ----------- -------------------------
<S> <C>
North Bridge Venture Partners II, L.P. 5,303,206
North Bridge Venture Partners IV-A, L.P. 191,156
North Bridge Venture Partners IV-B, L.P. 90,828
Matrix Partners IV, L.P. 6,931,976
Matrix IV Entrepreneurs Fund, L.P. 364,840
Matrix Partners VI, L.P. 333,672
Weston & Co., as nominee 54,318
</TABLE>
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<PAGE> 13
EXHIBIT 1
Agreement and Plan of Merger and Reorganization
<PAGE> 14
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
BY AND AMONG
CISCO SYSTEMS, INC.,
ARCHER ACQUISITION CORPORATION
AND
ARROWPOINT COMMUNICATIONS, INC.
MAY 4, 2000
<PAGE> 15
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE I THE MERGER.............................................. A-1
1.1 The Merger.................................................. A-1
1.2 Closing; Effective Time..................................... A-2
1.3 Effect of the Merger........................................ A-2
1.4 Certificate of Incorporation; Bylaws........................ A-2
1.5 Directors and Officers...................................... A-2
1.6 Effect on Capital Stock..................................... A-2
1.7 Surrender of Certificates................................... A-3
1.8 Termination of Exchange Agent Funding....................... A-4
1.9 No Further Ownership Rights in Company Common Stock......... A-5
1.10 Lost, Stolen or Destroyed Certificates...................... A-5
1.11 Tax and Accounting Consequences............................. A-5
1.12 Withholding Rights.......................................... A-5
1.13 Taking of Necessary Action; Further Action.................. A-5
ARTICLE II REPRESENTATIONS AND WARRANTIES OF COMPANY.............. A-5
2.1 Organization, Standing and Power............................ A-6
2.2 Capital Structure........................................... A-7
2.3 Authority................................................... A-8
2.4 SEC Documents; Financial Statements......................... A-8
2.5 Absence of Certain Changes.................................. A-9
2.6 Absence of Undisclosed Liabilities.......................... A-9
2.7 Litigation.................................................. A-10
2.8 Restrictions on Business Activities......................... A-10
2.9 Governmental Authorization.................................. A-10
2.10 Title to Property........................................... A-10
2.11 Intellectual Property....................................... A-10
2.12 Environmental Matters....................................... A-12
2.13 Taxes....................................................... A-13
2.14 Employee Benefit Plans...................................... A-14
2.15 Certain Agreements Affected by the Merger................... A-15
2.16 Employee Matters............................................ A-16
2.17 Interested Party Transactions............................... A-17
2.18 Insurance................................................... A-17
2.19 Compliance With Laws........................................ A-18
2.20 Minute Books................................................ A-18
2.21 Complete Copies of Materials................................ A-18
2.22 Brokers' and Finders' Fees.................................. A-18
2.23 Registration Statement; Proxy Statement/Prospectus.......... A-18
</TABLE>
i
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<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
2.24 Opinion of Financial Advisor................................ A-19
2.25 Vote Required............................................... A-19
2.26 Board Approval.............................................. A-19
2.27 Stockholder Agreement; Irrevocable Proxies.................. A-19
2.28 Section 203 of the DGCL Not Applicable...................... A-19
2.29 Inventory................................................... A-19
2.30 Accounts Receivable......................................... A-19
2.31 Customers and Suppliers..................................... A-20
2.32 Lock-up Agreements.......................................... A-20
2.33 Export Control Laws......................................... A-20
2.34 Year 2000................................................... A-20
2.35 Accounting and Tax Matters.................................. A-21
2.36 Affiliates.................................................. A-21
2.37 Representations Complete.................................... A-21
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER
SUB.............................................................. A-21
3.1 Organization, Standing and Power............................ A-21
3.2 Capital Structure........................................... A-21
3.3 Authority................................................... A-21
3.4 SEC Documents; Financial Statements......................... A-22
3.5 Absence of Undisclosed Liabilities.......................... A-23
3.6 Litigation.................................................. A-23
3.7 Broker's and Finders' Fees.................................. A-23
3.8 Registration Statement; Proxy Statement/Prospectus.......... A-23
3.9 Board Approval.............................................. A-24
3.10 Accounting and Tax Matters.................................. A-24
3.11 Representations Complete.................................... A-24
ARTICLE IV CONDUCT PRIOR TO THE EFFECTIVE TIME.................... A-24
4.1 Conduct of Business of Company.............................. A-24
4.2 Restrictions on Conduct of Business of Company.............. A-24
4.3 No Solicitation............................................. A-27
ARTICLE V ADDITIONAL AGREEMENTS................................... A-28
5.1 Proxy Statement/Prospectus; Registration Statement.......... A-28
5.2 Meeting of Stockholders..................................... A-28
5.3 Access to Information....................................... A-29
5.4 Confidentiality............................................. A-29
5.5 Public Disclosure........................................... A-29
5.6 Consents; Cooperation....................................... A-29
5.7 Legal Requirements.......................................... A-30
5.8 Blue Sky Laws............................................... A-31
</TABLE>
ii
<PAGE> 17
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
5.9 Employee Benefit Plans...................................... A-31
5.10 Forms S-3 and S-8........................................... A-32
5.11 Option Agreement............................................ A-32
5.12 Listing of Additional Shares................................ A-32
5.13 Nasdaq Quotation............................................ A-32
5.14 Employees................................................... A-33
5.15 Lock-up Agreements.......................................... A-33
5.16 Indemnification............................................. A-33
5.17 Tax Treatment............................................... A-34
5.18 Pooling Accounting.......................................... A-34
5.19 Pooling Letter.............................................. A-34
5.20 Stockholder Litigation...................................... A-34
5.21 Best Efforts and Further Assurances......................... A-34
5.22 Affiliates.................................................. A-35
5.23 Execution of Certain Agreements............................. A-35
5.24 Registration Rights......................................... A-35
5.25 Section 280G/83(b) Agreement................................ A-35
ARTICLE VI CONDITIONS TO THE MERGER............................... A-35
Conditions to Obligations of Each Party to Effect the
6.1 Merger...................................................... A-35
6.2 Additional Conditions to Obligations of Company............. A-36
Additional Conditions to the Obligations of Parent and
6.3 Merger Sub.................................................. A-37
ARTICLE VII TERMINATION, AMENDMENT AND WAIVER..................... A-38
7.1 Termination................................................. A-38
7.2 Effect of Termination....................................... A-39
7.3 Expenses and Termination Fees............................... A-39
7.4 Amendment................................................... A-41
7.5 Extension; Waiver........................................... A-41
ARTICLE VIII GENERAL PROVISIONS................................... A-41
8.1 Non-Survival at Effective Time.............................. A-41
8.2 Notices..................................................... A-42
8.3 Interpretation.............................................. A-42
8.4 Counterparts................................................ A-43
8.5 Entire Agreement; Nonassignability; Parties in Interest..... A-43
8.6 Severability................................................ A-43
8.7 Remedies Cumulative......................................... A-43
8.8 Governing Law............................................... A-43
8.9 Rules of Construction....................................... A-43
</TABLE>
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<PAGE> 18
SCHEDULES
<TABLE>
<S> <C>
Company Disclosure Schedule
Schedule 2.0 Revenue Levels
Schedule 2.1 Organization, Standing and Power
Schedule 2.2 Capital Structure
Schedule 2.3 Authority
Schedule 2.4 SEC Documents; Financial Statements
Schedule 2.5 Absence of Certain Changes
Schedule 2.6 Absence of Undisclosed Liabilities
Schedule 2.7 Litigation
Schedule 2.8 Restrictions on Business Activities
Schedule 2.9 Governmental Authorization
Schedule 2.10 Title to Property
Schedule 2.11 Intellectual Property
Schedule 2.12 Environmental Matters
Schedule 2.13 Taxes
Schedule 2.14 Employee Benefit Plans
Schedule 2.15 Certain Agreements Affected by the Merger
Schedule 2.16 Employee Matters
Schedule 2.17 Interested Party Transactions
Schedule 2.18 Insurance
Schedule 2.19 Compliance with Laws
Schedule 2.20 Minute Books
Schedule 2.21 Complete Copies of Materials
Schedule 2.22 Brokers' and Finders' Fees
Schedule 2.23 Registration Statement; Proxy Statement/Prospectus
Schedule 2.24 Opinion of Financial Advisor
Schedule 2.25 Vote Required
Schedule 2.26 Board Approval
Schedule 2.27 Stockholder Agreement/Irrevocable Proxies
Schedule 2.28 Section 203 of DGCL Not Applicable
Schedule 2.29 Inventory
Schedule 2.30 Accounts Receivable
Schedule 2.31 Customers and Suppliers
Schedule 2.32 Lock-up Agreements
Schedule 2.33 Export Control Laws
Schedule 2.34 Year 2000
Schedule 2.35 Accounting and Tax Matters
Schedule 2.36 Affiliates
Schedule 4.2 Restrictions on Conduct of Business of Company
</TABLE>
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<TABLE>
<S> <C>
Schedule 5.9(a) Outstanding Options
Schedule 5.9(d) Disqualified Persons
Schedule 5.14 List of Employees
Schedule 5.23 Certain Agreements
</TABLE>
EXHIBITS
<TABLE>
<S> <C>
Parent Disclosure Schedule
Exhibit A Option Agreement
Exhibit B Stockholder Agreement
Exhibit C Certificate of Merger
Exhibit D Employment and Non-Competition Agreement
Exhibit E Section 280G/83(b) Agreement
Exhibit F Affiliate Agreement
</TABLE>
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AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
This AGREEMENT AND PLAN OF MERGER AND REORGANIZATION (the "Agreement") is
made and entered into as of May 4, 2000, by and among Cisco Systems, Inc., a
California corporation ("Parent"), Archer Acquisition Corporation, a Delaware
corporation ("Merger Sub") and wholly owned subsidiary of Parent, and Arrowpoint
Communications, Inc., a Delaware corporation ("Company").
RECITALS:
A. The Boards of Directors of Company, Parent and Merger Sub believe it is
in the best interests of their respective companies and the stockholders of
their respective companies that Company and Merger Sub combine into a single
company through the statutory merger of Merger Sub with and into Company (the
"Merger") and, in furtherance thereof, have approved the Merger.
B. Pursuant to the Merger, among other things, the outstanding shares of
Company Common Stock, $0.001 par value ("Company Common Stock"), shall be
converted into shares of Parent Common Stock, $0.001 par value ("Parent Common
Stock"), at the rate set forth herein.
C. Company, Parent and Merger Sub desire to make certain representations
and warranties and other agreements in connection with the Merger.
D. The parties intend, by executing this Agreement, to adopt a plan of
reorganization within the meaning of Section 368 of the Internal Revenue Code of
1986, as amended (the "Code"), and to cause the Merger to qualify as a
reorganization under the provisions of Sections 368(a)(1)(A) and 368(a)(2)(E) of
the Code and as a pooling of interests for financial accounting purposes.
E. Concurrently with the execution of this Agreement and as an inducement
to Parent and Merger Sub to enter into this Agreement, (a) Company and Parent
have entered into a stock option agreement dated the date hereof in the form
attached hereto as Exhibit A (the "Option Agreement") providing for the purchase
by Parent of newly issued shares of Company Common Stock, and (b) certain
stockholders of Company have on the date hereof entered into a stockholder
agreement in the form attached hereto as Exhibit B (the "Stockholder Agreement")
to vote the shares of Company Common Stock owned by such persons to approve the
Merger.
AGREEMENT:
NOW, THEREFORE, in consideration of the covenants and representations set
forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto 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 C (the "Certificate of Merger") and the
applicable provisions of the Delaware General Corporation Law ("Delaware Law"),
Merger Sub shall be merged with and into Company, the separate corporate
existence of Merger Sub shall cease and Company shall continue as the surviving
corporation. Company as the surviving corporation after the Merger is
hereinafter sometimes referred to as the "Surviving Corporation."
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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 two 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, Phleger & Harrison LLP, Two Embarcadero Place, 2200 Geng
Road, Palo Alto, California 94303, or at such other location as the parties
hereto agree. In connection with the Closing, the parties hereto shall cause the
Merger to be consummated by filing the Certificate of Merger with the Secretary
of State of the State of Delaware, in accordance with the relevant provisions of
Delaware Law (the time of such filing, or such later time as may be agreed to by
the parties and set forth in the Certificate 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 and the
applicable provisions of Delaware Law. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time, all the property, rights,
privileges, powers and franchises of Company and Merger Sub shall vest in the
Surviving Corporation, and all debts, liabilities and duties of Company and
Merger Sub shall become the debts, liabilities and duties of the Surviving
Corporation.
1.4 Certificate of Incorporation; Bylaws.
(a) At the Effective Time, the Certificate of Incorporation of Company
shall be amended so as to read in its entirety as set forth in the Certificate
of Merger and as so amended shall be the Certificate of Incorporation of the
Surviving Corporation until thereafter amended as provided by Delaware Law and
such Certificate of Incorporation.
(b) The Bylaws of Merger Sub, as in effect immediately prior to the
Effective Time, shall be the Bylaws of the Surviving Corporation until
thereafter amended.
1.5 Directors and Officers. At the Effective Time, the directors of the
Surviving Corporation shall be those persons who were the directors of Merger
Sub, in each case until their successors are elected or appointed and qualified
or until their earlier resignation or removal. The officers of the Surviving
Corporation shall be the initial officers of Merger Sub, until their respective
successors are duly elected or appointed and qualified or until their earlier
resignation or removal.
1.6 Effect on Capital Stock. By virtue of the Merger and without any
action on the part of Merger Sub, Company or the holders of any of the following
securities:
(a) Conversion of Company Common Stock. At the Effective Time, subject
to Section 1.6(f), each share of Company Common Stock issued and
outstanding immediately prior to the Effective Time (other than any shares
of Company Common Stock to be canceled pursuant to Section 1.6(b)) will be
canceled and extinguished and be converted automatically into the right to
receive 2.1218 shares of Parent Common Stock (the "Exchange Ratio").
(b) Cancellation of Company Common Stock Owned by Parent or
Company. At the Effective Time, all shares of Company Common Stock that are
owned by Company as treasury stock and each share of Company Common Stock
owned by Parent or any direct or indirect wholly owned subsidiary of Parent
or of Company immediately prior to the Effective Time shall be canceled and
extinguished without any conversion thereof.
(c) Company Stock Option Plans. At the Effective Time, Company's 1997
Stock Incentive Plan ("Company Incentive Plan") and 2000 Non-Employee
Director Stock Option Plan (together with the Company Incentive Plan, the
"Company Stock Option Plans") and all options to purchase Company Common
Stock then outstanding under the Company Stock Option Plans and all
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obligations of Company under the Company ESPPs (as defined below) shall be
assumed by Parent in accordance with Section 5.9.
(d) Capital Stock of Merger Sub. At the Effective Time, each share of
common stock, $0.001 par value, of Merger Sub ("Merger Sub Common Stock")
issued and outstanding immediately prior to the Effective Time shall be
converted into and exchanged for one validly issued, fully paid and
nonassessable share of common stock of the Surviving Corporation, and the
Surviving Corporation shall be a wholly owned subsidiary of Parent. Each
stock certificate of Merger Sub evidencing ownership of any such shares
shall continue to evidence ownership of such shares of capital stock of the
Surviving Corporation.
(e) Adjustments to Exchange Ratio. The Exchange Ratio shall be
adjusted to reflect fully the effect of any stock split, reverse split,
stock dividend (including any dividend or distribution of securities
convertible into Parent Common Stock or Company Common Stock),
reorganization, recapitalization or other like change with respect to
Parent Common Stock or Company Common Stock occurring after the date hereof
and prior to the Effective Time and of any increase in the number of shares
of Company Common Stock, or securities convertible into or exchangeable for
shares of Company Common Stock, outstanding after the date hereof (treating
as outstanding as of the date hereof, up to 7,033,695 shares of Company
Common Stock issuable upon exercise of outstanding options, options to
purchase up to 148,441 shares of Company Common Stock to the extent granted
pursuant to Section 4.2(e) and up to 42,000 shares of Company Common Stock
issued pursuant to the Company ESPPs (as defined below)) relative to such
number as derived from Section 2.2 hereof, so as to provide holders of
Company Common Stock and Parent the same economic effect as contemplated by
this Agreement prior to such stock split, reverse split, stock dividend,
reorganization, recapitalization, like change or increase.
(f) Fractional Shares. No fraction of a share of Parent Common Stock
will be issued, but in lieu thereof each holder of shares of Company Common
Stock who would otherwise be entitled to a fraction of a share of Parent
Common Stock (after aggregating all fractional shares of Parent Common
Stock to be received by such holder) shall receive from Parent an amount of
cash (rounded to the nearest whole cent) equal to the product of (i) such
fraction, multiplied by (ii) the average closing price of a share of Parent
Common Stock as quoted on The Nasdaq National Market for the ten (10)
trading days ending on the last full trading day prior to the Effective
Time.
1.7 Surrender of Certificates.
(a) Exchange Agent. Parent's transfer agent shall act as exchange agent
(the "Exchange Agent") in the Merger.
(b) Parent to Provide Common Stock and Cash. Promptly after the Effective
Time, Parent shall make available to the Exchange Agent for exchange in
accordance with this Article I, through such reasonable procedures as Parent may
adopt, (i) the shares of Parent Common Stock issuable pursuant to Section 1.6(a)
in exchange for shares of Company Common Stock outstanding immediately prior to
the Effective Time (provided that delivery of any shares that are subject to
vesting and/or repurchase rights in favor of Company shall be in book entry form
until such vesting and/or repurchase rights lapse) and (ii) cash in an amount
sufficient to permit payment of cash in lieu of fractional shares pursuant to
Section 1.6(f).
(c) Exchange Procedures. Promptly after the Effective Time, the Surviving
Corporation shall cause to be mailed to each holder of record of a certificate
or certificates (the "Certificates") which immediately prior to the Effective
Time represented outstanding shares of Company Common Stock, whose shares were
converted into the right to receive shares of Parent Common Stock (and cash in
lieu
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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
Parent 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 are subject to vesting and/or repurchase rights in favor
of Company) representing shares of Parent 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 Parent,
together with such letter of transmittal, duly completed and validly executed in
accordance with the instructions thereto, the holder of such Certificate shall
be sent, as promptly as practicable, in exchange therefor a certificate (or book
entry in the case of shares that are subject to vesting and/or repurchase
rights) representing the number of whole shares of Parent Common Stock and
payment in lieu of fractional shares which such holder has the right to receive
pursuant to Section 1.6, and the Certificate so surrendered shall forthwith be
canceled. Until so surrendered, each outstanding Certificate that, prior to the
Effective Time, represented shares of Company Common Stock will be deemed from
and after the Effective Time, for all corporate purposes, other than the payment
of dividends, to evidence the ownership of the number of full shares of Parent
Common Stock into which such shares of Company Common Stock shall have been so
converted and the right to receive an amount in cash in lieu of the issuance of
any fractional shares in accordance with Section 1.6. Notwithstanding any other
provision of this Agreement, no interest will be paid or will accrue on any cash
payable to holders of Certificates pursuant to the provisions of this Article I.
(d) Distributions With Respect to Unexchanged Shares. No dividends or other
distributions with respect to Parent 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 Parent Common Stock represented thereby until the
holder of record of such Certificate shall surrender such Certificate. Subject
to applicable law, following surrender of any such Certificate, there shall be
paid to the record holder of the certificates representing whole shares of
Parent 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 Parent Common
Stock.
(e) Transfers of Ownership. If any certificate for shares of Parent 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 Parent or any agent designated by it any transfer or
other taxes required by reason of the issuance of a certificate for shares of
Parent Common Stock in any name other than that of the registered holder of the
Certificate surrendered, or established to the satisfaction of Parent 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, Parent 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.
1.8 Termination of Exchange Agent Funding. Any portion of funds (including
any interest earned thereon) or certificates for shares of Parent Common Stock
held by the Exchange Agent which have not been delivered to holders of
Certificates pursuant to this Article I within six months after the Effective
Time shall promptly be paid or delivered, as appropriate, to Parent, and
thereafter holders of Certificates who have not theretofore complied with the
exchange procedures set forth in and contemplated by
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Section 1.7 shall thereafter look only to Parent (subject to abandoned property,
escheat and similar laws) for their claim for shares of Parent Common Stock and,
only as general creditors thereof, any cash in lieu of fractional shares of
Parent Common Stock and any dividends or distributions (with a record date after
the Effective Time) with respect to Parent Common Stock to which they are
entitled.
1.9 No Further Ownership Rights in Company Common Stock. All shares of
Parent Common Stock issued upon the surrender for exchange of shares of Company
Common Stock in accordance with the terms hereof (including any cash paid in
lieu of fractional shares) shall be deemed to have been issued in full
satisfaction of all rights pertaining to such shares of Company Common Stock,
and there shall be no further registration of transfers on the records of the
Surviving Corporation of shares of Company Common Stock which were outstanding
immediately prior to the Effective Time. If, after the Effective Time,
Certificates are presented to the Surviving Corporation for any reason, they
shall be canceled and exchanged as provided in this Article I.
1.10 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 Parent Common Stock
(and cash in lieu of fractional shares) as may be required pursuant to Section
1.6; provided, however, that Parent 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 Parent, the Surviving
Corporation or the Exchange Agent with respect to the Certificates alleged to
have been lost, stolen or destroyed.
1.11 Tax and Accounting Consequences. It is intended by the parties hereto
that the Merger shall (a) constitute a reorganization within the meaning of
Section 368(a) of the Code and (b) qualify for accounting treatment as a pooling
of interests.
1.12 Withholding Rights. Parent and the Surviving Corporation shall be
entitled to deduct and withhold from the number of shares of Parent Common Stock
otherwise deliverable under this Agreement, and from any other payments made
pursuant to this Agreement, such amounts as Parent and the Surviving Corporation
are required to deduct and withhold with respect to such delivery and payment
under the Code or any provision of state, local, provincial or foreign tax law.
To the extent that amounts are so withheld, such withheld amounts shall be
treated for all purposes of this Agreement as having been delivered and paid to
the holder of shares of Company Common Stock in respect of which such deduction
and withholding was made by Parent and the Surviving Corporation.
1.13 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 Company and Merger Sub, the officers and directors of Company
and Merger Sub are fully authorized in the name of their respective corporations
or otherwise to take, and will take, all such lawful and necessary action, so
long as such action is not inconsistent with this Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF COMPANY
In this Agreement, any reference to any event, change, condition or effect
being "material" with respect to any person means any material event, change,
condition or effect related to the condition (financial or otherwise),
properties, assets (including intangible assets), liabilities, business,
operations or results of operations of such person and its subsidiaries, taken
as a whole. In this Agreement, any
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reference to a "Material Adverse Effect" with respect to any person means any
event, change or effect that is materially adverse to the condition (financial
or otherwise), properties, assets, liabilities, business, operations or results
of operations of such person and its subsidiaries, taken as a whole, provided,
however, that a "Material Adverse Effect" (a) with respect to Parent or Company
shall not include a decrease, in and of itself, in the trading price of Company
Common Stock or Parent Common Stock, and (b) with respect to Company shall not
include the following (collectively, "Non-Controllable Events"): (i) general
changes in the networking and telecommunications industry or economic conditions
that affect Company and its subsidiaries, taken as a whole, substantially
proportionately relative to Parent and its subsidiaries, taken as a whole or
(ii) a decline in the revenues or earnings of Company following the date of this
Agreement which is attributable to a delay of, reduction in or cancellation or
change in the purchase orders by customers of Company arising as a result of the
execution or announcement of this Agreement (provided that revenues do not
decline below the amounts set forth in Schedule 2.0 of the Company Disclosure
Schedule for each of the quarters ended June 30, 2000 and September 30, 2000, in
each case as of the end of such quarter). A decline of revenues below such
levels shall be deemed to be a Material Adverse Effect on Company.
In this Agreement, any reference to a party's "knowledge" means such
party's actual knowledge after reasonable inquiry of officers, directors and
other employees of such party charged with senior administrative or operational
responsibility for such matters.
Except as disclosed in that section of the document of even date herewith
delivered by Company to Parent prior to the execution and delivery of this
Agreement (the "Company Disclosure Schedule") corresponding to the Section of
this Agreement to which any of the following representations and warranties
specifically relate or as disclosed in another section of the Company Disclosure
Schedule if it is reasonably apparent on the face of the disclosure that it is
applicable to another Section of this Agreement, Company represents and warrants
to Parent and Merger Sub as follows:
2.1 Organization, Standing and Power. Each of Company and its subsidiaries
is a corporation duly organized, validly existing and in good standing under the
laws of its jurisdiction of organization. Each of Company and its subsidiaries
has the corporate power to own its properties and to carry on its business as
now being conducted and as presently 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 Company. Company has delivered to Parent a true and correct
copy of the Amended and Restated Certificate of Incorporation, as amended (the
"Certificate of Incorporation"), and Amended and Restated Bylaws, as amended, or
other charter documents, as applicable, of Company and each of its subsidiaries,
each as amended to date. Neither Company nor any of its subsidiaries is in
violation of any of the provisions of its respective charter or bylaws or
equivalent organizational documents. Company is the owner of all outstanding
shares of capital stock of each of its subsidiaries and all such shares are duly
authorized, validly issued, fully paid and nonassessable. All of the outstanding
shares of capital stock of each such subsidiary are owned by Company 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 Company or any such subsidiary
to issue, transfer, sell, purchase, redeem or otherwise acquire any such
securities. Except as disclosed in the Company SEC Documents (as defined in
Section 2.4), Company does not directly or indirectly own any equity or similar
interest in, or any interest convertible or exchangeable or exercisable for, any
equity or similar interest in, any corporation, partnership, joint venture or
other business association or entity.
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2.2 Capital Structure. The authorized capital stock of Company consists of
200,000,000 shares of Common Stock, $0.001 par value, and 5,000,000 shares of
Preferred Stock, $0.01 par value, of which there were issued and outstanding as
of the close of business on April 30, 2000, 35,045,467 shares of Common Stock
and no shares of Preferred Stock. There are no other outstanding shares of
capital stock or voting securities and no outstanding commitments to issue any
shares of capital stock or voting securities after April 30, 2000, other than
pursuant to the Option Agreement, the exercise of options outstanding as of such
date under the Company Stock Option Plans or pursuant to the Company's 2000
Employee Stock Purchase Plan and the 2000 International Employee Stock Purchase
Plan (together, the "Company ESPPs"). All outstanding shares of Company Common
Stock are duly authorized, validly issued, fully paid and non-assessable and are
free of any liens or encumbrances other than any liens or encumbrances created
by or imposed upon the holders thereof, and are not subject to preemptive rights
or rights of first refusal created by statute, the Certificate of Incorporation
or Bylaws of Company or any agreement to which Company is a party or by which it
is bound. As of the close of business on April 30, 2000, Company has reserved
(i) 19,300,000 shares of Common Stock for issuance to employees, consultants and
directors pursuant to the Company Stock Option Plans, of which 3,036,266 shares
have been issued pursuant to option exercises or direct stock purchases,
7,033,695 shares are subject to outstanding, unexercised options, no shares are
subject to outstanding stock purchase rights, and 9,177,539 shares are available
for issuance thereunder and (ii) 400,000 shares of Common Stock for issuance to
employees pursuant to the Company ESPPs, of which no shares have been issued.
Between April 30, 2000 and the date hereof, Company has not (i) issued or
granted additional options under the Company Stock Option Plans, or (ii)
accepted enrollments in the Company ESPPs. Except for (i) the rights created
pursuant to this Agreement, the Option Agreement, the Company Stock Option
Plans, and the Company ESPPs and (ii) Company's rights to repurchase any
unvested shares under the Company Stock Option Plans or restricted stock awards
granted outside of such Plans, there are no other options, warrants, calls,
rights, commitments or agreements of any character to which Company is a party
or by which it is bound obligating Company to issue, deliver, sell, repurchase
or redeem, or cause to be issued, delivered, sold, repurchased or redeemed, any
shares of capital stock of Company or obligating Company to grant, extend,
accelerate the vesting of, change the price of, or otherwise amend or enter into
any such option, warrant, call, right, commitment or agreement. There are no
contracts, commitments or agreements relating to voting, purchase or sale of
Company's capital stock (other than those that have been fully performed, those
granting Company the right to purchase unvested shares upon employment or
service termination, the Option Agreement and the Stockholder Agreement) (i)
between or among Company and any of its stockholders and (ii) to the best of
Company's knowledge, between or among any of Company's stockholders. The terms
of the Company Stock Option Plans permit the assumption or substitution of
options to purchase Parent Common Stock as provided in this Agreement, without
the consent or approval of the holders of such securities, stockholders, or
otherwise. The current "Purchase Period" (as defined in the Company ESPPs)
commenced under the Company ESPPs on May 1, 2000 and will end on October 31,
2000, and except for the purchase rights granted on such commencement date to
participants in the current Purchase Period, there are no other purchase rights
or options outstanding under the Company ESPPs. True and complete copies of all
agreements and instruments relating to or issued under the Company Stock Option
Plans or Company ESPPs have been made available to Parent and such agreements
and instruments have not been amended, modified or supplemented since being made
available to Parent, and there are no agreements to amend, modify or supplement
such agreements or instruments in any case from the form made available to
Parent. The shares of Company Common Stock issued under the Company Stock Option
Plans, as amended and under all prior versions thereof, have either been
registered under the Securities Act or were issued in transactions which
qualified for exemptions under either Section 4(2) of, or Rule 701 under, the
Securities Act for stock issuances under compensatory benefit plans.
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2.3 Authority. Company has all requisite corporate power and authority to
enter into this Agreement and the Option Agreement and to consummate the
transactions contemplated hereby and thereby. The execution and delivery of this
Agreement and the Option Agreement and the consummation of the transactions
contemplated hereby and thereby have been duly authorized by all necessary
corporate action on the part of Company, subject only to the adoption of this
Agreement by Company's stockholders holding a majority of the outstanding shares
of Company Common Stock as contemplated by Section 6.1(a). Each of this
Agreement and the Option Agreement has been duly executed and delivered by
Company and constitutes the valid and binding obligation of Company enforceable
against Company in accordance with its terms, except as enforceability may be
limited by bankruptcy and other laws affecting the rights and remedies of
creditors generally and general principles of equity. The execution and delivery
of this Agreement and the Option Agreement by Company does not, and the
consummation of the transactions contemplated hereby will not, conflict with, or
result in any violation of, or default under (with or without notice or lapse of
time, or both), or give rise to a right of termination, cancellation or
acceleration of any obligation or loss of any benefit under (i) any provision of
the Certificate of Incorporation or Bylaws of Company or any of its
subsidiaries, as amended, or (ii) any material mortgage, indenture, lease,
contract or other agreement or instrument, permit, concession, franchise,
license, judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to Company or any of its subsidiaries or any of their properties or
assets. No consent, approval, order or authorization of, or registration,
declaration or filing with, any court, administrative agency or commission or
other governmental authority or instrumentality ("Governmental Entity") is
required by or with respect to Company or any of its subsidiaries in connection
with the execution and delivery of this Agreement, the Option Agreement, or the
consummation of the transactions contemplated hereby and thereby, except for (i)
the filing of the Certificate of Merger as provided in Section 1.2; (ii) the
filing with the Securities and Exchange Commission (the "SEC") and the National
Association of Securities Dealers, Inc. (the "NASD") of the Proxy Statement (as
defined in Section 2.23) relating to the Company Stockholders Meeting (as
defined in Section 2.23); (iii) such consents, approvals, orders,
authorizations, registrations, declarations and filings as may be required under
applicable state securities laws and the securities laws of any foreign country;
(iv) such filings as may be required under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended ("HSR"); (v) the filing of a Form S-4
Registration Statement with the SEC in accordance with the Securities Act of
1933, as amended; (vi) the filing of a Current Report on Form 8-K with the SEC;
and (vii) such other consents, authorizations, filings, approvals and
registrations which, if not obtained or made, would not have a Material Adverse
Effect on Company and would not prevent, or materially alter or delay any of the
transactions contemplated by this Agreement or the Option Agreement.
2.4 SEC Documents; Financial Statements. Company has made available to
Parent a true and complete copy of each statement, report, registration
statement (with the prospectus in the form filed pursuant to Rule 424(b) of the
Securities Act of 1933, as amended (the "Securities Act")), definitive proxy
statement and other filings made with the SEC by Company since March 31, 1999
and, prior to the Effective Time, Company will have furnished to Parent true and
complete copies of any additional documents filed with the SEC by Company prior
to the Effective Time (collectively, the "Company SEC Documents"). Company has
timely filed all forms, statements and documents required to be filed by it with
the SEC and The Nasdaq National Market since March 31, 1999. In addition,
Company has made available to Parent all exhibits to the Company SEC Documents
filed prior to the date hereof, and will promptly make available to Parent all
exhibits to any additional Company SEC Documents filed prior to the Effective
Time. All documents required to be filed as exhibits to the Company SEC
Documents have been so filed, and all material contracts so filed as exhibits
are in full force and effect, except those which have expired in accordance with
their terms, and neither Company nor any of its subsidiaries is in material
default thereunder. As of their respective filing dates, the Company SEC
Documents complied
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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
Company SEC Documents contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements made therein, in light of the circumstances in which they
were made, not misleading, except to the extent corrected by a subsequently
filed Company SEC Document. The financial statements of Company, including the
notes thereto, included in the Company SEC Documents (the "Company 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 United States generally accepted accounting principles ("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-Q, as permitted
by Form 10-Q of the SEC). The Company Financial Statements fairly present the
consolidated financial condition and operating results of Company and its
subsidiaries at the dates and during the periods indicated therein (subject, in
the case of unaudited statements, to normal, recurring year-end adjustments).
There has been no change in Company accounting policies since December 31, 1999.
2.5 Absence of Certain Changes. Since March 31, 2000 (the "Company Balance
Sheet Date"), Company has conducted its business in the ordinary course
consistent with past practice and there has not occurred: (i) any change, event
or condition (whether or not covered by insurance) that has resulted in, or
might reasonably be expected to result in, a Material Adverse Effect to Company;
(ii) any acquisition, sale or transfer of any material asset of Company or any
of its subsidiaries other than in the ordinary course of business and consistent
with past practice; (iii) any change in accounting methods or practices
(including any change in depreciation or amortization policies or rates) by
Company or any revaluation by Company of any of its or any of its subsidiaries'
assets; (iv) any declaration, setting aside, or payment of a dividend or other
distribution with respect to the shares of Company, or any direct or indirect
redemption, purchase or other acquisition by Company of any of its shares of
capital stock; (v) any material contract entered into by Company or any of its
subsidiaries, other than in the ordinary course of business and as provided to
Parent, or any material amendment or termination of, or default under, any
material contract to which Company or any of its subsidiaries is a party or by
which it is bound; (vi) any amendment or change to the Certificate of
Incorporation or Bylaws; or (vii) any increase in or modification of the
compensation or benefits payable, or to become payable, by Company to any of its
directors or employees, other than pursuant to scheduled annual performance
reviews, provided that any resulting modifications are in the ordinary course of
business and consistent with Company's past practices. Company has not agreed
since March 31, 2000 to do any of the things described in the preceding clauses
(i) through (vii) and is not currently involved in any negotiations to do any of
the things described in the preceding clauses (i) through (vii) (other than
negotiations with Parent and its representatives regarding the transactions
contemplated by this Agreement).
2.6 Absence of Undisclosed Liabilities. Company 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
Consolidated Balance Sheets or in the related Notes to Consolidated Financial
Statements included in Company's Quarterly Report on Form 10-Q for the quarter
ended March 31, 2000 (the "Company Balance Sheet"), (ii) those incurred in the
ordinary course of business and not required to be set forth in the Company
Balance Sheet under GAAP, (iii) those incurred in the ordinary course of
business since the Company Balance Sheet Date and not reasonably likely to have
a Material Adverse Effect on Company; and (iv) those incurred in connection with
the execution of this Agreement.
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2.7 Litigation. There is no private or governmental action, suit,
proceeding, claim, arbitration or investigation pending before any agency, court
or tribunal, foreign or domestic, or, to the knowledge of Company or any of its
subsidiaries, threatened against Company or any of its subsidiaries or any of
their respective properties or any of their respective officers or directors (in
their capacities as such) that, individually or in the aggregate, would
reasonably be expected to have a Material Adverse Effect on Company. There is no
judgment, decree or order against Company or any of its subsidiaries, or, to the
knowledge of Company and its subsidiaries, any of their respective directors or
officers (in their capacities as such), that could prevent, enjoin, alter or
materially delay any of the transactions contemplated by this Agreement, or that
could reasonably be expected to have a Material Adverse Effect on Company.
2.8 Restrictions on Business Activities. There is no agreement, judgment,
injunction, order or decree binding upon Company or any of its subsidiaries
which has or reasonably could be expected to have the effect of prohibiting or
materially impairing any current business practice of Company or any of its
subsidiaries, any contemplated acquisition of property by Company or any of its
subsidiaries or the conduct by Company or any of its subsidiaries of its
business as currently conducted or as currently contemplated to be conducted.
2.9 Governmental Authorization. Company and each of its subsidiaries have
obtained each federal, state, county, local or foreign governmental consent,
license, permit, grant, or other authorization of a Governmental Entity (i)
pursuant to which Company 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 Company's or any of its subsidiaries' business or the holding of any such
interest ((i) and (ii) herein collectively called "Company Authorizations"), and
all of such Company Authorizations are in full force and effect, except where
the failure to obtain or have any of such Company Authorizations could not
reasonably be expected to have a Material Adverse Effect on Company.
2.10 Title to Property. Company and its subsidiaries have good and valid
title to all of their respective properties, interests in properties and assets,
real and personal, reflected in the Company Balance Sheet or acquired after the
Company Balance Sheet Date (except properties, interests in properties and
assets sold or otherwise disposed of since the Company Balance Sheet Date in the
ordinary course of business), or in the case of leased properties and assets,
valid leasehold interests in, free and clear of all mortgages, liens, pledges,
charges or encumbrances of any kind or character, except (i) the lien of current
taxes not yet due and payable, (ii) such imperfections of title, liens and
easements as do not and will not materially detract from or interfere with the
use of the properties subject thereto or affected thereby, or otherwise
materially impair business operations involving such properties, (iii) liens
securing debt which is reflected on the Company Balance Sheet, and (iv) liens
that in the aggregate would not have a Material Adverse Effect on Company. The
plants, property and equipment of Company and its subsidiaries that are used in
the operations of their businesses are in good operating condition and repair,
except where the failure to be in good condition or repair would not have a
Material Adverse Effect. All properties used in the operations of Company and
its subsidiaries are reflected in the Company Balance Sheet to the extent
generally accepted accounting principles require the same to be reflected.
Schedule 2.10 identifies each parcel of real property owned or leased by Company
or any of its subsidiaries. No lease relating to a foreign parcel contains any
extraordinary payment obligation.
2.11 Intellectual Property.
(a) Company and its subsidiaries own, or are licensed or otherwise possess
legally enforceable and unencumbered rights (subject to limitations set forth in
agreements pursuant to which Company licenses such as rights) to use all
patents, trademarks, trade names, service marks, domain names, database
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rights, copyrights, and any applications therefor, maskworks, net lists,
schematics, technology, know-how, trade secrets, inventory, ideas, algorithms,
processes, computer software programs or applications (in both source code,
except in circumstances where Company only possesses a license to the object
code form, and object code form), and tangible or intangible proprietary
information or material that are used in the business of Company and its
subsidiaries ("Intellectual Property"). Company owns and possesses source code
for all software owned by Company and owns or has valid licenses and possesses
source code for all products owned, distributed and presently supported by
Company. Company has not (i) licensed any of its Intellectual Property in source
code form to any party or (ii) entered into any exclusive agreements relating to
its Intellectual Property. No royalties or other continuing payment obligations
are due in respect of Third Party Intellectual Property Rights.
(b) Schedule 2.11 lists (i) all patents and patent applications and all
registered trademarks, trade names and service marks, registered copyrights, and
maskworks included in the Intellectual Property owned by Company, 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
Company is a party and pursuant to which any person is authorized to use any
Intellectual Property, and (iii) all licenses, sublicenses and other agreements
as to which Company is a party and pursuant to which Company 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 Company product, other than commercially available,
off-the-shelf software.
(c) There is no unauthorized use, disclosure, infringement or
misappropriation of any Intellectual Property rights of Company or any of its
subsidiaries, or any Intellectual Property right of any third party to the
extent licensed by or through Company or any of its subsidiaries, by any third
party, including any employee or former employee of Company or any of its
subsidiaries. Neither Company 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, license agreements and distribution and other customer
agreements arising in the ordinary course of business.
(d) Company is not, nor will it be as a result of the execution and
delivery of this Agreement or the performance of its obligations under this
Agreement, in breach of any license, sublicense or other agreement relating to
the Intellectual Property or Third Party Intellectual Property Rights.
(e) All patents, trademarks, service marks and copyrights held by Company
are valid and subsisting. Company (i) has not been sued in any suit, action or
proceeding (or received any notice or, to Company's knowledge, threat) which
involves a claim of infringement of any patents, trademarks, service marks,
copyrights or violation of any trade secret or other proprietary right of any
third party and (ii) has not brought any action, suit or proceeding for
infringement of Intellectual Property or breach of any license or agreement
involving Intellectual Property against any third party. The manufacture,
marketing, licensing or sale of Company's products does not infringe any patent,
trademark, service mark, copyright, trade secret or other proprietary right of
any third party.
(f) Company has secured valid written assignments from all consultants and
employees who contributed to the creation or development of Intellectual
Property of the rights to such contributions that Company does not already own
by operation of law.
(g) Company has taken all reasonably necessary steps to protect and
preserve the confidentiality of all Intellectual Property not otherwise
protected by patents or patent applications or copyright ("Confidential
Information"). All use, disclosure or appropriation of Confidential Information
owned by Company by or to a third party has been pursuant to the terms of a
written agreement between
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Company and such third party. All use, disclosure or appropriation of
Confidential Information not owned by Company has been pursuant to the terms of
a written agreement between Company and the owner of such Confidential
Information, or is otherwise lawful.
(h) There are no actions that must be taken by Company or any subsidiary
within sixty (60) days of the Closing Date that, if not taken, will result in
the loss of any Intellectual Property, including the payment of any
registration, maintenance or renewal fees or the filing of any responses to the
U.S. Patent and Trademark Office actions, documents, applications or
certificates for the purposes of obtaining, maintaining, perfecting or
preserving or renewing any Intellectual Property.
(i) Company has not received any opinion of counsel that any third party
patents apply to Company's products.
2.12 Environmental Matters.
(a) The following terms shall be defined as follows:
(i) "Environmental and Safety Laws" shall mean any federal, state or
local laws, ordinances, codes, regulations, rules, policies and orders that
are intended to assure the protection of the environment, or that classify,
regulate, call for the remediation of, require reporting with respect to,
or list or define air, water, groundwater, solid waste, hazardous or toxic
substances, materials, wastes, pollutants or contaminants, or which are
intended to assure the safety of employees, workers or other persons,
including the public.
(ii) "Hazardous Materials" shall mean any toxic or hazardous
substance, material or waste or any pollutant or contaminant, or infectious
or radioactive substance or material, including without limitation, those
substances, materials and wastes defined in or regulated under any
Environmental and Safety Laws.
(iii) "Property" shall mean all real property leased or owned by
Company or its subsidiaries either currently or in the past.
(iv) "Facilities" shall mean all buildings and improvements on the
Property of Company or its subsidiaries.
(b) Company represents and warrants that, except in all cases as, in the
aggregate, would not have a Material Adverse Effect on Company, as follows: (i)
no methylene chloride or asbestos is contained in or has been used at or
released from the Facilities; (ii) all Hazardous Materials and wastes have been
disposed of in accordance with all Environmental and Safety Laws; (iii) Company
and its subsidiaries have received no notice (verbal or written) of any
noncompliance of the Facilities or its past or present operations with
Environmental and Safety Laws; (iv) no notices, administrative actions or suits
are pending or, to Company's knowledge, threatened relating to a violation of
any Environmental and Safety Laws; (v) to Company's knowledge, neither Company
nor its subsidiaries are a potentially responsible party under the federal
Comprehensive Environmental Response, Compensation and Liability Act (CERCLA),
or state analog statute, arising out of events occurring prior to the Closing
Date; (vi) there have not been in the past, and are not now, any Hazardous
Materials on, under or migrating to or from the Facilities or Property; (vii)
there have not been in the past, and are not now, any underground tanks or
underground improvements at, on or under the Property including without
limitation, treatment or storage tanks, sumps, or water, gas or oil wells;
(viii) there are no polychlorinated biphenyls (PCBs) deposited, stored, disposed
of or located on the Property or Facilities or any equipment on the Property
containing PCBs at levels in excess of 50 parts per million; (ix) there is no
formaldehyde on the Property or in the Facilities, nor any insulating material
containing urea formaldehyde in the Facilities; (x) the Facilities and Company's
and its subsidiaries uses and activities therein have at all times
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complied with all Environmental and Safety Laws; and (xi) Company and its
subsidiaries have all the permits and licenses required to be issued and are in
full compliance with the terms and conditions of those permits.
2.13 Taxes. Company and each of its subsidiaries, and any consolidated,
combined, unitary or aggregate group for Tax (as defined below) purposes of
which Company or any of its subsidiaries is or has been a member, have properly
completed and timely filed all Tax Returns required to be filed by them and have
paid all Taxes shown thereon to be due. All unpaid taxes of Company and its
subsidiaries for periods through March 31, 2000 are reflected on the Company
Balance Sheet. Company has no material liability for unpaid Taxes accruing after
March 31, 2000 other than Taxes arising in the ordinary course of its business
subsequent to March 31, 2000. There is (i) no material claim for Taxes that is a
lien against the property of Company or any of its subsidiaries or is being
asserted against Company or any of its subsidiaries other than liens for Taxes
not yet due and payable; (ii) no audit of any Tax Return of Company or any of
its subsidiaries that is being conducted by a Tax authority; and (iii) no
extension of the statute of limitations on the assessment of any Taxes that has
been granted by Company or any of its subsidiaries and that is currently in
effect. Neither Company nor any of its subsidiaries has been or will 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 solely as a result of transactions,
events or accounting methods employed prior to the Merger. Neither Company 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
state Tax laws) apply to Company or any of its subsidiaries. All Tax sharing or
Tax allocation agreements to which Company or any of its subsidiaries is a party
are listed on Schedule 2.13 together with any liability of Company or its
subsidiaries to another party under any such agreement which is either currently
owing or which would result from assertions currently being made by Tax
Authorities from audits or proceedings in progress. Neither Company 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. Except as
set forth on Schedule 2.13, neither Company nor any of its subsidiaries has ever
been a member of a consolidated, combined or unitary group of which Company was
not the ultimate parent corporation. Company and each of its subsidiaries have
in their possession receipts for any Taxes paid to foreign Tax authorities. 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,
including pursuant to any Tax sharing or Tax allocation agreement. As used
herein, "Tax Return' ' shall mean any return, statement, report or form
(including, without limitation estimated Tax returns and reports, withholding
Tax returns and reports and information reports and returns) required to be
filed with respect to Taxes. Neither Company nor any of its subsidiaries has
ever been a United States real property holding corporation within the meaning
of Section 897 of the Code.
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2.14 Employee Benefit Plans.
(a) Schedule 2.14(a) lists, with respect to Company, any subsidiary of
Company and any trade or business (whether or not incorporated) which is treated
as a single employer with Company (an "ERISA Affiliate") within the meaning of
Section 414(b), (c), (m) or (o) of the Code, (i) all material employee benefit
plans (as defined in Section 3(3) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA")) other than Foreign Plans (as defined below); (ii)
each loan to a non-officer employee in excess of $50,000, loans to officers and
directors and any stock option, stock purchase, phantom stock, stock
appreciation right, supplemental retirement, severance, sabbatical, medical,
dental, vision care, disability, employee relocation, cafeteria benefit (Code
section 125) or dependent care (Code Section 129), life insurance or accident
insurance plans, programs or arrangements; (iii) all bonus, pension, profit
sharing, savings, deferred compensation or incentive plans, programs or
arrangements; (iv) other fringe or employee benefit plans, programs or
arrangements that apply to senior management of Company and that do not
generally apply to all employees; and (v) any current or former employment or
executive compensation or severance agreements, written or otherwise, as to
which unsatisfied obligations of Company of greater than $50,000 remain for the
benefit of, or relating to, any present or former employee, consultant or
director of Company (collectively, the "Company Employee Plans").
(b) Company has furnished or made available to Parent a copy of each of the
Company Employee Plans and related plan documents (including trust documents,
insurance policies or contracts, employee booklets, summary plan descriptions
and other authorizing documents, and any material employee communications
relating thereto) and has, with respect to each Company Employee Plan which is
subject to ERISA reporting requirements, provided or made available copies of
the Form 5500 reports filed for the last three plan years. Any Company Employee
Plan intended to be qualified under Section 401(a) of the Code either (i) has
obtained from the Internal Revenue Service a favorable determination letter as
to its qualified status under the Code, including all amendments to the Code
effected by the Tax Reform Act of 1986 and subsequent legislation other than the
Uruguay Round Agreements Act of 1994, the Uniformed Services Employment and
Reemployment Rights Act of 1994, the Small Business Job Protection Act of 1996,
and the Taxpayer Relief Act of 1997, or (ii) has applied to the Internal Revenue
Service for such a determination letter prior to the expiration of the requisite
period under applicable Treasury Regulations or Internal Revenue Service
pronouncements in which to apply for such determination letter and to make any
amendments necessary to obtain a favorable determination or (iii) the requisite
period for application has not expired. Company has also furnished Parent with
the most recent Internal Revenue Service determination letter issued with
respect to each such Company Employee Plan, and nothing has occurred since the
issuance of each such letter which would reasonably be expected to cause the
loss of the tax-qualified status of any Company Employee Plan subject to Code
Section 401(a). Company has also furnished or made available to Parent all
registration statements and prospectuses prepared in connection with each
Company Employee Plan.
(c) (i) None of the Company Employee Plans promises or provides retiree
medical or other retiree welfare benefits to any person, except as required by
applicable law; (ii) there has been no "prohibited transaction," as such term is
defined in Section 406 of ERISA and Section 4975 of the Code, with respect to
any Company Employee Plan, which would reasonably be expected to have, in the
aggregate, a Material Adverse Effect on Company; (iii) each Company Employee
Plan has been administered in accordance with its terms and in compliance with
the requirements prescribed by any and all statutes, rules and regulations
(including ERISA and the Code), except as would not have, in the aggregate, a
Material Adverse Effect on Company, and Company and each subsidiary or ERISA
Affiliate have performed in all material respects all obligations required to be
performed by them under, are not in default in any material respect under or
violation of, and have no knowledge of any material default or
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violation by any other party to, any of the Company Employee Plans; (iv) neither
Company nor any subsidiary or ERISA Affiliate is subject to any material
liability or material penalty under Sections 4976 through 4980 of the Code or
Title I of ERISA with respect to any of the Company Employee Plans; (v) all
material contributions required to be made by Company or any subsidiary or ERISA
Affiliate to any Company Employee Plan have been made on or before their due
dates and a reasonable amount has been accrued for contributions to each Company
Employee Plan for the current plan years; (vi) with respect to each Company
Employee Plan, no "reportable event" within the meaning of Section 4043 of ERISA
(excluding any such event for which the thirty (30) day notice requirement has
been waived under the regulations to Section 4043 of ERISA) nor any event
described in Section 4062, 4063 or 4041 or ERISA has occurred; (vii) no Company
Employee Plan is covered by, and neither Company nor any subsidiary or ERISA
Affiliate has incurred or expects to incur any liability under Title IV of ERISA
or Section 412 of the Code; and (viii) each Company Employee Plan can be
amended, terminated or otherwise discontinued after the Effective Time in
accordance with its terms, without liability to Parent (other than for benefits
accrued through the date of termination and ordinary administrative expenses
typically incurred in a termination event). With respect to each Company
Employee Plan subject to ERISA as either an employee pension plan within the
meaning of Section 3(2) of ERISA or an employee welfare benefit plan within the
meaning of Section 3(1) of ERISA, Company has prepared in good faith and timely
filed all requisite governmental reports (which were true and correct as of the
date filed) and has properly and timely filed and distributed or posted all
notices and reports to employees required to be filed, distributed or posted
with respect to each such Company Employee Plan, except where the failure to do
so would not have a Material Adverse Effect. No suit, administrative proceeding,
action or other litigation has been brought, or to the knowledge of Company is
threatened, against or with respect to any such Company Employee Plan, including
any audit or inquiry by the IRS or United States Department of Labor. No payment
or benefit which will or may be made by Company to any employee will be
characterized as an "excess parachute payment" within the meaning of Section
280G(b)(1) of the Code.
(d) With respect to each Company Employee Plan, Company and each of its
United States subsidiaries have complied except to the extent that such failure
to comply would not, individually or in the aggregate, have a Material Adverse
Effect on Company, with (i) the applicable health care continuation and notice
provisions of the Consolidated Omnibus Budget Reconciliation Act of 1985
("COBRA") and the regulations (including proposed regulations) thereunder, (ii)
the applicable requirements of the Family Medical and Leave Act of 1993 and the
regulations thereunder, and (iii) the applicable requirements of the Health
Insurance Portability and Accountability Act of 1996 and the regulations
(including proposed regulations) thereunder.
(e) The consummation of the transactions contemplated by this Agreement
will not (i) entitle any current or former employee or other service provider of
Company, any Company subsidiary or any other ERISA Affiliate to severance
benefits or any other payment, except as expressly provided in this Agreement,
or (ii) accelerate the time of payment or vesting, or increase the amount of
compensation due any such employee or service provider.
(f) There has been no amendment to, written interpretation or announcement
(whether or not written) by Company, any Company subsidiary or other ERISA
Affiliate relating to, or change in participation or coverage under, any Company
Employee Plan which would materially increase the expense of maintaining such
Plan above the level of expense incurred with respect to that Plan for the most
recent fiscal quarter included in Company's financial statements.
(g) Company does not currently maintain, sponsor, participate in or
contribute to, nor has it ever maintained, established, sponsored, participated
in, or contributed to, any pension plan (within the
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meaning of Section 3(2) of ERISA) which is subject to Part 3 of Subtitle B of
Title I of ERISA, Title IV of ERISA or Section 412 of the Code.
(h) Neither Company nor any Company subsidiary or other ERISA Affiliate is
a party to, or has made any contribution to or otherwise incurred any obligation
under, any "multiemployer plan" as defined in Section 3(37) of ERISA.
(i) Except as set forth in Schedule 2.15 of the Company Disclosure
Schedules, there is no agreement, contract or arrangement to which Company 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 or Section 404 of the
Code.
(j) With regard to each compensation and benefit plan required to be
maintained or contributed to by the law or applicable custom or rule of the
relevant jurisdiction outside of the United States (the "Foreign Plans"), (i)
each of the Foreign Plans is in material compliance with the provisions of the
laws of each jurisdiction in which each such Foreign Plan is maintained, to the
extent those laws are applicable to the Foreign Plans; (ii) all material
contributions to, and material payments from, the Foreign Plans which may have
been required to be made in accordance with the terms of any such Foreign Plan,
and, when applicable, the law of the jurisdiction in which such Foreign Plan is
maintained, have been timely made or shall be made by the Closing Date, and all
such contributions to the Foreign Plans, and all payments under the Foreign
Plans, for any period ending before the Closing Date that are not yet, but will
be, required to be made, are reflected as an accrued liability on the Balance
Sheet, or disclosed to Parent within fifteen (15) days following the date hereof
in Schedule 2.14(j) of the Company Disclosure Schedule; (iii) Company, Company
subsidiary and ERISA Affiliates have materially complied with all applicable
reporting and notice requirements, and all of the Foreign Plans have obtained
from the governmental body having jurisdiction with respect to such plans any
required determinations, if any, that such Foreign Plans are in compliance with
the laws of the relevant jurisdiction if such determinations are required in
order to give effect to the Foreign Plan; (iv) each of the Foreign Plans has
been administered in all material respects at all times in accordance with its
terms and applicable law and regulations; (v) to the knowledge of Company, there
are no pending investigations by any governmental body involving the Foreign
Plans, and no pending claims (except for claims for benefits payable in the
normal operation of the Foreign Plans), suits or proceedings against any Plan or
asserting any rights or claims to benefits under any Foreign Plan; (vi) the
consummation of the transactions contemplated by this Agreement will not by
itself create or otherwise result in any liability with respect to any Foreign
Plan other than the triggering of payment to participants; and (vii) the
benefits available under any Foreign Plan in the aggregate do not provide
substantially greater benefits to employees of Company or any of its
subsidiaries participating in such plans than the benefits available under
Company Employee Plans for employees of Company in the United States.
2.15 Certain Agreements Affected by the Merger. Neither the execution and
delivery of this Agreement nor the consummation of the transaction contemplated
hereby will (i) result in any payment (including, without limitation, severance,
unemployment compensation, golden parachute, bonus or otherwise) becoming due to
any director or employee of Company or any of its subsidiaries, (ii) materially
increase any benefits otherwise payable by Company or (iii) result in the
acceleration of the time of payment or vesting of any such benefits.
2.16 Employee Matters. With respect to United States employees, Company
and each of its subsidiaries are in compliance in all respects with all
currently applicable laws and regulations respecting employment, discrimination
in employment, terms and conditions of employment, wages, hours and occupational
safety and health and employment practices, and is not engaged in any unfair
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labor practice, except where the failure to be in compliance or the engagement
in such unfair labor practices would not have a Material Adverse Effect on
Company. Company has in all material respects withheld all amounts required by
law or by agreement to be withheld from the wages, salaries, and other payments
to employees; and is not liable for any material arrears of wages or any
material taxes or any material penalty for failure to comply with any of the
foregoing. Company is not liable for any material 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). There are no pending
claims against Company or any of its subsidiaries for any material amounts under
any workers compensation plan or policy or for long term disability. Neither
Company nor any of its subsidiaries has any obligations under COBRA with respect
to any former employees or qualifying beneficiaries thereunder, except for
obligations that are not material in amount. With respect to employees employed
outside the United States by Company or any of its subsidiaries, Company and
each of its subsidiaries are in compliance in all respects with all currently
applicable laws and regulations respecting employment, discrimination in
employment, terms of conditions of employment, wages, hours, withholding
requirements, taxes, governmental and administrative contribution requirements
and occupational safety and health practices, and are not engaged in any unfair
labor practices in any of the countries where Company or any of its subsidiaries
has employees, except for noncompliance which, in the aggregate, would not have
a Material Adverse Effect on Company. There are no material controversies
pending or, to the knowledge of Company or any of its subsidiaries, threatened,
between Company or any of its subsidiaries and any of their respective
employees, which controversies have or would reasonably be expected to result in
an action, suit, proceeding, claim, arbitration or investigation before any
agency, court or tribunal, foreign or domestic. Neither Company nor any of its
subsidiaries is a party to any collective bargaining agreement or other labor
union contract nor does Company nor any of its subsidiaries know of any
activities or proceedings of any labor union to organize any such employees. To
Company's knowledge, no employees of Company or any of its subsidiaries are in
violation of any term of any employment contract, patent disclosure agreement,
noncompetition agreement, or any restrictive covenant to a former employer
relating to the right of any such employee to be employed by Company because of
the nature of the business conducted or presently proposed to be conducted by
Company or any of its subsidiaries or to the use of trade secrets or proprietary
information of others. As of the date hereof, no employees of Company or any of
its subsidiaries have given notice to Company, nor is Company otherwise aware,
that any such employee intends to terminate his or her employment with Company
or any subsidiary.
2.17 Interested Party Transactions. Except as disclosed in the Company SEC
Documents, neither Company nor any of its subsidiaries is indebted to any
director or officer of Company or any of its subsidiaries (except for amounts
due as normal salaries and bonuses and in reimbursement of ordinary expenses),
and no such person is indebted to Company or any of its subsidiaries, and there
are no other transactions of the type required to be disclosed pursuant to Item
404 of Regulation S-K under the Securities Act and the Exchange Act.
2.18 Insurance. Company 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 Company and its
subsidiaries. There is no material claim pending under any of such policies or
bonds as to which coverage has been questioned, denied or disputed by the
underwriters of such policies or bonds. All premiums due and payable under all
such policies and bonds have been paid and Company and its subsidiaries are
otherwise in compliance in all material respects with the terms of such policies
and bonds. Company has no knowledge of any threatened termination of, or
material premium increase with respect to, any of such policies.
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2.19 Compliance With Laws. Each of Company and its subsidiaries has
complied with, are not in violation of, and have not received any notices of
violation with respect to, any federal, state, local or foreign statute, law or
regulation with respect to the conduct of its business, or the ownership or
operation of its business, except for such violations or failures to comply as
would not be reasonably expected to have a Material Adverse Effect on Company.
Each of Company and its subsidiaries has complied with, is not in violation of,
and has not received any notices of violation with respect to, any federal,
state, local or foreign statute, law or regulation with respect to the granting
of options, restricted stock, other stock-based awards or the stock purchase
rights granted under the Company ESPPs to their employees, consultants or other
service providers, except for such violations or failures to comply as would not
be reasonably expected to have a Material Adverse Effect on Company.
2.20 Minute Books. The minute books of Company and its subsidiaries made
available to Parent contain a complete and accurate summary of all meetings of
directors and stockholders or actions by written consent since the time of
incorporation of Company 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. Company has delivered or made available
true and complete copies of each document that has been requested by Parent or
its counsel in connection with their legal and accounting review of Company and
its subsidiaries.
2.22 Brokers' and Finders' Fees. Except for payment obligations to
Goldman, Sachs & Co. set forth in an engagement letter, a true, correct and
complete copy of which has been provided to Parent, Company 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 Registration Statement; Proxy Statement/Prospectus. The information
supplied by Company for inclusion in the registration statement on Form S-4 (or
such other or successor form as shall be appropriate) pursuant to which the
shares of Parent Common Stock to be issued in the Merger will be registered with
the SEC (the "Registration Statement") shall not at the time the Registration
Statement (including any amendments or supplements thereto) is declared
effective by the SEC contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading. The information supplied by Company for inclusion in the
proxy statement/prospectus to be sent to the stockholders of Company in
connection with the meeting of Company's stockholders to consider the Merger
(the "Company Stockholders Meeting") (such proxy statement/prospectus as amended
or supplemented is referred to herein as the "Proxy Statement") shall not, on
the date the Proxy Statement is first mailed to Company's stockholders, at the
time of the Company Stockholders Meeting and at the Effective Time, contain any
statement which, at such time, is false or misleading with respect to any
material fact, or omit to state any material fact necessary in order to make the
statements made therein, in light of the circumstances under which they are
made, not false or misleading; or omit to state any material fact necessary to
correct any statement in any earlier communication with respect to the
solicitation of proxies for the Company Stockholders Meeting which has become
false or misleading. If at any time prior to the Effective Time any event or
information should be discovered by Company which should be set forth in an
amendment to the Registration Statement or a supplement to the Proxy Statement,
Company shall promptly inform Parent and Merger Sub. Notwithstanding the
foregoing, Company makes no representation, warranty or covenant with respect to
any information supplied by Parent or Merger Sub or any other third party which
is contained in any of the foregoing documents.
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2.24 Opinion of Financial Advisor. Company has been advised by its
financial advisor, Goldman, Sachs & Co., that in such advisor's opinion, as of
the date hereof, the Exchange Ratio is fair, from a financial point of view, to
the stockholders of Company.
2.25 Vote Required. The affirmative vote of the holders of a majority of
the shares of Company Common Stock outstanding on the record date set for the
Company Stockholders Meeting is the only vote of the holders of any of Company's
capital stock necessary to adopt this Agreement.
2.26 Board Approval. The Board of Directors of Company has (i) approved
this Agreement and the Merger, (ii) determined that this Agreement and the
Merger are advisable and in the best interests of the stockholders of Company
and are on terms that are fair to such stockholders and (iii) recommended that
the stockholders of Company adopt this Agreement and approve the consummation of
the Merger.
2.27 Stockholder Agreement; Irrevocable Proxies. All of the persons listed
on Schedule 2.27 have agreed in writing to vote for approval of the Merger
pursuant to a Stockholder Agreement, and pursuant to an Irrevocable Proxy
attached thereto as Exhibit A.
2.28 Section 203 of the DGCL Not Applicable. The Board of Directors of
Company 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, the Stockholder Agreement or the Option Agreement or the consummation
of the Merger or the other transactions contemplated by this Agreement or by the
Stockholder Agreement and the Option Agreement. No other state takeover statute
is applicable to this Agreement, the Stockholder Agreement, the Option Agreement
or the transactions contemplated hereby or thereby.
2.29 Inventory. The inventories of Company disclosed in the Company SEC
Documents as of March 31, 2000 and in any subsequently filed Company SEC
Documents are stated consistently with the audited financial statements of
Company and consist of items of a quantity usable or salable in the ordinary
course of business. Since March 31, 2000, Company has continued to replenish
inventories in a normal and customary manner consistent with past practices.
Except as disclosed in the Company SEC Documents, Company has not received
written or oral notice that it will experience in the foreseeable future any
difficulty in obtaining, in the desired quantity and quality and at a reasonable
price and upon reasonable terms and conditions, the raw materials, supplies or
component products required for the manufacture, assembly or production of its
products. The values at which inventories are carried reflect the inventory
valuation policy of Company, which is consistent with its past practice and in
accordance with GAAP applied on a consistent basis. Since March 31, 2000, due
provision was made on the books of Company in the ordinary course of business
consistent with past practices to provide for all slow-moving, obsolete, or
unusable inventories to their estimated useful or scrap values and such
inventory reserves are adequate to provide for such slow-moving, obsolete or
unusable inventory and inventory shrinkage. As of March 31, 2000, Company had
inventory of approximately $1,600,000 in the distribution channel and had
commitments to purchase inventory (other than purchases of supplies in the
ordinary course) in an amount of approximately $6,000,000.
2.30 Accounts Receivable. The accounts receivable disclosed in the Company
SEC Documents as of March 31, 2000, and, with respect to accounts receivable
created since such date, disclosed in any subsequently filed Company SEC
Documents, or as accrued on the books of Company in the ordinary course of
business consistent with past practices in accordance with GAAP since the last
filed Company SEC Documents, represent and will represent bona fide claims
against debtors for sales and other charges, are not subject to discount except
for normal cash and immaterial trade discount. The amount carried for doubtful
accounts and allowances disclosed in each of such Company SEC Document or
accrued on such books is, in the reasonable judgment of Company, sufficient to
provide for any losses that may be sustained on realization of the receivables.
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2.31 Customers and Suppliers. None of Company's customers which
individually accounted for more than 5% of Company's gross revenues during the
12-month period preceding March 31, 2000 has terminated any agreement with
Company. As of the date hereof, no material supplier of Company has indicated
that it will stop, or decrease the rate of, supplying materials, products or
services to Company. Company has not knowingly breached, so as to provide a
benefit to Company that was not intended by the parties, any agreement with, or
engaged in any fraudulent conduct with respect to, any customer or supplier of
Company.
2.32 Lock-up Agreements. Company has received a waiver from Goldman, Sachs
& Co. on terms reasonably satisfactory to Parent to ensure that each of the
lock-up agreements executed by the officers, directors and securityholders of
Company in connection with the initial public offering of Company (the "Lock-up
Agreements") is inapplicable to this Agreement, the Option Agreement, the
Stockholders Agreement and all of the transactions contemplated hereby or
thereby.
2.33 Export Control Laws. Company has conducted its export transactions in
accordance with applicable provisions of United States export control laws and
regulations, including but not limited to the Export Administration Act and
implementing Export Administration Regulations, except for such violations which
would not have a Material Adverse Effect on Company. Without limiting the
foregoing, Company represents and warrants that, except as would not have a
Material Adverse Effect on Company:
(a) Company has obtained all export licenses and other approvals
required for its exports of products, software and technologies from the
United States;
(b) Company is in compliance with the terms of all applicable export
licenses or other approvals;
(c) There are no pending or threatened claims against Company with
respect to such export licenses or other approvals;
(d) There are no actions, conditions or circumstances pertaining to
Company's export transactions that may give rise to any future claims; and
(e) No consents or approvals for the transfer of export licenses to
Parent are required, or such consents and approvals can be obtained
expeditiously without material cost.
2.34 Year 2000. Company's current products and services are "Year 2000
Compliant," where "Year 2000 Compliant" means that such products and services
have been designed and tested so that, when used in accordance with their
associated documentation, they are capable of accurately processing, providing
and/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; provided that all other products and services used in combination in
any way with Company's current products and services properly exchange
date-related data with them. The information technology systems and
non-information technology systems used by Company in its internal operations
will function properly beyond 1999. Except as set forth on Schedule 2.34 to the
Company Disclosure Schedule, neither Company nor any of its subsidiaries has
made any written representations or warranties relating to the ability of any
product or service of Company or its subsidiaries to be Year 2000 Compliant.
Company has made inquiries to its key third-party vendors and providers as to
the status of their Year 2000 efforts, and has not uncovered any problems that
would aversely affect the operation of the products or that could disrupt or
harm the day-to-day functioning of the business or operations of Company.
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2.35 Accounting and Tax Matters. Except as set forth in the preliminary
letters issued by PricewaterhouseCoopers LLP ("PricewaterhouseCoopers"), and
Arthur Andersen LLP ("Arthur Andersen"), as of the date hereof, to Company's
knowledge neither Company nor any of its affiliates has taken or agreed to take
any action, nor does Company have knowledge of any fact or circumstance, that
would prevent Parent from accounting for the business combination to be effected
by the Merger as a pooling of interests in accordance with GAAP or prevent the
Merger from qualifying as a reorganization within the meaning of Section 368(a)
of the Code
2.36 Affiliates. Schedule 2.36 sets forth the names and addresses of each
person who is, in Company's reasonable judgment, an affiliate (as that term is
used in Rule 145 under the Securities Act or under applicable SEC accounting
releases with respect to pooling-of-interest accounting treatment) of Company.
2.37 Representations Complete. None of the representations or warranties
made by Company herein or in any Schedule hereto, including the Company
Disclosure Schedule, or certificate furnished by Company pursuant to this
Agreement, or the Company SEC Documents, when all such documents are read
together in their entirety, contains or will contain at the Effective Time any
untrue statement of a material fact, or omits or will omit at the Effective Time
to state any material fact necessary in order to make the statements contained
herein or therein, in the light of the circumstances under which made, not
misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Except as disclosed in that section of the document of even date herewith
delivered by Parent to Company prior to the execution and delivery of this
Agreement (the "Parent Disclosure Schedule") corresponding to the Section of
this Agreement to which any of the following representations and warranties
specifically relate or as disclosed in another section of the Parent Disclosure
Schedule if it is reasonably apparent on the face of the disclosure that it is
applicable to another Section of this Agreement, Parent represents and warrants
to Company as follows:
3.1 Organization, Standing and Power. Each of Parent and Merger Sub is a
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of organization. Each of Parent and Merger Sub 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 Parent.
Neither Parent nor Merger Sub is in violation of any of the provisions of its
Articles of Incorporation or Bylaws or equivalent organizational documents.
3.2 Capital Structure. The authorized capital stock of Parent consists of
20,000,000,000 shares of Common Stock, $0.001 par value per share, and 5,000,000
shares of Preferred Stock, no par value, of which there were issued and
outstanding as of the close of business on March 15, 2000, 6,943,728,170 shares
of Common Stock (after taking into account the two-for-one stock split of Parent
Common Stock effective as of March 22, 2000) and no shares of Preferred Stock.
The shares of Parent Common Stock to be issued pursuant to the Merger (including
pursuant to the exercise of any options assumed pursuant to Section 5.9) will be
duly authorized, validly issued, fully paid, and non-assessable, free of any
liens or encumbrances imposed by Parent or Merger Sub.
3.3 Authority. Parent and Merger Sub have all requisite corporate power
and authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been
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duly authorized by all necessary corporate action on the part of Parent and
Merger Sub. This Agreement has been duly executed and delivered by Parent and
Merger Sub and constitutes the valid and binding obligations of Parent and
Merger Sub. The execution and delivery of this Agreement do not, and the
consummation of the transactions contemplated hereby will not, conflict with, or
result in any violation of, or default under (with or without notice or lapse of
time, or both), or give rise to a right of termination, cancellation or
acceleration of any obligation or loss of a benefit under (i) any provision of
the Articles of Incorporation or Bylaws of Parent or any of its subsidiaries, as
amended, or (ii) any material mortgage, indenture, lease, contract or other
agreement or instrument, permit, concession, franchise, license, judgment,
order, decree, statute, law, ordinance, rule or regulation applicable to Parent
or any of its subsidiaries or their properties or assets, except where such
conflict, violation, default, termination, cancellation or acceleration with
respect to the foregoing provisions of (ii) would not have had and would not
reasonably be expected to have a Material Adverse Effect on Parent. No consent,
approval, order or authorization of, or registration, declaration or filing
with, any Governmental Entity, is required by or with respect to Parent or any
of its subsidiaries in connection with the execution and delivery of this
Agreement by Parent and Merger Sub or the consummation by Parent and Merger Sub
of the transactions contemplated hereby, except for (i) the filing of the
Certificate of Merger as provided in Section 1.2; (ii) the filing with the SEC
and NASD of the Registration Statement; (iii) the filing of a Form 8-K with the
SEC and NASD within 15 days after the Closing Date; (iv) any filings as may be
required under applicable state securities laws and the securities laws of any
foreign country; (v) such filings as may be required under HSR; (vi) the filing
with The Nasdaq National Market of a Notification Form for Listing of Additional
Shares with respect to the shares of Parent Common Stock issuable upon
conversion of the Company Common Stock in the Merger and upon exercise of the
options under the Company Stock Option Plans assumed by Parent; (vii) the filing
of a registration statement on Form S-8 with the SEC, or other applicable form
covering the shares of Parent Common Stock issuable pursuant to outstanding
options under the Company Stock Option Plans assumed by Parent; and (viii) such
other consents, authorizations, filings, approvals and registrations which, if
not obtained or made, would not have a Material Adverse Effect on Parent and
would not prevent or materially alter or delay any of the transactions
contemplated by this Agreement.
3.4 SEC Documents; Financial Statements. Parent has made available to
Company 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 Parent since July 31, 1999,
and, prior to the Effective Time, Parent will have furnished or made available
to Company true and complete copies of any additional documents filed with the
SEC by Parent prior to the Effective Time (collectively, the "Parent SEC
Documents"). Parent has timely filed all forms, statements and documents
required to be filed by it with the SEC and The Nasdaq National Market since
July 31, 1999. In addition, Parent has made available to Company all exhibits to
the Parent SEC Documents filed prior to the date hereof, and will promptly make
available to Company all exhibits to any additional Parent SEC Documents filed
prior to the Effective Time. All documents required to be filed as exhibits to
the Company SEC Documents have been so filed, and all material contracts so
filed as exhibits are in full force and effect, except those which have expired
in accordance with their terms, and neither Parent nor any of its subsidiaries
is in default thereunder. As of their respective filing dates, the Parent SEC
Documents complied in all material respects with the requirements of the
Exchange Act and the Securities Act, and none of the Parent SEC Documents
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements made
therein, in light of the circumstances in which they were made, not misleading,
except to the extent corrected by a subsequently filed Parent SEC Document. The
financial statements of Parent, including the notes thereto, included in the
Parent SEC Documents (the "Parent Financial Statements") were complete and
correct in all material respects as of their respective dates, complied as
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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-Q, as permitted by
Form 10-Q of the SEC). The Parent Financial Statements fairly present the
consolidated financial condition and operating results of Parent and its
subsidiaries at the dates and during the periods indicated therein (subject, in
the case of unaudited statements, to normal, recurring year-end adjustments).
Since January 31, 2000, there has not occurred any change, event or condition
that has resulted in, or would reasonably be expected to result in, a Material
Adverse Effect on Parent.
3.5 Absence of Undisclosed Liabilities. Parent 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 Parent's Form 10-Q for the period ended January 29, 2000 (the
"Parent Balance Sheet"), (ii) those incurred in the ordinary course of business
and not required to be set forth in the Parent Balance Sheet under generally
accepted accounting principles, and (iii) those incurred in the ordinary course
of business since the Parent Balance Sheet Date and consistent with past
practice.
3.6 Litigation. There is no litigation pending against Parent or any of
its subsidiaries or, to the knowledge of Parent, threatened against Parent or
any of its subsidiaries that would prevent, enjoin, alter or materially delay
any of the transactions contemplated by this Agreement, or that would have a
Material Adverse Effect on Parent or on the ability of Parent to consummate the
transactions contemplated by this Agreement. There is no judgment, decree or
order against Parent or any of its subsidiaries, or, to the knowledge of Parent,
any of their respective directors or officers (in their capacities as such),
that would prevent, enjoin, alter or materially delay any of the transactions
contemplated by this Agreement, or that would have a Material Adverse Effect on
Parent or on the ability of Parent to consummate the transactions contemplated
by this Agreement.
3.7 Broker's and Finders' Fees. Parent has not incurred, nor will it
incur, directly or indirectly, any liability for brokerage or finders' fees or
agents' commissions or investment bankers' fees or any similar charges in
connection with this Agreement or any transaction contemplated hereby.
3.8 Registration Statement; Proxy Statement/Prospectus. The information
supplied by Parent and Merger Sub for inclusion in the Registration Statement
shall not, at the time the Registration Statement (including any amendments or
supplements thereto) is declared effective by the SEC, contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. The information supplied by Parent for inclusion
in the Proxy Statement shall not, on the date the Proxy Statement is first
mailed to Company's stockholders, at the time of the Company Stockholders
Meeting and at the Effective Time, contain any statement which, at such time, is
false or misleading with respect to any material fact, or omit to state any
material fact necessary in order to make the statements therein, in light of the
circumstances under which it is made, not false or misleading; or omit to state
any material fact necessary to correct any statement in any earlier
communication with respect to the solicitation of proxies for the Company
Stockholders Meeting which has become false or misleading. If at any time prior
to the Effective Time any event or information should be discovered by Parent or
Merger Sub which should be set forth in an amendment to the Registration
Statement or a supplement to the Proxy Statement, Parent or Merger Sub will
promptly inform Company. Notwithstanding the foregoing, Parent and Merger Sub
make no representation, warranty or covenant with respect to any information
supplied by Company or any third party which is contained in any of the
foregoing documents.
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3.9 Board Approval. The Boards of Directors of Parent and Merger Sub have
(i) approved this Agreement and the Merger, (ii) determined that the Merger is
advisable and in the best interests of their respective stockholders and is on
terms that are fair to such stockholders and (iii) recommended that the
stockholder of Merger Sub adopt this Agreement and approve the consummation of
the Merger. The stockholder of Merger Sub has adopted this Agreement and
approved the consummation of the Merger. No vote of the holders of Parent Common
Stock is required under applicable law or Nasdaq Stock Market rules in
connection with this Agreement or the Merger.
3.10 Accounting and Tax Matters. Except as set forth in the preliminary
letters issued by PricewaterhouseCoopers and Arthur Andersen, as of the date
hereof, to Parent's knowledge neither Parent nor any of its affiliates has taken
or agreed to take any action, nor does Parent have knowledge of any fact or
circumstance, that would prevent Parent from accounting for the business
combination to be effected by the Merger as a pooling of interests or prevent
the Merger from qualifying as a reorganization within the meaning of Section
368(a) of the Code.
3.11 Representations Complete. None of the representations or warranties
made by Parent or Merger Sub herein or in any Schedule hereto, including the
Parent Disclosure Schedule, or certificate furnished by Parent or Merger Sub
pursuant to this Agreement, or the Parent SEC Documents, when all such documents
are read together in their entirety, contains or will contain at the Effective
Time any untrue statement of a material fact, or omits or will omit at the
Effective Time to state any material fact necessary in order to make the
statements contained herein or therein, in the light of the circumstances under
which made, not misleading.
ARTICLE IV
CONDUCT PRIOR TO THE EFFECTIVE TIME
4.1 Conduct of Business of Company. During the period from the date of
this Agreement and continuing until the earlier of the termination of this
Agreement or the Effective Time, Company agrees (except to the extent expressly
contemplated by this Agreement or as consented to in writing by Parent), to
carry on its and its subsidiaries' business in the ordinary course in
substantially the same manner as heretofore conducted, to pay and to cause its
subsidiaries to pay debts and Taxes when due subject to good faith disputes over
such debts or taxes, to pay or perform other obligations when due, and to use
all reasonable efforts consistent with past practice and policies to preserve
intact its and its subsidiaries' present business organizations, use its
commercially reasonable efforts consistent with past practice to keep available
the services of its and its subsidiaries' present officers and key employees and
use its commercially reasonable efforts consistent with past practice to
preserve its and its subsidiaries' relationships with customers, suppliers,
distributors, licensors, licensees, and others having business dealings with it
or its subsidiaries, to the end that its and its subsidiaries' goodwill and
ongoing businesses shall be unimpaired at the Effective Time. Company agrees to
promptly notify Parent of any material event or occurrence not in the ordinary
course of its or its subsidiaries' business, and of any event which would have a
Material Adverse Effect on Company.
4.2 Restrictions on Conduct of Business of Company. During the period from
the date of this Agreement and continuing until the earlier of the termination
of this Agreement or the Effective Time, except as expressly contemplated by
this Agreement, Company shall not do, cause or permit any of the following
(other than those items listed on Schedule 4.2 to the Company Disclosure
Schedule), or allow, cause or permit any of its subsidiaries to do, cause or
permit any of the following, without the prior written consent of Parent (it
being agreed that any actions taken or omitted by Company in compliance
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with this Section 4.2 shall not be deemed to constitute a breach of any of the
representations or warranties of Company in Article II):
(a) Charter Documents. Cause or permit any amendments to its
Certificate of Incorporation or Bylaws;
(b) Dividends; Changes in Capital Stock. Declare or pay any dividends
on or make any other distributions (whether in cash, stock or property) in
respect of any of its capital stock, or split, combine or reclassify any of
its capital stock or issue or authorize the issuance of any other
securities in respect of, in lieu of or in substitution for shares of its
capital stock, or repurchase or otherwise acquire, directly or indirectly,
any shares of its capital stock except from former employees, directors and
consultants in accordance with agreements providing for the repurchase of
shares in connection with any termination of service to it or its
subsidiaries;
(c) Stock Option Plans, Etc. Take any action to 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
contracts, other than in the ordinary course of business consistent with
past practice and in no event shall such contract, commitment, amendment,
modification or waiver (other than those relating to sales of products or
purchases of supplies in the ordinary course) involve the payment by
Company or its subsidiaries in excess of $400,000;
(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 (i) the issuance of
shares of its Common Stock pursuant to the exercise of stock options,
warrants or other rights therefor outstanding as of the date of this
Agreement, (ii) the grant of stock options under Company Stock Option Plans
to new employees in the ordinary course of business (not to exceed an
aggregate of 148,441 shares issuable thereunder), with an exercise price
equal to the fair market value of the Company Common Stock on the date of
grant and otherwise on Company's standard terms (including vesting
schedule) and (iii) the repurchase of Company Common Stock from former
employees, directors and consultants in accordance with agreements
providing for the repurchase of shares in connection with any termination
of service;
(f) Intellectual Property. Transfer or license to any person or entity
any rights to its Intellectual Property other than the license of
non-exclusive rights to its Intellectual Property 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;
(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 its and its subsidiaries' business, taken as a
whole, except 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 $200,000;
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(k) Payment of Obligations. Pay, discharge or satisfy in an amount in
excess of $175,000 in any one case, any claim, liability or obligation
(absolute, accrued, asserted or unasserted, contingent or otherwise)
arising other than in the ordinary course of business, other than the
payment, discharge or satisfaction of liabilities reflected or reserved
against in the Company 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 that do not exceed $175,000 individually
or $1,000,000 in the aggregate;
(m) Insurance. Materially reduce the amount of any material insurance
coverage provided by existing insurance policies;
(n) Termination or Waiver. Terminate or waive any right of substantial
value;
(o) Employee Benefit Plans; New Hires; Pay Increases. Adopt or amend
any employee benefit or stock purchase or option plan or hire any new
director level or officer level employee, pay any special bonus or special
remuneration to any employee or director, or increase the salaries or wage
rates of its employees other than pursuant to scheduled annual performance
reviews, providedthat any resulting modifications are in the ordinary
course of business and consistent with Company's past practices.
(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 Parent
prior to the filing of such a suit, or (iii) for a breach of this
Agreement;
(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 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 (except for purchases of supplies and components in the
ordinary course of business consistent with past practice), or acquire or
agree to acquire any equity securities of any corporation, partnership,
association or business organization;
(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 (except
as required to do so by law) 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. Company shall give all notices and other information
required by applicable law to be given to the employees of Company, any
collective bargaining unit representing any group of employees of Company,
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;
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(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) Accounting Policies and Procedures. Make any change to its
accounting methods, principles, policies, procedures or practices, except
as may be required by GAAP, Regulation S-X promulgated by the SEC or
applicable statutory accounting principles;
(w) Year 2000 Compliance. Fail to carry forward in all material
respects Company's Year 2000 assessment and compliance programs, as made
available to Parent by Company; or
(x) Other. Take or agree in writing or otherwise to take any of the
actions described in Sections 4.2(a) through (w) above, or any action that
is reasonably foreseeable by Company to be likely to 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. Company and its subsidiaries and the officers,
directors, employees or other agents of Company and its subsidiaries
(collectively, "Company Representatives") will not, directly or indirectly, (i)
take any action to solicit, initiate or encourage or agree to any Takeover
Proposal (as defined in Section 7.3(f)) or (ii) subject to the terms of the
immediately following sentence, engage in any discussions or negotiations with,
or disclose any nonpublic information relating to Company or any of it
subsidiaries to, or afford access to the properties, books or records of Company
or any of its subsidiaries to, any person that has advised Company that it may
be considering making, or that has made, a Takeover Proposal; provided that
nothing herein shall prohibit the Board of Directors of Company from complying
with Rules 14d-9 and 14e-2 promulgated under the Exchange Act. Notwithstanding
the immediately preceding sentence, if, prior to adoption of this Agreement by
Company's stockholders, an unsolicited written Takeover Proposal shall be
received by the Board of Directors of Company, then, to the extent the Board of
Directors of Company believes in good faith in the proper exercise of their
fiduciary duties to Company's stockholders (after receipt of advice from its
financial advisor), and after considering all terms and conditions of such
written Takeover Proposal, including the likelihood and timing of its
consummation, that such Takeover Proposal would result in a transaction more
favorable to Company's stockholders from a financial point of view than the
transaction contemplated by this Agreement (any such more favorable Takeover
Proposal being referred to in this Agreement as a "Superior Proposal") and the
Board of Directors of Company determines in good faith after advice from outside
legal counsel of nationally recognized reputation that it is necessary for the
Board of Directors of Company to comply with its fiduciary duties to
stockholders under applicable law, Company Representatives may furnish in
connection therewith information to the party making such Superior Proposal and,
subject to the provisions hereof, engage in negotiations with such party, and
endorse, recommend, approve and/or agree to such Superior Proposal and such
actions shall not be considered a breach of this Section 4.3 or any other
provisions of this Agreement; provided that in each such event Company notifies
Parent of such determination by the Board of Directors of Company and provides
Parent with a true and complete copy of the Superior Proposal received from such
third party, and provides (or has provided) or makes available to Parent all
documents containing or referring to non-public information of Company that are
supplied to such third party; provided, however, that Company provides such
non-public information pursuant to a non-disclosure agreement at least as
restrictive on such third party as the Confidentiality Agreement (as defined in
Section 5.4) is on Parent; and provided further that Company shall not, and
shall not permit any of its officers, directors, employees or other
representatives to agree to or endorse any Takeover Proposal or withdraw its
recommendation of the adoption of this Agreement unless Company has provided
Parent at least three (3) days prior notice thereof. Company will promptly (and
in any event within 24 hours) notify Parent
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after receipt of any Takeover Proposal or any notice that any person is
considering making a Takeover Proposal or any request for non-public information
relating to Company or any of its subsidiaries or for access to the properties,
books or records of Company or any of its subsidiaries by any person that has
advised Company that it may be considering making, or that has made, a Takeover
Proposal, or whose efforts to formulate a Takeover Proposal would be assisted
thereby (such notice to include the identity of such person or persons), and
will keep Parent fully informed of the status and details of any such Takeover
Proposal notice, request or correspondence or communications related thereto,
and shall provide Parent with a true and complete copy of such Takeover Proposal
notice or any amendment thereto, if it is in writing, or a complete written
summary thereof, if it is not in writing. Company shall immediately cease and
cause to be terminated all existing discussions or negotiations with any persons
conducted heretofore with respect to a Takeover Proposal.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Proxy Statement/Prospectus; Registration Statement. As promptly as
practicable after the execution of this Agreement, Company and Parent shall
prepare, and (i) Company shall file with the SEC (if necessary), preliminary
proxy materials relating to the adoption of this Agreement by the stockholders
of Company, and (ii) Parent shall file with the SEC, a Registration Statement on
Form S-4 (or such other or successor form as shall be appropriate). As promptly
as practicable following receipt of SEC comments thereon, Company shall file
with the SEC definitive proxy materials and Parent shall file with the SEC
amendments to its Registration Statement on Form S-4 (or such other or successor
form as shall be appropriate), in each case which complies in form with
applicable SEC requirements and shall use all reasonable efforts to cause the
Registration Statement to become effective as soon thereafter as practicable.
Company and Parent will notify each other promptly of the receipt of any
comments from the SEC or its staff and of any request by the SEC or its staff or
any other government officials for amendments or supplements to the Proxy
Statement 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 SEC, or its staff or any other
government officials, on the other hand, with respect to the Proxy Statement or
other filing. Whenever any event occurs that is required to be set forth in an
amendment or supplement to the Proxy Statement or any other filing, Company
shall promptly inform Parent of such occurrence and cooperate in filing with the
SEC or its staff or any other government officials, and/or mailing to
stockholders of Company, such amendment or supplement. The Proxy Statement shall
solicit the adoption of this Agreement by the stockholders of Company and shall
include the approval of this Agreement and the Merger by the Board of Directors
of Company and the recommendation of the Board of Directors of Company to
Company's stockholders that they vote in favor of the adoption of this Agreement
(provided that the Board of Directors of Company may exclude such recommendation
if, pursuant to Section 4.3, it is permitted to endorse, recommend or approve
and/or agree to a Superior Proposal) and shall include the opinion of Company's
financial advisors as described in Section 2.24 (unless subsequently withdrawn).
5.2 Meeting of Stockholders. Company 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 Company Stockholders Meeting within 35
days of the Registration Statement being declared effective by the SEC. Company
shall consult with Parent regarding the date of the Company Stockholders Meeting
and shall not postpone or adjourn (other than for the absence of a quorum) the
Company Stockholders Meeting, subject to Section 5.1, without the consent of
Parent. Subject to Section 5.1, Company shall use its reasonable best efforts to
solicit from stockholders of Company
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proxies in favor of adoption of this Agreement and shall take all other action
reasonably necessary or advisable to secure the vote or consent of stockholders
required to effect the Merger.
5.3 Access to Information.
(a) Company shall afford Parent and its accountants, counsel and other
representatives, reasonable access during normal business hours during the
period prior to the Effective Time to (i) all of Company's and its subsidiaries'
properties, books, contracts, commitments and records, and (ii) all other
information concerning the business, properties and personnel of Company and its
subsidiaries as Parent may reasonably request. Company agrees to provide to
Parent and its accountants, counsel and other representatives copies of internal
financial statements promptly upon request.
(b) Subject to compliance with applicable law, from the date hereof until
the Effective Time, each of Parent and Company shall confer on a regular and
frequent basis with one or more representatives of the other party to report
operational matters of materiality and the general status of ongoing operations.
(c) No information or knowledge obtained in any investigation pursuant to
this Section 5.3 shall affect or be deemed to modify any representation or
warranty contained herein or the conditions to the obligations of the parties to
consummate the Merger.
(d) Company shall provide Parent and its accountants, counsel and other
representatives reasonable access, during normal business hours during the
period prior to the Effective Time, to all of Company's and subsidiaries Tax
Returns and other records and workpapers relating to Taxes, and shall also
provide the following information upon the request of Parent or its
subsidiaries: (i) a schedule of the types of Tax Returns being filed by Company
and each of its subsidiaries in each taxing jurisdiction, (ii) a schedule of the
year of the commencement of the filing of each such type of Tax Return, (iii) a
schedule of all closed years with respect to each such type of Tax Return filed
in each jurisdiction, (iv) a schedule of all material Tax elections filed in
each jurisdiction by Company and each of its subsidiaries, (v) a schedule of any
deferred intercompany gain with respect to transactions to which Company or any
of its subsidiaries has been a party, and (vi) receipts for any Taxes paid to
foreign Tax authorities.
5.4 Confidentiality. The parties acknowledge that each of Parent and
Company have previously executed a non-disclosure agreement dated April 13, 2000
(the "Confidentiality Agreement), which agreement shall continue in full force
and effect in accordance with its terms.
5.5 Public Disclosure. Unless otherwise permitted by this Agreement,
Parent and Company 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, in which case the party proposing to issue such press release or make
such public statement or disclosure shall use its commercially reasonable
efforts to consult with the other party before issuing such press release or
making such public statement or disclosure.
5.6 Consents; Cooperation.
(a) Each of Parent and Company 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 Merger,
including those required under HSR. Company shall use its commercially
reasonable efforts to obtain all necessary consents, waivers and approvals under
any of its material contracts in connection with the Merger for the assignment
thereof or otherwise. The parties
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hereto will consult and cooperate with one another, and consider in good faith
the views of one another, in connection with any analyses, appearances,
presentations, memoranda, briefs, arguments, opinions and proposals made or
submitted by or on behalf of any party hereto in connection with proceedings
under or relating to HSR or any other federal or state antitrust or fair trade
law.
(b) Each of Parent and Company shall use its 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 HSR, the Sherman Act, as amended, the Clayton Act, as amended,
the Federal Trade Commission Act, as amended, and any other Federal, state or
foreign statutes, rules, regulations, orders or decrees that are designed to
prohibit, restrict or regulate actions having the purpose or effect of
monopolization or restraint of trade (collectively, "Antitrust Laws"). In
connection therewith, if any administrative or judicial action or proceeding is
instituted (or threatened to be instituted) challenging any transaction
contemplated by this Agreement as violative of any Antitrust Law, each of Parent
and Company shall cooperate and use its 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
Merger or any such other transactions, unless by mutual agreement Parent and
Company 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 Parent nor Company shall have any
obligation to litigate or contest any administrative or judicial action or
proceeding or any Order beyond the Final Date (as defined in Section 7.1(b)).
Each of Parent and Company shall use its 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. Parent and Company
also agree to take any and all of the following actions to the extent necessary
to obtain the approval of any Governmental Entity with jurisdiction over the
enforcement of any applicable laws regarding the transactions contemplated
hereby: entering into negotiations; providing information required by law or
governmental regulation; and substantially complying with any second request for
information pursuant to the Antitrust Laws.
(c) Notwithstanding anything to the contrary in Section 5.6(a) or (b), (i)
neither Parent nor any of it subsidiaries shall be required to divest any of
their respective businesses, product lines or assets, or to take or agree to
take any other action or agree to any limitation that would reasonably be
expected to have a Material Adverse Effect on Parent or of Parent combined with
the Surviving Corporation after the Effective Time and (ii) neither Company nor
its subsidiaries shall be required to divest any of their respective businesses,
product lines or assets, or to take or agree to take any other action or agree
to any limitation that would reasonably be expected to have a Material Adverse
Effect on Company.
5.7 Legal Requirements. Each of Parent, Merger Sub and Company will, and
will cause their respective subsidiaries to, take all reasonable actions
necessary to comply promptly with all legal requirements which may be imposed on
them with respect to the consummation of the transactions contemplated by this
Agreement and will promptly cooperate with and furnish information to any party
hereto necessary in connection with any such requirements imposed upon such
other party in connection with the consummation of the transactions contemplated
by this Agreement and will take all reasonable actions necessary to obtain (and
will cooperate with the other parties hereto in obtaining) any consent,
approval, order or authorization of, or any registration, declaration or filing
with, any Governmental Entity or other person, required to be obtained or made
in connection with the taking of any action contemplated by this Agreement.
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5.8 Blue Sky Laws. Parent 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 Parent Common Stock in connection with the
Merger. Company shall use its commercially reasonable efforts to assist Parent
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 Parent
Common Stock in connection with the Merger.
5.9 Employee Benefit Plans.
(a) At the Effective Time, the Company Stock Option Plans and each
outstanding option to purchase shares of Company Common Stock under the Company
Stock Option Plans, whether vested or unvested, will be assumed by Parent.
Company represents and warrants to Parent that Schedule 5.9(a) hereto sets forth
a true and complete list as of the date hereof of all holders of outstanding
options under the Company Stock Option Plans, including the number of shares of
Company capital stock subject to each such option, the exercise or vesting
schedule, the exercise price per share and the term of each such option. On the
Closing Date, Company shall deliver to Parent an updated Schedule 5.9(a) hereto
current as of such date. Each such option so assumed by Parent under this
Agreement shall continue to have, and be subject to, the same terms and
conditions set forth in the Company Stock Option Plans and the applicable stock
option agreements, immediately prior to the Effective Time, except that (i) such
option will be exercisable for that number of whole shares of Parent Common
Stock equal to the product of the number of shares of Company 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 Parent Common Stock, and (ii) the per share exercise price
for the shares of Parent Common Stock issuable upon exercise of such assumed
option will be equal to the quotient determined by dividing the exercise price
per share of Company 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. Except as set forth in Schedule 2.15 of the Company
Disclosure Schedule, the Merger will not terminate any of the outstanding
options under the Company Stock Option Plans or accelerate the exercisability or
vesting of such options or the shares of Parent Common Stock which will be
subject to those options upon Parent's assumption of the options in the Merger.
It is the intention of the parties that the options so assumed by Parent
qualify, to the maximum extent permissible, following the Effective Time as
incentive stock options as defined in Section 422 of the Code to the extent such
options qualified as incentive stock options prior to the Effective Time. Within
30 business days after the Effective Time, Parent will issue to each person who,
immediately prior to the Effective Time was a holder of an outstanding option
under the Company Stock Option Plans a document evidencing the foregoing
assumption of such option by Parent.
(b) All outstanding rights of Company which it may hold immediately prior
to the Effective Time to repurchase unvested shares of Company Common Stock (the
"Repurchase Options") shall continue in effect following the Merger and shall
thereafter continue to be exercisable by Parent upon the same terms and
conditions in effect immediately prior to the Effective Time, except for the
acceleration of vesting provided for in the agreements evidencing the Repurchase
Options and except that the shares purchasable pursuant to the Repurchase
Options and the purchase price per share shall be adjusted to reflect the
Exchange Ratio.
(c) Outstanding purchase rights under the Company ESPPs shall be exercised
on October 31, 2000, and each participant in the Company ESPPs shall accordingly
be issued, at such time, such number of shares of Parent Common Stock as will
equal (i) the number of shares of Company Common Stock to which such participant
would have been entitled under the Company ESPPs multiplied by (ii) the Exchange
Ratio. Company shall cause the Company ESPPs to terminate with such exercise
date, and no
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purchase rights shall be subsequently granted or exercised under the Company
ESPPs. Company employees who meet the eligibility requirements for participation
in the Parent Employee Stock Purchase Plan shall be eligible to begin payroll
deductions under that plan as of the start date of the first offering period
thereunder beginning after the Effective Time.
(d) Within 15 business days following the date of this Agreement, Company
shall set forth on Schedule 5.9(d) a list of all persons who Company reasonably
believes are, with respect to Company and as of the date of this Agreement,
"disqualified individuals" (within the meaning of Section 280G of the Code and
the regulations promulgated thereunder). For this purpose, Company shall assume
that the fair market value of Company Common Stock is approximately $135.00 per
share. Within a reasonable period of time after the last business day of each
month after the date of this Agreement (other than May 2000) and on or about the
date five business days prior to the expected Closing Date, Company shall revise
Schedule 5.9(d) to reflect the most recently available closing price of Company
Common Stock as of the last business day of such month and to reflect any
additional information which Company reasonably believes would impact the
determination of persons who are, with respect to Company and as of the each
such date, "disqualified individuals" (within the meaning of Section 280G of the
Code and the regulations promulgated thereunder).
(e) Unless Parent consents otherwise in writing, Company shall take all
action necessary to terminate, or cause to terminate, before the Effective Time,
any Company Employee Plan that is a 401(k) plan or other defined contribution
retirement plan.
(f) Company shall take all action as may be necessary or appropriate to
elect that options outstanding under the Company Incentive Plan shall be assumed
or equivalent options of Parent be substituted therefor.
(g) Company shall use its reasonable best efforts to provide to Parent,
within ten business days following the date of this Agreement, a schedule
identifying, and copies of, all Foreign Plans.
5.10 Forms S-3 and S-8. Parent agrees to file, no later than 30 business
days after the Closing (provided that Parent has received within 10 business
days after the Closing all option documentation it requires relating to the
outstanding options), (i) a registration statement on Form S-8 under the
Securities Act covering the shares of Parent Common Stock issuable pursuant to
outstanding options and shares granted to individuals for which a Form S-8
registration statement is available hereto and (ii) a registration statement on
Form S-3 under the Securities Act covering the shares of Parent Common Stock
issuable pursuant to outstanding options and shares granted to entities or to
individuals for which a Form S-8 registration statement is not available, which
Form S-3 shall remain current for one year from the Effective Time, under the
Company Stock Option Plans or Company ESPPs assumed by Parent or otherwise
issued in compensatory transactions to entities or to individuals not currently
providing services to Company as employees or consultants. Company shall
cooperate with and assist Parent in the preparation of such registration
statements.
5.11 Option Agreement. Company agrees to fully perform its obligations
under the Option Agreement.
5.12 Listing of Additional Shares. Prior to the Effective Time, Parent
shall file with The Nasdaq National Market a Notification Form for Listing of
Additional Shares with respect to the shares referred to in Section 6.1(f).
5.13 Nasdaq Quotation. Company and Parent agree to continue the quotation
of Company Common Stock and Parent Common Stock, respectively, on The Nasdaq
National Market during the term of the Agreement so that appraisal rights will
not be available to stockholders of Company under Section 262 of the Delaware
Law.
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5.14 Employees. Company shall use its commercially reasonable efforts to
cause each of the individuals set forth on Schedule 5.14 to deliver to Parent an
executed Employment Agreement in the form of Exhibit D.
5.15 Lock-up Agreements. Company hereby agrees that it has taken and will
continue to take all necessary action to ensure that none of this Agreement, the
Option Agreement, the Stockholder Agreement or the transactions contemplated
hereby or thereby will be subject to the terms of any of the Lock-up Agreements.
5.16 Indemnification.
(a) From and after the Effective Time, Parent will cause the Surviving
Corporation to fulfill and honor in all respects the obligations of Company
pursuant to the indemnification provisions of Company's Certificate of
Incorporation and Bylaws and any indemnification agreement with Company officers
and directors to which Company is a party, in each case in effect on the date
hereof; provided that such indemnification shall be subject to any limitation
imposed from time to time under applicable law. Without limitation of the
foregoing, in the event any person so indemnified (an "Indemnified Party") is or
becomes involved in any capacity in any claim, action, suit, proceeding or
investigation in connection with any matter relating to this Agreement or the
transactions contemplated hereby occurring on or prior to the Effective Time,
Parent shall, or shall cause the Surviving Corporation to, pay as incurred such
Indemnified Party's reasonable legal and other expenses (including the cost of
any investigation and preparation) incurred in connection therewith to the
fullest extent permitted by the Delaware Law upon receipt of any undertaking
contemplated by Section 145(e) of the Delaware Law. Any Indemnified Party
wishing to claim indemnification under this Section 5.16, upon learning of any
such claim, action, suit, proceeding or investigation, shall promptly notify
Parent and the Surviving Corporation (provided that the failure to so notify
Parent or the Surviving Corporation shall not relieve such entity from any
liability that it may have under this Section 5.16 except to the extent that
such failure prejudices such entity), and shall deliver to Parent and the
Surviving Corporation the undertaking contemplated by Section 145(e) of the
Delaware Law.
(b) For five years after the Effective Time, Parent will either (i) at all
times maintain at least $50,000,000 in cash, marketable securities or
unrestricted lines of credit (or any combination thereof) to be available to
indemnify the Indemnified Parties in accordance with Section 5.16(a) above or
(ii) cause the Surviving Corporation to provide officers' and directors'
liability insurance in respect of acts or omissions occurring on or prior to the
Effective Time covering each such person currently covered by Company's
officers' and directors' liability insurance policy on terms substantially
similar to those of such policy in effect on the date hereof, provided that in
satisfying its obligation under this Section, Parent shall not be obligated to
cause the Surviving Corporation to pay premiums in excess of 150% of the amount
per annum Company paid in its last full fiscal year, which amount has been
disclosed to Parent, and if the Surviving Corporation is unable to obtain the
insurance required by this Section 5.16, it shall obtain as much comparable
insurance as possible for an annual premium equal to such maximum amount.
(c) To the extent there is any claim, action, suit, proceeding or
investigation (whether arising before or after the Effective Time) against an
Indemnified Party that arises out of or pertains to any action or omission in
his or her capacity as director, officer, employee, fiduciary or agent of
Company occurring prior to the Effective Time, or arises out of or pertains to
the transactions contemplated by this Agreement for a period of five years after
the Effective Time (whether arising before or after the Effective Time), in each
case for which such Indemnified Party is indemnified under this Section 5.16,
such Indemnified Party shall be entitled to be represented by counsel, which
counsel shall be counsel of Parent (provided that if use of counsel of Parent
would be expected under applicable standards of
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professional conduct to give rise to a conflict between the position of the
Indemnified Person and of Parent, the Indemnified Party shall be entitled
instead to be represented by counsel selected by the Indemnified Party and
reasonably acceptable to Parent) and following the Effective Time the Surviving
Corporation and Parent shall pay the reasonable fees and expenses of such
counsel, promptly after statements therefor are received and the Surviving
Corporation and Parent will cooperate in the defense of any such matter;
provided, however, that neither the Surviving Corporation nor Parent shall be
liable for any settlement effected without its written consent (which consent
shall not be unreasonably withheld) and neither the Surviving Corporation nor
Parent shall settle any such claim, action, suit, proceeding or investigation
that includes either an admission of wrongdoing or the imposition of injunctive
relief without the written consent of the Indemnified Person (which consent
shall not be unreasonably withheld); and provided, further, that, in the event
that any claim or claims for indemnification are asserted or made within such
five-year period, all rights to indemnification in respect to any such claim or
claims shall continue until the disposition of any and all such claims. The
Indemnified Parties as a group may retain only one law firm (in addition to
local counsel) to represent them with respect to any single action unless there
is, under applicable standards of professional conduct, a conflict on any
significant issue between the position of any two or more Indemnified Parties.
(d) The provisions of this Section 5.16 are intended to be for the benefit
of, and shall be enforceable by, each Indemnified Party, his or her heirs and
representatives and may not be amended, altered or repealed without the prior
written consent of the affected Indemnified Party.
5.17 Tax Treatment. The parties each intend that the Merger will qualify
as a reorganization within the meaning of Section 368(a) of the Code and shall
use best efforts to cause the Merger to so qualify. Each of Parent and Company
shall execute and deliver a certificate in form reasonably acceptable to the
other party setting forth factual representations and covenants that will serve
as a basis for the tax opinions described in Section 6.1(e).
5.18 Pooling Accounting. Parent and Company shall each use its
commercially reasonable efforts to cause the business combination to be effected
by the Merger to be accounted for as a pooling of interests. Each of Parent and
Company shall use its commercially reasonable efforts to cause its "Affiliates"
(as defined in Section 5.7) not to take any action that would adversely affect
the ability of Parent to account for the business combination to be effected by
the Merger as a pooling of interests.
5.19 Pooling Letter. Company shall use all reasonable efforts to cause to
be delivered to PricewaterhouseCoopers, Parent's independent accountants, as
promptly as practicable but in any event prior to the Effective Time, a letter
from Arthur Andersen, Company's independent accountants, addressed to Company
and dated the Closing Date to the effect that Company qualifies as a combining
company in accordance with the provisions of Accounting Principles Board Opinion
No. 16, Business Combinations. Such letter shall be in a form reasonably
satisfactory to Company and customary in scope and substance for letters
delivered by independent public accountants in connection with transactions of
this type and shall permit PricewaterhouseCoopers to use such letter. Company
shall provide appropriate representations as reasonably requested by Arthur
Andersen that are customary in scope and substance for such letters.
5.20 Stockholder Litigation. Unless and until the Board of Directors of
Company has withdrawn its recommendation of the adoption of this Agreement,
Company shall give Parent the opportunity to participate at its own expense in
the defense of any stockholder litigation against Company and/or its directors
relating to the transactions contemplated by this Agreement and the Option
Agreement.
5.21 Best Efforts and Further Assurances. Subject to Sections 4.3 and 5.1,
(a) 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
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Agreement, and (b) each party hereto, at the reasonable request of another party
hereto, shall execute and deliver such other instruments and do and perform such
other acts and things as may be necessary or desirable for effecting completely
the consummation of this Agreement and the transactions contemplated hereby.
5.22 Affiliates. Company will use reasonable efforts to obtain an executed
Company Affiliate Agreement substantially in the form of Exhibit F hereto (the
"Affiliate Agreement") from (a) each person identified in Schedule 2.36 of the
Company Disclosure Schedule within 15 days following the execution and delivery
of this Agreement and (b) from any person who, to the knowledge of Company, may
be deemed to have become an affiliate of Company after the date of this
Agreement and prior to the Effective Time as soon as practicable after attaining
such status. The foregoing notwithstanding, Parent shall be entitled to place
legends as specified in the Affiliate Agreement on the certificates evidencing
any of the Parent Common Stock to be received by (i) any affiliate of Company or
(ii) any person Parent reasonably identifies (by written notice to Company) as
being a person who may be deemed an "affiliate" within the meaning of Rule 145
promulgated under the Securities Act, and to issue appropriate stop transfer
instructions to the transfer agent for such Parent Common Stock, consistent with
the terms of the Company Affiliate Agreement, regardless of whether such person
has executed Affiliate Agreement and regardless of whether such person's name
and address appear on Schedule 2.36 of the Company Disclosure Schedule.
5.23 Execution of Certain Agreements. Company shall not execute any
agreements or enter into any arrangements, with respect to the transactions
identified on Schedule 5.23 to the Company Disclosure Schedule, without Parent's
prior written consent.
5.24 Registration Rights. Prior to the Closing Date, Company shall take
all steps necessary to terminate any outstanding rights of Company's
securityholders relating to the registration of securities of Company, including
under Company's Investor Rights Agreement dated January 14, 2000.
5.25 Section 280G/83(b) Agreement. Company shall use its reasonable best
efforts to obtain, prior to the Closing Date, a properly executed Section
280G/83(b) Agreement in the form attached hereto as Exhibit E (the "280G/83(b)
Agreement") from each person reasonably identified by Company or Parent as
potentially receiving excess parachute payments, as defined in Section 280G of
the Code, in connection with the Merger. Prior to the Closing Date, Company
shall disclose the contents, and provide a copy, of the 280G/83(b) Agreement to
each person that Company reasonably believes may potentially receive excess
parachute payments, as defined in Section 280G of the Code, in connection with
the Merger.
ARTICLE VI
CONDITIONS TO THE MERGER
6.1 Conditions to Obligations of Each Party to Effect the Merger. The
respective obligations of each party to this Agreement to consummate and effect
the transactions contemplated hereby shall be subject to the satisfaction at or
prior to the Effective Time of each of the following conditions, any of which
may be waived, in writing, by agreement of all the parties hereto:
(a) Stockholder Approval. This Agreement shall have been adopted by
the requisite vote of the stockholders of Company under Delaware Law.
(b) Registration Statement Effective. The SEC shall have declared the
Registration Statement effective. No stop order suspending the
effectiveness of the Registration Statement or any part thereof shall have
been issued and no proceeding for that purpose, and no similar proceeding
in
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respect of the Proxy Statement, shall have been initiated or threatened by
he SEC; and all requests for additional information on the part of the SEC
shall have been complied with to the reasonable satisfaction of the parties
hereto.
(c) No Injunctions or Restraints; Illegality. No temporary restraining
order, preliminary or permanent injunction or other order issued by any
court of competent jurisdiction or other legal or regulatory restraint or
prohibition preventing the consummation of the Merger shall be in effect,
nor shall any proceeding brought by an administrative agency or commission
or other governmental authority or instrumentality, domestic or foreign,
seeking any of the foregoing be pending; nor shall there be any action
taken, or any statute, rule, regulation or order enacted, entered, enforced
or deemed applicable to the Merger, which makes the consummation of the
Merger illegal. In the event an injunction or other order shall have been
issued, each party agrees to use its reasonable best efforts to have such
injunction or other order lifted.
(d) Governmental Approvals. Parent, Company and Merger Sub and their
respective subsidiaries shall have timely obtained from each Governmental
Entity (i) all approvals, waivers and consents as may be required under the
Securities Act, under state Blue Sky laws and under HSR, and (ii) all other
approvals, waivers and consents, if any, necessary for consummation of or
in connection with the Merger and the several transactions contemplated
hereby, the failure to obtain which would have a Material Adverse Effect on
the Surviving Corporation or Parent following the Effective Time.
(e) Tax Opinion. Parent and Company shall have received substantially
similar written opinions of Brobeck, Phleger and Harrison LLP and Hale and
Dorr LLP, respectively, in form and substance reasonably satisfactory to
them, dated on or about the date of Closing to the effect that the Merger
will constitute a reorganization within the meaning of Section 368(a) of
the Code, and such opinions shall not have been withdrawn; provided,
however, that if counsel to either Parent or Company is unable or unwilling
to deliver such opinion, this condition shall nonetheless be deemed
satisfied with respect to such party if counsel to the other party delivers
such opinion to such party. In rendering such opinions, counsel shall be
entitled to rely upon, among other things, reasonable assumptions as well
as representations of Parent, Merger Sub and Company. In addition, Parent
and Company shall have received from such respective firms such tax
opinions as may be required by the SEC in connection with the filing of the
Registration Statement.
(f) Listing of Additional Shares. The shares of Parent Common Stock
issuable upon conversion of the Company Common Stock in the Merger and upon
exercise of the options under the Company Stock Option Plans assumed by
Parent shall have been approved for listing on The Nasdaq National Market.
(g) Letters of Accountants. PricewaterhouseCoopers, Parent's
independent accountants, shall have received the letter referred to in
Section 5.19 from Arthur Andersen to the effect that Company qualifies as a
combining company in accordance with the provisions of Accounting
Principles Board Opinion No. 16, Business Combinations, and Parent shall
have received a similar letter from PricewaterhouseCoopers to the effect
that the Merger qualifies for pooling of interests accounting treatment if
consummated in accordance with this Agreement. Such letter from Arthur
Andersen shall be in a form reasonably satisfactory to Company, and such
letter from PricewaterhouseCoopers shall be in a form reasonably
satisfactory to Parent, and each such letter shall be customary in scope
and substance for letters delivered by independent accountants in
connection with transactions of this type.
6.2 Additional Conditions to Obligations of Company. The obligations of
Company to consummate and effect the transactions contemplated hereby shall be
subject to the satisfaction at or
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prior to the Effective Time of each of the following additional conditions, any
of which may be waived, in writing, by Company:
(a) Representations, Warranties and Covenants. (i) The representations
and warranties of Parent and Merger Sub 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 and
correct in all respects) both when made and on and as of the Effective Time
as though such representations and warranties were made on and as of such
time, except where the failure to be so true and correct, without regard to
any materiality qualifications contained therein, individually or in the
aggregate does not constitute a Material Adverse Effect on Parent and (ii)
Parent and Merger Sub 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 Parent. Company shall have been provided with a
certificate executed on behalf of Parent by an authorized officer
certifying that the condition set forth in Section 6.2(a) shall have been
fulfilled.
6.3 Additional Conditions to the Obligations of Parent and Merger Sub. The
obligations of Parent and Merger Sub to consummate and effect the transactions
contemplated hereby shall be subject to the satisfaction at or prior to the
Effective Time of each of the following additional conditions, any of which may
be waived, in writing, by Parent:
(a) Representations, Warranties and Covenants. (i) The representations
and warranties of Company 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 and correct in
all respects) both when made and on and as of the Effective Time as though
such representations and warranties were made on and as of such time,
except where the failure to be so true and correct, without regard to any
materiality qualifications contained therein, individually or in the
aggregate does not constitute a Material Adverse Effect on Company and (ii)
Company 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 Company. Parent shall have been provided with a
certificate executed on behalf of Company by its President and Chief
Financial Officer certifying that the condition set forth in Section 6.3(a)
shall have been fulfilled.
(c) Third Party Consents. Parent shall have been furnished with
evidence satisfactory to it of the consent or approval of those persons
whose consent or approval shall be required in connection with the Merger
under any material contract of Company or any of its subsidiaries or
otherwise set forth on Schedule 2.3 of the Company Disclosure Schedule,
except where failure to obtain such consent would not have a Material
Adverse Effect on Company.
(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 Parent's conduct or operation
of the business of Company and its subsidiaries, following the Merger shall
be in effect, nor shall any proceeding brought by an administrative agency
or commission or other Governmental Entity, domestic or foreign, seeking
the foregoing be pending.
(e) Employment and Non-Competition Agreements. Each of the employees
of Company set forth on paragraph (a) of Schedule 5.14 and at least 75% of
the employees of Company set forth
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on paragraph (b) of Schedule 5.14 shall have accepted employment with
Parent and shall have entered into an Employment and Non-Competition
Agreement in the form attached hereto as Exhibit D.
(f) Lock-up Agreements. Company shall have taken all necessary action
to ensure that none of the transactions contemplated by this Agreement, the
Option Agreement or the Stockholder Agreement are subject to the terms of
any of the Lock-up Agreements.
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 Company, this Agreement may be terminated:
(a) by mutual consent of Parent and Company;
(b) by either Parent or Company, if, without fault of the terminating
party, the Closing shall not have occurred on or before October 31, 2000 or
such later date as may be agreed upon in writing by the parties hereto (the
"Final Date"); provided, however, that the Final Date shall be extended to
December 31, 2000 in the event that if the only reason the Closing shall
not have occurred by October 31, 2000 is the failure of the conditions set
forth in Section 6.1(b) and/or Section 6.1(d) (although such extension
shall not occur if the failure of such conditions has been caused or
resulted from one party's action or failure to act constituting a breach of
this Agreement and the other party does not consent to such extension); and
provided further that the right to terminate this Agreement under this
Section 7.1(b) shall not be available to any party whose action or failure
to act has been the cause of or resulted in the failure of the Merger to
occur on or before such date and such action or failure to act constitutes
a breach of this Agreement;
(c) by Parent, if (i) Company shall breach any of its representations,
warranties or obligations hereunder to an extent that would cause the
condition set forth in Section 6.3(a) not to be satisfied and such breach
shall not have been cured within ten (10) business days of receipt by
Company of written notice of such breach (and Parent shall not have
willfully breached any of its covenants hereunder, which breach is not
cured), (ii) the Board of Directors of Company shall have withdrawn or
modified its recommendation of this Agreement or the Merger in a manner
adverse to Parent or shall have resolved to do any of the foregoing, (iii)
Company shall have failed to comply with Section 4.3, (iv) the Board of
Directors of Company shall have recommended, endorsed, accepted or agreed
to a Takeover Proposal or shall have resolved to do so, or (v) for any
reason Company fails to call and hold the Company Stockholders Meeting by
September 30, 2000 or in the event the condition set forth in Section
6.1(b) shall not have been satisfied by September 30, 2000 under
circumstances in which it can be reasonably expected that the Final Date
will be extended pursuant to the proviso set forth in Section 7.1(b),
December 15, 2000;
(d) by Company, if Parent shall breach any of its representations,
warranties or obligations hereunder to an extent that would cause the
condition set forth in Section 6.2(a) not to be satisfied and such breach
shall not have been cured within ten (10) business days following receipt
by Parent of written notice of such breach (and Company shall not have
willfully breached any of its covenants hereunder, which breach is not
cured);
(e) by Parent if a Trigger Event (as defined in Section 7.3(e)) or
Takeover Proposal shall have occurred and the Board of Directors of Company
in connection therewith, does not within ten
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(10) business days of such occurrence (i) reconfirm its approval and
recommendation of this Agreement and the transactions contemplated hereby,
and (ii) reject such Takeover Proposal or Trigger Event (in the case of a
Trigger Event involving a tender or exchange offer); or
(f) by either Parent or Company 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) any required approval of the stockholders of Company 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 (provided that the right to terminate this Agreement under this
subsection (ii) shall not be available to either party where the failure to
obtain such stockholder approval shall have been caused by the action or
failure to act of such party and such action or failure constitutes a
breach by such party of this Agreement).
7.2 Effect of Termination. In the event of termination of this Agreement
as provided in Section 7.1, this Agreement shall forthwith become void and there
shall be no liability or obligation on the part of Parent, Merger Sub or Company
or their respective officers, directors, stockholders or affiliates, except to
the extent that such termination results from the breach by a party hereto of
any of its representations, warranties or covenants set forth in this Agreement;
provided that (a) the provisions of Section 5.4 (Confidentiality), Section 7.3
(Expenses and Termination Fees), this Section 7.2 and Article VIII shall remain
in full force and effect and survive any termination of this Agreement and (b)
nothing herein shall relieve any party from liability in connection with a
willful breach of the representations or warranties of such party to this
Agreement or the breach of any covenant or agreement set forth in this
Agreement.
7.3 Expenses and Termination Fees.
(a) Subject to subsections (b), (c), (d) and (e) of this Section 7.3,
whether or not the Merger is consummated, all costs and expenses incurred in
connection with this Agreement and the transactions contemplated hereby
(including, without limitation, the fees and expenses of its advisers,
accountants and legal counsel) shall be paid by the party incurring such
expense, except that expenses incurred in connection with printing the Proxy
Materials and the Registration Statement, registration and filing fees incurred
in connection with the Registration Statement, the Proxy Materials and the
listing of additional shares pursuant to Section 6.1(f) and fees, costs and
expenses associated with compliance with applicable state securities laws in
connection with the Merger shall be shared equally by Company and Parent.
(b) In the event that (i) Parent shall terminate this Agreement pursuant to
Section 7.1(e); (ii) Parent shall terminate this Agreement pursuant to Section
7.1(c)(iii) as a result of the failure by Company, its stockholders who are
parties to the Stockholder Agreements, and each of their respective directors,
officers, employees, affiliates and controlling persons, or any person
authorized by such persons, to comply with the requirements of Section 4.3;
(iii) Parent shall terminate this Agreement pursuant to Section 7.1(c)(iv) and
at the time of such recommendation, endorsement, acceptance, agreement or
resolution under Section 7.1(c)(iv), there shall not exist circumstances giving
rise to a Material Adverse Effect on Parent; (iv) Parent (or in the case of
Section 7.1(f)(ii), Company) shall terminate this Agreement pursuant to Section
7.1(c)(ii) or 7.1(f)(ii) and, prior to such withdrawal, modification or
stockholder rejection, there shall have been (A) a Trigger Event with respect to
Company or (B) a Takeover Proposal with respect to Company which at the time of
such withdrawal, modification or stockholder rejection shall not have been
rejected by Company or withdrawn by the other party and at the time of such
withdrawal, modification or stockholder rejection under Section 7.1(c)(ii) or
7.1(f)(ii), there shall not exist circumstances giving rise to a Material
Adverse Effect on Parent; or (v) Parent (or in the case of Section 7.1(b),
Company, provided that this clause (v) shall not apply if an action or
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failure to act on the part of Parent has been the cause of or resulted in the
failure of the Merger to occur on or before the date specified in Section 7.1(b)
and such action or failure to act constitutes a breach of this Agreement) shall
terminate this Agreement pursuant to Section 7.1(b), 7.1(c)(i) or 7.1(c)(v) due
in whole or in part to any failure by Company to use its reasonable best efforts
to perform and comply with all agreements and conditions required by this
Agreement to be performed or complied with by Company prior to or on the Closing
Date or any failure by Company's affiliates to take any actions required to be
taken hereby, and prior thereto there shall have been (A) a Trigger Event with
respect to Company or (B) a Takeover Proposal with respect to Company which
shall not have been rejected by Company or withdrawn by the other party, then
Company shall promptly reimburse Parent for all of the out-of-pocket costs and
expenses incurred by Parent in connection with this Agreement and the
transactions contemplated hereby (including, without limitation, the fees and
expenses of its advisors, accountants and legal counsel), and, in addition to
any other remedies Parent may have, Company shall promptly pay to Parent the sum
of $150,000,000.
(c) In the event that (i) Parent shall terminate this Agreement pursuant to
Section 7.1(c)(i) or 7.1(c)(v) under circumstances not described in Section
7.3(b)(v); or (ii) Parent shall terminate this Agreement pursuant to Section
7.1(c)(ii) or 7.1(f)(ii) (under circumstances not described in Section
7.3(b)(iv)) and at the time of such withdrawal, modification or stockholder
rejection, there shall not exist circumstances giving rise to a Material Adverse
Effect on Parent, Company shall promptly reimburse Parent for all of the
out-of-pocket costs and expenses incurred by Parent in connection with this
Agreement and the transactions contemplated hereby (including, without
limitation, the fees and expenses of its advisors, accountants and legal
counsel); and, in the event (A) any Takeover Proposal or Trigger Event is,
within twelve months of the later of (x) such termination of this Agreement and
(y) the payment of the above described expenses, consummated (as defined in
Section 7.3(g)) by or with any person (or any affiliate of any person) that made
a Takeover Proposal prior to termination of this Agreement or that caused a
Trigger Event prior to such termination, or (B) any other Takeover Proposal or
Trigger Event not described in clause (A) is consummated (as defined in Section
7.3(g)) within six months of the later of (x) such termination of this Agreement
and (y) the payment of the above-described expenses, Company shall promptly pay
to Parent the additional sum of $150,000,000 (less any amounts paid by Company
to Parent under Section 7.3(b)).
(d) In the event that Company shall terminate this Agreement pursuant to
Section 7.1(d) Parent shall promptly reimburse Company for all of the
out-of-pocket costs and expenses incurred by Company in connection with this
Agreement and the transactions contemplated hereby (including, without
limitation, the fees and expenses of its advisors, accountants and legal
counsel).
(e) As used herein, a "Trigger Event" shall occur if any Person (as that
term is defined in Section 13(d) of the Exchange Act and the regulations
promulgated thereunder) acquires securities representing 15% or more, or
commences a tender or exchange offer, open market purchase program or other
publicly announced initiative following the successful consummation of which the
offeror and its affiliate would beneficially own securities representing 15% or
more, of the voting power of Company; provided, however, a Trigger Event shall
not be deemed to include the acquisition by any Person of securities
representing 15% or more of Company if such Person has acquired such securities
not with the purpose nor with the effect of changing or influencing the control
of Company, nor in connection with or as a participant in any transaction having
such purpose or effect, including without limitation not in connection with such
Person (i) making any public announcement with respect to the voting of such
shares at any meeting to consider any merger, consolidation, sale of substantial
assets or other business combination or extraordinary transaction involving
Company; (ii) making, or in any way participating in, any "solicitation" of
"proxies" (as such terms are defined or used in Regulation 14A under the
Exchange Act) to vote any voting securities of Company (including, without
limitation, any such
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solicitation subject to Rule 14a-11 under the Exchange Act) or seeking to advise
or influence any Person with respect to the voting of any voting securities of
Company, directly or indirectly, relating to a merger or other business
combination involving Company or the sale or transfer of a significant portion
of assets (excluding the sale or disposition of assets in the ordinary course of
business) of Company; (iii) forming, joining or in any way participating in any
"group" within the meaning of Section 13(d)(3) of the Exchange Act with respect
to any voting securities of Company, directly or indirectly, relating to a
merger or other business combination involving Company or the sale or transfer
of a significant portion of assets (excluding the sale or disposition of assets
in the ordinary course of business) of Company; or (iv) otherwise acting, alone
or in concert with others, to seek control of Company or to seek to control or
influence the management or policies of Company.
(f) For purposes of this Agreement, "Takeover Proposal" means any offer or
proposal for, or any indication of interest in, a merger or other business
combination involving Company or any of its subsidiaries or the acquisition of
15% or more of the outstanding shares of capital stock of Company, or a
significant portion of the assets of, Company or any of its subsidiaries, other
than the transactions contemplated by this Agreement.
(g) For purposes of Section 7.3(c) above, (A) "consummation" of a Takeover
Proposal shall occur on the date a written agreement is entered into with
respect to a merger or other business combination involving Company or the
acquisition of 15% or more of the outstanding shares of capital stock of
Company, or sale or transfer of any material assets (excluding the sale or
disposition of assets in the ordinary course of business) of Company or any of
its subsidiaries and (B) "consummation" of a Trigger Event shall occur on the
date any Person (other than any stockholder which currently owns 15% or more of
the outstanding shares of capital stock of Company, provided that such
stockholder does not increase its ownership) or any of its affiliates or
associates would beneficially own securities representing 15% or more of the
voting power of Company, following a tender or exchange offer.
7.4 Amendment. The boards of directors of the parties hereto may cause
this Agreement to be amended at any time by execution of an instrument in
writing signed on behalf of each of the parties hereto; provided that an
amendment made subsequent to adoption of the Agreement by the stockholders of
Company or Merger Sub shall not (i) alter or change the amount or kind of
consideration to be received on conversion of the Company Common Stock, (ii)
alter or change any term of the Certificate of Incorporation of the Surviving
Corporation to be effected by the Merger, or (iii) alter or change any of the
terms and conditions of the Agreement if such alteration or change would
materially adversely affect the holders of Company Common Stock or Merger Sub
Common Stock.
7.5 Extension; Waiver. At any time prior to the Effective Time any party
hereto may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties made to such
party contained herein or in any document delivered pursuant hereto and (iii)
waive compliance with any of the agreements or conditions for the benefit of
such party contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party.
ARTICLE VIII
GENERAL PROVISIONS
8.1 Non-Survival at Effective Time. The representations, warranties and
agreements set forth in this Agreement shall terminate at the Effective Time,
except that the agreements set forth in Article I, Section 5.4
(Confidentiality), 5.9 (Employee Benefit Plans), 5.10 (Forms S-3 and S-8), 5.16
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(Indemnification), 5.18 (Pooling Accounting), 5.21 (Best Efforts and Further
Assurances), 7.3 (Expenses and Termination Fees), 7.4 (Amendment), and this
Article VIII shall survive the Effective Time.
8.2 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally or by commercial
delivery service, or mailed by registered or certified mail (return receipt
requested) or sent via facsimile (with confirmation of receipt) to the parties
at the following address (or at such other address for a party as shall be
specified by like notice):
(a) if to Parent or Merger Sub, to:
Cisco Systems, Inc.
170 West Tasman Drive
San Jose, California 95134-1706
Attention: Senior Vice President, Legal and Government Affairs
Facsimile No.: (408) 526-5926
Telephone No.: (408) 526-8252
with a copy to:
Brobeck, Phleger & Harrison LLP
Two Embarcadero Place
2200 Geng Road
Palo Alto, California 94303
Attention: Therese A. Mrozek, Esq.
Facsimile No.: (212) 586-7878
Telephone No.: (212) 237-2515
(b) if to Company, to:
Arrowpoint Communications, Inc.
50 Nagog Park
Acton, Massachusetts 01720
Attention: Charlie Gray, General Counsel
Facsimile No: (978) 206-3254
Telephone No.: (978) 206-3000
with a copy to:
Hale and Dorr LLP
60 State Street
Boston, Massachusetts 02109-1803
Attention: Patrick J. Rondeau, Esq.
Facsimile No.: (617) 526-5000
Telephone No.: (617) 526-6000
8.3 Interpretation. When a reference is made in this Agreement to Exhibits
or Schedules, such reference shall be to an Exhibit or Schedule to this
Agreement unless otherwise indicated. The words "include," "includes" and
"including" when used herein shall be deemed in each case to be followed by the
words "without limitation." The phrase "made available" in this Agreement shall
mean that the information referred to has been made available if requested by
the party to whom such information is to be made available. The phrases "the
date of this Agreement", "the date hereof", and terms of similar import, unless
the context otherwise requires, shall be deemed to refer to May 4, 2000. The
table of
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contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement.
8.4 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
8.5 Entire Agreement; Nonassignability; Parties in Interest. This
Agreement and the documents and instruments and other agreements specifically
referred to herein or delivered pursuant hereto, including the Exhibits, the
Schedules, including the Company Disclosure Schedule and the Parent Disclosure
Schedule (a) constitute the entire agreement among the parties with respect to
the subject matter hereof and supersede all prior agreements and understandings,
both written and oral, among the parties with respect to the subject matter
hereof, except for the Confidentiality Agreement, which shall continue in full
force and effect, and shall survive any termination of this Agreement or the
Closing, in accordance with its terms; (b) are not intended to confer upon any
other person any rights or remedies hereunder, except as set forth in Sections
1.6(a)-(c) and (f), 1.7-1.9, 5.9, 5.10, 5.12 and 5.16; and (c) shall not be
assigned by operation of law or otherwise except as otherwise specifically
provided.
8.6 Severability. In the event that any provision of this Agreement, or
the application thereof, becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable, the remainder of this
Agreement will continue in full force and effect and the application of such
provision to other persons or circumstances will be interpreted so as reasonably
to effect the intent of the parties hereto. The parties further agree to replace
such void or unenforceable provision of this Agreement with a valid and
enforceable provision that will achieve, to the extent possible, the economic,
business and other purposes of such void or unenforceable provision.
8.7 Remedies Cumulative. Except as otherwise provided herein, any and all
remedies herein expressly conferred upon a party will be deemed cumulative with
and not exclusive of any other remedy conferred hereby, or by law or equity upon
such party, and the exercise by a party of any one remedy will not preclude the
exercise of any other remedy.
8.8 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, without regard to the laws
that might otherwise govern under applicable principles of conflicts of law.
Each of the parties hereto irrevocably consents to the exclusive jurisdiction of
any court located within the State of Delaware in connection with any matter
based upon or arising out of this Agreement or the matters contemplated herein,
agrees that process may be served upon them in any manner authorized by the laws
of the State of Delaware for such persons and waives and covenants not to assert
or plead any objection which they might otherwise have to such jurisdiction and
such process.
8.9 Rules of Construction. The parties hereto agree that they have been
represented by counsel during the negotiation, preparation and execution of this
Agreement and, therefore, waive the application of any law, regulation, holding
or rule of construction providing that ambiguities in an agreement or other
document will be construed against the party drafting such agreement or
document.
[Signature page follows.]
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<PAGE> 63
IN WITNESS WHEREOF, Company, Parent and Merger Sub have caused this
Agreement and Plan of Merger and Reorganization to be executed and delivered by
their respective officers thereunto duly authorized, all as of the date first
written above.
CISCO SYSTEMS, INC.
By: /s/ LARRY R. CARTER
------------------------------------
Name: Larry R. Carter
----------------------------------
Title: Chief Financial Officer
-----------------------------------
ARROWPOINT COMMUNICATIONS, INC.
By: /s/ CHIN-CHENG WU
------------------------------------
Name: Chin-Cheng Wu
----------------------------------
Title: Chief Executive Officer
-----------------------------------
ARCHER ACQUISITION CORPORATION
By: /s/ LARRY R. CARTER
------------------------------------
Name: Larry R. Carter
----------------------------------
Title: Chief Financial Officer
-----------------------------------
SIGNATURE PAGE TO AGREEMENT AND
PLAN OF MERGER AND REORGANIZATION
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<PAGE> 64
EXHIBIT 2
Stockholder Agreement
<PAGE> 65
STOCKHOLDER AGREEMENT
THIS STOCKHOLDER AGREEMENT (this "Agreement") is entered into as of May 4,
2000, by and among Cisco Systems, Inc., a California corporation ("Parent"),
Archer Acquisition Corporation, a Delaware corporation and wholly owned
subsidiary of Parent ("Merger Sub"), and the undersigned stockholder
("Stockholder") of ArrowPoint Communications, Inc., a corporation existing under
the laws of Delaware ("Company").
RECITALS:
WHEREAS, Parent has agreed to acquire the outstanding securities of Company
pursuant to a statutory merger of Merger Sub with and into Company (the
"Merger") effected in part through the conversion of each outstanding share of
capital stock of Company (the "Company Capital Stock"), into shares of common
stock of Parent (the "Parent Shares") at the rate set forth in the Agreement and
Plan of Merger and Reorganization dated as of May 4, 2000 by and among Parent,
Merger Sub and Company (such agreement as it may be amended or restated is
hereinafter referred to as the "Reorganization Agreement") (the "Transaction");
WHEREAS, Stockholder is the registered and beneficial owner of such number
of shares of the outstanding Company Capital Stock as is indicated on the
signature page of this Agreement (the "Shares"); and
WHEREAS, in order to induce Parent to enter into the Transaction, certain
stockholders of Company have agreed to vote the Shares and any other such shares
of Company Capital Stock so as to facilitate consummation of the Transaction.
NOW, THEREFORE, in consideration of the promises and mutual agreements,
provisions and covenants set forth in the Reorganization Agreement, the parties
hereto agree as follows:
1. Share Ownership and Agreement to Retain Shares.
1.1 Encumbrance.
(a) Stockholder represents, warrants and covenants to Parent that (i)
Stockholder is the beneficial owner of that number of Shares of Company
Capital Stock set forth on the signature page hereto; (ii) except as
otherwise set forth on the signature page hereto, Stockholder has held such
Company Capital Stock at all times since the date set forth on such
signature page; (iii) the Shares constitute the Stockholder's entire
interest in the outstanding Company Capital Stock; (iv) no other person or
entity not a signatory to this Agreement has a beneficial interest in or a
right to acquire the Shares or any portion of the Shares; and (v) the
Shares are and will be at all times up until the Expiration Date free and
clear of any liens, claims, options, charges or other encumbrances. As used
herein, the term "Expiration Date" shall mean the earlier to occur of (A)
the Effective Time (as defined in the Reorganization Agreement) of the
Transaction, and (B) the termination of the Reorganization Agreement.
1.2 New Shares. Stockholder agrees that any shares of Company Capital
Stock that Stockholder purchases or with respect to which Stockholder
otherwise acquires beneficial ownership after the date of this Agreement
and prior to the Expiration Date ("New Shares") shall be subject to the
terms and conditions of this Agreement to the same extent as if they
constituted Shares.
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2. Agreement to Vote Shares. Prior to the Expiration Date, at every meeting
of the stockholders of Company called with respect to any of the following, and
at every adjournment thereof, and on every action or approval by written
resolution of the stockholders of Company with respect to any of the following,
Stockholder shall vote the Shares and any New Shares in favor of approval of the
Transaction and any matter that could reasonably be expected to facilitate the
Transaction.
3. Irrevocable Proxy. Stockholder is hereby delivering to Parent a duly
executed proxy in the form attached hereto as Exhibit A (the "Proxy") with
respect to each meeting of stockholders of Company, such Proxy to cover the
total number of Shares and New Shares in respect of which Stockholder is
entitled to vote at any such meeting. Upon the execution of this Agreement by
the Stockholder, the Stockholder hereby revokes any and all prior proxies given
by the Stockholder with respect to the Shares and agrees not to grant any
subsequent proxies with respect to the Shares or any New Shares until after the
Expiration Date.
4. Representations, Warranties and Covenants of Stockholder. Stockholder
hereby represents, warrants and covenants to Parent as follows:
(a) Until the Expiration Date, the Stockholder will not (i) initiate
or solicit, directly or indirectly, any proposal, plan of offer to acquire
all or any substantial part of the business or properties or Company
Capital Stock, whether by merger, purchase of assets, tender offer or
otherwise, or to liquidate Company or otherwise distribute to the
Stockholders of Company all or any substantial part of the business,
properties or Company Capital Stock (each, an "Acquisition Proposal"); (ii)
initiate, directly or indirectly, any contact with any person in an effort
to or with a view towards soliciting any Acquisition Proposal; (iii)
furnish information concerning Company's business, properties or assets to
any corporation, partnership, person or other entity or group (other than
Parent or Merger Sub, or any associate, agent or representative of Parent
or Merger Sub), under any circumstances that would reasonably be expected
to relate to an actual or potential Acquisition Proposal; or (iv) negotiate
or enter into discussions or an agreement, directly or indirectly, with any
entity or group with respect of any potential Acquisition Proposal provided
that, in the case of clauses (iii) and (iv), the foregoing shall not
prevent Stockholder, in Stockholder's capacity as a director or officer (as
the case may be) of Company, from taking any actions permitted under
Section 4.3 of the Reorganization Agreement. In the event the Stockholder
shall receive or become aware of any Acquisition Proposal subsequent to the
date hereof, such Stockholder shall promptly inform Parent as to any such
matter and the details thereof to the extent possible without breaching any
other agreement to which such Stockholder is a party or violating its
fiduciary duties.
(b) Stockholder is competent to execute and deliver this Stockholder
Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby. This Stockholder Agreement has been duly
and validly executed and delivered by Stockholder and, assuming the due
authorization, execution and delivery by Parent, constitutes a legal, valid
and binding obligation of Stockholder, enforceable against Stockholder in
accordance with its terms except that (i) the enforceability thereof may be
subject to applicable bankruptcy, insolvency or other similar laws, now or
hereinafter in effect affecting creditors' rights generally and (ii) the
availability of the remedy of specific performance or injunctive or other
forms of equitable relief may be subject to equitable defenses and would be
subject to the discretion of the court before which any proceeding therefor
may be brought.
(c) The execution and delivery of this Stockholder Agreement by
Stockholder does not, and the performance of this Stockholder Agreement by
Stockholder shall not result in any breach of or constitute a default (or
an event that with notice or lapse of time or both would become a default)
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<PAGE> 67
under, or give to others any rights of termination, amendment, acceleration
or cancellation of, or result in the creation of a lien or encumbrance, on
any of the Shares or New Shares pursuant to, any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which Stockholder is a party or by which
Stockholder or the Shares or New Shares are or will be bound or affected.
5. Additional Documents. Stockholder hereby covenants and agrees to execute
and deliver any additional documents necessary or desirable, in the reasonable
opinion of Parent, to carry out the purpose and intent of this Agreement.
6. Consent and Waiver. Stockholder hereby gives any consents or waivers
that are reasonably required for the consummation of the Transaction under the
terms of any agreement to which Stockholder is a party or pursuant to any rights
Stockholder may have in its capacity as a stockholder of the Company.
7. Termination. This Agreement and the Proxy delivered in connection
herewith shall terminate and shall have no further force or effect as of the
Expiration Date.
8. Confidentiality. Stockholder agrees (i) to hold any information
regarding this Agreement and the Transaction in strict confidence, and (ii) not
to divulge any such information to any third person, until such time as the
Transaction has been publicly disclosed by Parent, except as may otherwise be
required by law.
9. Miscellaneous.
9.1 Severability. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid,
void or unenforceable, then the remainder of the terms, provisions,
covenants and restrictions of this Agreement shall remain in full force and
effect and shall in no way be affected, impaired or invalidated.
9.2 Binding Effect and Assignment. This Agreement and all of the
provisions hereof shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns, but,
except as otherwise specifically provided herein, neither this Agreement
nor any of the rights, interests or obligations of the parties hereto may
be assigned by either of the parties hereto without the prior written
consent of the other. This Agreement is binding upon Stockholder in
Stockholder's capacity as a stockholder of Company (and not in
Stockholder's capacity as a director or officer, as the case may be, of
Company) and only with respect to the specific matters set forth herein.
9.3 Amendment and Modification. This Agreement may not be modified,
amended, altered or supplemented except by the execution and delivery of a
written agreement executed by the parties hereto.
9.4 Specific Performance; Injunctive Relief. The parties hereto
acknowledge that Parent will be irreparably harmed and that there will be
no adequate remedy at law for a violation of any of the covenants or
agreements of Stockholder set forth herein. Therefore, it is agreed that,
in addition to any other remedies that may be available to Parent or Merger
Sub upon any such violation, Parent and Merger Sub shall have the right to
seek to enforce such covenants and agreements by specific performance,
injunctive relief or by any other means available to Parent or Merger Sub
at law or in equity and the Stockholder hereby waives the absence of
irreparable harm as a defense in connection with such enforcement and
waives any requirement for the security or posting of any bond in
connection with such enforcement.
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9.5 Notices. All notices, requests, demands or other communications
that are required or may be given pursuant to the terms of this Stockholder
Agreement shall be in writing and shall be deemed to have been duly given
if delivered by hand or mailed by registered or certified mail, postage
prepaid, as follows:
(a) If to the Stockholder, at the address set forth below the
Stockholder's signature at the end hereof.
(b) if to Parent or Merger Sub, to:
Cisco Systems, Inc.
170 West Tasman Drive
San Jose, CA 95134-1706
Attention: Senior Vice President, Legal Governmental Affairs
Facsimile No.: (408) 526-5926
Telephone No.: (408) 526-8252
with a copy to:
Brobeck, Phleger & Harrison LLP
Two Embarcadero Place
2200 Geng Road
Palo Alto, California 94303
Attention: Therese A. Mrozek, Esq.
Facsimile No.: (650) 496-2885
Telephone No.: (650) 812-2583
(c) if to Stockholder, to its address set forth on the signature page
with a copy to:
Hale and Dorr LLP
60 State Street
Boston, Massachusetts 02109-1803
Attention: Patrick J. Rondeau, Esq.
Facsimile No.: (617) 526-5000
Telephone No.: (617) 526-6000
or to such other address as any party hereto may designate for itself by
notice given as herein provided.
9.6 Governing Law. This Amendment shall be governed by, construed and
enforced in accordance with the laws of the State of Delaware without
regard to any applicable conflicts of laws rules.
9.7 Entire Agreement. This Agreement and the Proxy contain the entire
understanding of the parties hereto in respect of the subject matter
hereof, and supersede all prior negotiations and understandings among the
parties hereto with respect to such subject matter.
9.8 Counterpart. This Agreement may be executed in several
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same agreement.
9.9 Effect of Headings. The section headings herein are for
convenience only and shall not affect the construction or interpretation of
this Agreement.
[Signature page follows.]
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IN WITNESS WHEREOF, the parties hereto have caused this Stockholder
Agreement to be executed as of the date first above written.
<TABLE>
<S> <C>
CISCO SYSTEMS, INC. STOCKHOLDER
By: By:
------------------------------------------------- -------------------------------------------------
Name: Title:
----------------------------------------------- -----------------------------------------------
Title:
-----------------------------------------------
ARCHER ACQUISITION CORPORATION
By: By:
------------------------------------------------- -------------------------------------------------
Name: Title:
----------------------------------------------- -----------------------------------------------
Title:
-----------------------------------------------
By:
</TABLE>
Total Number of Shares of Company Capital Stock owned on the date hereof:
Common Stock:
------------------------
[SIGNATURE PAGE TO STOCKHOLDER AGREEMENT]
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<PAGE> 70
EXHIBIT 3
Stock Option Agreement
<PAGE> 71
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT (the "Agreement"), dated as of May 4, 2000, by and
between Cisco Systems, Inc., a California corporation ("Parent"), and ArrowPoint
Communications, Inc., a Delaware corporation ("Company").
WHEREAS, concurrently with the execution and delivery of this Agreement,
Company, Parent and Archer Acquisition Corporation, a Delaware corporation and
wholly owned subsidiary of Parent ("Merger Sub"), are entering into an Agreement
and Plan of Merger and Reorganization (the "Reorganization Agreement"), which
provides, among other things, that upon the terms and subject to the conditions
thereof, Merger Sub will be merged with and into Company (the "Merger"), with
Company continuing as the surviving corporation; and
WHEREAS, as a condition and inducement to Parent's willingness to enter
into the Reorganization Agreement, Parent has required that Company agree, and
Company has so agreed, to grant to Parent an option with respect to certain
shares of Company's common stock upon the terms and subject to the conditions
set forth herein.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements set forth herein and in the Reorganization Agreement,
the parties hereto agree as follows:
1. Grant of Option. Company hereby grants to Parent an irrevocable option
(the "Company Option") to purchase up to 6,974,047 shares (the "Company Shares")
of common stock, par value $.001 per share, of Company (the "Company Common
Stock") in the manner set forth below at a price (the "Exercise Price") of $135
per Company Share, payable in cash. Capitalized terms used herein but not
defined herein shall have the meanings set forth in the Reorganization
Agreement.
2. Exercise of Option. The Company Option may be exercised by Parent, in
whole or in part at any time or from time to time after the occurrence of any of
the events that obligates Company to pay Parent the Termination Fee pursuant to
Section 7.3(b) or 7.3(c) of the Reorganization Agreement. In the event Parent
wishes to exercise the Company Option, Parent shall deliver to Company a written
notice (an "Exercise Notice") specifying the total number of Company Shares it
wishes to purchase. Each closing of a purchase of Company Shares (a "Closing")
shall occur at a place, on a date and at a time designated by Parent in an
Exercise Notice delivered at least two business days prior to the date of the
Closing for such purchase.
3. Termination of Option. The Company Option shall terminate upon the
earlier of: (a) the Effective Time; (b) the termination of the Reorganization
Agreement pursuant to Section 7.1 thereof (other than a termination in
connection with which Parent is entitled to any payments as specified in
Sections 7.3(b) or (c) thereof); (c) 180 days following any termination of the
Reorganization Agreement in connection with which Parent is entitled to a
payment as specified in Section 7.3(b) thereof (or if, at the expiration of such
180-day period, the Company Option cannot be exercised by reason of any
applicable judgment, decree, order, law or regulation, ten business days after
such impediment to exercise shall have been removed or shall have become final
and not subject to appeal); or (d) 270 days following any termination of the
Reorganization Agreement in connection with which Parent is entitled to a
payment as specified in Section 7.3(c) thereof (or if, at the expiration of such
270-day period, the Company Option cannot be exercised by reason of any
applicable judgment, decree, order, law or regulation, ten business days after
such impediment to exercise shall have been removed or shall have become final
and not subject to appeal); provided, however, that if Parent has exercised the
Company Option but the Closing has not occurred as provided in Section 5 with
respect to such exercise, the
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Company Option shall survive until immediately following such Closing.
Notwithstanding the foregoing, the Company Option may not be exercised if Parent
is in material breach of any of its representations, warranties, covenants or
agreements contained in this Agreement or in the Reorganization Agreement.
4. Conditions to Closing. The obligation of Company to issue the Company
Shares to Parent hereunder is subject to the conditions that (a) all waiting
periods, if any, under the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended, and the rules and regulations promulgated thereunder ("HSR Act"),
applicable to the issuance of the Company Shares hereunder shall have expired or
have been terminated; (b) all consents, approvals, orders or authorizations of,
or registrations, declarations or filings with, any federal, state or local
administrative agency or commission or other federal, state or local
governmental authority or instrumentality, if any, required in connection with
the issuance of the Company Shares hereunder shall have been obtained or made,
as the case may be; and (c) no preliminary or permanent injunction or other
order by any court of competent jurisdiction prohibiting or otherwise
restraining such issuance shall be in effect. Company shall use its reasonable
best efforts to satisfy such conditions as soon as practicable after Parent
exercises the Company Option.
5. Closing. At any Closing, (a) Company will deliver to Parent a single
certificate in definitive form representing the number of Company Shares
designated by Parent in its Exercise Notice, such certificate to be registered
in the name of Parent and to bear the legend set forth in Section 11, and (b)
Parent will deliver to Company the aggregate price for the Company Shares so
designated and being purchased by wire transfer of immediately available funds
or certified check or bank check. At any Closing at which Parent is exercising
the Company Option in part, Parent shall present and surrender this Agreement to
Company, and Company shall deliver to Parent an executed new agreement with the
same terms as this Agreement evidencing the right to purchase the balance of the
shares of Company Common Stock purchasable hereunder.
6. Representations and Warranties of Company. Company represents and
warrants to Parent that (a) Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
the corporate power and authority to enter into this Agreement and to carry out
its obligations hereunder; (b) the execution and delivery of this Agreement by
Company and the consummation by Company of the transactions contemplated hereby
have been duly authorized by all necessary corporate action on the part of
Company and no other corporate proceedings on the part of Company are necessary
to authorize this Agreement or any of the transactions contemplated hereby; (c)
this Agreement has been duly executed and delivered by Company and constitutes a
valid and binding obligation of Company, and, assuming this Agreement
constitutes a valid and binding obligation of Parent, enforceable against
Company in accordance with its terms, except as enforceability may be limited by
bankruptcy and other laws affecting the rights and remedies of creditors
generally and general principles of equity; (d) Company has taken all necessary
corporate action to authorize and reserve for issuance and to permit it to
issue, upon exercise of the Company Option, and at all times from the date
hereof through the expiration of the Company Option will have reserved, that
number of unissued Company Shares that are subject to the Company Option, all of
which, upon their issuance and delivery in accordance with the terms of this
Agreement, will be validly issued, fully paid and nonassessable; (e) upon
delivery of the Company Shares to Parent upon the exercise of the Company
Option, Parent will acquire the Company Shares free and clear of all claims,
liens, charges, encumbrances and security interests of any nature whatsoever;
(f) except as may be required under the Securities Act of 1933, as amended (the
"Securities Act"), the execution and delivery of this Agreement by Company does
not, and the performance of this Agreement by Company will not, conflict with,
or result in any violation of, or default (with or without notice or lapse of
time, or both) under, or give rise to a right of termination, cancellation or
acceleration of any obligation or the loss of a benefit under, or the creation
of a lien, pledge, security interest or other encumbrance on assets pursuant to
(any such conflict, violation, default,
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right of termination, cancellation or acceleration, loss or creation, a
"Violation"), (i) any provision of the Certificate of Incorporation, as amended,
or Bylaws, as amended, of Company or (ii) any provisions of any material
mortgage, indenture, lease, contract or other agreement, instrument, permit,
concession, franchise, or license or (iii) any judgment, order, decree, statute,
law, ordinance, rule or regulation applicable to Company or its properties or
assets, which Violation, in the case of each of clauses (ii) and (iii), would
have a Material Adverse Effect on Company; and (g) except as described in
Section 2.3 of the Reorganization Agreement, the execution and delivery of this
Agreement by Company does not, and the performance of this Agreement by Company
will not, require any consent, approval, authorization or permit of, or filing
with or notification to, any governmental or regulatory authority, other than
applicable filings with and payment of fees to The Nasdaq National Market with
respect to the inclusion for quotation thereon of the additional shares of
Company Common Stock which may be purchased hereunder.
7. Representations and Warranties of Parent. Parent represents and warrants
to Company that (a) Parent is a corporation duly organized, validly existing and
in good standing under the laws of the State of California and has the corporate
power and authority to enter into this Agreement and to carry out its
obligations hereunder; (b) the execution and delivery of this Agreement by
Parent and the consummation by Parent of the transactions contemplated hereby
have been duly authorized by all necessary corporate action on the part of
Parent and no other corporate proceedings on the part of Parent are necessary to
authorize this Agreement or any of the transactions contemplated hereby; (c)
this Agreement has been duly executed and delivered by Parent and constitutes a
valid and binding obligation of Parent, enforceable against Parent in accordance
with its terms, except as enforceability may be limited by bankruptcy and other
laws affecting the rights and remedies of creditors generally and general
principles of equity; (d) except as described in Section 3.3 of the
Reorganization Agreement, the execution and delivery of this Agreement by Parent
does not, and the performance of this Agreement by Parent will not, result in
any Violation pursuant to, (i) any provision of the Articles of Incorporation or
By-laws of Parent, (ii) any provisions of any material mortgage, indenture,
lease, contract or other agreement, instrument, permit, concession, franchise,
or license or (iii) any judgment, order, decree, statute, law, ordinance, rule
or regulation applicable to Parent or its properties or assets, which Violation,
in the case of each of clauses (ii) and (iii), would have a Material Adverse
Effect on Parent; (e) except as described in Section 3.3 of the Reorganization
Agreement and Section 4(a) of this Agreement, and except as may be required
under the Securities Act and the Securities Exchange Act of 1934, as amended,
the execution and delivery of this Agreement by Parent does not, and the
performance of this Agreement by Parent will not, require any consent, approval,
authorization or permit of, or filing with or notification to, any governmental
or regulatory authority; and (f) any Company Shares acquired upon exercise of
the Company Option will not be, and the Company Option is not being, acquired by
Parent with a view to the public distribution thereof.
8. Put and Call.
(a) Exercise. At any time during which the Company Option is exercisable
pursuant to Sections 2 and 3 (the "Repurchase Period"), upon demand by Parent,
Parent shall have the right to sell to Company (or any successor entity
thereof), and Company (or such successor entity) shall be obligated to
repurchase from Parent (the "Put"), and upon demand by Company following two (2)
business days' prior notice, Company (or any successor entity thereof) shall
have the right to purchase from Parent and Parent shall be obligated to sell to
Company (or any successor entity) (the "Call") all or any portion of the Company
Option, to the extent not previously exercised, at the price set forth in
subparagraph
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(i) below, or all or any portion of the Company Shares purchased by Parent
pursuant thereto, at a price set forth in subparagraph (ii) below:
(i) The difference between the "Market/Tender Offer Price" for shares
of Company Common Stock as of the date (the "Notice Date") notice of
exercise of the Put or Call is given to a party (defined as the higher of
(A) the price per share offered as of the Notice Date pursuant to any
tender or exchange offer or other Takeover Proposal that was made prior to
the Notice Date and not terminated or withdrawn as of the Notice Date (the
"Tender Price") or (B) the average of the closing prices of shares of
Company Common Stock on The Nasdaq National Market for the ten trading days
immediately preceding the Notice Date (the "Market Price")), and the
Exercise Price, multiplied by the number of Company Shares purchasable
pursuant to the Company Option (or portion thereof with respect to which
Parent is exercising its rights under this Section 8), but only if the
Market/Tender Offer Price is greater than the Exercise Price.
(ii) The Exercise Price paid by Parent for the Company Shares acquired
pursuant to the Company Option plus the difference between the
Market/Tender Offer Price and the Exercise Price, but only if the
Market/Tender Offer Price is greater than the Exercise Price, multiplied by
the number of Company Shares so purchased.
(iii) Notwithstanding subparagraphs (i) and (ii) above, in no event
shall the proceeds payable to Parent pursuant to this Section 8 exceed the
sum of (x) $150,000,000 plus (y) the Exercise Price multiplied by the
number of Company Shares purchased minus (z) any amount paid to Parent by
Company pursuant to Section 7.3(b) or Section 7.3(c) of the Reorganization
Agreement.
(b) For purposes of Section 8(a), the Tender Price shall be the highest
price per share offered pursuant to a tender or exchange offer or other Takeover
Proposal during the Repurchase Period.
(c) Payment and Redelivery of Company Option or Shares. In the event Parent
or Company exercises its rights under this Section 8, Company shall, within ten
business days of the Notice Date, pay the required amount to Parent in
immediately available funds and Parent shall surrender to Company the Company
Option or the certificates evidencing the Company Shares purchased by Parent
pursuant thereto, and Parent shall warrant that it owns such shares and that
such shares are then free and clear of all liens, claims, charges and
encumbrances of any kind or nature whatsoever.
9. Registration Rights.
(a) Following any exercise of the Company Option, Parent may by written
notice (the "Registration Notice") to Company request Company to register under
the Securities Act all or any part of the shares of Company Common Stock
acquired pursuant to this Agreement (the "Restricted Shares") beneficially owned
by Parent (the "Registrable Securities") pursuant to a bona fide firm commitment
underwritten public offering in which Parent and the underwriters shall effect
as wide a distribution of such Registrable Securities as is reasonably
practicable and shall use their reasonable best efforts to prevent any Person
(including any Group) and its affiliates from purchasing through such offering
Restricted Shares representing more than 1% of the outstanding shares of Common
Stock of Company on a fully diluted basis (a "Permitted Offering"); provided,
further, that any such Registration Notice must relate to a number of shares
equal to at least 2% of the outstanding shares of Company Common Stock and that
any rights to require registrations hereunder shall terminate with respect to
any shares that may be sold pursuant to Rule 144(k) under the Securities Act.
The Registration Notice shall include a certificate executed by Parent and its
proposed managing underwriter, which underwriter shall be an investment banking
firm of nationally recognized standing (the "Manager"), stating that (i) they
have a good faith intention to commence promptly a Permitted Offering and (ii)
the Manager in good faith believes that, based on the then prevailing market
conditions, it will be able to sell the Registrable Securities at a per
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share price equal to at least 80% of the Fair Market Value of such shares. For
purposes of this Section 9, the term "Fair Market Value" shall mean the per
share average of the closing sale prices of Company's Common Stock on The Nasdaq
National Market for the ten trading days immediately preceding the date of the
Registration Notice.
(b) Company shall use its reasonable best efforts to effect, as promptly as
practicable, the registration under the Securities Act of the unpurchased
Registrable Securities; provided, however, that (i) Parent shall not be entitled
to more than an aggregate of two effective registration statements hereunder and
(ii) Company will not be required to file any such registration statement during
any period of time (not to exceed 40 days after such request in the case of
clause (A) below or 90 days in the case of clauses (B) and (C) below) when (A)
Company is in possession of material non-public information which it reasonably
believes (i) would be detrimental to be disclosed at such time and, (ii) after
consultation with counsel to Company, such information would have to be
disclosed if a registration statement were filed at that time; (B) Company is
required under the Securities Act to include audited financial statements for
any period in such registration statement and such financial statements are not
yet available for inclusion in such registration statement; or (C) Company
determines, in its reasonable judgment, that such registration would interfere
with any financing, acquisition or other material transaction involving Company
or any of its affiliates. If consummation of the sale of any Registrable
Securities pursuant to a registration hereunder does not occur within 120 days
after the filing with the SEC of the initial registration statement, the
provisions of this Section 9 shall again be applicable to any proposed
registration; provided, however, that Parent shall not be entitled to request
more than two registrations pursuant to this Section 9. Company shall use its
reasonable best efforts to cause any Registrable Securities registered pursuant
to this Section 9 to be qualified for sale under the securities or Blue Sky laws
of such jurisdictions as Parent may reasonably request and shall continue such
registration or qualification in effect in such jurisdiction; provided, however,
that Company shall not be required to qualify to do business in, or consent to
general service of process in, any jurisdiction by reason of this provision.
(c) The registration rights set forth in this Section 9 are subject to the
condition that Parent shall provide Company with such information with respect
to Parent's Registrable Securities, the plans for the distribution thereof, and
such other information with respect to Parent as, in the reasonable judgment of
counsel for Company, is necessary to enable Company to include in such
registration statement all material facts required to be disclosed with respect
to a registration thereunder.
(d) If Company's securities of the same type as the Registrable Securities
are then authorized for quotation or trading or listing on the New York Stock
Exchange, Nasdaq National Market System, or any other securities exchange or
automated quotations system, Company, upon the request of Parent, shall promptly
file an application, if required, to authorize for quotation, trading or listing
the shares of Registrable Securities on such exchange or system and will use its
reasonable efforts to obtain approval, if required, of such quotation, trading
or listing as soon as practicable.
(e) A registration effected under this Section 9 shall be effected at
Company's expense, except for underwriting discounts and commissions and the
fees and the expenses of counsel to Parent, and Company shall provide to the
underwriters such documentation (including certificates, opinions of counsel and
"comfort" letters from auditors) as are customary in connection with
underwritten public offerings as such underwriters may reasonably require. In
connection with any such registration, the parties agree (i) to indemnify each
other and the underwriters in the customary manner and (ii) to enter into an
underwriting agreement in form and substance customary to transactions of this
type with the Manager and the other underwriters participating in such offering.
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<PAGE> 76
10. Adjustment Upon Changes in Capitalization.
(a) In the event of any change in Company Common Stock by reason of stock
dividends, splitups, mergers (other than the Merger), recapitalizations,
combinations, exchange of shares or the like, the type and number of shares or
securities subject to the Company Option, and the purchase price per share
provided in Section 1, shall be adjusted appropriately, and proper provision
shall be made in the agreements governing such transaction so that Parent shall
receive, upon exercise of the Company Option, the number and class of shares or
other securities or property that Parent would have received in respect of the
Company Common Stock if the Company Option had been exercised immediately prior
to such event or the record date therefor, as applicable.
(b) In the event that Company shall enter in an agreement: (i) to
consolidate with or merge into any person, other than Parent or one of its
subsidiaries, and Company shall not be the continuing or surviving corporation
of such consolidation or merger; (ii) to permit any person, other than Parent or
one of its subsidiaries, to merge into Company and Company shall be the
continuing or surviving corporation, but, in connection with such merger, the
then-outstanding shares of Company Common Stock shall be changed into or
exchanged for stock or other securities of Company or any other person or cash
or any other property or the outstanding shares of Company Common Stock
immediately prior to such merger shall after such merger represent less than 50%
of the outstanding shares and share equivalents of the merged company; or (iii)
to sell or otherwise transfer all or substantially all of its assets to any
person, other than Parent or one of its subsidiaries, then, and in each such
case, the agreement governing such transaction shall make proper provisions so
that upon the consummation of any such transaction and upon the terms and
conditions set forth herein, Parent shall receive for each Company Share with
respect to which the Company Option has not been exercised an amount of
consideration in the form of and equal to the per share amount of consideration
that would be received by the holder of one share of Company Common Stock less
the Exercise Price (and, in the event of an election or similar arrangement with
respect to the type of consideration to be received by the holders of Company
Common Stock, subject to the foregoing, proper provision shall be made so that
the holder of the Company Option would have the same election or similar rights
as would the holder of the number of shares of Company Common Stock for which
the Company Option is then exercisable).
11. Restrictive Legends. Each certificate representing shares of Company
Common Stock issued to Parent hereunder shall include a legend in substantially
the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY BE
REOFFERED OR SOLD ONLY IF SO REGISTERED OR IF AN EXEMPTION FROM SUCH
REGISTRATION IS AVAILABLE. SUCH SECURITIES ARE ALSO SUBJECT TO ADDITIONAL
RESTRICTIONS ON TRANSFER AS SET FORTH IN THE STOCK OPTION AGREEMENT, DATED
AS OF MAY 4, 2000, A COPY OF WHICH MAY BE OBTAINED FROM THE ISSUER.
12. Binding Effect; No Assignment. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns. Except as expressly provided for in this Agreement, neither
this agreement nor the rights or the obligations of either party hereto are
assignable, except by operation of law, or with the written consent of the other
party. Nothing contained in this Agreement, express or implied, is intended to
confer upon any person other than the parties hereto and their respective
permitted assigns any rights or remedies of any nature whatsoever by reason of
this Agreement. Any Restricted Shares sold by Parent in compliance with the
provisions of Section 9 shall, upon consummation of such sale, be free of the
restrictions imposed with respect to such shares by this Agreement, unless and
until Parent shall repurchase or otherwise become the
B-6
<PAGE> 77
beneficial owner of such shares, and any transferee of such shares shall not be
entitled to the rights of Parent. Certificates representing shares sold in a
registered public offering pursuant to Section 9 shall not be required to bear
the legend set forth in Section 11.
13. Specific Performance. The parties recognize and agree that if for any
reason any of the provisions of this Agreement are not performed in accordance
with their specific terms or are otherwise breached, immediate and irreparable
harm or injury would be caused for which money damages would not be an adequate
remedy. Accordingly, each party agrees that, in addition to other remedies, the
other party shall be entitled to seek an injunction restraining any violation or
threatened violation of the provisions of this Agreement. In the event that any
action should be brought in equity to enforce the provisions of this Agreement,
neither party will allege, and each party hereby waives the defense, that there
is adequate remedy at law.
14. Entire Agreement. This Agreement and the Reorganization Agreement
(including the Company Disclosure Schedule and the Parent Disclosure Schedule
relating thereto) constitute the entire agreement among the parties with respect
to the subject matter hereof and supersede all other prior agreements and
understandings, both written and oral, among the parties or any of them with
respect to the subject matter hereof.
15. Further Assurance. Each party will execute and deliver all such further
documents and instruments and take all such further action as may be necessary
in order to consummate the transactions contemplated hereby.
16. Validity. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of the other
provisions of this Agreement, which shall remain in full force and effect. In
the event any court or other competent authority holds any provision of this
Agreement to be null, void or unenforceable, the parties hereto shall negotiate
in good faith the execution and delivery of an amendment to this Agreement in
order, as nearly as possible, to effectuate, to the extent permitted by law, the
intent of the parties hereto with respect to such provision. Each party agrees
that, should any court or other competent authority hold any provision of this
Agreement or part hereof to be null, void or unenforceable, or order any party
to take any action inconsistent herewith, or not take any action required
herein, the other party shall not be entitled to specific performance of such
provision or part hereof or to any other remedy, including but not limited to
money damages, for breach hereof or of any other provision of this Agreement or
part hereof as the result of such holding or order.
17. Notices. Any notice or communication required or permitted hereunder
shall be in writing and either delivered personally, telegraphed or telecopied
or sent by certified or registered mail, postage prepaid, and shall be deemed to
be given, dated and received when so delivered personally, telegraphed or
telecopied or, if mailed, five business days after the date of mailing to the
following address or telecopy number, or to such other address or addresses as
such person may subsequently designate by notice given hereunder.
(a) if to Parent or Merger Sub, to:
Cisco Systems, Inc.
170 West Tasman Drive
San Jose, CA 95134
Attention: Senior Vice President, Legal and Government Affairs
Facsimile No.: (408) 526-5926
Telephone No.: (408) 526-8252
B-7
<PAGE> 78
with a copy to:
Brobeck, Phleger & Harrison LLP
Two Embarcadero Place
2200 Geng Road
Palo Alto, California 94303
Attention: Therese A. Mrozek, Esq.
Facsimile No.: (650) 496-2885
Telephone No.: (650) 424-0160
(b) if to Company, to:
ArrowPoint Communications, Inc.
50 Nagog Park
Acton, Massachusetts 01720
Attention: Charlie Gray, Esq.
Facsimile No.: (978) 206-3254
Telephone No.: (978) 206-3141
with a copy to:
Hale and Dorr LLP
60 State Street
Boston, Massachusetts 02109-1803
Attention: Patrick J. Rondeau, Esq.
Facsimile No.: (617) 526-5000
Telephone No.: (617) 526-6000
18. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware applicable to agreements made
and to be performed entirely within such State without regard to any applicable
conflicts of law rules.
19. Descriptive Headings. The descriptive headings herein are inserted for
convenience of reference only and are not intended to be part of or to affect
the meaning or interpretation of this Agreement.
20. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which,
taken together, shall constitute one and the same instrument.
21. Expenses. Except as otherwise expressly provided herein or in the
Reorganization Agreement, all costs and expenses incurred in connection with the
transactions contemplated by this Agreement shall be paid by the party incurring
such expenses.
22. Amendments; Waiver. This Agreement may be amended by the parties hereto
and the terms and conditions hereof may be waived only by an instrument in
writing signed on behalf of each of the parties hereto, or, in the case of a
waiver, by an instrument signed on behalf of the party waiving compliance.
[Signature page follows.]
B-8
<PAGE> 79
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective duly authorized officers as of the date first above
written.
CISCO SYSTEMS, INC.
By: /s/ LARRY R. CARTER
------------------------------------
Name: Larry R. Carter
Title: Chief Financial Officer
ARROWPOINT COMMUNICATIONS, INC.
By: /s/ CHIN-CHENG WU
------------------------------------
Name: Chin-Cheng Wu
Title: Chief Executive Officer
SIGNATURE PAGE TO STOCK OPTIONS AGREEMENT
B-9
<PAGE> 80
EXHIBIT 4
Company Affiliate Agreement
<PAGE> 81
EXECUTION COPY
COMPANY AFFILIATE AGREEMENT
May 4, 2000
Cisco Systems, Inc.
170 West Tasman Drive
San Jose, CA 95134-1706
Ladies and Gentlemen:
Pursuant to the terms of an Agreement and Plan of Merger and
Reorganization, dated as of May 4, 2000 (the "Reorganization Agreement"), by and
among Cisco Systems, Inc., a California corporation ("Parent"), Archer
Acquisition Corporation, a Delaware corporation and a wholly owned subsidiary of
Parent ("Merger Sub"), and ArrowPoint Communications, Inc., a Delaware
corporation ("Company"), Parent has agreed to acquire Company through the merger
of Merger Sub with and into Company (the "Transaction"). Capitalized terms used
herein and not otherwise defined herein shall have the respective meanings
ascribed to such terms in the Reorganization Agreement.
The undersigned has been advised that as of the date hereof the undersigned
may be deemed to be (but does not hereby admit to be) an "affiliate" of Company,
as the term "affiliate" is (i) defined for purposes of paragraphs (c) and (d) of
Rule 145 of the rules and regulations (the "Rules and Regulations") of the
Securities and Exchange Commission (the "SEC") promulgated under the Securities
Act of 1933, as amended (the "Securities Act"), and/or (ii) used in and for
purposes of Accounting Series Releases 130, 135 and 146 and Staff Accounting
Bulletin Two, as amended, of the SEC.
The undersigned understands that the representations, warranties and
covenants set forth herein will be relied upon by Parent, other stockholders of
Parent, Merger Sub, Company and their respective counsel and accounting firms.
Except to the extent written notification to the contrary is received by Parent
from the undersigned prior to the consummation of the Transaction, the
representations and warranties contained herein shall be accurate at all times
from the date hereof through the Effective Time.
The undersigned hereby represents and warrants to and agrees with Parent
that in the event the undersigned receives any shares of Parent Common Stock as
a result of the Transaction:
The undersigned has power and authority to execute and deliver this letter
agreement and to make the representations and warranties set forth herein and to
perform his or her obligations hereunder;
<PAGE> 82
The undersigned has carefully read this letter agreement and the
Reorganization Agreement and, to the extent the undersigned felt necessary,
discussed the requirements of such documents and other applicable limitations
upon his or her ability to sell, transfer, pledge or otherwise dispose of Parent
Common Stock with his or her counsel or counsel for the Company;
The undersigned is the owner of the number of shares of Company Common
Stock (the "Shares") set forth on the signature page hereto and did not acquire
any of the Shares in contemplation of the Transaction. The Shares constitute the
undersigned's entire interest in Company's capital stock, excluding stock
options held by the undersigned.
The undersigned will not make any sale, transfer, pledge or other
disposition of Parent Common Stock (i) in violation of the Securities Act or the
Rules and Regulations or (ii) to a transferee that has not agreed in writing to
be bound hereby;
The undersigned has been advised that the issuance of Parent Common Stock
to the undersigned in connection with the Transaction has been or will be
registered with the Commission under the Securities Act on a Registration
Statement on Form S-4. However, the undersigned has also been advised that,
since at the time the Transaction was or will be submitted for a vote of the
stockholders of the Company the undersigned may be deemed to be or have been an
affiliate of the Company and the distribution by the undersigned of any Parent
Common Stock has not been registered under the Securities Act, the undersigned
may not sell, transfer, or otherwise dispose of Parent Common Stock issued to
him or her in the Transaction unless (i) such sale, transfer, or other
disposition has been registered under the Securities Act, (ii) such sale,
transfer, or other disposition is made in conformity with the volume and other
limitations of Rule 145 or (iii) in the opinion of counsel reasonably acceptable
to Parent (it being understood that the law firm of Brobeck, Phleger & Harrison
LLP is deemed to be reasonably satisfactory to Parent), such sale, transfer, or
other disposition is otherwise exempt from registration under the Securities
Act;
The undersigned understands that, except as provided in the Reorganization
Agreement, Parent is under no obligation to register the sale, transfer, or
other disposition of Parent Common Stock by the undersigned or on his or her
behalf under the Securities Act or to take any other action necessary in order
to make compliance with an exemption from such registration available;
The undersigned also understands that Parent may impose stop transfer
instructions or elect to not permit the transfer of shares of Parent Common
Stock or the issuance of a new certificate representing such shares unless and
until such a transfer can be made without adversely affecting the ability of
Parent or the surviving corporation to account for the business combination to
be effected by the Transaction as a pooling of interests, and that there will be
placed on the certificates for Parent Common Stock issued to him or her, or any
substitutions therefor, a legend stating in substance:
2
<PAGE> 83
THE SECURITIES EVIDENCED BY THIS CERTIFICATE WERE ISSUED IN A TRANSACTION
TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
APPLIES. THE SECURITIES EVIDENCED BY THIS CERTIFICATE MAY BE TRANSFERRED
ONLY IN ACCORDANCE WITH THE TERMS OF AN AGREEMENT DATED MAY 4, 2000 BETWEEN
THE REGISTERED HOLDER HEREOF AND CISCO SYSTEMS, INC., A COPY OF WHICH
AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICES OF CISCO SYSTEMS, INC.;
The undersigned also understands that, unless the sale, transfer, or other
disposition by him or her of Parent Common Stock issued to him or her has been
registered under the Securities Act or is a sale made in conformity with the
provisions of Rule 145, Parent reserves the right to put the following legend on
the certificates issued to any transferee of the undersigned:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE WERE ACQUIRED FROM A PERSON
WHO RECEIVED SUCH SHARES IN A TRANSACTION TO WHICH RULE 145 PROMULGATED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, APPLIES, AND WERE NOT
ACQUIRED BY THE HOLDER WITH A VIEW TO TRANSFER, OR FOR RESALE IN CONNECTION
WITH, ANY DISTRIBUTION THEREOF WITHIN THE MEANING OF THE SECURITIES ACT OF
1933, AS AMENDED. THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES LAWS, AND MAY NOT BE SOLD OR OTHERWISE DISPOSED OF, UNLESS SUCH
SALE, TRANSFER, OR OTHER DISPOSAL IS MADE IN CONNECTION WITH AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND
ANY APPLICABLE STATE SECURITIES LAWS OR IS EXEMPT FROM THE REGISTRATION
REQUIREMENTS OF SUCH ACT, THE RULES AND REGULATIONS IN EFFECT THEREUNDER
AND ANY APPLICABLE STATE SECURITIES LAWS;
Except as contemplated by the Reorganization Agreement, there are no
contracts, commitments or agreements relating to voting, purchase or sale of
Company's capital stock between the undersigned and the Company.
Any other provisions of this letter agreement to the contrary
notwithstanding, except as set forth below, from and after the date hereof until
such time as results covering at least 30 days of combined operations of the
Company and Parent have been published by Parent, in the form of a quarterly
earnings report, an effective registration statement filed with the
3
<PAGE> 84
Commission, a report to the Commission on Form 10-K, 10-Q, or 8-K, or any other
public filing or announcement which includes such combined results of operations
(the period commencing on the date hereof and ending on the date of the
publication of the post-Transaction financial results is referred to herein as
the "Pooling Period"), the undersigned will not, except as may be permitted
under ASR No. 135 or Staff Accounting Bulletin Nos. 65 and 76, Topic 2E, engage
in any sale, transfer, or other disposition of, or reduce the undersigned's risk
in respect of, any of the following:
a. any shares of Parent Common Stock which the undersigned may acquire in
connection with the Transaction, or any securities which may be paid
as a dividend or otherwise distributed thereon or with respect thereto
or issued or delivered in exchange or substitution therefore (all such
shares and other securities being referred to herein, collectively, as
"Restricted Securities"), or any option, right or other interest with
respect to any Restricted Securities;
b. the shares of Company Common Stock and options or warrants to purchase
Company Common Stock beneficially owned by the undersigned (provided
that the undersigned may exercise such options); or
c. any shares of Company Common Stock or any other equity securities of
the Company which the undersigned purchases or otherwise acquires
after the execution of this letter agreement;
As promptly as practicable after the Effective Time, Parent will publish
results covering at least 30 days of combined operations of the Company and
Parent in the form of a quarterly earnings report, an effective registration
statement filed with the Commission, a report to the Commission on Form 10-K,
10-Q, 8-K, or any other public filing or announcement which includes such
combined results of operations; provided, however, that Parent will under no
circumstance be obligated to publish such results earlier than that time at
which Parent publishes results for its first full fiscal quarter during which
such 30 days of combined operations occurs.
This Company Affiliate Agreement shall terminate upon the termination of
the Reorganization Agreement.
This Company Affiliate Agreement shall be governed by and construed and
enforced in accordance with the internal laws of the State of Delaware without
giving effect to the principles of conflicts of laws thereof and may be executed
in counterparts.
[Signature Page Follows]
4
<PAGE> 85
Very truly yours,
-----------------------------------------
(signature)
-----------------------------------------
(print name)
Number of Shares beneficially owned as of
the date hereof:
-----------------------------------------
Accepted as of May 4, 2000
CISCO SYSTEMS, INC.
By: /s/ Larry Carter
----------------------
Name: Larry Carter
Title: Senior Vice President, Finance and
Administration, Chief Financial Officer
and Secretary
SIGNATURE PAGE FOR COMPANY AFFILIATE AGREEMENT
<PAGE> 86
Very truly yours,
/s/ SHALIN WU AND ICHANG LIN
-----------------------------------------
Shalin Wu and Ichang Lin, as trustees for the
Chin-Cheng 1996 Irrevocable Children's Trust
dated 12/6/96
Number of Shares beneficially owned as of
the date hereof:
------------------------------------------
Accepted as of May ___, 2000
CISCO SYSTEMS, INC.
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
6
<PAGE> 87
/s/ CHIN-CHENG WU
-----------------------------------------
Chin-Cheng Wu
Number of Shares beneficially owned as of
the date hereof:
-----------------------------------------
Accepted as of May ___, 2000
CISCO SYSTEMS, INC.
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
7
<PAGE> 88
/s/ EDWARD T. ANDERSON
-----------------------------------------
North Bridge Venture Partners IV-A, L.P.
by Edward T. Anderson
Number of Shares beneficially owned as of
the date hereof:
-----------------------------------------
Accepted as of May ___, 2000
CISCO SYSTEMS, INC.
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
<PAGE> 89
/s/ Edward T. Anderson
-----------------------------------------
North Bridge Venture Partners IV-B, L.P.
by Edward T. Anderson
Number of Shares beneficially owned as of
the date hereof:
-----------------------------------------
Accepted as of May ___, 2000
CISCO SYSTEMS, INC.
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
8
