As filed with the Securities and Exchange Commission on September 4, 1996
Registration No.333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
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DIALOGIC CORPORATION
(Exact name of registrant as specified in its charter)
New Jersey 22-2476441
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1515 Route 10
Parsippany, New Jersey 07054
(201) 993-3000
(Address, including zip code, and telephone number,
including area code, of Registrant's principal
executive offices)
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EDWARD B. JORDAN
Dialogic Corporation
1515 Route 10
Parsippany, New Jersey 07054
(201) 993-3000
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
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Copy to:
Peter H. Ehrenberg, Esq.
Lowenstein, Sandler, Kohl, Fisher & Boylan, P.C.
65 Livingston Avenue
Roseland, New Jersey 07068
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Approximate date of commencement of proposed sale to the public:
From time to time after the effective date of this Registration Statement
as determined by the Selling Shareholders. See "Selling Shareholders".
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) .under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
registration statement for the same offering. |_|
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the same
offering. |_|
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. |_|
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CALCULATION OF REGISTRATION FEE
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Proposed
Proposed maximum
Title of each class maximum aggregate Amount of
of securities to be Amount to be offering price offering registration
registered registered per unit (1) price (1) fee
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Common Stock,
no par value 85,298 Shares $33.75 $2,878,808.00 $993.00
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(1) Pursuant to Rule 457(c), the proposed maximum offering price per unit
is estimated solely for the purpose of calculating the registration fee
and is based on the average of the high and low prices of the Company's
Common Stock on the NASDAQ National Market System on September 3, 1996.
---------------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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<PAGE>
DIALOGIC CORPORATION
------------
85,298 Shares
Common Stock
No Par Value
INTRODUCTION
This Prospectus relates to up to 85,298 shares of the Common Stock, no par
value (the "Common Stock"), of Dialogic Corporation (the "Company"), which will
be offered by certain shareholders of the Company. See "Selling Shareholders".
The Company will not receive any of the proceeds from the sale of shares by the
selling shareholders.
The shares of Common Stock offered hereby were issued by the Company to the
shareholders of Dianatel Corporation., a California corporation ("Dianatel"), in
exchange for their shares of Dianatel's Common Stock in connection with the
merger of Dianatel with and into a wholly-owned subsidiary of the Company on
June 27, 1996. The shareholders of the Company who formerly were shareholders of
Dianatel, as well as certain of their transferees, are hereinafter collectively
referred to as the "Selling Shareholders". See "Selling Shareholders".
The Common Stock is traded in the over-the-counter market and quoted on the
National Market System of the National Association of Securities Dealers
Automated Quotation System ("NASDAQ"). The shares of Common Stock offered hereby
are offered without underwriters at the market - that is, at the price in effect
at the time of sale by the Selling Shareholders. On ______, 1996, the closing
sales price of the Common Stock on NASDAQ was $ ___ per share. The Company will
bear all expenses in connection with the registration of the Common Stock being
registered hereby, which expenses are estimated to be approximately $7,200. The
Selling Shareholders will pay all brokerage commissions incurred in connection
with the sale of shares of Common Stock at the market.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
--------------------
The date of this Prospectus is _______, 1996.
<PAGE>
No person has been authorized to give any information or to make any
representations other than as contained in this Prospectus in connection with
the offer made hereby, and, if given or made, such information or
representations must not be relied upon as having been authorized by the
Company. The delivery of this Prospectus at any time does not imply that the
information herein is correct as of any time subsequent to the date hereof. This
Prospectus does not constitute an offer to sell securities in any jurisdiction
to any person to whom it is unlawful to make such offer in such jurisdiction.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, files reports and other information with the Securities
and Exchange Commission (the "Commission"). Reports, proxy statements and other
information filed by the Company can be inspected and copied at the offices of
the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549 and the Commission's Regional Offices in New York (Seven
World Trade Center, 13th Floor, New York, New York 10048) and Chicago (Suite
1400, 500 West Madison Street, Chicago, Illinois 60661), and copies of such
materials can be obtained from the Public Reference Section of the Commission at
450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
There are incorporated herein by reference the following documents of
the Company heretofore filed by it with the Commission:
(a) the Company's Annual Report on Form 10-K for the year ended
December 31, 1995;
(b) the Company's Quarterly Reports on Form 10-Q for the periods ended
March 31, 1996 and June 30, 1996;
(c) the Company's Current Report on Form 8-K dated July 10, 1996; and
(d) the description of the Company's Common Stock contained in the
Company's report on Form 8-A declared effective by the Commission on April 11,
1994.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of this offering shall be deemed to be incorporated by reference
into this Prospectus. Any statement contained in a document incorporated or
deemed to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any other subsequently filed document which also is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any statement so modified or superseded shall not be deemed, except
as so modified or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person, including any
beneficial owner, to whom this Prospectus is delivered, upon written or oral
request of such person, a copy of any and all of the documents that have been
incorporated by reference in this Prospectus (not including exhibits to such
documents unless such exhibits are specifically incorporated by reference
therein). Requests should be directed to Dialogic Corporation, 1515 Route 10,
Parsippany, New Jersey 07054, Attention: Edward B. Jordan, Vice President,
telephone number (201) 993-3000.
THE COMPANY
The Company designs, manufactures and markets hardware and software signal
computing components for computer telephony systems. The Company's products are
offered as modular building blocks that enable its customers--primarily VARs,
OEMs, systems integrators, service providers and applications developers--to
design computer telephony systems that meet the applications demands of their
end-user customers. Dialogic has promoted the acceptance of open,
non-proprietary computer telephony systems, enabling its customers to respond to
end-user demand for standards-based systems and expanding the types of systems
into which the Company's products may be incorporated.
The Company's signal computing products are computer expansion boards
which typically fit in a PC chassis and operate under the control of an industry
standard PC operating system. With its emphasis on developing modular building
blocks for computer telephony systems, the Company offers products that operate
over a continuum in performance and density. Its traditional products enable
developers to create computer telephony systems with voice processing,
facsimile, data, speech recognition, and speech synthesis capabilities. Its high
density products, first introduced during 1994, provide advanced switching and
other computer-telephony features that enable the Company's customers to extend
their product offerings into call center and enhanced services environments.
The Company is incorporated in New Jersey and maintains its principal
executive offices at 1515 Route 10, Parsippany, New Jersey 07054; telephone
number (201) 993-3000.
SELLING SHAREHOLDERS
Dianatel Selling Shareholders
Effective as of June 27, 1996, San Jose DLGC Acquisition Corporation, a
wholly-owned subsidiary of the Company (the "Subsidiary") and Dianatel entered
into an Agreement and Plan of Merger (the "Dianatel Agreement"). Pursuant to the
terms of the Dianatel Agreement, Dianatel was merged with and into the
Subsidiary and the Subsidiary, as the surviving corporation, remained a
wholly-owned subsidiary of the Company. Each Dianatel shareholder was given the
opportunity to elect to receive cash or shares of the Company's Common Stock in
the Merger. Under the Dianatel Agreement, a total of 45,153 shares of the
Company's Common Stock were issued as "Initial Consideration" (as defined in the
Dianatel Agreement), a total of 10,271 shares of Common Stock have been
deposited in an escrow account and may ultimately be distributed to the former
shareholders of Dianatel as "Escrow Consideration" (as defined in the Dianatel
Agreement) and a total of 29,874 shares of the Company's Common Stock may be
issued in the future as "Option Cancellation Consideration" (as defined in the
Dianatel Agreement) in certain circumstances. This Prospectus covers all of the
shares of the Company's Common Stock which may be issued to the former
shareholders of Dianatel as Initial Consideration, Escrow Consideration or
Option Cancellation Consideration and which may be resold by such shareholders,
as well as transferees of such shareholders, pursuant to this offering. The
Dianatel merger became effective on June 27, 1996 (the "Effective Date of the
Merger").
The following table sets forth information as to the maximum number of
shares of the Company's Common Stock which may be acquired (as Initial
Consideration, Escrow Consideration or Option Cancellation Consideration),
directly or indirectly, by the Selling Shareholders or their transferees
pursuant to the Dianatel Agreement, each of which shares, if issued to the
former shareholders of Dianatel, may be resold pursuant to this offering. The
shares listed in the table represent all of the shares of Dialogic Common Stock
known by the Company to be beneficially owned by such shareholders or their
predecessor as of June 27, 1996. As of June 30, 1996, there were 15,676,884
shares of the Company's Common Stock outstanding.
Number of
Shares of Dialogic
Dianatel Selling Shareholders Common Stock
- ----------------------------- ------------
Robert T.Flaherty......................................... 23,917
Patrick McGuire........................................... 16,726
Gary A. Maier ............................................ 18,744
Michael J. Maier.......................................... 18,744
Dalton Martin............................................. 1,967
R. Thomas Fair............................................ 5,200
- -----------------
1Includes 29,874 shares of Option Cancellation Consideration which will only be
issuable to the Selling Shareholders and saleable by the Selling Shareholders if
certain stock options are cancelled.
General
None of the Selling Shareholders has ever held any position or office
or had any material relationship with the Company or any of its subsidiaries
(other than with Dianatel prior to its acquisition by the Company), except that
Robert Flaherty has served as the President and a director of the subsidiary
into which Dianatel was merged since June 3, 1996.
MANNER OF SALE
The Common Stock is traded in the over-the-counter market and
is quoted on the NASDAQ National Market System. It is anticipated that the
Selling Shareholders will sell the shares of the Company's Common Stock at the
market; that is, at the price in effect at the time of sale to investors. Sales
are expected to be effected by registered broker/dealers.
EXPERTS
The consolidated financial statements and the related
financial statement schedule incorporated in this Prospectus by reference from
the Company's Annual Report on Form 10-K have been audited by Deloitte & Touche
LLP, independent auditors, as stated in their reports, which are incorporated
herein by reference, and have been so incorporated in reliance upon the reports
of such firm given upon their authority as experts in accounting and auditing.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
Securities and Exchange Commission registration fee.................$ 993
Legal fees and expense.............................................. 3,000
Accounting fees and expense......................................... 3,000
Miscellaneous expenses............................................... 207
Total................................................. $7,200
No portion of the foregoing expenses will be borne by the Selling
Shareholders.
All expenses other than the Securities and Exchange Commission
registration fee are estimated.
Item 15. Indemnification of Directors and Officers
Subsection (2) of Section 3-5, Title 14A of the New Jersey
Business Corporation Act empowers a corporation to indemnify any person who was
or is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative,
arbitrative or investigative (other than an action by or in the right of the
corporation), by reason of the fact that he is or was a corporate agent (i.e., a
director, officer, employee or agent of the corporation or a person serving at
the request of the corporation as a director, officer, trustee, employee or
agent of another corporation or enterprise), against reasonable costs (including
attorneys' fees), judgments, fines, penalties and amounts paid in settlement
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal
proceeding, had no reasonable cause to believe his conduct was unlawful.
Subsection (3) of Section 3-5 empowers a corporation to indemnify a
corporate agent against reasonable costs (including attorneys' fees) incurred by
him in connection with any proceeding by or in the right of the corporation to
procure a judgment in its favor which involves such corporate agent by reason of
the fact that he is or was a corporate agent if he acted in good faith and in a
manner reasonably believed to be in or not opposed to the best interests of the
corporation, except that no indemnification may be made in respect to any claim,
issue or matter as to which such person shall have been judged to be liable for
negligence or misconduct unless and only to the extent that the Superior Court
of New Jersey or the court in which such action or suit was brought shall
determine that despite the adjudication of liability, such person is fairly and
reasonably entitled to indemnity for such expenses which the court shall deem
proper.
Subsection (4) of Section 3-5 provides that to the extent that a
corporate agent has been successful in the defense of any action, suit or
proceeding referred to in subsections (2) and (3) or in the defense of any
claim, issue or matter therein, he shall be indemnified against expenses
(including attorneys' fees) incurred by him in connection therewith.
Subsection 8 of Section 3-5 provides that the indemnification
provisions in the law shall not exclude any other rights to indemnification that
a director or officer may be entitled to under a provision of the certificate of
incorporation, a by-law, an agreement, a vote of shareholders, or otherwise.
That subsection explicitly permits indemnification for liabilities and expenses
incurred in proceedings brought by or in the right of the corporation
(derivative proceedings). The only limit on indemnification of directors and
officers imposed by that subsection is that a corporation may not indemnify a
director or officer if a judgment has established that the director's or
officer's acts or omissions were a breach of his or her duty of loyalty, not in
good faith, involved a knowing violation of the law, or resulted in receipt of
an improper personal benefit.
Subsection (9) of Section 3-5 provides that a corporation is empowered
to purchase and maintain insurance on behalf of a director or officer against
any expenses or liabilities incurred in any proceeding by reason of that person
being or having been a director or officer, whether or not the corporation would
have the power to indemnify that person against expenses and liabilities under
other provisions of the law.
The Registrant's Restated Certificate of Incorporation contains the
following provisions regarding indemnification:
"Every person who is or was a director, officer or corporate
agent of the Corporation shall be indemnified by the Corporation to the
fullest extent allowed by law, including the indemnification permitted
by N.J.S. 14A:3-5(8), against all liabilities and expenses imposed upon
or incurred by that person in connection with any proceeding in which
that person may be made, or threatened to be made, a party, or in which
that person may become involved by reason of that person being or
having been a director, officer or corporate agent of or serving or
having served in any capacity with any other enterprise at the request
of the Corporation, whether or not that person is a director, officer
or corporate agent or continues to serve the other enterprise at the
time the liabilities or expenses are imposed or incurred."
The Registrant's Restated Certificate of Incorporation contains the
following provisions regarding certain limitations on the liability of directors
and officers:
"A director or an officer of the Corporation shall not be
personally liable to the Corporation or its shareholders for the breach
of any duty owned to the Corporation or its shareholders except to the
extent that an exemption from personal liability is not permitted by
the New Jersey Business Corporation Act."
See also the undertakings set forth in response to Item 17 herein.
Item 16. Exhibits
2.1 Agreement and Plan of Merger, dated as of June 27, 1996, among
Dialogic Corporation, San Jose DLGC Acquisition Corporation and
Dianatel Corporation (without appendices, which will be furnished
to the Commission upon request).
4.1 Restated Certificate of Incorporation of Dialogic Corporation is
incorporated by reference to Exhibit 3.1 of Amendment No. 2
of the Registrant's Registration Statement on Form S-1
(No. 33-59598) filed in connection with the Registrant's initial
public offering.
4.2 By-laws of Dialogic Corporation are incorporated by reference to
Exhibit 3.2 to the Registrant's Registration Statement on Form
S-1 (No. 33-59598) filed in connection with the Registrant's
initial public offering.
5.1 Opinion of Lowenstein, Sandler, Kohl, Fisher & Boylan, a
Professional Corporation.
23.1 Independent Auditors' Consent (Deloitte & Touche, LLP)
23.2 Consent of Lowenstein, Sandler, Kohl, Fisher & Boylan, A
Professional Corporation, is included in Exhibit 5.1.
24.1 Power of Attorney.
<PAGE>
Item 17. Undertakings
The undersigned Registrant hereby undertakes:
A. To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement:
(i) to include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933 (the "Act"), unless the foregoing
information is contained in periodic reports filed by the Registrant
pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
(the "Exchange Act") that are incorporated by reference in this
Registration Statement; and
(ii) to reflect in the prospectus any facts or events arising
after the effective date of this Registration Statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in this Registration Statement, unless the foregoing information is
contained in periodic reports filed by the Registrant pursuant to
Section 13 or 15(d) of the Exchange Act that are incorporated by
reference in this Registration Statement; and
(iii) to include any material information with respect to the
plan of distribution not previously disclosed in this Registration
Statement or any material change to such information in the
Registration Statement.
B. That, for the purpose of determining any liability under the Act,
each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof;
C. To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
D. That for purposes of determining any liability under the Act, each
filing of the Registrant's annual report pursuant to Section 13(a) or Section
15(d) of the Exchange Act (and, where applicable, each filing of an employee
benefit plan's annual report pursuant to Section 15(d) of the Exchange Act) that
is incorporated by reference in this Registration Statement shall be deemed to
be a new Registration Statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
E. That insofar as indemnification for liabilities arising under the
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described in Item 15 above, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the Township of Parsippany, State of New Jersey, on the 4th day
of September, 1996.
DIALOGIC CORPORATION
By: /s/ Edward B. Jordan
Edward B. Jordan,
Vice President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
Signatures Title Date
Nicholas Zwick* Chairman of the Board September 4, 1996
- -----------------------------
Nicholas Zwick
Howard G. Bubb* Director, President and September 4, 1996
- ----------------------------- Chief Executive Officer
Howard G. Bubb
Kenneth J. Burkhardt, Jr.* Director September 4, 1996
- -----------------------------
Kenneth J. Burkhardt, Jr.
Masao Konomi* Director September 4, 1996
- -----------------------------
Masao Konomi
John N. Lemasters* Director September 4, 1996
- -----------------------------
John N. Lemasters
Francis G. Rodgers* Director September 4, 1996
- -----------------------------
Francis G. Rodgers
James J. Shinn* Director September 4, 1996
- -----------------------------
James J. Shinn
/s/ Edward B. Jordan Chief Financial and September 4, 1996
- ----------------------------- Accounting Officer
Edward B. Jordan
*By: /s/ Edward B. Jordan
Edward B. Jordan
Attorney-in-Fact
<PAGE>
EXHIBIT INDEX
Exhibit No. Description Page No.
2.1 Agreement and Plan of Merger, dated as of June 27, 1996,
among Dialogic Corporation, San Jose DLGC Acquisition
Corporation and Dianatel Corporation
4.1 Registrant's Restated Certificate of Incorporation
(incorporated by reference)
4.2 Registrant's By-Laws (incorporated by reference)
5.1 Opinion of Lowenstein, Sandler, Kohl, Fisher & Boylan, P.C.
23.1 Independent Auditors' Consent (Deloitte & Touche LLP)
23.2 Consent of Lowenstein, Sandler, Kohl, Fisher & Boylan,
P.C. is included in Exhibit 5.1
24.1 Power of Attorney
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement"), dated as of June 27,
1996, is
BY AND AMONG
DIALOGIC CORPORATION, a New Jersey corporation, having its
principal place of business at 1515 Route 10, Parsippany, New Jersey 07054 (the
"Acquirer"),
AND
SAN JOSE DLGC ACQUISITION CORPORATION, a California
corporation, having a place of business at 96 Bonaventura Drive, San Jose,
California 95134 (the "Subsidiary"),
AND
DIANATEL CORPORATION, a California corporation, having its
principal place of business at 96 Bonaventura Drive, San Jose, California 95134
(the "Corporation").
RECITALS:
1. The Acquirer is a corporation duly organized and existing
under the laws of the State of New Jersey, having an authorized capital stock of
70,000,000 shares, consisting of (a) 10,000,000 shares of preferred stock, no
par value, none of which is presently issued and outstanding ("Preferred
Stock"), and (b) 60,000,000 shares of common stock, no par value ("Common
Stock"), of which, at December 31, 1995, 14,709,408 shares were issued and
outstanding and 2,657,006 shares were reserved for issuance upon exercise of
options to purchase Common Stock ("Acquirer Options") which were either
outstanding or authorized to be granted pursuant to plans or agreements
authorized by the Acquirer's Board. Subsequent to December 31, 1995, the Board
of Directors and shareholders of the Acquirer authorized the grant of options
covering an additional 400,000 shares of Common Stock.
2. The Subsidiary is a wholly-owned subsidiary of the
Acquirer organized for purposes of consummating the transaction contemplated
hereby.
3. The Corporation is a corporation duly organized and
existing under the laws of the State of California, having an authorized capital
stock of 6,000,000 shares, consisting of (a) 1,000,000 shares of preferred
stock, par value $.01 per share ("Corporation Preferred Stock"), and (b)
5,000,000 shares of common stock, par value $.01 per share ("Corporation Common
Stock").
4. As of the date hereof, the Corporation has no shares of
Corporation Preferred Stock outstanding and 572,700 shares of Corporation Common
Stock outstanding; 214,000 additional shares of Corporation Common Stock are
reserved for issuance upon exercise of options to purchase Corporation Common
Stock ("Corporation Options") which are outstanding pursuant to plans approved
by the Corporation's Board of Directors. Immediately prior to the consummation
of the merger described herein, a total of 14,330 shares of Corporation Common
Stock will be repurchased by the Corporation pursuant to contractual
arrangements providing for such repurchases in the event of certain business
combinations such as the merger described herein.
5. The respective Boards of Directors of the Acquirer, the
Subsidiary and the Corporation have determined that it is in the best interests
of each corporation and its stockholders that the Corporation be merged with and
into the Subsidiary, such merger (the "Merger") to be effected in accordance
with the laws of the State of California in the manner and on the terms and
conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual agreements and
covenants contained herein, the parties hereto hereby agree that the Corporation
shall be merged with and into the Subsidiary and that the terms and conditions
of such Merger and the mode of carrying the same into effect shall be as
follows:
ARTICLE I
DEFINITIONS
The following terms shall have the following meanings:
1.01 "1933 Act" shall mean the Securities Act of 1933, as
amended.
1.02 "Affiliate" shall have the meaning ascribed to
such term in Rule 405 promulgated by the SEC.
1.03 "Agreement" shall mean this Agreement and all of
the exhibits, appendices and other documents attached hereto.
1.04 "Closing" shall mean the closing described in
Article IX at which all certificates and other instruments and documents
referred to in, or contemplated by, this Agreement shall be exchanged by the
parties, except for those documents or other items specifically required
to be exchanged at a different time.
1.05 "Closing Documents" shall mean the certificates,
instruments and documents required to be executed and delivered by this
Agreement or executed and delivered pursuant to the Merger.
1.06 "Closing Price" shall mean the closing price of
the Common Stock on the Nasdaq Stock Market on a given date or dates.
1.07 "Code" shall mean the Internal Revenue Code of 1986,
as amended.
1.08 "Effective Time of the Merger" shall have the meaning
ascribed to such term in Section 2.01.2.
1.09 "Escrow Agent" shall mean United Jersey Bank or
such other bank having total assets in excess of $300 million as the Acquirer
shall designate prior to the Effective Time of the Merger.
1.10 "Escrow Consideration" shall have the meaning
ascribed to such term in Section 2.02.2.
1.11 "GAAP" shall mean generally accepted accounting
principles, consistently applied.
1.12 "Initial Consideration" shall have the meaning
ascribed to such term in Section 2.02.1.
1.13 "Merger Consideration" shall mean the Initial
Consideration, the Escrow Consideration to the extent distributable hereunder
and the Option Cancellation Consideration to the extent distributable hereunder.
1.14 "Most Recent Balance Sheet Date" shall have the
meaning ascribed to such term in Section 3.25.4.
1.15 "Option Cancellation Consideration" shall have the
meaning ascribed to such term in Section 2.02.3.2.
1.16 "Optionee" shall mean any person who, at the Effective
Time of the Merger, owns one or more Corporation Options.
1.17 "Representative" shall mean Michael J. Maier or such
other individual as shall be designated as such from time to time after the
Effective Time of the Merger by persons and entities owning, in the aggregate, a
majority of the shares of Common Stock then being held in escrow by the Escrow
Agent pursuant to the terms of this Agreement and the Escrow Agreement (as such
term is defined in Section 2.02.2.2)
1.18 "SEC" shall mean the Securities and Exchange Commission.
1.19 "Stockholders" shall mean those persons who own
Corporation Securities (as such term is defined in Section 3.02.2) immediately
prior to the Effective Time of the Merger.
1.20 "Transfer Agent" shall mean the Acquirer's transfer
agent.
ARTICLE II
THE PLAN OF MERGER
2.01 The Merger. Upon performance of all of the covenants and
obligations of the parties contained herein and upon fulfillment (or waiver) of
all of the conditions to the obligations of the parties contained herein, at the
Effective Time of the Merger and pursuant to the General Corporation Law of the
State of California (the "GCL"), the Acquirer, the Subsidiary and the
Corporation shall cause the following to occur:
2.01.1 The Surviving Corporation. The Corporation shall be
merged with and into the Subsidiary, the latter of which shall be the surviving
corporation (the "Surviving Corporation"). The separate existence and corporate
organization of the Corporation shall cease at the Effective Time of the Merger,
and thereupon the Subsidiary and the Corporation shall be a single corporation,
the name of which shall be Dianatel Corporation. The Subsidiary, as the
Surviving Corporation, shall succeed, insofar as permitted by law, to all
rights, assets, liabilities and obligations of the Corporation in accordance
with the GCL.
2.01.2 Merger Agreement. Upon completion of the Closing, an
agreement of merger, in the form of the agreement annexed hereto as Appendix
2.01.2 or in such other form as shall be satisfactory to the Acquirer and the
Corporation, in substance consistent in all respects with the terms of this
Agreement, and properly executed in accordance with the GCL (the "Merger
Agreement"), shall be filed with the Secretary of State of the State of
California. The Merger shall become effective when the Merger Agreement is so
filed. The date when the Merger shall become effective is referred to in this
Agreement as the "Effective Time of the Merger".
2.01.3 Articles of Incorporation. The Articles of
Incorporation of the Subsidiary shall be and remain the articles of
incorporation of the Surviving Corporation until amended as provided by law,
except that Article I of the Articles of Incorporation shall, upon the Merger
becoming effective, read in its entirety as follows: "The name of the
corporation is Dianatel Corporation".
2.01.4 By-Laws. The By-Laws of the Subsidiary shall be and
remain the by-laws of the Surviving Corporation until amended as provided by
law.
2.01.5 Directors. From and after the Effective Time of the
Merger and until their respective successors shall be duly elected and
qualified, the Board of Directors of the Surviving Corporation shall consist of
each of the members of the Board of Directors of the Subsidiary immediately
prior to the Effective Time of the Merger.
2.01.6 Officers. From and after the Effective Time of the
Merger and until their respective successors shall be duly elected or appointed
and qualified, the officers of the Surviving Corporation shall consist of each
of the officers of the Subsidiary immediately prior to the Effective Time of the
Merger.
2.02 Conversion of Corporation Common Stock. Each share of
Corporation Common Stock issued and outstanding immediately prior to the
Effective Time of the Merger (other than treasury shares and Dissenting Shares
as hereinafter defined) shall, by virtue of the Merger and without any action on
the part of the holder thereof, be converted at the Effective Time of the Merger
into (i) the right to receive the Initial Consideration in accordance with
Section 2.02.1, (ii) the right to receive the Escrow Consideration in accordance
with Section 2.02.2, to the extent that the Escrow Consideration is
distributable hereunder, and (iii) the right to receive the Option Cancellation
Consideration in accordance with Section 2.02.3, to the extent that the Acquirer
is obligated to issue the Option Cancellation Consideration hereunder; provided
however that, in any event, if between the date of this Agreement and the
Effective Time of the Merger the outstanding shares of Common Stock shall have
been changed into a different number of shares or a different class, by reason
of any stock dividend, stock split, reclassification, recapitalization,
combination or exchange of shares, the Merger Consideration shall be
correspondingly adjusted to reflect such stock dividend, stock split,
reclassification, recapitalization, combination or exchange of shares. After the
Effective Time of the Merger, all such shares of Corporation Common Stock shall
no longer be outstanding and shall automatically be canceled and retired and
shall cease to exist, and each certificate previously evidencing any such shares
shall thereafter represent the right to receive the Merger Consideration. The
holders of such certificates previously evidencing such shares of Corporation
Common Stock outstanding immediately prior to the Effective Time of the Merger
shall, as of the Effective Time of the Merger, cease to have any rights with
respect to such shares of Corporation Common Stock except as otherwise provided
herein or by law. Such certificates previously evidencing such shares of
Corporation Common Stock shall be exchanged for (i) certificates evidencing
shares of Common Stock which are required to be issued pursuant to Section
2.02.1 and which may be required to be issued pursuant to Sections 2.02.2 and
2.02.3 and (ii) cash payable in accordance with Section 2.02.1, in each case to
the extent (if any) applicable and only upon the surrender of such certificates
in accordance with the provisions of Section 2.03, without interest. No
fractional shares of Common Stock shall be issued, and, in lieu thereof, cash
payments shall be made pursuant to Sections 2.02.1.9, 2.02.2.3 and 2.02.3.2. The
Merger Consideration shall be calculable and issuable or payable as follows:
2.02.1 Initial Consideration. Each share of Corporation Common
Stock issued and outstanding immediately prior to the Effective Time of the
Merger (excluding any treasury shares and Dissenting Shares) shall be converted
into either (i) the right to receive 0.1212 shares of Common Stock (the "Per
Share Stock Amount"), (ii) the right to receive $5.89 in cash, without interest
(the "Per Share Cash Amount"), or (iii) the right to receive a combination of a
fraction of a share of Common Stock and cash determined in accordance with this
Section 2.02.1 (such consideration described in clauses (i), (ii) and (iii) each
being referred to as the "Initial Consideration"). The determination of the type
of Initial Consideration to be issued or paid with respect to each such share of
Corporation Common Stock shall be determined as follows:
2.02.1.1 Elections by Holders of Stock or Cash. Subject to the
allocation and election procedures set forth in this Section 2.02.1, each record
holder immediately prior to the Effective Time of the Merger of shares of
Corporation Common Stock will be entitled (i) to elect to receive Initial
Consideration in the form of cash for any or all of such shares (as to any such
share of Corporation Common Stock, a "Cash Election"), (ii) to elect to receive
Initial Consideration in the form of Common Stock for any or all of such shares
(as to any of such shares of Corporation Common Stock, a "Stock Election"), or
(iii) to indicate that such record holder has no preference as to the receipt of
Initial Consideration in the form of cash or Common Stock for any or all of such
shares (as to any of such shares of Corporation Common Stock, a "Non-Election").
All such elections have been made on a form designed for that purpose and
approved by the Corporation and the Acquirer (a "Form of Election"). Holders of
record of shares of Corporation Common Stock who hold such shares as nominees,
trustees or in other representative capacities (a "Share Fiduciary") may have
submitted multiple Forms of Election, provided that each such Form of Election
covers all the shares of Corporation Common Stock held by such Share Fiduciary
for a particular beneficial owner. For the purpose of making any allocations
required hereunder, holders of Dissenting Shares (as hereinafter defined in
Section 2.10) shall be deemed to have made a Cash Election but shall not be
allocated Common Stock under Section 2.02.1.3.
2.02.1.2 Maximum Cash Election Number. Subject to Section
2.02.1.8, the maximum number of shares of Corporation Common Stock to be
converted into the right to receive the Per Share Cash Amount as the form of
Initial Consideration in the Merger (the "Maximum Cash Election Number") shall
be equal to 50% (the "Cash Percentage") of the number of shares of Corporation
Common Stock outstanding immediately prior to the Effective Time of the Merger.
There shall be no percentage limit on the number of shares of Corporation Common
Stock to be converted into the right to receive Common Stock as the form of
Initial Consideration in the Merger . The number of shares of Common Stock to be
issued pursuant to this Section 2.02.1, prior to the operation of the provisions
set forth in Section 2.02.1.8, is hereinafter referred to as the "Stock Number".
2.02.1.3 Oversubscription for Cash Election. Subject to
Section 2.02.1.8, if the aggregate number of shares of Corporation Common Stock
covered by Cash Elections (the "Cash Election Shares") exceeds the Maximum Cash
Election Number, each share of Corporation Common Stock covered by a Stock
Election (the "Stock Election Shares") and each share of Corporation Common
Stock covered by a Non-Election (the "Non-Election Shares") shall be converted
into the right to receive 0.1212 shares of Common Stock, and the Cash Election
Shares shall be converted into the right to receive Common Stock and cash in the
following manner: each Cash Election Share shall be converted into the right to
receive (i) an amount in cash, without interest, equal to the product of (x) the
Per Share Cash Amount and (y) a fraction (the "Cash Fraction"), the numerator of
which shall be the Maximum Cash Election Number and the denominator of which
shall be the total number of Cash Election Shares, and (ii) a fraction of a
share of Common Stock equal to the product of (x) 0.1212 and (y) a fraction
equal to one minus the Cash Fraction.
2.02.1.4 No Oversubscription. Subject to Section 2.02.1.8, if
the aggregate number of Cash Election Shares equals or is less than the Maximum
Cash Election Number, then, for purposes of determining the Initial
Consideration, (a) each Cash Election Share shall be converted into the right to
receive the Per Share Cash Amount and (b) each Stock Election Share and each
Non-Election Share shall be converted into the right to receive 0.1212 shares of
Common Stock (i.e., the Per Share Stock Amount).
2.02.1.5 Procedures for Holders' Elections. Each of the
holders of Corporation Common Stock have submitted to the Acquirer a Form of
Election covering all of the shares of Corporation Common Stock which they own,
accompanied by the certificates representing the shares of Corporation Common
Stock as to which the election is being made. The Acquirer will have the
discretion to determine whether Forms of Election have been properly completed,
signed and submitted and to disregard immaterial defects in Forms of Election.
The decision of the Acquirer in such matters shall be conclusive and binding,
provided that the Acquirer does not act unreasonably. The Acquirer will not be
under any obligation to, but may (if it chooses to do so), notify any person of
any defect in a Form of Election submitted to the Acquirer. The Acquirer shall
also make all computations contemplated by this Section 2.02.1 and all such
computations shall be conclusive and binding on the holders of Corporation
Common Stock, provided that the Acquirer does not act unreasonably.
2.02.1.6 Non-Election. For purposes hereof, the term "Election
Deadline" shall mean the time and date on which this Agreement is executed by
the Corporation. If the Acquirer shall determine that any purported Cash
Election or Stock Election was not properly made, such purported Cash Election
or Stock Election shall, unless cured by the Election Deadline, be deemed to be
of no force and effect and the shareholder or Share Fiduciary making such
purported Cash Election or Stock Election shall, for purposes hereof, be deemed
to have made a Non-Election.
2.02.1.7 Irrevocability. All elections on Forms of Election
are irrevocable.
2.02.1.8 Decrease in Cash Percentage. In the event that the
aggregate amount of cash to be paid pursuant to Sections 2.02.1.3 and 2.02.1.4
but for the operation of this Section 2.02.1.8 exceeds the amount (the
"Aggregate Stock Value") equal to (x) the Stock Number (calculated as of the
Election Deadline) multiplied by (y) the Closing Price as of the trading day
immediately preceding the date on which the Election Deadline occurs, then the
Maximum Cash Election Number shall be automatically decreased to the minimum
extent necessary to assure that such aggregate amount of cash does not exceed
the Aggregate Stock Value.
2.02.1.9 No Fractional Shares. No certificates or scrip
evidencing fractional shares of Common Stock shall be issued as Initial
Consideration upon the surrender for exchange of Certificates (as defined
herein) and fractional share interests will not entitle the owner thereof to
vote or to any rights as a stockholder of the Acquirer. Cash shall be paid in
lieu of fractional shares of Common Stock otherwise issuable as Initial
Consideration, based upon a valuation of $48.625 per whole share of Common
Stock.
2.02.1.10 Delivery of the Initial Consideration. Promptly
after the Effective Time of the Merger, the Acquirer shall (i) instruct the
Transfer Agent to deliver to each Stockholder the number of whole shares of
Common Stock which such Stockholder is entitled to receive as Initial
Consideration and (ii) pay to each Stockholder by check the amount of cash which
such Stockholder is entitled to receive as Initial Consideration.
2.02.1.11 Return of Shares. Except as otherwise provided in
the Release and Payment Agreement described in Section 6.15, any shares of
Common Stock delivered to the Transfer Agent pursuant to Section 2.02.1.10 which
remains undistributed to the holders of Corporation Common Stock for two years
after the Effective Time of the Merger shall be delivered to the Acquirer, upon
demand, and any holders of Corporation Common Stock who have not theretofore
complied with this Agreement shall thereafter look only to the Acquirer for the
Initial Consideration to which they are entitled.
2.02.2 Escrow Consideration. The following provisions shall
apply in determining the extent (if any) to which the Escrow Consideration
shall be delivered to the Stockholders:
2.02.2.1 Deposit With Escrow Agent. As of the Effective Time
of the Merger, the Acquirer shall deposit, or shall cause to be deposited, with
the Escrow Agent, for the benefit of the holders of shares of Corporation Common
Stock, for exchange in accordance with this Agreement, through the Escrow Agent,
certificates evidencing, on behalf of each Stockholder, a number of shares of
Common Stock equal to (i) 0.0184 multiplied by (ii) the number of shares of
Corporation Common Stock owned by such Stockholder immediately prior to the
Effective Time of the Merger, rounded down to eliminate any fractional share to
the nearest whole number (such certificates for shares of Common Stock, together
with any distributions or dividends thereon, being referred to herein as the
"Escrow Fund"). Promptly after the Effective Time of the Merger, the Acquirer
shall pay each Stockholder by check an amount equal to $48.625 multiplied by
such eliminated fractional share. As of the Effective Time of the Merger, the
Acquirer shall also deliver to the Escrow Agent the stock powers delivered to
the Acquirer pursuant to Section 6.13.
2.02.2.2 Escrow Agreement. The Escrow Fund shall be held as
collateral for the Stockholders' indemnification obligations under Section 10.02
and pursuant to the provisions of an escrow agreement (the "Escrow Agreement")
in substantially the form and substance of the escrow agreement set forth in
Appendix 2.02.2.2 annexed hereto. The shares of Common Stock to be held in the
Escrow Fund (the "Escrow Shares") will be represented by certificates issued in
the names of the respective Stockholders and will be held by the Escrow Agent
from the Effective Time of the Merger until the first annual anniversary of the
Closing Date (the "Escrow Period"), subject to the provisions of the Escrow
Agreement which provide for distributions of a portion of the Escrow Fund on the
three, six and nine month anniversaries of the Closing Date. In the event that
the Merger is approved by the Corporation's stockholders as provided herein, the
Stockholders shall, without any further act of any Stockholder, be deemed to
have consented to and approved (i) the use of the Escrow Shares as collateral
for the Stockholders' indemnification obligations under Section 10.02 in the
manner set forth in the Escrow Agreement, (ii) the appointment of the
Representative as the representative of the Stockholders under the Escrow
Agreement and as the attorney-in-fact and agent for and on behalf of each
Stockholder (other than holders of Dissenting Shares), (iii) the taking by the
Representative and the Representative's successors, if any, of any and all
actions and the making of any and all decisions required or permitted to be
taken by him or her under the Escrow Agreement (including, without limitation,
the exercise of the power to: authorize delivery to the Acquirer of Escrow
Shares in satisfaction of claims by the Acquirer; agree to, negotiate and enter
into settlements and compromises of and demand arbitration and comply with
orders of courts and awards of arbitrators with respect to such claims; resolve
any claim made pursuant to Section 10.02; and take all actions necessary in the
judgment of the Representative for the accomplishment of the foregoing) and (iv)
all of the other terms, conditions and limitations set forth in the Escrow
Agreement.
2.02.2.3 Distributions of the Escrow Fund. To the extent that
Escrow Shares are distributable to the Stockholders pursuant to the terms of the
Escrow Agreement, each Stockholder shall receive a portion of such shares equal
to the number of Escrow Shares to be distributed multiplied by a fraction, the
numerator of which fraction shall equal the number of shares of Corporation
Common Stock owned by such Stockholder immediately prior to the Effective Time
of the Merger and the denominator of which fraction shall equal the aggregate
number of shares of Corporation Common Stock issued and outstanding immediately
prior to the Effective Time of the Merger. Fractional shares shall not be
distributed by the Escrow Agent. In lieu of fractional shares, the Escrow Agent
shall round down to the nearest whole number the number of Escrow Shares to be
delivered to each Stockholder and the Acquirer shall deliver to the Escrow Agent
for delivery to each Stockholder the cash value of such fractional share, based
on an assumed price of $48.625 for a whole share. For purposes of this
Agreement, the term "Escrow Consideration" shall mean the aggregate number of
Escrow Shares distributed to Stockholders pursuant to this Section 2.02.2 and
pursuant to the Escrow Agreement divided by the number of shares of Corporation
Common Stock issued and outstanding immediately prior to the Effective Time of
the Merger.
2.02.3 Option Cancellation Consideration.
2.02.3.1 Obligation of the Acquirer. In the event that (i)
during the period (the "Option Period") from the Effective Time of the Merger
through one year from the date hereof, the Surviving Corporation terminates the
employment of an Optionee as a direct result of a determination by the Surviving
Corporation to discontinue the position theretofore occupied by such Optionee,
(ii) such determination does not result in whole or in substantial part from the
malfeasance or misfeasance of such Optionee, (iii) such Optionee is not offered
employment that extends to the end of the Option Period by any of (x) the
Surviving Corporation, (y) the Acquirer or (z) any other affiliate of the
Acquirer on terms of compensation that are substantially equivalent to such
Optionee's current terms of compensation and (iv) as a result of the foregoing,
any portion of such Optionee's New Options (as defined in Section 2.13)
terminate before the end of the Option Period, then the Acquirer (which shall
not elect to accelerate the vesting of any such Optionee's New Options to a date
prior to the last day of the applicable Option Period) shall distribute in the
aggregate to the Stockholders a number of shares of Common Stock having an
aggregate "Market Value" (as defined herein) equal to the sum of the
"Appreciated Amounts" (as defined herein) of each such terminated New Option
which such Optionee is not given the right to exercise during the Option Period.
For purposes of this Agreement, the following terms shall have the following
meanings:
(a) The "Appreciated Amount" of an Optionee's New Option shall
mean the number of shares of Common Stock covered by such New Option
multiplied by the amount by which the Closing Price of a share of
Common Stock on the date of such Optionee's termination of employment
exceeds the exercise price of such New Option.
(b) The "Market Value" of a share of Common Stock distributed
pursuant to this Section 2.02.3 shall equal the Closing Price of such
share on the second business day prior to the distribution of such
share pursuant to this Section 2.02.3.
2.02.3.2 Distribution to Stockholders. To the extent that
shares of Common Stock are distributable to the Stockholders pursuant to the
terms of this Section 2.02.3, each Stockholder shall receive a portion of such
shares equal to the number of shares to be distributed multiplied by a fraction,
the numerator of which fraction shall equal the number of shares of Corporation
Common Stock owned by such Stockholder immediately prior to the Effective Time
of the Merger and the denominator of which fraction shall equal the aggregate
number of shares of Corporation Common Stock issued and outstanding immediately
prior to the Effective Time of the Merger. Fractional shares shall not be
distributed pursuant to this Section 2.02.3. In lieu of fractional shares, the
Acquirer shall round down to the nearest whole number the number of shares to be
delivered to each Stockholder and the Acquirer shall deliver to each Stockholder
the cash value of such fractional shares, based on the Closing Price on the
second business day prior to the date of distribution of such shares. For
purposes of this Agreement, the term "Option Cancellation Consideration" shall
mean the aggregate number of shares of Common Stock distributed to Stockholders
pursuant to this Section 2.02.3 divided by the number of shares of Corporation
Common Stock issued and outstanding immediately prior to the Effective Time of
the Merger.
2.03 Exchange Procedures. As soon as reasonably practicable
after the Effective Time of the Merger, the Acquirer will instruct the Transfer
Agent to mail to each holder of record of a certificate or certificates which
immediately prior to the Effective Time of the Merger evidenced outstanding
shares of Corporation Common Stock (other than Dissenting Shares) (the
"Certificates"), other than Stockholders who have theretofore submitted their
Certificates to the Acquirer together with a Form of Election, (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 proper delivery of the
Certificates to the Transfer Agent and shall be in such form and have such other
provisions as the Acquirer may reasonably specify) and (ii) instructions for use
in effecting the surrender of the Certificates in exchange for certificates
evidencing shares of Common Stock or cash. Upon surrender of all of a
Stockholder's Certificates for cancellation to the Transfer Agent together with
such letter of transmittal or Form of Election, duly executed, and such other
customary documents as may be required pursuant to such instructions, the holder
of such Certificates shall be entitled to receive in exchange therefor upon
consummation of the Merger (A) certificates (rounded down to the nearest whole
number) evidencing the number of shares of Common Stock, if any, to which such
holder is entitled as part of such holder's Initial Consideration in accordance
with Section 2.02.1, (B) the cash, if any, which such holder has the right to
receive as part of such holder's Initial Consideration in accordance with
Section 2.02.1, (C) cash in lieu of fractional shares of Common Stock to which
such holder may be entitled pursuant to Section 2.02.1.9, (D) any dividends or
other distributions to which such holder is entitled pursuant to Section 2.04
and (E) to the extent that any shares of Common Stock are distributed pursuant
to Sections 2.02.2 or 2.02.3, certificates (to be distributed at the times
described in Section 2.02.2, the Escrow Agreement and Section 2.02.3) evidencing
the number of shares of Common Stock to which such holder is entitled as part of
such holder's Escrow Consideration in accordance with Section 2.02.2 and Option
Cancellation Consideration in accordance with Section 2.02.3, and the
Certificates so surrendered shall forthwith be canceled. In the event of a
transfer of ownership of shares of Corporation Common Stock which is not
registered in the transfer records of the Corporation, a certificate evidencing
the proper number of shares of Common Stock and/or cash may be issued and/or
paid in accordance with this Agreement to a transferee if the Certificate
evidencing such shares of Corporation Common Stock is presented to the Transfer
Agent, accompanied by all documents required to evidence and effect such
transfer and by evidence that any applicable stock transfer taxes have been
paid. Until surrendered as contemplated by this Section 2.03, each Certificate
shall be deemed at any time after the Effective Time of the Merger to evidence
only the right to receive upon such surrender the applicable type and amount of
the Merger Consideration.
2.04 Distributions with Respect to Unexchanged Shares of
Common Stock. No dividends or other distributions declared or made after the
Effective Time of the Merger with respect to Common Stock with a record date
after the Effective Time of the Merger shall be paid to the holder of any
unsurrendered Certificate with respect to any shares of Common Stock evidenced
thereby, and no other part of the Merger Consideration shall be paid to any such
holder, until the holder of such Certificate shall surrender such Certificate to
the Acquirer or the Transfer Agent. Subject to the effect of applicable laws,
following surrender of any such Certificate, there shall be paid to the holder
of the certificates evidencing shares of Common Stock issued in exchange
therefor, without interest, (i) promptly, the amount of any cash payable with
respect to a fractional share of Common Stock to which such holder may have been
entitled pursuant to this Agreement and the amount of dividends or other
distributions with a record date after the Effective Time of the Merger
theretofore paid with respect to such shares of Common Stock, and (ii) at the
appropriate payment date, the amount of dividends or other distributions, with a
record date after the Effective Time of the Merger but prior to surrender and a
payment date occurring after surrender, payable with respect to such shares of
Common Stock. No interest shall be paid on the Merger Consideration.
2.05 No Further Rights in Corporation Common Stock. All shares
of Common Stock issued and cash paid upon conversion of the shares of
Corporation Common Stock in accordance with the terms hereof shall be deemed to
have been issued or paid in full satisfaction of all rights pertaining to such
shares of Corporation Common Stock.
2.06 No Liability. The Acquirer shall not be liable to any
holder of shares of Corporation Common Stock for any shares of Common Stock or
cash (or dividends or distributions with respect thereto) delivered to a public
official pursuant to any applicable abandoned property, escheat or similar law.
2.07 Withholding Rights. The Acquirer shall be entitled to
deduct and withhold, or cause the Transfer Agent or Escrow Agent to deduct and
withhold, from the consideration otherwise payable pursuant to this Agreement to
any holder of shares of Corporation Common Stock the minimum amounts (if any)
that the Acquirer is required to deduct and withhold with respect to the making
of such payment under the Code, or any provision of state, local or foreign tax
law. To the extent that amounts are so withheld by the Acquirer, such withheld
amounts shall be treated for all purposes of this Agreement as having been paid
to the holder of the shares of Corporation Common Stock in respect of which such
deduction and withholding was made by the Acquirer.
2.08 Treasury Shares. Each share of Corporation Common Stock
held in the treasury of the Corporation shall be canceled and extinguished
without any conversion thereof and no payment shall be made with respect hereto.
2.09 Stock Transfer Books. At the Effective Time of the
Merger, the stock transfer books of the Corporation shall be closed and there
shall be no further registration of transfers of shares of Corporation Common
Stock thereafter on the records of the Corporation. On or after the Effective
Time of the Merger, any Certificates presented to the Transfer Agent or the
Acquirer for any reason shall be converted into the right to receive the Merger
Consideration.
2.10 Dissenting Shares. Subject to Article VI, any holder of
Corporation Common Stock shall have the right to dissent in the manner provided
in Chapter 13 of the GCL and if all necessary requirements of Chapter 13 of the
GCL are met, holders of such shares shall be entitled to payment of the fair
value of such shares in accordance with the provisions of Chapter 13 of the GCL
("Dissenting Shares"), provided, however, that (i) if any holder of Dissenting
Shares shall subsequently withdraw his demand for appraisal of such shares
within 60 days of the Effective Time of the Merger, or, with the written consent
of the Surviving Corporation, any time thereafter, or (ii) if any holder fails
to follow the procedures for establishing his entitlement to appraisal rights as
provided in such Chapter 13 of the GCL, or (iii) if within the time periods
specified in Chapter 13 of the GCL, any holder or holders of the Dissenting
Shares fails to institute a judicial proceeding to determine the rights of the
holders of Dissenting Shares and to fix the fair value of the Dissenting Shares,
the right to appraisal of such shares shall be forfeited and such shares shall
thereupon be deemed to have been converted into the right to receive and to have
become exchangeable for, as of the Effective Time of the Merger, the Merger
Consideration. If such event occurs at or prior to the Election Deadline, the
holder may make an election under Section 2.02.1.1; if such event occurs after
the Election Deadline, such holder's shares of Corporation Common Stock shall be
deemed to be Non-Election Shares.
2.11 Common Stock. The shares of Common Stock outstanding
or held in treasury immediately prior to the Effective Time of the Merger
shall not be affected by the Merger.
2.12 Transfer Agent. The Transfer Agent shall act as the
exchange agent for the Stockholders to deliver to the Stockholders the shares of
Common Stock to which they are entitled as part of the Initial Consideration.
Adoption of this Agreement by the Corporation's stockholders shall constitute
ratification of the appointment of the Transfer Agent as exchange agent.
2.13 Corporation Stock Options. At the Effective Time of the
Merger, all Corporation Options which are outstanding and unexercised
immediately prior to the Effective Time of the Merger (the "Prior Options")
shall be converted automatically into options to purchase shares of Common Stock
(the "New Options"), in accordance with the terms of such options, appropriately
adjusted (as to both number of shares and exercise price) as follows:
(a) the number of shares of Common Stock covered by each New
Option shall equal the number of shares of Corporation Common Stock covered by
the applicable Prior Option immediately prior to the Effective Time of the
Merger, multiplied by 0.1396 and rounded down to the nearest whole number;
(b) the per share exercise price for each New Option shall
equal the per share exercise price under the applicable Prior Option immediately
prior to the Effective Time of the Merger, divided by 0.1396 and rounded down to
the nearest penny; and
(c) in all other respects, the terms of the New Options
shall be identical to the terms of the Prior Options.
Notwithstanding the foregoing, in the case of any option which is intended to be
an incentive stock option under the Code, the exercise price, the number of
shares purchasable pursuant to such option and the terms and conditions of
exercise of such option shall be determined in accordance with Section 424(a) of
the Code.
2.14 Further Assurances. The Corporation agrees that if, at
any time before or after the Effective Time of the Merger, the Acquirer
determines or is advised that any further deeds, assignments or assurances are
reasonably necessary or desirable to vest, perfect or confirm in the Surviving
Corporation title to any property or rights of the Corporation, then the
Acquirer and the Surviving Corporation and their respective proper officers and
directors may execute and deliver all such proper deeds, assignments and
assurances and do all other things necessary or desirable to vest, perfect or
confirm title to such property or rights in the Surviving Corporation and
otherwise to carry out the purposes of this Agreement, in the name of the
Corporation or otherwise.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE CORPORATION
The Corporation hereby represents and warrants to the Acquirer
and the Subsidiary as follows:
3.01 Organization.
3.01.1 The Corporation is a corporation, duly organized,
validly existing and in good standing under the laws of the State of California,
and has all requisite corporate power and franchises to own its property,
conduct the businesses in which it is engaged and execute, deliver and perform
this Agreement.
3.01.2 True and complete copies of the Corporation's
certificate of incorporation and by-laws, in each case as amended, stock
transfer records, and agreements, if any, among some or all of the stockholders
of the Corporation are set forth in Appendix 3.01.2 annexed hereto. The
Corporation has furnished to the Acquirer's counsel true and complete copies of
the Corporation's Board and stockholder minutes for the past five years or since
the Corporation's inception (if less than five years ago).
3.02 Capitalization; Options and Convertible Securities;
Funded Debt.
3.02.1 The Corporation has authorized capital stock consisting
of 6,000,000 shares, of which 1,000,000 shares are Corporation Preferred Stock
and 5,000,000 shares are Corporation Common Stock. No shares of Corporation
Preferred Stock are outstanding, a total of 572,700 shares of Corporation Common
Stock are outstanding (prior to any repurchase contemplated by Section 6.14 and
214,000 additional shares of Corporation Common Stock are reserved for issuance
upon exercise of outstanding stock options. Except as set forth in Appendix
3.02.1, all of the Corporation's outstanding shares of capital stock have been
validly issued, are fully paid and are nonassessable, and were issued in
compliance with all applicable federal and state securities laws.
3.02.2 Except as otherwise indicated on Appendix 3.02.2
annexed hereto, the Corporation does not have outstanding any subscriptions,
options, rights, warrants, convertible securities or other agreements or
commitments to issue, or contracts or any other agreements obligating the
Corporation to issue, or to transfer from treasury, any shares of its capital
stock of any class or kind, or securities convertible thereinto, or any
agreements restricting transfer of any securities of the Corporation
("Corporation Securities") or granting rights of first refusal with respect to
any Corporation Securities. All outstanding options granted by the Corporation
were granted under the plans set forth in Appendix 3.02.2 annexed hereto and
were granted pursuant to the stock option grant forms set forth in Appendix
3.02.2 annexed hereto. No persons who are now holders of the Corporation
Securities, and no persons who previously were holders of the Corporation
Securities, are or ever were entitled to statutory or contractual pre-emptive
rights. The Corporation has no shares of capital stock in its treasury. No
shares of capital stock of the Corporation were ever issued by the Corporation
or transferred by any stockholder in violation of any right of first refusal
known to the Corporation.
3.02.3 Appendix 3.02.3 annexed hereto contains a list of the
Corporation's outstanding stock options, setting forth the name of the option
holder, the date of grant or grants, the exercise price or prices, and the
vesting schedule or schedules. All such options are incentive options.
3.02.4 Except as set forth in Appendix 3.02.4 annexed hereto,
the Corporation and the "Corporation Subsidiaries" (as defined herein) have no
term or funded debt or bank loans. No event has occurred which (whether with or
without notice, lapse of time or the happening or occurrence of any other event)
would constitute a default by the Corporation or any of the Corporation
Subsidiaries, which has not been cured or waived, under any agreement or other
instrument relating to such term or funded debt or bank loans. There have been
no waivers of defaults executed or delivered by financial institutions to the
Corporation or any of the Corporation Subsidiaries since January 1, 1990. True
and complete copies of all agreements with respect to the debt and loans
referenced in this Section 3.02.4 have been furnished to the Acquirer's counsel.
3.03 Subsidiaries; Acquisitions; Dispositions.
3.03.1 Except for its ownership of less than five percent (5%)
of the outstanding capital stock of SPE Microsystems, Inc. (which,
notwithstanding any provision to the contrary set forth herein, shall not be
deemed to constitute a "Corporation Subsidiary"), the Corporation does not
directly or indirectly have any investment in, own or otherwise control any
corporation, partnership, limited liability company, joint venture or other
entity except for the entities listed on Appendix 3.03.1 annexed hereto
(collectively, the "Corporation Subsidiaries"). To the best of the Corporation's
knowledge, no events have occurred that would indicate that there has been a
permanent diminution in the value of the Corporation's investment in SPE
Microsystems, Inc.
3.03.2 Appendix 3.03.2 annexed hereto lists the name of each
business whose capital stock was acquired, or whose assets were acquired in
bulk, by the Corporation or any of the Corporation Subsidiaries since the date
of its incorporation, together with true and copies of all agreements providing
for such acquisitions. The merger described in the merger agreement between the
Corporation and Fastlane Communications, Inc., dated as of June 17, 1994, was
abandoned without any liability to or obligation of the Corporation remaining in
effect on the date hereof; such agreement has been terminated and such merger
was never consummated.
3.03.3 Appendix 3.03.3 annexed hereto lists each business
entity disposed of by the Corporation or any of the Corporation Subsidiaries
since the date of its incorporation, together with true and complete copies of
all agreements providing for such dispositions.
3.04 Foreign Qualifications. Appendix 3.04 annexed hereto
identifies all jurisdictions in which the Corporation or any of the Corporation
Subsidiaries are required to be qualified to do business as a foreign
corporation, together with true and complete copies of certificates establishing
their authorization to do so.
3.05 Other Business Names. Appendix 3.05 annexed hereto is a
complete list of the business names used by the Corporation, any of the
Corporation Subsidiaries and their respective predecessors and by any companies
acquired by or merged into any of them subsequent to their respective dates of
incorporation.
3.06 Owned Real Estate. The Corporation and the Corporation
Subsidiaries do not own any real estate.
3.07 Leased Real Estate.
3.07.1 Appendix 3.07.1 annexed hereto contains the name of the
landlord of each building or portion of a building leased (or subleased) by the
Corporation or any of the Corporation Subsidiaries and describes the date of the
lease (or sublease) for each of the premises leased (or subleased) by the
Corporation or any of the Corporation Subsidiaries. A true and complete copy of
each such lease (or sublease), as amended, has been delivered to the Acquirer's
counsel. The Corporation and the Corporation Subsidiaries are not in default in
any material respect under any such lease (or sublease) and the Corporation is
not aware of any facts which, with notice and/or the passage of time, would
constitute such a default. Each such leased (or subleased) building, or portion
thereof, is in satisfactory condition, normal wear and tear excepted. To the
best of the Corporation's knowledge, the roof, exterior walls, and all other
structural components of each such leased (or subleased) building are in a
condition which is sufficient for the Corporation's purposes; the Corporation
and the Corporation Subsidiaries have performed all periodic maintenance which
they have been required to perform under applicable lease (or sublease)
provisions, and have not deferred any such maintenance; and the heating, air
conditioning, plumbing and electrical systems of each leased (or subleased)
building are in good operating order, ordinary wear and tear excepted.
3.07.2 Except as otherwise indicated on Appendix 3.07.2
annexed hereto, the Merger is not deemed by any of the leases (or subleases)
described therein to be an assignment requiring landlord consent or any prior
notice, or such consent has been obtained or such prior notice has been given,
or such consent or prior notice is otherwise not required.
3.07.3 There are no subtenants of the Corporation or any of
the Corporation Subsidiaries under any of the Corporation's real estate leases
or any of the real estate leases of any of the Corporation Subsidiaries.
3.08 Tangible Personal Property. Appendix 3.08 annexed hereto
identifies all items, initially valued at more than $500 and having an initial
estimated useful life of more than one year, of machinery, motor vehicles,
computer equipment, furniture, fixtures, leasehold improvements, and all other
tangible personal property owned by, in the possession of, or used (and, in the
case of assets which are not owned by the Corporation or any Corporation
Subsidiary, identified as such) by the Corporation or any of the Corporation
Subsidiaries in connection with their business on the date hereof. Such Appendix
provides the date and cost of acquisition of each such asset. The Corporation
does not lease any such property.
3.09 Condition of Assets. All personal property owned by the
Corporation or any of the Corporation Subsidiaries or leased or otherwise used
by the Corporation or any of the Corporation Subsidiaries in such entity's
businesses is, in all material respects, in good condition, normal wear and tear
excepted, and in good operating order
3.10 Intangible Property; Infringement Claims.
3.10.1 Appendix 3.10.1 annexed hereto contains a true and
complete list of all intangible personal property owned or used by the
Corporation or any of the Corporation Subsidiaries, including but not limited to
all computer software (other than software that is widely available on a
commercial basis for purchase by the general public) and firmware,
distributorship, franchise, or license agreements (whether the Corporation or
any of the Corporation Subsidiaries is the grantor or grantee of such
distributorship, franchise or license), patents, patent applications,
inventions, trademarks, trademark applications, copyrights that have been
registered and trade names (collectively, the "Intangibles"). True and complete
copies of all written instruments which evidence such intangible personal
property have been delivered to the Acquirer. The Corporation or a Corporation
Subsidiary is the sole and exclusive owner of each of said items of intangible
personal property; there are no claims or demands against the Corporation or any
of the Corporation Subsidiaries with respect to any of such items of intangible
personal property, and no proceedings have been instituted, are pending, or to
the knowledge of the Corporation have been threatened to terminate or cancel any
such agreements or which challenge the right of the Corporation or any of the
Corporation Subsidiaries with respect to any of such assets; and there are no
facts known to the Corporation which make it likely that any such agreement will
not be renewed at its next expiration date. No person (other than the
Corporation and the Corporation Subsidiaries) owns any computer software or
firmware, patent, patent application, trademark, trademark application, trade
name, or copyright used by the Corporation or any of the Corporation
Subsidiaries The Corporation has the unrestricted right to use and transfer to
the Surviving Corporation, free from any rights or claims of others, all trade
secrets, customer lists and other Intangibles which it has used or which it is
now using in connection with the sale of any and all products or services which
have been or are being sold by it.
3.10.2 To the best of the Corporation's knowledge, no part of
the business carried on by the Corporation or any of the Corporation
Subsidiaries infringes the patent, trademark, trade names, trade secret,
copyright, or other intellectual property rights of any other person. Except as
set forth in Appendix 3.10.2 annexed hereto, the Corporation and the Corporation
Subsidiaries have not been notified that any third-party claims that the
Corporation or any Corporation Subsidiary has effected any such infringement;
and there are no facts known to the Corporation which might reasonably serve as
the basis, in whole or in part, of any such claim.
3.11 Trade Accounts Receivable; Inventory; Products
3.11.1 Except as indicated on Appendix 3.11.1 annexed hereto,
all trade accounts receivable of the Corporation and the Corporation
Subsidiaries have originated in the ordinary course of its business, are valid
and fully collectible and not subject to any defense, counterclaim or setoff.
Except as indicated on Appendix 3.11.1 annexed hereto, no trade accounts
receivable of the Corporation or of any of the Corporation Subsidiaries have
been factored and payment for all sales is due within 30 days or less after the
date of shipment.
3.11.2 The Corporation and the Corporation Subsidiaries have
no security agreements with their account debtors.
3.11.3 All inventory in the possession of the Corporation and
the Corporation Subsidiaries is owned by the Corporation or a Corporation
Subsidiary and is recorded on its books and records in a manner consistent with
past practices. Appendix 3.11.3 annexed hereto describes the method by which the
Corporation's inventory has been reflected in the Corporation's books and
records. No inventory in the possession of the Corporation or any of the
Corporation Subsidiaries has been consigned to the Corporation or any
Corporation Subsidiary, consists of items billed to customers or represents
items for which the related liability has not been recorded.
3.11.4 The products listed in Schedule A annexed to the
Covenant Against Competition set forth in Appendix 6.07A annexed hereto and the
products described in the brochure set forth in Schedule B annexed to such
Covenant Against Competition represent all of the products that the Corporation
has announced, developed, manufactured, assembled, marketed or sold since it
commenced operations. Other than the products so listed or so described, there
are no products which the Corporation intends to announce, develop, manufacture,
assemble, market or sell during the 1996 and/or 1997 calendar years. It is
understood that the Acquirer has relied upon this representation in determining
the scope of the Covenants Against Competition to be delivered pursuant to
Section 6.07.
3.12 Stockholders; Title to Stock. Appendix 3.12 annexed
hereto contains a complete list of the names and residence addresses of all of
the Corporation's stockholders and the number of shares of Corporation
Securities owned by each of them. To the best of the Corporation's knowledge and
except with respect to the operation of community property laws, each of the
persons listed on Appendix 3.12 annexed hereto is the sole record and beneficial
owner of the shares of Corporation Securities listed on that Appendix, owns
those shares of Corporation Securities free and clear of any security interests,
liens, encumbrances or claims, and has the right to vote the Corporation
Securities in favor of the Merger without the consent of any other person.
3.13 Title to Assets. Except as set forth in Appendix 3.13,
each of the Corporation and the Corporation Subsidiaries has good and marketable
title in and to all of its property reflected in the balance sheet provided in
Appendix 3.25.1 (the "Most Recent Balance Sheet") annexed hereto plus all assets
purchased by the Corporation and the Corporation Subsidiaries since the Most
Recent Balance Sheet Date (less all assets which the Corporation or any of the
Corporation Subsidiaries have disposed of in the ordinary course of business
since the Most Recent Balance Sheet Date), which property is free and clear of
any security interests, consignments, liens, judgments, encumbrances,
restrictions, or claims of any kind except as described in the next sentence
hereof. Except for security interests granted by the Corporation to Gary Maier
and Pat McGuire (which security interests are fully described in certain
financing statements, copies of which are set forth in such Appendix 3.13 and
which are hereinafter referred to as the "Financing Statements"), the only liens
or security interests which exist and, at the Closing, will exist on the
Corporation's assets are those which either (a) secure liabilities disclosed in
the Most Recent Balance Sheet, (b) secure the ownership interests of lessors of
equipment used by the Corporation or any of the Corporation Subsidiaries and are
disclosed in Appendices 3.08 or 3.13 annexed hereto or (c) are liens for current
taxes or assessments not yet due and delinquent.
3.14 Material Contracts and Other Matters
3.14.1 Appendix 3.14.1 annexed hereto identifies the following
contracts, leases and other contractual obligations to which the Corporation or
any of the Corporation Subsidiaries are currently a party or by which the
Corporation or any of the Corporation Subsidiaries is currently bound: (i)
contracts with or loans to any of the stockholders, officers, directors,
employees, agents, consultants, advisors, salesmen, distributors or sales
representatives of the Corporation or any of the Corporation Subsidiaries; (ii)
any employment or consulting contracts with, or covenants against competition or
confidentiality agreements by, any present or former employees of the
Corporation or any Corporation Subsidiaries; (iii) any collective bargaining
agreement; (iv) contracts with suppliers other than purchase orders in the
ordinary course of business; (v) contracts with customers other than purchase
orders in the ordinary course of business; (vi) leases as lessor of real estate
or equipment; (vii) deeds of trust, mortgages, conditional sales contracts,
security agreements, pledge agreements, trust receipts, or any other agreements
or arrangements whereby any of the assets of the Corporation or any of the
Corporation Subsidiaries are subject to a lien, encumbrance, charge or other
restriction; (viii) agreements relating to loans or lines of credit; (ix)
contracts restricting the Corporation or any Corporation Subsidiary from doing
business in any areas or in any way limiting competition; (x) contracts calling
for aggregate payments by the Corporation or any Corporation Subsidiary in
excess of $1,500 per month or $18,000 per year and which are not terminable
without cost or liability on notice of 90 days or less; (xi) contracts providing
for the installation or maintenance of equipment purchased or leased by the
Corporation or any Corporation Subsidiary and requiring payment by the
Corporation or any Corporation Subsidiary of more than $1,500 per month; (xii)
any marketing alliance, strategic alliance, joint venture, partnership or
limited partnership agreement; (xiii) guarantees by the Corporation or any
Corporation Subsidiary of the obligations of any other party except those
resulting from the endorsement of customer checks deposited by the Corporation
or any Corporation Subsidiary for collection; (xiv) contracts requiring the
Corporation or any Corporation Subsidiary to perform services for others or
requiring services to be performed for the Corporation or any Corporation
Subsidiary over a period in excess of 90 days from the date of such contract;
(xv) contracts restricting the transfer or voting of Corporation Securities
(other than restrictions imposed pursuant to option plans set forth in Appendix
3.02.2); (xvi) escrow arrangements of any sort; (xvii) contracts with others to
manipulate or assemble products ; (xviii) contracts to manufacture products for
others on a private label or custom basis; (xix) contracts or arrangements
pursuant to which the Corporation or any Corporation Subsidiary has agreed to
indemnify, hold harmless or defend any person or entity; (xx) any other material
contract, lease or obligation; and (xxi) all commitments to enter into any of
the types of contracts, leases or obligations described in this Section 3.14.
The Corporation and the Corporation Subsidiaries have, in all respects,
performed all material obligations required on their part to be performed to
date under any of such contracts, leases or other commitments to which they are
a party or otherwise bound and no default has occurred thereunder (or will occur
thereunder upon the giving of notice or the passage of time or both) which could
have an adverse effect upon the business or financial condition of or impose a
liability upon the Corporation or any of the Corporation Subsidiaries. To the
best of the Corporation's knowledge, all parties to such contracts and leases
with the Corporation or any of the Corporation Subsidiaries are in substantial
compliance therewith and no event has occurred which, through the giving of
notice or the passage of time or both, would cause or constitute a material
default under any such contract or lease or would cause the acceleration of any
obligation of any party thereto.
3.14.2 No purchase commitment of the Corporation or any
Corporation Subsidiary (other than with respect to occasional purchases of
components that are typically included within kits purchased by the Corporation)
is substantially in excess of the normal, ordinary, and usual requirements of
the Corporation's business or was made at any price substantially in excess of
the then current market price, or contains terms and conditions significantly
more onerous than those which are usual and customary in the Corporation's
industry.
3.14.3 Except as set forth in Appendix 3.14.3 annexed hereto,
the Corporation and the Corporation Subsidiaries have no outstanding bids, sale
proposals, contracts, or unfilled orders quoting prices which reflect discounts
other than commercially reasonable discounts given in the ordinary course of
business.
3.14.4 True and complete copies of the contracts (or, in the
case of standardized customer contracts, the form of such contracts) and leases
listed or referred to on Appendix 3.14.1 annexed hereto and in any other
Appendix annexed hereto have been provided to Acquirer's counsel. The
Corporation has required substantially all of its customers to execute a
standardized customer contract. To the best of the Corporation's knowledge,
there are no substantial variations among such contracts.
3.14.5 No employment contract, severance agreement, stock
option, consulting agreement, covenant against competition or other agreement,
separately or in the aggregate, to which the Corporation or any Corporation
Subsidiary is a party has resulted or is likely to result (as a result of the
Merger or otherwise) in the payment of "Excess Parachute Payments" within the
meaning of Section 280G of the Code.
3.14.6 Except as described in Appendix 3.14.6 annexed hereto
and except for failures to obtain consent or give prior notice which would not,
in the aggregate, be material to the Corporation, none of the agreements
referenced in Section 3.14.1 or any other agreement of the Corporation or any of
the Corporation Subsidiaries requires the consent of or prior notice to any
third-party in connection with the execution of this Agreement or the
consummation of the transactions contemplated hereby, or such consent has been
obtained or such prior notice has been given.
3.14.7 For the past two years, the Corporation has not sold
any products designed to test ISDN circuits.
3.15 Customers and Suppliers.
3.15.1 Appendix 3.15.1 annexed hereto lists all customers, or
groups of related customers, which purchased goods and services from the
Corporation and the Corporation Subsidiaries during fiscal 1995 and at least the
first six months of fiscal 1996, the total value of business transacted with
such customers during fiscal 1995 and at least the first six months of fiscal
1996 by the Corporation and the Corporation Subsidiaries, and any pricing
policies other than standard pricing policies currently in effect with respect
to each customer listed on that Appendix and other than a specific discount
granted to Rockwell International.
3.15.2 Appendix 3.15.2 annexed hereto lists all suppliers from
whom the Corporation or any of the Corporation Subsidiaries purchased goods and
services of more than $5,000 during fiscal 1995 or during at least the first six
months of fiscal 1996 and the total value of business transacted by the
Corporation and the Corporation Subsidiaries with such suppliers during fiscal
1995 and at least the first six months of fiscal 1996.
3.15.3 Except as listed on Appendix 3.15.3 annexed hereto,
none of the top twenty (by revenues) customers listed on Appendix 3.15.1, none
of the top twenty (by expenses) suppliers listed on Appendix 3.15.2 and none of
the marketing alliance partners or strategic alliance partners referred to in
agreements listed on Appendix 3.14.1 have, since January 1, 1995, terminated or
changed significantly their relationships with the Corporation or any of the
Corporation Subsidiaries or advised the Corporation that they intend to
terminate or change significantly their relationships with the Corporation or
any of the Corporation Subsidiaries on and after the Closing Date, except as
disclosed on Appendix 3.15.3. The Corporation, having been advised by the
Acquirer that the Acquirer does not foresee a material loss of customer orders
resulting from the Merger, does not foresee a material loss of customer orders
resulting from the Merger,
3.15.4 Appendix 3.15.4 annexed hereto describes the
Corporation's and each Corporation Subsidiary's warranty policy presently in
effect and each previous warranty policy utilized by the Corporation or any
Corporation Subsidiary within the last three years.
3.16 Transactions With Directors, Officers and Affiliates.
Except as listed on Appendix 3.16 annexed hereto, there have been no
transactions outside of the ordinary course of business during the last three
years between the Corporation or any of the Corporation Subsidiaries and
Renegade C Software, Inc., or any director, officer, employee, stockholder or
Affiliate of the Corporation or any Corporation Subsidiary, and each transaction
listed in such Appendix has been on terms no less favorable to the Corporation
or any Corporation Subsidiary than those which could have been obtained at the
time from bona fide third parties. To the best knowledge of the Corporation,
during fiscal 1995 and fiscal 1996, none of the officers, directors or employees
of the Corporation or any of the Corporation Subsidiaries or any spouse or
relative of any such persons, has been a director or officer of, or has had any
direct or indirect interest in, any firm, corporation, association or business
enterprise which, during such period, has been a significant supplier, customer
or sales agent of the Corporation or any of the Corporation Subsidiaries or has
competed with or been engaged in any business of the kind being conducted by the
Corporation or any of the Corporation Subsidiaries, except as disclosed on
Appendix 3.16 annexed hereto. Except as listed on Appendix 3.16 annexed hereto,
the Corporation and the Corporation Subsidiaries are not indebted to nor a
creditor of any shareholder of the Corporation or of any relative of any such
shareholder except for accrued wages and salaries.
3.17 Current Employees and Employment Practices.
3.17.1 Annexed hereto as Appendix 3.17.1 is a list, as of the
date hereof, showing the names of all employees of the Corporation and the
Corporation Subsidiaries, their original dates of employment, their job titles
and their hourly rates.
3.17.2 Except as indicated on Appendix 3.17.2 annexed hereto,
all employees of the Corporation and the Corporation Subsidiaries are employees
at will who may be terminated by the Corporation at any time with no obligation
to make any payment except wages to the date of termination.
3.17.3 The Corporation and the Corporation Subsidiaries are in
compliance in all material respects with all federal and state laws respecting
employment, wages and hours. Such entities have not engaged in any
discriminatory hiring or employment practices or any unfair labor practices nor
have any employment discrimination or unfair labor practice complaints against
such entities been filed, or, to the knowledge of the Corporation, been
threatened to be filed, with any federal or state agency having jurisdiction
over the labor matters of the Corporation and the Corporation Subsidiaries. To
the best knowledge of the Corporation, the Corporation and the Corporation
Subsidiaries have not been threatened by any former employee with any suit
alleging wrongful termination. The Corporation has no knowledge of facts which
might form a basis for any complaint or suit of a type described in this Section
3.17.3 which, if commenced, could potentially have a material adverse effect on
the Corporation. The Corporation and the Corporation Subsidiaries do not employ
any alien who does not have a valid permit to work in the United States of
America.
3.17.4 Appendix 3.17.4 annexed hereto lists all employees who
left the employ of the Corporation or any of the Corporation Subsidiaries
voluntarily or were terminated on or after January 1, 1994, and, to the extent
known to the Corporation, the reasons such persons left the employ of the
Corporation or any of the Corporation Subsidiaries.
3.17.5 No current employee of the Corporation or any of the
Corporation Subsidiaries is bound by any previous non-competition agreement
(other than agreements given to the Corporation) and no employee, in his or her
capacity as an agent of the Corporation, has violated a confidentiality
agreement or non-compete agreement with an unrelated entity.
3.18 Employment.
3.18.1 Appendix 3.18.1 annexed hereto contains a true and
complete list of all funded or unfunded, written or oral, employee benefit
plans, contracts, agreements, incentives and salary, wage or other compensation
plans or arrangements, including but not limited to all pension and profit
sharing plans, savings plans, bonus plans, deferred compensation plans,
incentive compensation plans, stock purchase plans, supplemental retirement
plans, severance or termination pay plans, stock option plans, hospitalization
plans, medical plans, life insurance plans, dental plans, disability plans,
cafeteria plans, dependent care plans, tuition reimbursement plans, educational
assistance plans, salary continuation plans, vacation plans, supplemental
unemployment benefit plans, collective bargaining agreements, employment
contracts, consulting agreements, retiree benefits and agreements, severance
agreements and each other employee benefit program, plan, policy or arrangement
(each a "Benefit Plan") maintained, contributed to, or required to be
contributed to by the Corporation or any Corporation Subsidiary with respect to
any current or former employees, directors, officers, agents or consultants of
the Corporation or any Corporation Subsidiary, or for which the Corporation or
any Corporation Subsidiary may be responsible or with respect to which it may
have any liability, whether or not subject to the Employee Retirement Income
Security Act of 1974 ("ERISA"), and whether legally binding or not, that
involves the payment by the Corporation or any Corporation Subsidiary of an
annual amount of more than $1,000 in the aggregate.
3.18.2 The Corporation has delivered to the Acquirer's counsel
true and complete copies of all documents embodying or relating to the Benefit
Plans and of all employee handbooks utilized by the Corporation or any of the
Corporation Subsidiaries within the past five years. Each of the Benefit Plans
listed in Appendix 3.18.1 annexed hereto is and has at all times been in
compliance in all material respects with all applicable provisions of ERISA, the
Code, the Age Discrimination in Employment Act of 1967, the Americans with
Disabilities Act of 1990, the Family Medical Leave Act of 1993 and all other
laws applicable to the Benefit Plans.
3.18.3 Each Corporation "employee pension benefit plan" as
defined in ss.3(2) of ERISA (each a "Pension Plan") which is intended to meet
the requirements of Section 401(a) of the Code now meets, and since its
inception has met, the requirements for qualification under Section 401(a) of
the Code and nothing has occurred which would adversely affect the qualified
status of any such Pension Plan. Except as set forth in Appendix 3.18.3 annexed
hereto, the Internal Revenue Service has issued a favorable determination letter
with respect to the qualification under the Code (including without limitation
the Tax Reform Act of 1986) of each Pension Plan (true and complete copies of
which have been delivered to the Acquirer's counsel) and the Internal Revenue
Service has not taken any action to revoke any such letter.
3.18.4 Each fiduciary and every plan official of each Benefit
Plan is bonded to the extent required by Section 412 of ERISA. The Corporation
and the Corporation Subsidiaries have not maintained, contributed to or been
required to contribute to (i) any Pension Plan under which more than one
employer makes contributions (as defined in Section 4064(a) of ERISA) or (ii) a
"multiemployer plan" as defined in Section 3(37)(A) and (D) of ERISA, nor have
they withdrawn from any Pension Plan as a "substantial employer" as defined in
Section 4001(a)(2) of ERISA so as to become subject to the provisions of Section
4063 of ERISA, or ceased operations at any facility so as to become subject to
the provisions of Section 4062 of ERISA. Those sections of all annual reports
heretofore filed with the Internal Revenue Service, the Department of Labor or
the Pension Benefit Guaranty Corporation by or on behalf of every Benefit Plan
which were required to be certified were certified without qualification by the
accountants or actuaries of such Benefit Plan. By their terms, each of the
Benefit Plans can be amended, terminated or otherwise discontinued after the
Closing Date without liability to the Corporation, any Corporation Subsidiary or
the Surviving Corporation.
3.18.5 Except as set forth in Appendix 3.18.5 annexed hereto,
the execution and performance of the transactions contemplated by this Agreement
will not constitute an event under any Benefit Plan or individual agreement that
will or will likely result in any payment (whether of severance pay or
otherwise), acceleration, vesting or increase in benefits with respect to any
current or former employee, officer, consultant, agent or director of the
Corporation or any Corporation Subsidiary.
3.18.6 Long-term disability benefits for any employee of the
Corporation and each Corporation Subsidiary who has become disabled (including
without limitation any individual who is disabled but has not satisfied any
applicable waiting period) and death benefits for any employee of the
Corporation and each Corporation Subsidiary who has died are described in
Appendix 3.18.6 annexed hereto and are fully insured in amounts and with
insurance companies described in Appendix 3.18.6 annexed hereto.
3.18.7 Except as set forth in Appendix 3.18.7 annexed hereto,
each group health plan (within the meaning of Section 5000(b)(1) of the Code)
maintained by the Corporation or any of the Corporation Subsidiaries has been
administered in substantial compliance with the coverage continuation
requirements contained in the Consolidated Omnibus Budget Reconciliation Act of
1985 ("COBRA") and as provided under Section 4980B of the Code and any
regulations promulgated or proposed under the Code. Except to the minimum extent
required by COBRA, the Corporation and the Corporation Subsidiaries have never
maintained, sponsored or contributed to any plan or program or arrangement
providing post-termination employment, health, dental, disability or life
insurance benefits with respect to current or former employees, officers,
consultants, agents or directors and/or their spouses or dependents.
3.18.8 The Corporation and the Corporation Subsidiaries have
made all contributions required to be made to each Benefit Plan under the terms
of the plan and applicable law. No prohibited transaction (as defined in Section
4975 of the Code or Section 406 of ERISA) has occurred with respect to any
Benefit Plan which could subject any Benefit Plan or any related trust, the
Corporation, any Corporation Subsidiary, the Surviving Corporation or any
director or employee of any of them to any tax or penalty imposed under Section
4975 of the Code or Section 502(i) or 502(1) of ERISA, either directly or
indirectly, and whether by way of indemnity or otherwise.
3.18.9 The Corporation or the plan "administrator" (as defined
in Section 3(16) of ERISA) of each Benefit Plan has timely filed all ERISA and
Code required reporting and disclosure forms, including, but not limited to, the
Form 5500 series, with the appropriate government agencies, with respect to
every Benefit Plan required to file such forms.
3.19 Insurance. Appendix 3.19 annexed hereto lists all
insurance policies which the Corporation and the Corporation Subsidiaries
currently have in effect and had in effect during the last three years. Such
Appendix lists, for each such policy, the name of the carrier, the policy
number, the policy period, the basic coverage afforded, the amount of coverage
and any claims made thereunder. True and complete copies of said policies,
including without limitation all endorsements, have been delivered to the
Acquirer's counsel. The Corporation is not in breach of any representation that
it has made to any third-party with respect to insurance to be maintained by the
Corporation, whether or not such insurance is required to be maintained for the
benefit of any third-party.
3.20 Licenses and Permits. The Corporation, the Corporation
Subsidiaries and their employees and agents have all certifications, licenses,
permits, orders, approvals and authorizations ("Confirmations") required for the
conduct of the businesses of such entities as presently conducted (except for
Confirmations which, if not obtained, would not result in a material adverse
impact upon the Corporation). The Corporation and the Corporation Subsidiaries
have the United States Federal Communications Commission certifications and
Canadian Department of Communications certifications listed on Appendix 3.20
annexed hereto. All such certifications are currently in effect. The Corporation
and the Corporation Subsidiaries are acting within the terms of such
certifications, licenses, permits, orders, approvals and authorizations. To the
best knowledge of the Corporation, no suspension or cancellation of any such
certifications, licenses, permits, orders, approvals and authorizations has been
threatened or has occurred within the past five years.
3.21 Authority Relative to Agreement; Enforceability. The
execution, delivery and performance of this Agreement and the Merger Agreement
and the consummation of the transactions contemplated hereby are within the
legal capacity and power of the Corporation and have been duly authorized by all
requisite corporate action on the part of the Corporation. This Agreement is a
legal, valid and binding obligation of the Corporation, enforceable against the
Corporation in accordance with its terms. All persons who executed this
Agreement on behalf of the Corporation have been duly authorized to do so.
3.22 Compliance With Other Instruments; Consents. Except as
set forth in Appendix 3.22 annexed hereto, neither the execution of this
Agreement or the Merger Agreement nor the consummation of the Merger will
conflict with, violate or result in a breach of or constitute a default under
(or an event which, with the giving of notice or lapse of time or both, would
constitute a default), or result in the termination of, or accelerate the
performance required by, or result in the creation of any lien or encumbrance
upon any of the assets of the Corporation or any Corporation Subsidiary under,
any provision of the articles of association and by-laws of the Corporation or
any of the Corporation Subsidiaries or any indenture, mortgage, lien, lease,
agreement, contract, instrument, or other restriction of any kind or character
to which the Corporation or any Corporation Subsidiary is subject or by which
the Corporation or any Corporation Subsidiary is bound, or require the consent
of any third party or governmental agency.
3.23 Compliance With Applicable Laws.
3.23.1 The Corporation and each Corporation Subsidiary are in
compliance in all material respects with all federal, state, county, and
municipal laws, ordinances, regulations, judgments, orders or decrees applicable
to the conduct of their businesses or to the assets owned, used, or occupied by
them. The Corporation and the Corporation Subsidiaries have received no notice
or advice to the contrary. All reports required by federal, state and local
governments, including, but not limited to, reports to the United States
Department of Commerce, the Environmental Protection Agency ("EPA"), the
Occupational Safety and Health Administration ("OSHA"), state equivalents of
such federal agencies, all reports required under licenses or qualifications to
import, export, manufacture, assemble or sell various classes and types of
products sold by the Corporation or any of the Corporation Subsidiaries, if such
licenses or qualifications are necessary, and all other reports to similar
agencies, board groups or administrations have been timely filed by the
Corporation and the Corporation Subsidiaries and all information contained
therein is true and correct, (except in all such instances for reports which, if
not filed, would not result in a material adverse impact upon the Corporation).
The Corporation and the Corporation Subsidiaries have not received any
governmental inquiries or responses with respect thereto other than inquiries or
responses which were not material with respect to their businesses, operations,
financial condition or assets.
3.23.2 Except for the filing of the Merger Agreement with the
Secretary of State of California, neither the execution of this Agreement nor
the consummation of the Merger will (a) violate any order, writ, injunction,
statute, rule or regulation applicable to the Corporation or any of the
Corporation Subsidiaries or (b) require (with respect to the Corporation and the
Corporation Subsidiaries) the consent, approval, authorization or permission of,
or the filing with, or the notification of, any federal, state or local
government agency.
3.24 Environmental Compliance. The Corporation and the
Corporation Subsidiaries are in compliance in all material respects with all
applicable federal, state and local laws and regulations relating to pollution
control and environmental contamination including, but not limited to, all laws
and regulations governing the generation, use, collection, treatment, storage,
transportation, recovery, removal, discharge, or disposal of "Hazardous
Materials" (as that term is defined in the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, 42 U.S.C. ss.ss.9601-9657 and any
amendments thereto ("CERCLA")) and all laws and regulations with regard to
record-keeping, notification and reporting requirements respecting Hazardous
Materials. Except as set forth in Appendix 3.24 annexed hereto, the Corporation
and the Corporation Subsidiaries have not violated, nor have they been subject
to any administrative or judicial proceeding pursuant to, such laws or
regulations either now or any time during the past three years. There are no
facts or circumstances that the Corporation reasonably believes could form the
basis for the assertion of any claim against the Corporation or any Corporation
Subsidiaries relating to environmental matters including, but not limited to,
any claim arising from past or present environmental practices asserted under
(a) CERCLA, (b) the Resource Conservation and Recovery Act, 42 U.S.C.
ss.ss.6901-6987 and any amendments thereto ("RCRA"), (c) the Federal Technical
Standards and Correction Action Requirements for Owners and Operators of
Underground Storage Tanks, 40 C.F.R. Part 280, (d) the Clean Air Act (42 U.S.C.
7401 et seq.), (e) the Clean Water Act (33 U.S.C. 1251, et seq.), (e) the Toxic
Substance Control Act (15 U.S.C. 2601 et seq.) and (f) any similar state or
local environmental statute. Promptly upon learning thereof, the Corporation
will advise the Acquirer of any facts or circumstances known to the Corporation
that it reasonably believes could form the basis for the assertion of any claim
against the Corporation or any Corporation Subsidiary relating to environmental
matters including, but not limited to, any claim arising from past or present
environmental practices asserted under CERCLA, RCRA or any other federal, state
or local environmental statute. There has been no written communication during
the past three years between the Corporation or any Corporation Subsidiary and
any federal or state environmental agency. There have been no Hazardous
Materials generated, transported or disposed of by the Corporation or any
Corporation Subsidiary during the past three years except as an integral part of
products sold by the Corporation or any Corporation Subsidiary in the ordinary
course of its business. No Hazardous Materials have been either disposed of or
found by the Corporation or any Corporation Subsidiary or, to the Corporation's
knowledge, by any other party, at any site or facility owned or operated by the
Corporation or any Corporation Subsidiary presently or at any previous time or
by any predecessor of the Corporation or any Corporation Subsidiary or by any
company whose business or assets have been acquired by the Corporation or any
Corporation Subsidiary.
3.25 Financial Statements.
3.25.1 The Corporation has delivered to the Acquirer its
balance sheet as of May 31, 1996 and its income statement for the eight months
ended May 31, 1996, copies of which are set forth in Appendix 3.25.1 annexed
hereto. Such financial statements fairly present the Corporation's financial
condition as of May 31, 1996 and the results of its operations for the eight
months then ended.
3.25.2 There are no transactions that have been improperly
recorded in the accounting records underlying the financial statements set forth
in Appendix 3.25.1 annexed hereto.
3.25.3 In preparing its financial statements, management of
the Corporation relies upon certain estimates. Appendix 3.25.3 annexed hereto
sets forth a summary of all estimates made by the Corporation in preparing the
financial statements set forth in Appendix 3.25.1 annexed hereto, other than
those estimates which are either immaterial to the Corporation or are unlikely
to change within the foreseeable future. The Corporation's allowances for
warranty repairs, accounts receivable and inventory matters reflected in the
financial statements annexed hereto are adequate to absorb currently estimated
warranty repair costs and bad debts. Provision has also been made in preparing
the financial statements annexed hereto to reduce excess or obsolete inventories
to their net realizable value.
3.25.4 The Corporation and the Corporation Subsidiaries had no
material liabilities (whether absolute, accrued, contingent or otherwise) as at
the date of the balance sheet included in Appendix 3.25.1 (the "Most Recent
Balance Sheet Date") which would be required to be reflected in and disclosed on
the Corporation's consolidated balance sheet as at that date in accordance with
GAAP but are not so reflected or disclosed. Since the Most Recent Balance Sheet
Date, the Corporation and the Corporation Subsidiaries have incurred no
liabilities whatsoever in addition to those reflected in or disclosed on the
Most Recent Balance Sheet, except liabilities incurred in the ordinary course of
business subsequent to the Most Recent Balance Sheet Date. The Corporation and
the Corporation Subsidiaries have no deferred contractual obligations other than
those (if any) reflected on the Most Recent Balance Sheet.
3.25.5 The Corporation is not in default of any obligation
which, if such default were reflected in the annexed financial statements, would
have a material effect on such financial statements, Adequate provision has been
made in such financial statements to reflect any loss which the Corporation
reasonably expects to sustain in the fulfillment of, or arising from the
inability to fulfill, any sales or purchase commitments.
3.25.6 There are no unasserted claims or assessments that
legal counsel has advised the Corporation are probable of assertion and must be
disclosed and accounted for in accordance with Statement of Financial Accounting
Standards No. 5.
3.25.7 The Corporation's books and records reflect, or the
Corporation has otherwise substantially disclosed to the Acquirer in writing,
all transactions between the Corporation and any officer, director or
shareholder of the Corporation or any person or entity affiliated with any such
officer, director or shareholder.
3.25.8 No funds or assets of the Corporation and/or any of the
Corporation Subsidiaries have been used for illegal purposes; no unrecorded
funds or assets of the Corporation and/or any of the Corporation Subsidiaries
have been established for any purpose; no accumulation or use of the corporate
funds of the Corporation and/or any of the Corporation Subsidiaries has been
made without being properly accounted for in the respective books and records of
the Corporation and/or any of the Corporation Subsidiaries; all payments by or
on behalf of the Corporation or any of the Corporation's Subsidiaries have been
duly and properly recorded and accounted for in such entities' books and
records; no false or artificial entry has been made in such books and records
for any reason; no payment has been made by or on behalf of the Corporation
and/or the Corporation Subsidiaries with the understanding that any part of such
payment is to be used for any purpose other than that described in the documents
supporting such payment or substantially disclosed to the Acquirer in writing;
and the Corporation and/or the Corporation Subsidiaries have not made, directly
or indirectly, any illegal contributions to any political party or candidate,
either domestic or foreign, or any contribution, gift, bribe, rebate, payoff,
influence payment, kickback, whether in cash, property or services, to any
individual corporation, partnership or other entity, to secure business for the
Corporation and/or any of the Corporation Subsidiaries or any third-parties or
to pay for business secured for the Corporation and/or any of the Corporation
Subsidiaries or any third-parties.
3.25.9 No operations have been discontinued by the Corporation
or any of the Corporation Subsidiaries within the last three years.
3.25.10 Any financial statements provided by the Corporation
to the Acquirer for periods subsequent to May 31, 1996 and through the Effective
Time of the Merger will be prepared and presented on the same basis and be
consistent in compilation with the financial statements annexed hereto as
Appendix 3.25.1.
3.25.11 Except for dividends described in Appendix 3.25.11
annexed hereto, dividends referred to in Section 5.02.5 and any repurchase
described in Section 6.14, , no dividends or distributions have ever been paid
by the Corporation with respect to any class or series of the Corporation's
securities and no Corporation Securities have ever been repurchased by the
Corporation.
3.26 Intentionally omitted.
3.27 Taxes.
3.27.1 True and complete copies of all tax and information
returns required to have been filed by the Corporation and each Corporation
Subsidiary (either separately or as part of a consolidated group) since January
1, 1991 have been provided to the Acquirer and have been filed with the
appropriate authorities; and all liabilities for federal, state and local taxes
(including without limitation income, franchise, property, sales, use,
value-added, withholding, excise, capital and other tax liabilities, charges,
assessments, penalties and interest ("Tax Liabilities")) of the Corporation and
each Corporation Subsidiary have been paid to the extent such payments are
required prior to the date hereof or accrued (as of the appropriate dates) on
the books of the Corporation and/or the Corporation Subsidiaries. Such returns
were correct as filed. The Corporation's consolidated financial statements
listed in Appendix 3.25.1 include adequate provision for Tax Liabilities
incurred or accrued as of the Most Recent Balance Sheet Date.
3.27.2 The Federal income tax returns of the Corporation and
the Corporation Subsidiaries have not been audited by the Internal Revenue
Service for any period. State and local franchise and sales tax returns of the
Corporation and the Corporation Subsidiaries have not been audited for any
period. No assessment or additional Tax Liabilities have been proposed or
threatened against the Corporation or any Corporation Subsidiary or any of their
assets, and neither the Corporation nor any Corporation Subsidiary has executed
any waiver of the statute of limitations on the assessment or collection of any
Tax Liabilities.
3.27.3 There are no pending investigations of the Corporation
or any Corporation Subsidiary or their tax returns by any federal, state or
local taxing authority, and there are no federal, state, local or foreign tax
liens upon any of the assets of the Corporation or any of the Corporation
Subsidiaries.
3.27.4 Appendix 3.27.4 annexed hereto lists any elections
which the Corporation or any of the Corporation Subsidiaries have made with
respect to the income tax treatment of any items which cannot be revoked without
the consent of the Internal Revenue Service.
3.27.5 The Corporation has valid resale certificates from all
customers from which the Corporation must obtain such certificates in order to
be exempt from all obligations to collect sales taxes.
3.27.6 The Corporation is not aware of any "Plans" by
stockholders of the Corporation to effect "Sales" of 50% or more of the Common
Stock acquired in the Merger. The terms "Plans" and "Sales" having the meanings
set forth in Appendix 6.08 annexed hereto.
3.27.7 At no time has a consent been filed by the Corporation
or any Corporation Subsidiary to have the provisions of Section 341(f)(2) of the
Code apply, and no agreement under Section 341(f)(3) of the Code has at any time
been filed by the Corporation or any Corporation Subsidiary.
3.27.8 The Corporation and its stockholders have properly
elected to qualify the Corporation as an "S corporation" within the meaning of
Section 1361(a) of the Code for all taxable periods commencing with the
Corporation's initial taxable year and continuing in effect for all taxable
periods since that time. Corresponding treatment as an S corporation for state
tax purposes has been maintained for all such periods in all states in which the
Corporation does business. The Corporation's status as an S corporation (or
corresponding status under state law) has never been disallowed or questioned by
the Internal Revenue Service or any state taxing authority. A copy of the
Corporation's elections to be treated as an S corporation is set forth in
Appendix 3.27.8 annexed hereto.
3.27.9 The assumptions set forth in Appendix 6.09 annexed
hereto are accurate in all material respects.
3.28 Litigation. Except as disclosed in Appendix 3.28 annexed
hereto, there are no legal, administrative, arbitration or other proceedings,
and no other claims pending or, to the best knowledge of the Corporation,
threatened, against the Corporation or any of the Corporation Subsidiaries, nor
is the Corporation or any Corporation Subsidiary subject to any existing
judgment; nor has the Corporation or any Corporation Subsidiary received any
inquiry from any agency of the federal or of any state or local government about
this Agreement or the Merger, or about any violation or possible violation of
any law, regulation or ordinance materially adversely affecting its business or
assets; nor have the Corporation or any of the Corporation Subsidiaries received
any material claims regarding the performance of its products during the past
three years. With the exception of a claim by William Majkut (as referred to in
Sections 5.02.5 and 6.14.1), the Corporation is not aware of any claims by any
person or entity that such person or entity is entitled to capital stock, or
rights or options to purchase capital stock, of the Corporation which claims are
inconsistent with the disclosures made hereunder with respect to such capital
stock or rights or options. No facts exist which give rise to any claim by any
current or former director, officer, agent or employee of the Corporation or any
other person or entity for indemnification against the Corporation under the
Corporation's articles of incorporation or by-laws, under California law
(including without limitation Section 317 of the GCL), under any agreement
providing for indemnification or otherwise. The Corporation is not obligated to
Renegade C Software, Inc. or its successors or assigns and no facts exist which
give rise to any claim against the Corporation by Renegade C Software, Inc. or
its successors or assigns.
3.29 Adverse Business Changes. Except as described on
Appendix 3.29 annexed hereto, since the Most Recent Balance Sheet Date there
has not been:
3.29.1 any material (either when taken by itself or in
conjunction with all other such changes) adverse change in the working capital,
financial condition, assets, liabilities (whether absolute, contingent or
otherwise), reserves, results of operations, business, or prospects of the
Corporation and the Corporation Subsidiaries taken as a whole;
3.29.2 any damage, destruction or loss (whether or not covered
by insurance) materially and adversely affecting the businesses of the
Corporation and the Corporation's Subsidiaries;
3.29.3 any material disposition, mortgage, pledge, or
subjection to any lien, claim, charge, option, or encumbrance of any property or
asset of the Corporation or any Corporation Subsidiary, any commitment made or
liability incurred by the Corporation or any of the Corporation Subsidiaries, or
any cancellation or compromise of any debt or claim of the Corporation or any of
the Corporation Subsidiaries, otherwise than in the ordinary course of business;
3.29.4 except as referred to in Section 5.02.5 or Section
6.14, any dividend or distribution declared, set aside or paid in respect of the
Corporation Securities or any repurchase by the Corporation of any shares of
Corporation Securities;
3.29.5 any employment contract entered into by the Corporation
or any Corporation Subsidiary, or any increase (other than increases made on or
before May 30, 1996 in the ordinary course of business with respect to
employees) or decrease in the rates of compensation payable or to become payable
by the Corporation or any Corporation Subsidiary to any of their officers,
directors, employees or agents over or under the rates in effect during the 12
months ended on the Most Recent Balance Sheet Date; any amendment or
modification of any Benefit Plan; or any commitment or obligation of any kind
for the payment by the Corporation or any Corporation Subsidiary of any bonus,
additional salary or compensation, or retirement, termination or severance
benefits to officers, directors, employees or agents; or
3.29.6 any amendment, termination or threatened termination of
any material contract, agreement, insurance policy, lease, or license to which
the Corporation or any Corporation Subsidiary is a party or by which any such
entity may be bound.
3.30 Other Changes. Except as described in Appendix
3.30 annexed hereto, there has not been:
3.30.1 any strike, shutdown, picketing, work stoppage, labor
dispute or threat of a labor dispute or any attempt or threat of an attempt by a
labor union to organize the employees of the Corporation or any Corporation
Subsidiary, or any application or complaint filed by an employee or union with
the National Labor Relations Board of any comparable state or local agent, since
September 30, 1991;
3.30.2 any material change in the sources of supply or method
of doing business of the Corporation and/or any of the Corporation Subsidiaries
since September 30, 1994;
3.30.3 any distribution or disposition of the assets of the
Corporation and/or any of the Corporation Subsidiaries other than in the
ordinary course of business since September 30, 1994;
3.30.4 any catastrophic event affecting the business or assets
of the Corporation and/or any of the Corporation Subsidiaries, such as but not
limited to fire, explosion, earthquake, accident, flood, condemnation, act of
God, riot or civil disturbance, since September 30, 1994;
3.30.5 any loss or, to the best of the Corporation's
knowledge, threatened loss of a customer or group of customers which purchased
individually or in the aggregate more than $50,000 of goods and services from
the Corporation and the Corporation Subsidiaries (taken as a whole) during the
12 months ended on the Most Recent Balance Sheet Date;
3.30.6 any loss or, to the best of the Corporation's
knowledge, threatened loss of a supplier or group of suppliers from whom the
Corporation and/or any Corporation Subsidiary purchased individually or in the
aggregate more than $10,000 of goods during the 12 months ended on the Most
Recent Balance Sheet Date;
3.30.7 any material change in discount practices or policies
of the Corporation and/or any Corporation Subsidiary since September 301, 1993;
3.30.8 any termination since September 30, 1994 of any permit
or license issued to the Corporation and/or any Corporation Subsidiary or to any
of their employees or agents upon which a material portion of such entities'
business is dependent;
3.30.9 since September 30, 1994, any statute, order, judgment,
writ, injunction, decree, permit, rule or regulation of any court or any
governmental or regulatory body adopted or entered or proposed to be adopted or
entered which may materially and adversely affect the property or business of
the Corporation and the Corporation Subsidiaries taken as a whole;
3.30.10 since September 30, 1994, other than the execution of
this Agreement, any act or omission by the Corporation or any Corporation
Subsidiary outside of the ordinary course of business; or
3.30.11 any material adverse change in the relationship of the
Corporation or any Corporation Subsidiary with Brooktrout Technologies, Qualcom,
DAX Systems or Rockwell International since September 30, 1994.
3.31 Brokerage. Except as disclosed in Appendix 3.31 annexed
hereto, no broker or finder has rendered services to the Corporation (or any
stockholder thereof) or any Corporation Subsidiary in connection with this
Agreement or the Merger.
3.32 Banks. Appendix 3.32 annexed hereto contains a complete
list of the names and addresses of each financial institution in which the
Corporation or any Corporation Subsidiary maintains an account and/or safe
deposit box, the bank account numbers assigned to the Corporation or any
Corporation Subsidiary and the persons authorized to sign checks on behalf of
the Corporation or any Corporation Subsidiary and to deposit assets in such
safety deposit boxes.
3.33 Appendices. All of the facts recited in the Appendices
referred to in this Article III shall be deemed to be representations of facts
as though recited in this Article III in their entirety.
3.34 Full Disclosure. No representation or warranty made by
the Corporation in this Agreement, and no certification furnished or to be
furnished to the Acquirer pursuant to this Agreement, contains or will contain
any untrue statement of a material fact, or omits or will omit to state a
material fact necessary to make the statements contained herein or therein not
misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE ACQUIRER
The Acquirer hereby represents and warrants to the Corporation
as follows:
4.01 Organization. Each of the Acquirer and the Subsidiary is
a corporation, duly organized, validly existing and in good standing under the
laws of its state of incorporation and has all requisite corporate power and
franchises to own its property, conduct the business in which it is engaged and
to execute, deliver, and perform this Agreement. True and complete copies of the
Acquirer's certificate of incorporation and by-laws as of the date hereof have
been provided to the Corporation.
4.02 Capitalization; Options. The Acquirer has authorized
capital stock of 70,000,000 shares, consisting of (a) 10,000,000 shares of
Preferred Stock, no par value, of which no shares are presently issued and
outstanding, and (b) 60,000,000 shares of Common Stock, no par value, of
which, as of December 31, 1995, 14,709,408 shares were issued and outstanding
and 2,657,006 shares were reserved for issuance upon exercise of Acquirer
Options which were either outstanding or authorized to be granted pursuant
to plans or agreements authorized by the Acquirer's Board. Subsequent to
December 31, 1995, the Board of Directors and shareholders of the Acquirer
authorized the grant of options covering an additional 400,000 shares of Common
Stock.
4.03 Authorization. The execution and delivery of this
Agreement and the Merger Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by the Board of Directors of the
Acquirer and the Subsidiary, or a duly constituted committee of each such Board
of Directors. This Agreement constitutes the legal, valid and binding obligation
of the Acquirer and Subsidiary, enforceable against the Acquirer and the
Subsidiary in accordance with its terms. All persons who have executed this
Agreement on behalf of the Acquirer and the Subsidiary have been duly authorized
to do so. Except for such approvals as are referenced in Section 3.23.2 or as
may be necessary in connection with the offer and sale of the Acquirer's capital
stock in the Merger, neither the Acquirer's execution of this Agreement nor the
Acquirer's consummation of the Merger will (a) violate any order, writ,
injunction, statute, rule or regulation applicable to the Acquirer, or (b)
require the consent, approval, authorization or permission of, or the filing
with or the notification of, any federal, state or local government agency.
4.04 No Third Party Consent Required: No Violation of Other
Instruments. Neither the execution nor the performance of this Agreement by the
Acquirer or the Subsidiary requires the consent of any third party nor will such
execution or performance violate or result in a material breach or constitute a
material default under any provision of the certificate of incorporation or
by-laws of the Acquirer or the Subsidiary or any material indenture, mortgage,
lien, lease, agreement, contract, instrument, order, judgment, decree, statute,
ordinance, regulation or other restriction to which the Acquirer or the
Subsidiary is subject or by which the Acquirer or the Subsidiary is bound.
4.05 Financial Statements. The Acquirer has delivered to the
Corporation its consolidated balance sheets as of December 31, 1995 and December
31, 1994 and the related consolidated statements of income, changes in
stockholders' equity and cash flows for the three years ended December 31, 1995.
Such statements (including without limitation the notes thereto) fairly present
the consolidated financial position of the Acquirer and its subsidiaries as of
December 31, 1995 and December 31, 1994 and the consolidated results of such
entities' operations and such entities' consolidated cash flows for the periods
presented and have been prepared in conformity with GAAP.
4.06 No Material Adverse Change. Since December 31, 1995,
there have been no changes in the consolidated financial condition, assets,
liabilities or business of the Acquirer and its subsidiaries which in the
aggregate would be materially adverse to the consolidated financial condition or
operations of the Acquirer and its subsidiaries taken as a whole.
4.07 Reports. The Acquirer has previously delivered to the
Corporation a true and complete copy of its Annual Report on Form 10-K for the
year ended December 31, 1995, its Quarterly Report on Form 10-Q for the quarter
ended March 31, 1996 and its proxy statement for its 1996 annual meeting of
shareholders. Such documents did not contain any untrue statement of a material
fact and did not omit to state a material fact necessary to make the statements
contained therein not misleading or omit to state a material fact required to be
stated therein.
4.08 Litigation. Except as described in the reports described
in Section 4.07 hereof, there are no legal, administrative, arbitration or other
proceedings or other claims pending or, to the knowledge of the Acquirer,
threatened, against the Acquirer or any other subsidiary of the Acquirer, nor
are the Acquirer or any other subsidiary of the Acquirer subject to any existing
judgment, which may reasonably be expected to materially adversely affect the
consolidated financial condition, business, property or prospects of the
Acquirer, nor have the Acquirer or any other subsidiary of the Acquirer received
any inquiry from an agency of the federal or of any state or local government
about the Merger, or about any violation or possible violation of any law,
regulation or ordinance materially adversely affecting the business or assets of
the Acquirer and its Subsidiaries taken as a whole.
4.09 Full Disclosure. No representation or warranty made by
the Acquirer or the Subsidiary in this Agreement, and no certification furnished
or to be furnished to the Corporation pursuant to this Agreement, contains or
will contain any untrue statement of a material fact or omits, or will omit, to
state a material fact necessary to make the statements contained herein or
therein not misleading.
4.10 Information. Except as disclosed by the Corporation, the
Acquirer has no actual knowledge of any claim that the Corporation has infringed
any right that any third-party has in any Intangibles. The assumptions set forth
in paragraphs 8, 10 (as to the Acquirer and the Subsidiary), and 11, and in the
first sentence of paragraph 16 (as to the Acquirer), of Appendix 6.09 are
accurate in all material respects.
ARTICLE V
COVENANTS TO THE PARTIES
5.01 Acquirer's Covenants. The Acquirer and the Subsidiary
covenant and agree with the Corporation to undertake, fully perform and
discharge each of the following obligations:
5.01.1 Best Efforts. The Acquirer and the Subsidiary shall
each use its best efforts (a) to cause to be fulfilled and satisfied all of the
conditions to the consummation of the Merger required to the fulfilled and
satisfied by it and (b) to cause to be performed all of the matters required of
it to be performed on or before the Effective Time of the Merger. However, such
best efforts obligation shall not obligate the Acquirer or the Subsidiary to
agree to any substantive amendment to this Agreement or any ancillary agreements
to be executed in connection with this Agreement or to waive any condition of
Closing hereunder.
5.01.2 Access. Prior to the Closing, the Acquirer will permit
the Corporation and its authorized representatives to have reasonable access to
the senior officers of the Acquirer and will furnish the Corporation with such
financial and operating data and such other information with respect to the
businesses and properties of Acquirer and its subsidiaries as the Corporation
may reasonably request in order to properly assess an investment in the
Acquirer; provided, however, that such access shall not extend to information
covered by confidentiality agreements between the Acquirer and third-parties and
other information regarding the Acquirer's customers which Acquirer maintains on
a confidential basis.
5.01.3 Benefits. As soon as practicable after the Effective
Time of the Merger, those person who are employed by the Surviving Corporation
("Surviving Corporation Employees") shall become eligible for employment
benefits that are, overall, at least as advantageous as the benefits which such
employees enjoyed as employees of the Corporation during the 12 months prior to
the date hereof. To the extent, if any, that benefits under the Acquirer's
benefit plans vary depending upon years of service, the Surviving Corporation
Employees shall be credited with all years of service with the Corporation.
Notwithstanding the foregoing, it is understood that this Section 5.01.3 does
not confer upon any person the right to be employed by the Surviving Corporation
or the right to receive any discretionary benefit (including, without
limitation, stock options or discretionary bonuses).
5.01.4 Registration.
5.01.4.1 The Corporation and its stockholders have
been advised that the Common Stock to be issued pursuant to this Agreement will
not be registered under the 1933 Act, but will be issued in reliance upon the
exemption afforded by Section 4(2) of the 1933 Act, and that the Acquirer shall
rely upon the truth and accuracy of the representations set forth in the
agreements described in Section 6.08 in order to utilize such exemption. The
Acquirer shall cause each certificate of Common Stock issued pursuant to the
Merger to bear the following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED PURSUANT TO THE SECURITIES ACT OF 1933, AS AMENDED,
OR CALIFORNIA'S SECURITIES LAWS AND MAY NOT BE TRANSFERRED
UNLESS THEY ARE SO REGISTERED OR, IN THE OPINION OF COUNSEL TO
THIS CORPORATION, SUCH TRANSFER IS EXEMPT FROM REGISTRATION."
The Acquirer shall give instructions to the Transfer Agent consistent with the
foregoing legend.
5.01.4.2 Notwithstanding the foregoing, a Stockholder
may transfer shares of Common Stock received pursuant to the Merger to one
or more members of a group consisting of (i) the spouse or children of such
Stockholder, and (ii) one or more trusts for their benefit; provided however,
that the transferee in each case will furnish the Acquirer with an investment
letter in form and substance satisfactory to counsel for the Acquirer who
shall be satisfied with the competence of such persons to give an investment
letter.
5.01.4.3 Within thirty days after the Effective Time
of the Merger, the Acquirer shall file a registration statement (the
"Registration Statement") on the appropriate form with the SEC pursuant to
which the Acquirer shall register the Common Stock issued pursuant to the Merger
for resale by the Stockholders. The Acquirer shall thereafter use its best
efforts to have such Registration Statement promptly declared effective by
the SEC.
5.01.4.4 The Acquirer shall promptly institute
and diligently prosecute such proceedings before, and make such filings
with, such state regulatory agencies as it shall determine to be necessary or
appropriate in connection with or preliminary to the issuance of the Common
Stock required to be issued to the Stockholders pursuant to the Merger and any
solicitation of the Corporation's stockholders for their approval of the Merger
and the matters related thereto.
5.01.4.5 The Acquirer shall bear all costs incurred
in preparing and filing the Registration Statement including, without
limitation, all applicable legal fees, accounting fees, printing fees, NASD
fees and Blue Sky and SEC filing fees. The Acquirer shall also bear all
costs of keeping that Registration Statement current, subject to Section
5.01.4.7. The Acquirer shall not, however, be responsible for retaining an
underwriter on behalf of the Stockholders or for any fees or expenses charged
by any broker or dealer in connection with the sale of such shares by the
Stockholders.
5.01.4.6 The Acquirer's obligation with respect
to the Registration Statement are contingent upon its receipt of information
concerning the Stockholders reasonably required for inclusion in the
Registration Statement, its receipt of indemnification in the manner
contemplated by the agreements described in Section 6.08 and its receipt
of an acknowledgment (in form and substance satisfactory to the Acquirer)
from the Stockholders that their rights under this Section 5.01 are not
transferable. The Acquirer shall indemnify the Stockholders with respect to the
Registration Statement to the extent described in Appendix 5.01.4.6.
5.01.4.7 Notwithstanding the foregoing: (a) the
Acquirer's obligation to keep the Registration Statement current shall
lapse on the sooner of (x) the date on which all shares of Common Stock issued
pursuant to the Merger have been sold pursuant to the Registration Statement or
(y) two years after the Effective Time of the Merger; and (b) the Acquirer
shall have the right to delay the effectiveness of the Registration
Statement, or with notice to the Stockholders, withdraw the Registration
Statement if such actions are required because the Acquirer is unable to
disclose, or because it would materially adverse affect the Acquirer to
disclose, information which it would otherwise be required to disclose in
such Registration Statement; provided, however, that no such delay shall extend
for more than thirty (30) days and provided that if such withdrawal occurs, the
Acquirer shall file another registration statement, for the purpose of enabling
the Stockholders to sell their Common Stock, within thirty (30) days after such
withdrawal. Subject to the immediately preceding sentence, the Acquirer
shall amend the Registration Statement from time to time to the extent
necessary to assure compliance with the disclosure requirements of the 1933 Act.
5.01.5 Tax Matters. The Acquirer will cause the Surviving
Corporation to comply with the assumptions set forth in paragraphs 6 and 9 of
Appendix 6.09.
5.02 Corporation's Covenants. The Corporation covenants
and agrees with the Acquirer to undertake, fully perform and discharge each of
the following obligations:
5.02.1 Stockholder Approval. The Corporation shall use its
best efforts to obtain from each of its stockholders a unanimous consent form in
form and substance satisfactory to the Acquirer. The Corporation shall provide
to such stockholders such information regarding the Acquirer and the Merger as
the Acquirer shall approve in advance.
5.02.2 Best Efforts. The Corporation shall use its best
efforts (a) to cause to be fulfilled and satisfied all of the conditions to the
consummation of the Merger required to be fulfilled and satisfied by it and (b)
to cause to be performed all of the matters required of it to be performed on or
before the Effective Time of the Merger. The Corporation shall take such steps
and do such acts as may be necessary to make all of the warranties and
representations contained herein and in the Appendices to this Agreement true
and correct as of the Effective Time of the Merger, with the same effect as if
the same had been made as of the Effective Time of the Merger. Such best efforts
obligation shall not obligate the Corporation to agree to any substantive
amendment to this Agreement or any ancillary agreements to be executed in
connection with this Agreement or to waive any condition of Closing hereunder.
5.02.3 Maintenance of Business Assets. The Corporation shall
carry on, and shall cause each of the Corporation Subsidiaries to carry on, its
business (including, without limitation, its development efforts) in the
ordinary course consistent with prior practice and shall use its best efforts to
preserve, and to cause each of the Corporation Subsidiaries to preserve intact
its present assets and properties.
5.02.4 Conduct of Business. Prior to the Closing Date, the
Corporation shall (and shall cause the Corporation Subsidiaries to) conduct its
business only in the ordinary course of business, except as otherwise previously
consented to by the Acquirer in writing. Without limiting the generality of the
foregoing covenant, the Corporation shall (and shall cause its subsidiaries to)
(a) maintain its articles of incorporation (the "Charter") and by-laws in their
respective forms on the date of this Agreement; (b) at all times keep full and
complete books and records in accordance with prior practices; (c) maintain in
full force and effect the insurance policies heretofore maintained by the
Corporation and the Corporation Subsidiaries (or policies providing
substantially the same coverage); (d) take reasonable action intended to
preserve its property in good condition; (e) take reasonable action intended to
preserve its business organization intact and to preserve for the Surviving
Corporation the goodwill of customers, suppliers and others having business
relationships with the Corporation and the Corporation Subsidiaries; (f) conduct
its business in compliance in all material respects with all laws, regulations
and ordinances applicable to its businesses; (g) promptly advise the Acquirer in
writing of any material adverse change in its business, assets or prospects; and
(h) furnish to the Acquirer all interim financial statements of the Corporation
and its subsidiaries when they become available to any officer of the
Corporation.
5.02.5 Negative Covenants. Except for (i) any repurchase
contemplated by Section 6.14, (ii) the payment of dividends in an amount equal
to $25,971 plus a sum (to be approved by the Acquirer in writing) representing
47.115% of (x) the Corporation's estimated net income for the period from
October 1, 1995 through the Closing Date less (y) dividends previously paid by
the Corporation with respect to its current fiscal year, (iii) the payment to
William Majkut of $6,000 in connection with prior discussions regarding a stock
option and (iv) such other matters as shall have been previously consented to by
the Acquirer in writing, the Corporation will not (and shall cause the
Corporation Subsidiaries not to), prior to the Effective Time of the Merger, (a)
purchase or redeem any Corporation Securities, any options or rights to purchase
any Corporation Securities or any instruments convertible into Corporation
Securities; (b) issue or sell any shares of capital stock other than pursuant to
stock options outstanding on the date hereof and disclosed pursuant to Article
III hereof, (c) grant options to purchase any capital stock of the Corporation
or accelerate the vesting of any stock options previously granted by the
Corporation; (d) grant warrants or rights to purchase any capital stock of the
Corporation; (e) increase its indebtedness for borrowed money except in the
ordinary course of business; (f) pledge or hypothecate any of the Corporation's
assets to secure indebtedness of the Corporation or any other person; (g)
guarantee the obligation of any other individual or entity other than a
Corporation Subsidiary; (h) merge or consolidate with, purchase substantially
all of the assets of, or otherwise acquire any business of, any proprietorship,
firm, association, corporation, limited liability company or other business
organization; (i) increase or decrease the rate of compensation of or pay any
unusual compensation to any officer or employee, or enter into any agreement to
increase or decrease the rate of compensation of, or pay any bonus to, any
officer or employee; (j) enter into or amend any collective bargaining
agreement, or create of modify any pension or profit sharing plan, bonus plan,
deferred compensation plan, death benefit, or retirement plan, or any other
employee benefit plan, or increase the level of benefits under any such plan, or
increase or decrease any severance or termination pay benefit or any other
fringe benefit; (k) make any representation to anyone indicating any intention
of the Surviving Corporation to retain, institute, or provide any employee
benefit, or represent in any manner that any officer or employee of the
Corporation will be employed by the Surviving Corporation after the Closing,
provided, however, that the Corporation and the Acquirer shall jointly meet with
the Corporation's employees as soon as practicable following execution of this
Agreement to explain employment and benefits to be offered by the Surviving
Corporation upon Closing; (l) declare or pay any dividend on, or make any
distribution with respect to, any Corporation Securities; (m) sell or dispose of
any of its assets otherwise than in the ordinary course of its business; (n)
enter into any contract or commitment of a type required to be disclosed on any
Appendix to this Agreement other than contracts entered into in the ordinary
course of the Corporation's business; (o) take any other action outside of the
ordinary course of the Corporation's business; or (p) enter into any contracts
or commitment to take any of the foregoing actions.
5.02.6 Access. Prior to the Effective Time of the Merger, the
Corporation will permit the Acquirer and its authorized representative to have
reasonable access to the premises, technology, books and records of the
Corporation and the Corporation Subsidiaries, and will furnish the Acquirer with
such financial and operating data and such other information with respect to the
businesses and properties of the Corporation and the Corporation Subsidiaries as
the Acquirer may reasonably request in order to properly assess the acquisition
of the Corporation.
5.02.7 Acquisition Proposals. During the period between the
date hereof and the Effective Time of the Merger or the termination of this
Agreement pursuant to Article VIII, the Corporation shall not (and shall cause
the Corporation Subsidiaries not to), directly or indirectly, (i) solicit
submissions of offers from any person other than the Acquirer relating to any
acquisition of the stock or assets of the Corporation or any of the Corporation
Subsidiaries, or any merger, consolidation or business combination with the
Corporation or any of the Corporation Subsidiaries (an "Acquisition Proposal"),
(ii) respond in any way to an unsolicited Acquisition Proposal, (iii)
participate in any discussions or negotiations regarding an Acquisition Proposal
with any person other than the Acquirer, or furnish any non-public information
regarding the Corporation to any person, other than the Acquirer, or otherwise
encourage any Acquisition Proposal by any person other than the Acquirer, (iv)
enter into any agreement or understanding, whether oral or in writing, that
would have the effect of preventing the consummation of the Merger, or (v)
approve any cash or stock tender offers made by any such third party or parties.
The Corporation shall advise the Acquirer promptly of the receipt by the
Corporation of any notification of any purchase or proposed purchase of
Corporation Securities by any person.
5.02.8 Reorganization. The Corporation shall not take, fail to
take or cause to be taken or not taken any action within its control which would
preclude the Merger from being treated as a "reorganization" within the meaning
of Section 368(a) of the Code.
5.02.9 Board Meetings. Until the Merger is consummated or
abandoned, the Corporation shall give the Acquirer advance notice of the
meetings of the Corporation's Board of Directors. The Acquirer shall be entitled
to have one of its representatives attend (personally or by telephone conference
call) those meetings, subject, however, to the right of the presiding officer at
each such meeting to exclude that representative from a discussion of matters
which the presiding officer deems to be confidential or which bear upon the
Corporation's performance of this Agreement.
5.02.10 Stockholder Information. At the Closing, the
Corporation shall furnish to the Acquirer the names, addresses and Social
Security Numbers or Taxpayer Identification Numbers of each person or entity
that owns Corporation Common Stock or Corporation Options as of the Closing
Date. Such list shall set forth the number of shares or options owned by each
such person or entity and shall provide such details as the Acquirer shall
reasonably request.
5.02.11 Covenant Regarding S Corporation Status. Through the
Effective Time of the Merger, the Corporation shall maintain in effect its
status as an S corporation for federal income tax purposes and its corresponding
status for state income tax purposes in any applicable state in which such
status is recognized.
5.03 Stockholders' Covenants. The Stockholders shall,
subsequent to the Effective Time of the Merger and at the Acquirer's reasonable
request, furnish to the Acquirer additional Stock Powers (as defined in Section
6.13 and in form satisfactory to the Acquirer) to permit proper administration
of the Escrow Agreement.
ARTICLE VI
CONDITIONS TO OBLIGATIONS OF ACQUIRER
The obligations of the Acquirer to consummate the Merger are
subject to fulfillment, prior to or at the Closing, of each of the following
conditions:
6.01 Performance. The Corporation shall have performed
all of the acts required to be performed by it hereunder.
6.02 Representations and Warranties. Except for the
representations and warranties made expressly as of a specific date (which shall
be true in all material respects as of such date), all of the Corporation's
representations and warranties set forth in Article III hereof shall be true in
all material respects (or, in the case of representations and warranties subject
to an express materiality qualification, true in all respects) as of the
Effective Time of the Merger.
6.03 Material Events. No event (including but not limited to
fire, flood, earthquake, explosion, acts of God, war, riot, civil commotion,
acts of any government, governmental subdivision or governmental agency, and the
termination or modification of advantageous contracts or business relationships)
shall have occurred since the Most Recent Balance Sheet Date which materially
adversely affects, interrupts or impairs the business, or materially impairs the
value of the properties, of the Corporation and the Corporation Subsidiaries
taken as a whole.
6.04 Litigation. No action (other than actions which have been
dismissed or settled) shall have been instituted by any person before any court
or governmental agency to restrain or prohibit the consummation of the Merger or
to subject the Acquirer or its directors or officers to liability on the ground
that it or they have breached any law or regulation or otherwise acted
improperly in relation to the Merger.
6.05 Opinion of Counsel. The Acquirer shall have received an
opinion letter of Hopkins & Carley, counsel for the Corporation, dated as of the
Effective Time of the Merger, substantially in the form and substance of the
letter set forth in Appendix 6.05 annexed hereto, covering the matters set forth
in such Appendix and such other matters as the Acquirer and its counsel shall
reasonably request.
6.06 Consents. Each of the parties hereto shall have obtained
all consents, authorizations and approvals required to be obtained by it with
respect to the Merger under any applicable laws and under any mortgages,
indentures, leases, agreements or other instruments to which it or any of its
subsidiaries is a party.
6.07 Covenant Against Competition. The Acquirer shall have
received, from Gary Maier, Robert Flaherty and Patrick McGuire, covenants
against competition, in the form and substance of the applicable covenants
against competition set forth in Appendices 6.07A, 6.07B and 6.07C annexed
hereto and providing for no additional consideration.
6.08 Investment and Joinder Agreement. Prior to the Closing,
each Stockholder of the Corporation shall have delivered to the Acquirer an
agreement, in the form and substance of the agreement set forth in Appendix 6.08
annexed hereto, with respect to certain securities matters and with respect to
certain indemnification provisions.
6.09 Tax Opinion. The Acquirer shall have received an opinion
of Lowenstein, Sandler, Kohl, Fisher & Boylan, counsel for the Acquirer,
reasonably satisfactory in form and substance to it, based upon the assumptions
set forth in Appendix 6.09 annexed hereto and as otherwise required by
Lowenstein, Sandler, Kohl, Fisher & Boylan, to the effect that for Federal
income tax purposes, in the opinion of such counsel; (i) the Merger will be
treated for federal income tax purposes as a reorganization qualifying under the
provisions of Section 368(a)(1)(A) of the Code; (ii) no gain or loss shall be
recognized upon the exchange of Corporation Common Stock solely for Common Stock
and no gain or loss shall be recognized by the Corporation, the Acquirer or the
Subsidiary by virtue of the consummation of the Merger; (iii) in the case of
Corporation shareholders who recognize gain on the exchange of their Corporation
Common Stock and in whose hands such stock was a capital asset on the date of
the exchange, such gain shall be treated as capital gain (long-term or
short-term, depending on the shareholders' respective holding periods for their
Corporation Common Stock), except in the case of any such shareholder as to
which the exchange has the effect of a dividend within the meaning of Section
356(a)(2) of the Code by reason of the applicability of the stock attribution
rules of Section 318 of the Code, it being understood that the applicability of
such attribution rules to any particular shareholder shall depend on such
shareholder's particular factual circumstances; (iv) the basis of any Common
Stock received in exchange for Corporation Common Stock shall equal the basis of
the recipient's Corporation Common Stock surrendered on the exchange, reduced by
the amount of cash received, if any, on the exchange, and increased by the
amount of the gain recognized, if any, on the exchange (whether characterized as
dividend or capital gain income); and (v) the holding period for any Common
Stock received in exchange for Corporation Common Stock will include the period
during which the Corporation Common Stock surrendered on the exchange was held,
provided such stock was held as a capital asset on the date of the exchange.
6.10 No Dissenters. Shareholders owning all of the
outstanding Corporation Securities (computed on a common equivalent basis)
shall have consented to or voted in favor of the Merger.
6.11 Termination of Rights. Except for registration rights
granted pursuant to this Agreement and rights that exist solely in the
Corporation's articles of incorporation, all registration rights, rights of
refusal and redemption rights of any Stockholder, and all other rights conferred
upon any Stockholder in connection with any stock purchase agreement or other
agreement previously executed by any stockholder of the Corporation and/or the
Corporation, shall have been terminated or waived, as of the Closing Date,
pursuant to the Release and Payment Agreements described in Section 6.15.
6.12 Employment Agreement. Robert Flaherty shall have entered
into an employment agreement with the Surviving Corporation in the form and
substance of the agreement set forth in Appendix 6.12 annexed hereto.
6.13 Stockholder Approval; Stock Powers. The stockholders of
the Corporation shall have approved the Merger and the consummation thereof by
execution of a unanimous written consent in form and substance satisfactory to
the Acquirer. Each of the Stockholders shall have delivered to the Acquirer, for
purposes of delivery to the Escrow Agent pursuant to Section 2.02.2.1, five
stock powers, executed in blank, with signatures guaranteed in a form
satisfactory to the Acquirer (the "Stock Powers").
6.14 Payments by the Corporation. The Corporation shall have
effected the following:
6.14.1 The Corporation shall have paid to William
Majkut the sum of $6,000 and shall have received from such individual a
release, in form and substance satisfactory to the Acquirer, from all claims
against the Corporation.
6.14.2 The Corporation shall have repurchased from
Robert Flaherty 6,000 shares of Corporation Common Stock at a price of $0.8382
per share, such purchase to be made prior to the Effective Time of the Merger
(notwithstanding any provisions herein to the contrary) pursuant to a
Restricted Stock Purchase Agreement dated June 16, 1994. For purposes of this
Agreement, such 6,000 shares shall not be deemed to be issued or outstanding
immediately prior to the Effective Time of the Merger, it being understood that
no Merger Consideration shall be payable or distributable with respect to such
shares.
6.14.3 The Corporation shall have repurchased from
Dalton Martin 8,330 shares of Corporation Common Stock at a price of $0.83
per share, such purchase to be made prior to the Effective Time of the Merger
(notwithstanding any provisions herein to the contrary) pursuant to a Restricted
Stock Purchase Agreement dated January 2, 1995. For purposes of this Agreement,
such 8,330 shares shall not be deemed to be issued or outstanding immediately
prior to the Effective Time of the Merger, it being understood that no Merger
Consideration shall be payable or distributable with respect to such shares.
6.15 Release and Payment Agreement. The Corporation, each of
the Stockholders and each of the spouses of those Stockholders who are married
shall have executed a release and payment agreement (the "Release and Payment
Agreement") in the form and substance of the agreement annexed hereto as
Appendix 6.15.
6.16 Certificates. The Acquirer shall have received a
certificate, executed by the chief executive officer of the Corporation, in form
and substance satisfactory to the Acquirer, dated as of the Closing Date. Such
certificate shall confirm that the conditions set forth in Sections 6.01, 6.02
and 6.03 have been satisfied.
6.17 Closing Documentation. The Acquirer shall have received
such additional documentation on the Closing Date as the Acquirer and its
counsel may reasonably require to evidence compliance by the Corporation with
all of its obligations under this Agreement.
ARTICLE VII
CONDITIONS TO OBLIGATION OF THE CORPORATION
The obligations of the Corporation to consummate the Merger
are subject to the fulfillment, prior to or at the Closing, of each of the
following conditions:
7.01 Performance. The Acquirer and the Subsidiary shall
have performed all of the acts required to be performed by them hereunder.
7.02 Representation and Warranties. Except for representations
and warranties made expressly as of a specific date (which shall be true in all
material respects as of such date), all of the Acquirer's representations and
warranties set forth in Article IV shall be true in all material respects (or,
in the case of representations and warranties subject to an express materiality
qualification, true in all respects) as of the Effective Time of the Merger.
7.03 Material Events. No event (including but not limited to
fire, flood, earthquake, explosion, acts of God, war, riot, civil commotion,
acts of any government, governmental subdivision or governmental agency, and the
termination or modification of advantageous contracts or business relationships)
shall have occurred since March 31, 1996 which materially adversely affects,
interrupts or impairs the business, or materially impairs the value of the
properties, of the Acquirer and its subsidiaries, taken as a whole.
7.04 Litigation. No action (other than actions which have been
dismissed or settled) shall have been instituted by any person before any court
or governmental agency to restrain or prohibit the consummation of the Merger or
to subject the Corporation or its directors or officers to liability on the
ground that it or they have breached any law or regulation or otherwise acted
improperly in relation to the Merger.
7.05 Stockholder Approval. The stockholders of the Corporation
shall have approved the Merger and the consummation thereof by execution of a
unanimous written consent in form and substance reasonably satisfactory to the
Corporation.
7.06 Employment Agreement. The Subsidiary shall have executed
and delivered at the Closing an employment agreement with Robert Flaherty in the
form of the agreement set forth in Appendix 6.12.
7.07 Opinion of Counsel. The Corporation shall have received
an opinion letter of Lowenstein, Sandler, Kohl, Fisher & Boylan, counsel for the
Acquirer, dated as of the Effective Time of the Merger, substantially in the
form and substance of the letter set forth in Appendix 7.07 annexed hereto,
covering the matters set forth in such Appendix and such other matters as the
Corporation and its counsel shall reasonably request. Such firm shall be
entitled to rely upon the opinion of California counsel as to matters of
California law. The Corporation shall also have received a letter from
Lowenstein, Sandler, Kohl, Fisher & Boylan authorizing the Corporation to rely
upon the opinion letter delivered pursuant to Section 6.09.
7.08 Consents. Each of the parties hereto shall have obtained
all consents, authorizations and approvals required to be obtained by it with
respect to the Merger under any applicable laws and under any mortgages,
indentures, leases, agreements or other instruments to which it or any of its
subsidiaries is a party.
7.09 Release and Payment Agreement. The Acquirer and the
Subsidiary shall have executed and delivered the Release and Payment Agreement.
7.09 Certificate. The Corporation shall have received a
certificate, executed by the chief financial officer of Acquirer, in form and
substance satisfactory to the Corporation, dated as of the Closing Date. Such
certificate shall confirm that the conditions set forth in Sections 7.01, 7.02
and 7.03 have been satisfied.
7.10 Closing Documentation. The Corporation shall have
received such additional documentation on the Closing Date as the Corporation
and its counsel may reasonably require to evidence compliance by the Acquirer
with all of its obligations under this Agreement.
ARTICLE VIII
TERMINATION AND AMENDMENT OF AGREEMENT
8.01 Termination Procedure. If a party having the right to
terminate this Agreement pursuant to this Article VIII elects to terminate this
Agreement, it shall give written notice of such election to the other party
hereto prior to the completion of the Closing and in accordance with the
applicable provisions of this Article VIII. Upon the giving of any such notice,
this Agreement (except this Article VIII and Section 11.01) shall terminate and
be of no further force or effect. Thereafter, each party hereto shall be
mutually released and discharged from liability to the other or to any third
parties hereunder, except for any liability any party hereto may have at law as
a result of a breach of any of its representations or covenants hereunder. In
the event of a termination pursuant to this Article VIII, no party hereto shall
be liable to any other party for any costs or expenses paid or incurred in
connection herewith except as otherwise provided in this Section 8.01.
8.02 Termination by Mutual Consent; Non-Fulfillment of
Conditions; Misrepresentations; Stockholder Vote.
8.02.1 This Agreement may be terminated and the Merger
abandoned for any reason by mutual agreement of the parties at any time prior to
the consummation of the Closing, even though this Agreement and the Merger have
been approved by the stockholders of the Corporation.
8.02.2 The Acquirer may terminate this Agreement at any time
prior to the consummation of the Closing in the event that (i) the Acquirer
discovers a material breach by the Corporation of any representation or warranty
set forth in Article III (or, in the case of representations and warranties
subject to an express materiality qualification, a breach of any such
representation or warranty) or a material breach by the Corporation of any
covenant set forth in this Agreement, which breach has not been cured prior to
the earlier of the Closing or five (5) days after the receipt by the Corporation
of written notice of such breach, or if (ii) the Acquirer discovers facts which
will preclude any of the conditions set forth in Article VI from being satisfied
on or before the date set forth in Section 8.04.
8.02.3 The Corporation may terminate this Agreement at any
time prior to the consummation of the Closing in the event that (i) the
Corporation discovers a material breach by the Acquirer of any representation or
warranty set forth in Article IV (or, in the case of representations and
warranties subject to an express materiality qualification, a breach of any such
representation or warranty) or a material breach by the Acquirer of any covenant
set forth in this Agreement, which breach has not been cured prior to the
earlier of the Closing or five (5) days after the receipt by the Acquirer of
written notice of such breach, or (ii) if the Corporation discovers facts which
will preclude any of the conditions set forth in Article VII from being
satisfied on or before the date set forth in Section 8.04. In the event that (i)
the Corporation advises the Acquirer that a representation or warranty made by
the Corporation herein was accurate as of the date hereof but is not true in all
material respects (or, in the case of representations and warranties subject to
an express materiality qualification, true in all respects) as of the Closing
Date and (ii) the Acquirer advises the Corporation that it will waive the
condition described in Section 6.02 with respect to such representation or
warranty, then the Corporation will have the right to terminate this Agreement
unless the Acquirer advises the Corporation that it will waive its
indemnification rights hereunder with respect to such representation or
warranty.
8.02.4 Either Acquirer or Corporation may terminate this
Agreement immediately if the Corporation's stockholders fail to approve the
Merger by the requisite vote.
8.03 Amendment of Agreement. The Acquirer, the Subsidiary and
the Corporation, by mutual consent, may amend, modify or supplement this
Agreement in such manner as may be agreed upon by them in writing at any time
before or after approval thereof by the Corporation's stockholders; provided,
however, that no such amendment, modification or supplement shall reduce the
consideration to be received by the Corporation's stockholders after the
Corporation's stockholders have approved the Merger unless such reduction is
contemplated herein or is subsequently approved by the Corporation's
stockholders.
8.04 Outside Date. Either party may terminate this Agreement
if the Merger has not been consummated by August 31, 1996; provided, however,
that a party whose default has prevented such consummation shall not be entitled
to terminate this Agreement pursuant to this Section 8.04.
ARTICLE IX
THE CLOSING; CLOSING DATE
Unless this Agreement shall have been terminated and the
Merger herein contemplated shall have been abandoned pursuant to a provision of
Article VIII hereof, the Closing will be held at the offices of Hopkins & Carley
in San Jose, California commencing at 9:00 a.m. on June 27, 1996 or as soon
thereafter as each of the conditions provided for in Articles VI and VII have
been met or waived. At such time and place, the documents referred to in
Articles VI and VII hereof will be exchanged by the parties and, immediately
thereafter, the Acquirer and the Corporation shall cause the Merger Agreement to
be filed with the Secretary of the State of California. Notwithstanding the
foregoing, if any of the conditions provided for in Article VI or VII hereof
shall not have been met or waived by June 27, 1996 then, subject to Section
8.04, the party to this Agreement which is unable to meet such condition or
conditions shall be entitled to postpone the Closing for a reasonable time by
notice to the other parties until such condition or conditions shall have been
met (which such notifying party will seek to cause to happen at the earliest
practicable date) or waived.
ARTICLE X
SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION
10.01 Survival of Representations and Warranties. All
statements contained in any exhibit or certificate or other instrument delivered
or to be delivered by or on behalf of the parties hereto, or in connection with
the transactions contemplated hereby, shall be deemed representations and
warranties hereunder. All representations, warranties, and agreements hereunder
shall survive the Closing and any audit or investigation made by or on behalf of
the parties. Consummation of the Merger shall not be deemed or construed to be a
waiver of any right or remedy possessed by any party hereto, notwithstanding
that such party knew or should have known at the time of Closing that such right
or remedy existed.
10.02 Indemnification by the Stockholders.
10.02.1 By execution of the joinder agreements described in
Section 6.08, each of the Stockholders shall, subject to Sections 10.2.5, 10.2.6
and 10.2.7, indemnify and hold the Acquirer, the Subsidiary and the Surviving
Corporation and their respective directors, officers, employees, fiduciaries,
agents and affiliates, and each other person, if any, who controls such persons
harmless against any claims, actions, suits, proceedings, investigations,
losses, expenses, damages, obligations, liabilities, judgments, fines, fees,
costs and expenses (including without limitation costs and reasonable attorneys'
fees) and amounts paid in settlement of any pending, threatened or completed
claim, action, suit, proceeding or investigation (collectively "Loss" or
"Losses") which arise or result from or are related to (i) any breach or failure
of the Corporation or any of its stockholders to perform any of its or their
covenants or agreements set forth herein (other than the Covenants Against
Competition delivered pursuant to Section 6.07, as to which liability shall
extend only to the persons providing such Covenants and as to which relief shall
be accorded independent of this Section 10.02), (ii) the inaccuracy of any
representation or warranty made by the Corporation herein, (iii) any Tax
Liabilities, including without limitation federal, state and local income taxes,
franchise, personal property, real property, sales, use and any other tax
relating to the assets of the Corporation or the business of the Corporation for
all periods up to and including the Closing Date other than those which are
accrued as liabilities of the Corporation on the Most Recent Balance Sheet or
reserved on such balance sheet or have arisen in the ordinary course of business
subsequent to the Most Recent Balance Sheet, together with interest and
penalties and additions to tax, if any, arising out of tax assessments, (iv) any
underground storage tank located at any premise associated with or occupied by
the Corporation, (v) any liability or costs arising out of any litigation or
claims disclosed in Appendix 3.28 annexed hereto, (vi) any failure of the real
estate which the Corporation currently occupies to comply in all material
respects with all municipal, state and federal statutes, ordinances, rules and
regulations applicable to the construction of the building and its use,
including but not limited to zoning, building, environmental and occupational
safety and health regulations and the Americans With Disabilities Act of 1990,
(vii) any liability that may arise (assuming that Acquirer acts in a
commercially reasonable manner on and after the Closing Date) from any claim
that any products sold by the Corporation prior to the Closing Date infringe the
patent, trademark, trade names, trade secret, copyright, or other intellectual
property rights of any other person, (viii) any liability asserted with respect
to any claim by or against Renegade C Software, Inc. or (ix) any expense
(including without limitation reasonable attorney's fees) that the Surviving
Corporation or the Acquirer may incur in successfully enforcing the provisions
of this Article X.
10.02.2 Except as otherwise provided in the Escrow Agreement,
if the Acquirer should be entitled to indemnification under this Agreement, it
shall be entitled to recover shares of Common Stock from the escrow created
pursuant to Section 2.02.2 having an aggregate value, calculated at a price per
share equal to $48.625 per share, equal to the amount of its Loss or Losses. In
the event that the recovery of such shares is not sufficient to cover the
Acquirer's Loss or Losses, the Stockholders agree, pursuant to the
above-mentioned joinder agreements, to reimburse the Acquirer or the Surviving
Corporation from time to time on demand with respect to any such deficiency
which the Acquirer or the Surviving Corporation may sustain or incur, subject to
Section 10.02.05.
10.02.3 The Acquirer and the Surviving Corporation shall have
the right to set off any sum owed to the Acquirer or the Surviving Corporation
by the Stockholders or any of them pursuant to the foregoing indemnity, against
any sum owed to any Stockholder by the Acquirer or the Surviving Corporation
other than sums owed for wages, bonuses or other employment benefits. The
Acquirer may, at its option, exercise its offset rights by reducing the number
of shares of Common Stock issuable pursuant to Section 2.02.3, such deduction to
be based upon a price of $48.625 per share. Exercise of such right of setoff
shall not be a waiver of any other rights or remedies which the Acquirer or the
Surviving Corporation may have against the Stockholders or any of them. Such
right of setoff shall not limit the liability of the Stockholders hereunder, and
such right shall be in addition to, and not in lieu of, any other rights and
remedies that the Acquirer or the Surviving Corporation may have against the
Stockholders or any of them pursuant to this Agreement.
10.02.4 If the Stockholders should be required to indemnify
the Acquirer, the Subsidiary or the Surviving Corporation, they shall have no
right to contribution by or indemnification from the Corporation.
10.02.5 In the event that the Stockholders are required to
provide indemnification to the Acquirer beyond the Escrow Shares, any such
reimbursement shall be pro rata among the Stockholders in proportion to their
relative ownership of Corporation Common Stock as of the time immediately prior
to the Effective Time of the Merger. The obligation of any Stockholder to
provide indemnification hereunder shall not be expanded by virtue of the
inability, failure or refusal of any other Stockholder to provide
indemnification hereunder. As to each Stockholder, the maximum amount of
reimbursement that such Stockholder shall be required to provide (excluding the
effect of Section 2.02.2), shall equal the sum of the value of the Initial
Consideration received by such Stockholder (with respect to Common Stock, valued
on a per share basis at the Closing Price on the Closing Date) plus the value of
any Option Cancellation Consideration received by such Stockholder (valued on a
per share basis at the Market Value, as such term is defined in Section
2.02.3.1(b)).
10.02.6 Notwithstanding any provision herein to the contrary,
the Acquirer shall not be entitled to indemnification hereunder or under the
Escrow Agreement with respect to the first $50,000 of Losses identified by the
Acquirer hereunder.
10.2.7 Notwithstanding any provision herein to the contrary,
the Acquirer shall not be entitled to indemnification hereunder or under the
Escrow Agreement with respect to Losses resulting from inaccuracies in the
representations set forth in the following Sections of this Agreement unless the
Representative is first notified of such Losses within two years after the
Effective Time of the Merger: 3.02.4, 3.03.1, 3.04, 3.05, 3.09, 3.11.1, 3.11.2,
3.11.3, 3.14.2, 3.14.3, 3.15, 3.17.4, 3.19 and 3.32.
10.03 Indemnification by Acquirer. Acquirer shall indemnify
and hold the Corporation, the Stockholders and the Corporation's directors,
officers, employees, fiduciaries, agents and affiliates and each other person,
if any, who controls such persons harmless against any Losses which arise or
result from or are related to (a) any breach or failure of the Acquirer to
perform any of its covenants or agreements set forth herein, or (b) the
inaccuracy of any representation or warranty made by the Acquirer herein.
10.04 Enforcement of Indemnification Rights.
10.04.1 Any person or entity seeking enforcement of
indemnification hereunder shall notify any potentially liable person or entity
(i) of any payment made in respect of any liability, obligation or claim to
which the foregoing indemnity relates, and (iii) of any claim made or suit filed
against such person or entity with respect to the Corporation, its assets or
this Agreement. Such notification shall include a specific demand for
indemnification and defense if such person or entity wishes to assert his or its
indemnification rights hereunder.
10.04.2 If there is any dispute as to the right of
indemnification and defense hereunder, the disputing party shall give the other
party written notice of such dispute, specifying in detail the basis of the
dispute, not later than 20 days after receipt of demand for indemnification. If
the dispute cannot be resolved amicably, the parties shall arbitrate the dispute
in the manner set forth in the Escrow Agreement.
10.04.3 If there is no dispute as to the right to
indemnification with respect to any such demand, notice of which must be given
within such 20 days period, time being of the essence, or upon resolution of any
such dispute by the parties or by any arbitrator, the person or entity entitled
to indemnification shall be promptly paid the amount of such demand, the amount
agreed to by the parties or the amount ordered by such arbitration.
10.04.4 In determining the amount of any Loss, net after tax
proceeds of insurance received shall reduce the Loss. Tax benefits, if any,
derived from such Loss by the party seeking indemnification shall not reduce the
Loss, unless the amount paid to indemnify it for such Loss shall not be treated
by it as income subject to federal or state income tax, in which event the
amount of the Loss shall be reduced by the tax benefits derived therefrom.
ARTICLE XI
GENERAL PROVISIONS
11.01 Confidentiality. All confidential information furnished
by the Corporation or any Corporation Subsidiary to the Acquirer, or furnished
by the Acquirer or any subsidiary of the Acquirer to the Corporation, pursuant
hereto or in connection with the Merger, shall be treated as the sole property
of the party furnishing the information until the consummation of the Merger
and, if the Merger shall not occur, the party receiving such information shall
return to the party which furnished such information all documents or other
materials containing, reflecting or referring to such information, shall use its
best efforts to keep confidential all of such information and shall not directly
or indirectly use such information.
11.02 Counterparts. For the convenience of the parties hereto,
any number of counterparts hereof may be executed, and each counterpart shall be
deemed to be an original instrument.
11.03 Waiver. At any time prior to the Effective Time of the
Merger, the parties hereto may, by written agreement executed by the party
entitled to grant an extension or waiver, (a) extend the time for the
performance of any of the obligations or other acts of the parties hereto, (b)
waive any inaccuracies in the representations and warranties contained in this
Agreement, or (c) waive compliance with any of the covenants or agreements set
forth herein.
11.04 Headings. The headings and subheadings contained in this
Agreement are included solely for ease of reference, are not intended to give a
full description of the contents of any particular Section, and shall not be
given any weight whatsoever in interpreting any provision of this Agreement.
11.05 No Third Party Rights. Nothing herein expressed or
implied is intended, nor shall be construed, to confer upon or give any person,
firm or corporation, other than the Acquirer, the Subsidiary, the Corporation,
and, with respect to Section 5.01.4, the Stockholders (in their capacity as
such), any rights or remedies under or by reason of this Agreement.
11.06 Press Releases. The Acquirer and the Corporation agree
to consult with each other between the date hereof and up to and including the
Effective Time of the Merger in issuing any press release or otherwise making
any formal public statement with respect to the transactions contemplated by
this Agreement, and shall not issue any such press release or make any such
formal public statement prior to such consultation, except as may be required by
law or in response to any inquiry from a security analyst or financial reporter
and except for statements required to be contained in any document filed with
the Securities and Exchange Commission.
11.07 Notices. All notices, requests, demands or other
communications hereunder shall be in writing and shall be conclusively deemed to
have been received by the party to whom addressed if delivered by hand, by
telecopier or by courier or if mailed, postage prepaid, certified mail, return
receipt requested, to the following addresses or to such other address as any
party may select by notice to the other parties in accordance with this Section
11.07:
If to the Acquirer:
Dialogic Corporation
1515 Route 10
Parsippany, New Jersey 07054
Telecopy No.: (201) 993-3060
Telephone No.: (201)993-3000
Attention: Edward B. Jordan Chief Financial Officer
With a copy to:
Lowenstein, Sandler, Kohl,
Fisher & Boylan
65 Livingston Avenue
Roseland, NJ 07068
Telecopy No.: (201) 992-5820
Telephone No.: (201) 992-8700
Attention: Peter H. Ehrenberg, Esq.
If to the Corporation:
Dianatel Corporation
96 Bonaventura Drive
San Jose, California 95134
Telecopy No.: (408 ) 433-3388
Telephone No.: (408) 428-1000
Attention: Mr. Robert Flaherty, President
With a copy to:
Hopkins & Carley
105 Almaden Boulevard
15th Floor
San Jose, California 95113-2089
Telecopy No.: (408) 998-4790
Telephone No.: (408) 286-9800
Attention: Clarence Kellogg, Esq.
Notice delivered as provided herein will be deemed given on
the third business day following the date mailed or the date of actual receipt,
whichever is earlier.
11.08 Governing Law. This Agreement and the legal relations
between the parties hereto shall be governed by and construed in accordance with
the internal laws of the State of New Jersey without regard to conflicts of law
principles, except to the extent that California law governs the terms of the
Merger.
11.09 Modifications, Amendments and Waivers. This Agreement
shall not be modified or amended except by a writing signed by each of the
parties hereto.
11.10 Assignability and Parties in Interest. This Agreement
shall not be assignable by any of the parties hereto. The benefits of this
Agreement shall inure to, and be binding upon, the parties hereto and their
respective successors. Nothing in this Agreement is intended to confer,
expressly or by implication, upon any other person any rights or remedies under
or by reason of this Agreement, except that Section 5.01.4 is intended to confer
benefits upon the Stockholders.
11.11 Complete Agreement. This Agreement, the Appendices
hereto and the documents delivered pursuant hereto and referred to herein
contain the entire agreement among the parties hereto with respect to the
transactions contemplated herein and supersede all previous negotiations,
commitments and writings.
11.12 Rule of Construction. It is not intended by the parties
hereto that this Agreement or any of the agreements ancillary hereto shall be
construed against the party that has drafted all or any portion of this
Agreement or such ancillary agreements.
11.13 General Interpretive Principles. For purposes of
this Agreement, except as otherwise expressly provided or unless the context
otherwise requires:
11.13.1 the terms defined in this Agreement have
the meanings assigned to them in this Agreement and include the plural as
well as the singular, and the use of any gender herein shall be deemed to
include the other genders;
11.13.2 accounting terms not otherwise defined
herein have the meanings assigned to them in accordance with GAAP;
11.13.3 references herein to "Articles", "Sections",
Subsections", "Paragraphs" and other subdivisions without reference to a
document are to designated Articles, Sections, Subsections, Paragraphs and other
subdivisions of this Agreement;
11.13.4 a reference to a Section or Article without
further reference to Subsections within such Section or to Subsections or
Sections within such Article shall constitute a reference to all Subsections
within such Section or all Sections and Subsections within such Article
unless the context otherwise expressly indicates;
11.13.5 the words "herein", "hereof", "hereunder"
and other words of similar import refer to this Agreement as a whole and not to
any particular provision; and
11.13.6 the term "include" or "including" shall
mean without limitation by reason of enumeration.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective officers as of the date first above
written.
SAN JOSE DLGC ACQUISITION
CORPORATION DIALOGIC CORPORATION
By:___________________________________ By:_______________________
Edward B. Jordan, Vice President Edward B. Jordan
Executive Vice President
DIANATEL CORPORATION
By:________________________________
Robert T. Flaherty, President
TABLE OF APPENDICES
Appendix Description
2.01.2 Agreement of Merger between the Subsidiary and the Corporation
2.02.2.2 Escrow Agreement
3.01.2 Certificate of Incorporation, By-Laws and other organizational
documents
3.02.1 Shares not fully paid
3.02.2 Options and other securities matters
3.02.3 List of option holders
3.02.4 Indebtedness
3.03.1 Corporation Subsidiaries
3.03.2 Acquisitions
3.03.3 Dispositions
3.04 Foreign qualifications
3.05 Business or trade names
3.07.1 Real estate leases
3.07.2 Consents required under real estate leases
3.08 Tangible personal property
3.10.1 Intangible property
3.10.2 Infringement matters
3.11.1 Accounts receivable matters
3.11.3 Inventory matters
3.12 List of stockholders
3.13 Title to Assets
3.14.1 Material contracts and other matters
3.14.3 Certain discounts
3.14.6 Consents or notices required under material contracts
3.15.1 Customers
3.15.2 Suppliers
3.15.3 Termination or significant change in relationships with
customers, suppliers or others
3.15.4 Warranty matters
3.16 Transactions with interested persons
3.17.1 List of employees
3.17.2 Employees who are not terminable at will
3.17.4 Terminated employees
3.18.1 Benefit plans
3.18.3 IRS determination letter matters
3.18.5 Certain "events" under benefit plans
3.18.6 Long term disability and death benefits
3.18.7 Compliance with COBRA
3.19 Insurance
3.20 Licenses and permits
3.22 Conflicts with other instruments
3.24 Conflicts with laws
3.25.1 Financial statements
3.25.3 Value assigned to certain matters
3.25.7 Non-recurring expenses
3.25.12 Reserve balances
3.25.13 Other income
3.26 Projections
3.27.4 Elections
3.27.8 S corporation election
3.28 Litigation
3.29 Adverse changes
3.30 Other changes
3.31 Brokers or finders
3.32 Bank matters
5.01.4.6 Indemnification obligation
6.05 Opinion of Hopkins & Carley
6.07 Covenants against competition
6.08 Investment and joinder agreement
6.09 Tax opinion representations
6.12 Employment agreement
6.15 Release and payment agreement
7.07 Opinion of Lowenstein, Sandler, Kohl, Fisher & Boylan
September 4, 1996
Dialogic Corporation
1515 Route 10
Parsippany, NJ 07054
Gentlemen:
You have requested our opinion in connection with the
registration with the Securities and Exchange Commission under the Securities
Act of 1933, as amended, of 85,298 shares of the common stock ("Common Stock")
of Dialogic Corporation (the "Company") on a registration statement on Form S-3
(the "Registration Statement"). The shares of Common Stock to which the
Registration Statement relates will be offered by certain shareholders of the
Company.
We have examined and relied upon originals or copies,
authenticated or certified to our satisfaction, of all such corporate records of
the Company, communications or certifications of public officials, certificates
of officers, directors and representatives of the Company, and such other
documents as we have deemed relevant and necessary as the basis of the opinions
expressed herein. In making such examination, we have assumed the genuineness of
all signatures, the authenticity of all documents tendered to us as originals,
and the conformity to originals documents of all documents submitted to us as
certified or photostatic copies.
Based upon the foregoing and relying upon statements of fact
contained in the documents which we have examined, we are of the opinion that
the shares of Common Stock registered pursuant to the Registration Statement
will be, when sold, legally issued, fully paid and non-assessable.
We hereby consent to the filing of this opinion as an exhibit
to the Registration Statement and any amendment thereto.
Very truly yours,
LOWENSTEIN, SANDLER, KOHL,
FISHER AND BOYLAN, P.A.
By: /s/ Laura R. Kuntz
________________________________
Laura R. Kuntz
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement
of Dialogic Corporation on Form S-3 of our reports dated February 15, 1996,
appearing in and incorporated by reference in the Annual Report on Form 10-K of
Dialogic Corporation for the year ended December 31, 1995 and to the reference
to us under the heading "Experts" in the Prospectus, which is a part of the
Registration Statement.
DELOITTE & TOUCHE LLP
New York, New York
August 30, 1996
EXHIBIT 24.1
POWER OF ATTORNEY
WHEREAS, the undersigned officers and directors of Dialogic Corporation
desire to authorize Nicholas Zwick, Howard G. Bubb and Edward B. Jordan to act
as their attorneys-in-fact and agents, for the purpose of executing and filing a
registration statement on Form S-3 including all amendments thereto,
NOW, THEREFORE,
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Nicholas Zwick, Howard G. Bubb and Edward
B. Jordan, and each of them, his true and lawful attorney-in-fact and agent,
with full power of substitution and resubstitution, to sign a Registration
Statement on Form S-3 registering up to 85,298 shares of the Common Stock of
Dialogic Corporation for resale by former shareholders of Dianatel Corporation
and GammaLink Corporation, including any and all amendments and supplements
thereto, and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite and necessary to be done
in and about the premises, as fully and to all intents and purposes as he might
or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned have executed this power of
attorney in the following capacities on this 10th day of June, 1996.
SIGNATURE TITLE
/s/Howard G. Bubb
______________________________ President, Chief Executive Officer and Director
Howard G. Bubb
/s/Kenneth J. Burkhardt, Jr.
______________________________ Director
Kenneth J. Burkhardt, Jr.
/s/Masao Konomi
______________________________ Director
Masao Konomi
/s/John N. Lemasters
______________________________ Director
John N. Lemasters
/s/Francis G. Rodgers
_____________________________ Director
Francis G. Rodgers
/s/James J. Shinn
_____________________________ Director
James J. Shinn
/s/Nicholas Zwick
______________________________ Director
Nicholas Zwick
/s/Edward B. Jordan
______________________________ Treasurer, Vice President and Chief Financial
Edward B. Jordan Officer (Chief Financial and Accounting Officer)
