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As filed with the Securities and Exchange Commission on January 8, 1999
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
UNIPHASE CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 94-2579683
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
163 BAYPOINTE PARKWAY
SAN JOSE, CALIFORNIA 95134
(408) 434-1800
(Address, including zip code, and telephone number, including area code,
of registrar's principal executive offices)
Kevin N. Kalkhoven
Chairman of the Board of Directors, President and Chief Executive Officer
163 Baypointe Parkway
San Jose, California 95134
(408) 434-1800
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
COPIES TO:
Christopher S. Dewees, Esq.
David P. Valenti, Esq.
Morrison & Foerster LLP
755 Page Mill Road
Palo Alto, California 94304
(650) 813-5600
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
From time to time after the effective date of this Registration Statement.
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 of 1933, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act of 1933, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
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TITLE OF SHARES TO AMOUNT TO BE PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
BE REGISTERED REGISTERED AGGREGATE PRICE PER SHARE AGGREGATE OFFERING PRICE REGISTRATION FEE
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Common Stock, $.001
par value ......... 729,510 shares $66.375(1) $48,421,226.25(1) $14,284.26
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(1) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(c) based on the average of the high and low
reported sales prices on the Nasdaq National Market on January 5, 1999.
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
AN 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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Subject to Completion, dated January 8, 1999
PROSPECTUS
Uniphase Corporation
729,510 SHARES OF COMMON STOCK
729,510 shares of the Company's common stock were issued to certain former
stockholders of Broadband Communications Products, Inc. (the "Selling
Stockholders") in connection with the acquisition by the Company of Broadband
Communications Products, Inc. Some of these stockholders may wish to sell these
shares in the future, and this Prospectus allows them to do so. The Company will
not receive any of the proceeds from any sale of shares by the such
stockholders, but has agreed to bear the expenses of registration of the shares
by this Prospectus.
Nasdaq National Market symbol:
UNPH
The last sale price of the common stock on the Nasdaq National Market on January
5, 1999 was $66.625 per share.
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THE SHARES REGISTERED HEREBY INVOLVE A HIGH LEVEL OF INVESTMENT RISK. YOU SHOULD
INVEST ONLY IF YOU CAN AFFORD A COMPLETE LOSS. SEE "RISK FACTORS" BEGINNING ON
PAGE 7 OF THIS PROSPECTUS.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES, OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OF SALE IS NOT PERMITTED.
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January 8, 1999
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TABLE OF CONTENTS
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PAGE
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Available Information..................................................4
Incorporation of Certain Documents by Reference........................4
The Company............................................................5
Recent Events..........................................................6
Use of Proceeds........................................................7
Risk Factors...........................................................7
Selling Stockholders..................................................14
Plan of Distribution..................................................15
Experts...............................................................15
Legal Matters.........................................................15
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No person has been authorized to give any information or to make any
representations not contained or incorporated by reference in this Prospectus in
connection with the offer described in this Prospectus and, if given or made,
such information and representations must not be relied upon as having been
authorized by the Company or the Selling Stockholders. Neither the delivery of
this Prospectus nor any sale made under this Prospectus shall under any
circumstances create any implication that there has been no change in the
affairs of the Company since the date hereof or since the date of any documents
incorporated herein by reference. This Prospectus does not constitute an offer
to sell or a solicitation of an offer to buy any securities other than the
securities to which it relates, or an offer or solicitation in any state to any
person to whom it is unlawful to make such offer in such state.
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 the Company files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed can be inspected and copied at the
Commission's Public Reference Section, 450 Fifth Street, N.W., Washington, D.C.,
20549, and at the following regional offices of the Commission: Seven World
Trade Center, 13th Floor, New York, New York 10048 and 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661-2511. Copies of such material can be
obtained from the Public Reference Section of the Commission, 450 Fifth Street,
N.W., Washington, D.C. 20549, at prescribed rates. The Commission maintains a
web site (http://www.sec.gov) containing reports, proxy and information
statements and other information of registrants, including the Company, that
file electronically with the Commission. In addition, the Common Stock is listed
on the Nasdaq National Market and similar information concerning the Company can
be inspected and copied at the offices of the National Association of Securities
Dealers, Inc., 9513 Key West Avenue, Rockville, Maryland 20850.
The Company has filed with the Commission a registration statement on Form S-3
(the "Registration Statement") (of which this Prospectus is a part) under the
Securities Act of 1933, as amended (the "Securities Act"), with respect to the
Shares. This Prospectus does not contain all of the information set forth in the
Registration Statement, certain portions of which have been omitted as permitted
by the rules and regulations of the Commission. Statements contained in this
Prospectus as to the contents of any contract or other documents are not
necessarily complete, and in each instance reference is made to the copy of such
contract or other document filed as an exhibit to the Registration Statement,
each such statement being qualified in all respects by such reference and the
exhibits and schedules thereto. For further information regarding the Company
and the Shares, reference is hereby made to the Registration Statement and such
exhibits and schedules which may be obtained from the Commission at its
principal office in Washington, D.C. upon payment of the fees prescribed by the
Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The documents listed below have been filed by the Company under the Exchange Act
with the Commission and are incorporated herein by reference:
a. The Company's Annual Report on Form 10-K for the year ended June 30, 1998;
b. The Company's Quarterly Report on Form 10-Q for the quarter ended September
30, 1998;
c. The Company's Report on Form 8-K/A dated as of August 24, 1998;
d. The Company's Report on Form 8-K/A dated as of August 25, 1998;
e. The Company's Report on Form 8-K dated as of January 7, 1999; and
f. The description of the Registrant's Common Stock contained in the Company's
Registration Statement on Form 8-A filed with the Commission on November 15,
1993.
Each document filed by the Company pursuant to Sections 13(a), 13(c), 14 and
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of the offering made hereby shall be deemed to be incorporated
by reference in this Prospectus and to be part hereof from the date of filing
such documents. Any statement contained herein or 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 the applicable Prospectus Supplement) 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 such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.
Copies of all documents which are incorporated herein by reference (not
including the exhibits to such information, unless such exhibits are
specifically incorporated by reference in such information) will be provided
without charge to each person, including any beneficial owner, to whom this
Prospectus is delivered upon written or oral request. Requests should be
directed to the Corporate Secretary at the Company's corporate headquarters at
163 Baypointe Parkway, San Jose, California 95134 or by telephone at (408)
434-1800.
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THE COMPANY
Uniphase Corporation (the "Company") is an optoelectronics company that designs,
develops, manufactures and markets components and modules for fiber optic
telecommunications and cable television (CATV) systems, laser subsystems, and
laser-based semiconductor wafer defect examination and analysis equipment. The
Company's telecommunications and CATV divisions design, develop, manufacture and
market semiconductor lasers, high-speed external modulators, transmitters and
other components for fiber optic networks in the telecommunications and CATV
industries. The Company's Laser Division designs, develops, manufactures and
markets laser subsystems for a broad range of OEM applications which include
biotechnology, industrial process control and measurement, graphics and
printing, and semiconductor equipment.
The Company offers optoelectronic products in two principal product markets:
fiber optic modules and components for telecommunications and laser subsystems.
The Company's laser subsystems were the Company's initial product offering that
enabled the Company to invest in the further development of its laser technology
and to offer new applications products. Since May 1995, the Company has
undertaken a series of strategic initiatives to position itself as a full-line
merchant supplier of optical modules and components for fiber optic
telecommunication systems.
Since its founding, Uniphase has shipped over one million lasers in its capacity
as a supplier of laser subsystems for OEMs in a variety of markets, including
CATV, long haul telecommunications, semiconductor wafer inspection,
biotechnology, and graphics and printing markets. The Company focuses on selling
its laser subsystems to such customers at the design-in phase of a product,
creating the potential for recurring sales throughout a product's life.
The Company entered the telecommunications market in May 1995. Currently, the
Company's portfolio of telecommunications products includes those produced by
its various divisions: Uniphase Telecommunications Products ("UTP"), UTP
Fibreoptics ("UFP"), Uniphase Laser Enterprise ("ULE"), Uniphase Network
Components ("UNC"), Uniphase Fiber Components ("UFC"), Uniphase Netherlands
("UNBV"), Chassis Engineering, Inc. ("Chassis") and Broadband Communications
Products, Inc. ("BCP").
The Company's predecessor was incorporated in California in 1979 under the name
"Uniphase Corporation." The Company was incorporated in California in 1984 under
the name "Uniphase Holding, Corporation," and changed its name to Uniphase
Corporation in 1987 as part of a reorganization in which it succeeded to the
assets, liabilities and business operations of its predecessor. The Company
reincorporated in Delaware in October 1993. Unless the context otherwise
requires, the term the "Company" refers to Uniphase Corporation, a Delaware
corporation, its California predecessors and its subsidiaries. The Company's
principal executive offices are located at 163 Baypointe Parkway, San Jose,
California 95134 and its telephone number is (408) 434-1800.
RECENT EVENTS
ACQUISITION OF BROADBAND COMMUNICATIONS PRODUCTS, INC.
Pursuant the terms of the an Agreement and Plan of Reorganization dated as of
November 23, 1998 between and among the Company, Broadband Communications
Products, Inc. ("Broadband") and Phase Acquisition Corp. ("Phase") (the "Merger
Agreement"), the Company completed the merger of Phase, a wholly-owned
subsidiary of the Company, with and into Broadband (the "Merger"). The
transaction was accounted for using the pooling of interests method. As
consideration for the transaction, 711.72 shares of the Company's common stock
were issued for each outstanding share of Broadband common stock, subject to
adjustment for cash paid in lieu of fractional shares. The Company issued
729,510 shares of common stock in exchange for the outstanding shares of
Broadband common stock, subject to withholding of approximately 10 percent of
such shares in escrow in accordance with certain conditions in the Agreement.
Outstanding options to acquire shares of Broadband common stock were
automatically converted into options to purchase the Company's common stock at
the same exchange ratio.
The shares of Company Common Stock issued in the Merger were issued pursuant to
an exemption from registration under the Securities Act of 1993, as amended. In
accordance with the Merger agreement, the Company filed the registration
statement of which this Prospectus is a part to register certain of the Company
shares of Common Stock issued pursuant to the Merger (the "Shares").
SALE OF ULTRAPOINTE ASSETS
In December 1998, the company sold substantially all of the assets of its
wholly-owned subsidiary Ultrapointe Corporation to KLA-Tencor Corporation, which
had previously been the exclusive world-wide distributor of the Ultrapointe
defect review inspection systems. As a result of the disposition of those
assets, the Company incurred a non-recurring loss of approximately $3 million in
its quarter ended December 31, 1998.
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USE OF PROCEEDS
The Company will not receive any of the proceeds from the sale of Shares by the
Selling Stockholders, but has agreed to bear certain expenses of registration of
the Shares under federal and state securities laws. This Registration Statement
is intended to satisfy certain of the Company's obligations under the Merger
Agreement.
RISK FACTORS
Investors should carefully consider the following risk factors in evaluating an
investment in the Common Stock offered hereby. The statements contained in this
Prospectus that are not purely historical are "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995 and
Section 21E of the Securities Exchange Act of 1934, including, without
limitation, statements regarding the Company's expectations, hopes, beliefs,
anticipations, commitments, intentions and strategies regarding the future.
Actual results could differ from those projected in any forward-looking
statements for the reasons, among others, detailed in the following "Risk
Factors." The fact that some of the risk factors described in this Prospectus
may be the same or similar to those described in our past filings means only
that those risks are present in multiple periods. We believe that many of the
risks detailed here are part of doing business in the industry in which we
compete and will likely be present in all periods reported. The fact that
certain risks are endemic to the industry does not lessen the significance of
the risk. We have made forward-looking statements as of the date of this
Prospectus and assume no obligation to update them, or to update the reasons why
actual results could differ from those projected in them.
VARIABILITY AND UNCERTAINTY OF QUARTERLY OPERATING RESULTS
We have experienced and expect to continue to experience significant
fluctuations in our quarterly results. Fluctuations in our quarterly results may
cause substantial fluctuations in the market price of our common stock. Factors
which have influenced and may continue to influence our operating results in a
particular quarter include:
- the timing of the receipt of product orders from a limited number of
major customers,
- our ability to manufacture technically advanced products with
satisfactory yields on a timely basis,
- product mix,
- competitive pricing pressures,
- relative proportions of domestic and international sales,
- costs associated with the acquisition or disposition of businesses,
- our ability to timely and cost effectively design, manufacture and
ship products,
- the timing differences between when we incur expenses to increase
our marketing and sales capabilities and when we realize benefits,
if any, from such expenditures,
- the announcement and introduction of new products by us and by our
competitors, and
- expenses associated with any intellectual property litigation.
In addition, our sales often reflect orders shipped in the same quarter that
they are received. Also, customers may cancel or reschedule shipments, and
production difficulties could delay shipments. In addition, we sell our
telecommunications equipment products to Original Equipment Manufacturers (OEMs)
who typically order in large quantities and therefore the timing of such sales
may significantly affect our quarterly results. The timing of such OEM sales can
be affected by factors beyond our control, such as demand for the OEMs' products
and manufacturing risks experienced by OEMs. In this regard, we have experienced
rescheduling of orders by customers in each of our markets and may experience
similar rescheduling in the future. As a result of all of these factors, the
Company's results from operations may vary significantly from quarter to
quarter.
Be advised that future acquisitions or dispositions of businesses, products or
technologies by the Company may result in substantial charges or other expenses
that may cause fluctuations in the Company's quarterly operating results.
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The acquisition or disposition of other businesses, products or technologies may
also affect the Company's operating results in any particular quarter. For
example, in the second and fourth quarters of fiscal 1998, we incurred charges
of $6.6 million and $93.0 million, respectively for acquired in-process research
and development in connection with the acquisition of UFC and UNBV. In the third
quarter of fiscal 1997, we incurred charges of $33.3 million for acquired
in-process research and development in connection with the acquisition of ULE.
In addition, we incurred other charges in connection with acquisitions completed
in fiscal 1999, 1998 and 1997. Be advised that future acquisitions or
dispositions of businesses, products or technologies by the Company may result
in reorganization of its operations, substantial charges or other expenses that
may cause fluctuations in the Company's quarterly operating results and its cash
flows.
DIFFICULTIES IN MANUFACTURE OF THE COMPANY'S PRODUCTS
The manufacture of our products involves highly complex and precise processes,
requiring production in highly controlled and clean environments. Changes in our
manufacturing processes or those of our suppliers or their inadvertent use of
defective or contaminated materials could significantly reduce our manufacturing
yields and product reliability. Certain divisions of the Company, including ULE
and UNBV, have in the past and may in the future experience lower than expected
production yields, which could delay product shipments and impair gross margins.
The Company cannot and does not assure that ULE, UNBV or any of its other
manufacturing facilities will maintain acceptable yields in the future. Because
the majority of our manufacturing costs are relatively fixed, manufacturing
yields are critical to our results of operations. To the extent we do not
achieve acceptable manufacturing yields or experience product shipment delays,
the Company's business, operating results and financial condition would be
materially and adversely affected.
During the fourth quarter of fiscal 1998, we commenced construction of a new
laser fabrication facility in the Netherlands for UNBV, which we acquired in
June 1998. Historically, our UNBV facility has not achieved acceptable
manufacturing yields since the June 1998 acquisition, and there is continuing
risk attendant to this new facility and the manufacturing yields and costs that
we will achieve there. We cannot assure that UNBV will successfully manufacture
laser products in the future at performance or cost levels necessary to meet our
customers' needs, if at all. In addition, UFC is establishing a production
facility in Sydney, Australia for fiber Bragg grating products. The Company
cannot assure that this facility will manufacture grating products to customers
specifications at the cost and yield levels required. Each new manufacturing
line must go through varying levels of qualification with our customers. This
qualification process determines whether the manufacturing line achieves the
customers' minimum quality, performance and reliability standards. Customers
will not purchase any products (other than limited number of evaluation units)
prior to qualification of the manufacturing line for the product. Delays in
qualification can cause a product to be dropped from a long term supply program
and result in significant lost revenue opportunity over the term of that
program. To the extent the Company does not achieve and maintain yields or
product reliability or fails in the timely qualification of its new
manufacturing lines, our operating results and customer relationships would be
adversely affected.
MANAGEMENT OF GROWTH; ACQUISITION RISKS
We have historically achieved our growth through a combination of acquisitions
and internally developed new products. As part of our strategy to sustain
growth, we expect to continue to pursue acquisitions of other companies,
technologies and complementary product lines. We also expect to continue
developing new solid state lasers, components and other products for OEM
customers and attempting to further penetrate the telecommunications and CATV
markets through these new products. Both courses of action involve certain risks
to the Company.
In March 1997, the Company acquired ULE, which produces our 980 nm pump laster
products. In June 1998, we acquired UNBV. In the case of both acquisitions, we
acquired businesses that had previously been engaged primarily in research and
development and that needed to make the transition from a research activity to a
commercial business with sales and profit levels that are consistent with our
overall financial goals for the Company. This transition has not yet been
completed at UNBV, which continues to operate at higher expense levels and lower
gross margins than those required to meet our profitability goals. In addition,
in August 1998, the Company acquired certain assets of Chassis, and in November
1998 acquired Broadband Communications Products, Inc. The success of each of
these acquisitions will depend upon our ability to manufacture and sell high
power lasers and other components, modules and subsystems used in wavelength
divisional multiplexing applications and continued demand for these acquired
products by telecommunications and CATV customers. Our ability to manage our
growth effectively depend upon the integration into the Company of the acquired
entities' operations, products and personnel, the retention of key personnel of
the acquired entities and the expansion of our financial and management controls
and reporting systems and procedures. The Company cannot assure that we will
successfully manufacture and sell these products or successfully manage such
growth, and failure to do so could have a material adverse effect on the
Company's business, financial condition and operating results.
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Since 1997, when we acquired ULE, we have increased our marketing, customer
support and administrative functions to support an increased level of operations
primarily from our telecommunications products. The Company cannot and does not
assure success in creating this infrastructure nor can it or will it ensure any
increase in the level of its sales and operations through its new products. We
commenced operations at UTP in 1996 to penetrate the CATV markets, and at UNC in
1998 to develop and market a line of complementary optical components for our
telecommunications customers. In each case, we hired development, manufacturing
and other staff in anticipation of developing and selling new products. The
Company cannot and will not assure that its operations will achieve levels
sufficient to justify the increased expense levels associated with these new
businesses.
RISKS FROM CUSTOMER CONCENTRATION
Historically, orders from a relatively limited number of OEM customers accounted
for a substantial portion of our net sales from telecommunications products. In
the telecommunications markets, our customers evaluate our products and
competitive products for deployment in large telecommunications systems that
they are installing. Our failure to be selected by a customer for particular
system projects can significantly impact our business, operating results and
financial condition. Similarly, if our customers are not selected as the primary
supplier for an overall system installation, we can be similarly adversely
affected. Further, sales to any single customer may vary significantly from
quarter to quarter. Such fluctuations could have a material adverse effect on
the Company's business, operating results and financial condition. We expect
that, for the foreseeable future, sales to a limited number of customers will
continue to account for a high percentage of our net sales. The Company cannot
and does not assure that current customers will continue to place orders or that
the Company will obtain new orders from new customers.
One telecommunications customer, CIENA Corporation, accounted for approximately
12% of our net sales for fiscal 1998. One laser subsystems customer, the Applied
Biosystems Division of Perkin-Elmer Corporation, accounted for approximately 10%
and 12% of our net sales for fiscal 1997 and 1996, respectively. One additional
customer, KLA-Tencor Corporation, purchased both Laser subsystems and
Ultrapointe systems and accounted for 12% and 13% of our consolidated net sales
in fiscal 1998 and 1996, respectively. the Ultrapointe product line was sold to
KLA-Tencor Corporation in December 1998 and will not be a source of future sales
for the Company. No other customers represented 10% or more of total sales
during fiscal 1998. The loss or delay of orders from these or other OEM
customers could have a materially adverse effect on the Company's business,
financial condition and operating results.
INTENSE INDUSTRY COMPETITION
The telecommunications and laser subsystems markets in which we sell our
products are highly competitive. In each of the markets we serve, we face
intense competition from established competitors. Many of these competitors have
substantially greater financial, engineering, manufacturing, marketing, service
and support resources than we do. We compete with many companies in the
telecommunications market that have substantially greater resources, greater
name recognition, manufacturing expertise and capability and longer standing
customer relationships than do we. To remain competitive, we believe we must
maintain a substantial investment in research and development, marketing, and
customer service and support. The Company cannot and does not assure that the
Company will compete successfully in the laser or telecommunications industries
in the future, that the Company will have sufficient resources to continue to
make such investments, that the Company will make the technological advances
necessary to maintain its competitive position or that its products will receive
market acceptance. In addition, be advised that technological changes or
development efforts by the Company's competitors may render the Company's
products or technologies obsolete or uncompetitive.
DECLINING MARKET FOR GAS LASERS; DEVELOPMENT AND OTHER RISKS RELATING TO SOLID
STATE LASER TECHNOLOGIES
Gas laser subsystems sales accounted for 26.3%, 37.3% and 52.9% of our net sales
for the fiscal years ended 1998, 1997 and 1996, respectively. The market for gas
lasers is mature and expected to decline as customers replace conventional
lasers, including gas lasers, with solid state lasers. Solid state lasers are
currently expected to be the primary commercial laser technology in the future.
Consequently, we have devoted substantial resources to developing and
commercializing our solid state laser products. We believe that some companies
are further advanced than us in solid state laser development and are competing
with the Company for many of the same opportunities. To be competitive in our
laser markets, we believe continued manufacturing cost reductions and enhanced
performance of our laser products will be required on a continuing basis as
these markets further mature. However, the Company cannot assure that our solid
state laser products will be competitive with products of other companies as to
cost or performance in the future.
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ATTRACTING AND RETAINING KEY PERSONNEL
Our future depends, in part, on our ability to attract and retain certain key
personnel. In particular, our research and development efforts depend on hiring
and retaining qualified engineers. Competition for highly skilled engineers is
extremely intense, and we are currently experiencing difficulty in identifying
and hiring certain qualified engineers in many areas of our business. The
Company cannot and does not assure that the Company will be able to hire and
retain such personnel at compensation levels consistent with the Company's
existing compensation and salary structure. Our future also depends on the
continued contributions of its executive officers and other key management and
technical personnel, none of whom has an employment agreement with the Company
and each of whom would be difficult to replace. The Company does not maintain a
key person life insurance policy on the Chief Executive Officer. However, the
loss of the services of one or more of the Company's executive officers or key
personnel or the inability to continue to attract qualified personnel could
delay product development cycles or otherwise have a material adverse effect on
the Company's business, financial condition and operating results.
RISKS ASSOCIATED WITH INTERNATIONAL SALES
International sales accounted for approximately 38.5%, 30.0% and 24.5% of net
sales in fiscal years 1998, 1997 and 1996, respectively. We expect that
international sales will continue to account for a significant portion of our
net sales. We may continue to expand Company operations outside of the United
States and to enter additional international markets, both of which will require
significant management attention and financial resources. International sales
are subject to inherent risks, including
- unexpected changes in regulatory requirements,
- tariffs and other trade barriers,
- political and economic instability in foreign markets,
- difficulties in staffing and management,
- integration of foreign operations,
- longer payment cycles,
- greater difficulty in accounts receivable collection,
- currency fluctuations, and
- potentially adverse tax consequences.
Since a significant portion of our foreign sales are denominated in U.S.
dollars, our products may also become less price competitive in countries in
which local currencies decline in value relative to the U.S. dollar. Our
business and operating results may also be materially and adversely affected by
lower sales levels which typically occur during the summer months in Europe and
certain other overseas markets. Furthermore, the sales of many of our OEM
customers depends on international sales and, consequently, this further exposes
us to the risks associated with such international sales.
YEAR 2000
We are aware of the risks associated with the operation of information
technology ("IT") and non-information technology ("non-IT") systems as the
millennium (year 2000) approaches. The "Year 2000" problem is pervasive and
complex, and may affect many IT and non-IT systems. The Year 2000 problem
results from the rollover of the two digit year value from "99" to "00". Systems
that do not properly recognize such date-sensitive information could generate
erroneous data or fail. In addition to our own systems we rely on external
systems of our customers, suppliers, creditors, financial organizations,
utilities providers and government entities, both domestic and international
(which we collectively refer to as "Third Parties"). Consequently, we could be
affected by disruptions in the operations of Third Parties with which we
interact. Furthermore, as customers expend resources to correct their own
systems, they may reduce their purchasing frequency and volume of our products.
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We are using both internal and external resources to assess
- the Company's state of readiness (including the readiness of Third
Parties, with which we interact) concerning the Year 2000 problem,
- our costs to correct material Year 2000 problems related to our
internal IT and non-IT systems,
- the known risks related to any failure to correct any Year 2000
problems we identify, and
- the contingency plan, if any, that we should adopt should any
identified Year 2000 problems not be corrected.
We continue to evaluate the estimated costs associated with the efforts to
prepare for Year 2000 based on actual experience. While the efforts will involve
additional costs, we believe, based on available information, that we will
manage our total Year 2000 transition without any material adverse effect on the
Company's business operations, products or financial prospects. The actual
outcomes and results could be affected by future factors including, but not
limited to,
- the continued availability of skilled personnel,
- cost control,
- the ability to locate and remediate software code problems,
- critical suppliers and subcontractors meeting their Year 2000
compliance commitments, and
- timely actions by customers.
We anticipate that we will remediate all Year 2000 risks and be able to conduct
normal operations without having to establish a Year 2000 contingency plan.
We are working with our software system suppliers and believe that certain of
these systems are currently not Year 2000 compliant. However, we anticipate that
such systems will be corrected for the Year 2000 problem prior to December 31,
1999. We are working with those Third Parties to identify any Year 2000 problems
affecting such Third Parties that could have a material adverse affect on our
business, financial condition or results of operations. However, it would be
impracticable for us to attempt to address all potential Year 2000 problems of
Third Parties that have been or may in the future be identified. Specifically,
Year 2000 problems have arisen or may arise regarding the IT and non-IT systems
of Third Parties having widespread national and international interactions with
persons and entities generally (for example, certain IT and non-IT Systems of
governmental agencies, utilities and information and financial networks) that,
if uncorrected, could have a material adverse impact on the Company's business,
financial condition or results of operations. We are still assessing the effect
the Year 2000 problem will have on its suppliers and, at this time, cannot
determine such impact.
CONFLICTING PATENTS AND INTELLECTUAL PROPERTY RIGHTS OF THIRD PARTIES; POTENTIAL
INFRINGEMENT CLAIMS
The laser, semiconductor capital equipment, and telecommunications markets in
which we sell our products experience frequent litigation regarding patent and
other intellectual property rights. Numerous patents in these industries are
held by others, including academic institutions and our competitors. Such
patents could inhibit our development of new products for such markets. The
industry in which we operate experiences periodic claims of patent infringement
or other intellectual property rights. While in the past licenses generally have
been available to us where third-party technology was necessary or useful for
the development or production of our products, the Company cannot and does not
assure that licenses to third-party technology will be available on commercially
reasonable terms, if at all. Generally, a license, if granted, includes payments
by us of up-front fees, ongoing royalties or a combination thereof. Be advised
that such royalty or other terms could have a significant adverse impact on the
Company's operating results. We are a licensee of a number of third party
technologies and intellectual property rights and are required to pay royalties
to these third party licensors on certain of our telecommunications products and
solid state lasers. During fiscal 1998, 1997 and 1996, we expensed $2.0 million,
$1.4 million and $1.3 million, respectively, in license and royalty fees
primarily in connection with our gas laser subsystems. In addition, be advised
that third parties may in the future assert claims against the Company
concerning the Company's existing products or with respect to future products
under development by the Company. Any litigation to determine the validity of
any third-party claims could result in significant expense to the Company and
divert the efforts of the Company's technical and management personnel, whether
or not the Company is successful in such litigation. If the Company is
unsuccessful in
10
<PAGE> 11
any such litigation, the Company could be required to expend significant
resources to develop non-infringing technology or to obtain licenses to the
technology which is the subject of the litigation. The Company cannot and does
not assure that the Company would be successful in such development or that any
such licenses would be available to the Company. Without such a license, the
Company could be enjoined from future sales of the infringing product or
products.
EURO CURRENCY
On January 1, 1999, several member countries of the European Union established
fixed conversion rates between their existing sovereign currencies and adopted
the Euro as their new common legal currency. From then on, the Euro has and will
trade on currency exchanges and the legacy currencies will remain legal tender
in the participating countries for a transition period between January 1, 1999
and January 1, 2002. During the transition period, noncash payments can be made
in the Euro, and parties can elect to pay for goods and services and transact
business using either the Euro or a legacy currency. Between January 1, 2002 and
July 1, 2002 the participating countries will introduce Euro notes and coins and
withdraw all legacy currencies, which will no longer be available. The Euro
conversion may affect cross-border competition by creating cross-border price
transparency. We are assessing our pricing/marketing strategy in order to insure
that we remain competitive in a broader European market. We are also assessing
our information technology systems to allow for transactions to take place in
both the legacy currencies and the Euro and the eventual elimination of the
legacy currencies, and reviewing whether certain existing contracts will need to
be modified. Our currency risk and risk management for operations in
participating countries may be reduced as the legacy currencies are converted to
the Euro. Final accounting, tax and governmental legal and regulatory guidance
are not yet available. We will continue to evaluate issues involving
introduction of the Euro. Based on current information and our current
assessment, we do not expect that the Euro conversion will have a material
adverse effect on the Company's business, financial condition or results from
operations.
MARKET RISKS
The Company experiences financial market risks, including changes in interest
rates, foreign currency exchange rates and marketable equity security prices. We
utilize derivative financial instruments to mitigate these risks. We do not use
derivative financial instruments for speculative or trading purposes. The
primary objective of our investment activities is to preserve principal while at
the same time maximizing yields without significantly increasing risk. To
achieve this objective, a majority of our marketable investments are floating
rate and municipal bonds, auction instruments and money market instruments
denominated in U.S. dollars. We hedge currency risks of investments denominated
in foreign currencies with forward currency contracts. Gains and losses on these
foreign currency investments are generally offset by corresponding gains and
losses on the related hedging instruments, resulting in negligible net exposure
to the Company. A substantial portion of our revenue, expense and capital
purchasing activities are transacted in U.S. dollars. However, we do enter into
these transactions in other currencies, primarily European currencies. To
protect against reductions in value and the volatility of future cash flows
caused by changes in foreign exchange rates, we have established hedging
programs. Currency forward contracts are utilized in these hedging programs. Our
hedging programs reduce, but do not always entirely eliminate the impact of
foreign currency exchange rate movements. Actual results on our financial
position may differ materially.
DEPENDENCE ON SOLE AND LIMITED SOURCE SUPPLIERS
We currently obtain various components included in the manufacture of our
products from single or limited source suppliers. A disruption or loss of
supplies from these companies or a price increase for these components would
have a material adverse effect on the Company's results of operations, product
quality and customer relationships. We currently utilize a sole source for the
crystal semiconductor chip sets incorporated in our solid state microlaser
products and acquire our pump diodes for use in its solid state laser products
from Opto Power Corporation and GEC. We also obtain lithium niobate wafers,
gallium arsenide wafers, specialized fiber components and certain lasers used in
its telecommunications products primarily from Crystal Technology, Inc.,
Fujikura, Ltd., Philips Key Modules, and Sumitomo, respectively. We do not have
long-term or volume purchase agreements with any of these suppliers, and the
Company cannot and does not assure that these components will be available in
the quantities required by it, if at all.
LIMITED PROTECTION OF INTELLECTUAL PROPERTY
Our future depends in part upon our intellectual property, including trade
secrets, know-how and continuing technological innovation. The Company cannot
and does not assure that the steps taken by the Company to protect its
intellectual property will adequately prevent misappropriation or that others
will not develop competitive technologies or products. We currently hold 95 U.S.
patents on products or processes and certain corresponding foreign patents and
has applications for certain patents currently pending. Be advised that other
companies may be investigating or developing other technologies that are similar
to the Company's. Moreover, the Company cannot and does not assure that any
patents will be issued from any
11
<PAGE> 12
application pending or filed by the Company or that, if patents do issue, the
claims allowed will be sufficiently broad to deter or prohibit others from
marketing similar products. In addition, be advised that any patents issued to
the Company may be challenged, invalidated or circumvented. Further, the Company
cannot and does not assure that the rights under its patents will provide a
competitive advantage to the Company. In addition, the laws of certain
territories in which the Company's products are or may be developed,
manufactured or sold, including Asia, Europe or Latin America, may not protect
the Company's products and intellectual property rights to the same extent as
the laws of the United States.
FUTURE CAPITAL REQUIREMENTS
We are devoting substantial resources for new facilities and equipment for the
production of source lasers, fiber-Bragg gratings and modules used in
telecommunications and for the development of new solid state lasers. Although
we believe existing cash balances, cash flow from operations and available lines
of credit, will be sufficient to meet our capital requirements at least through
the end of fiscal 1999, we may be required to seek additional equity or debt
financing to compete effectively in these markets. We cannot precisely determine
the timing and amount of such capital requirements and will depend on several
factors, including our acquisitions and the demand for our products and products
under development. The Company cannot and does not assure that such additional
financing will be available when needed, or, if available, will be on terms
satisfactory to the Company.
POTENTIAL VOLATILITY OF COMMON STOCK PRICE
The market price of the Company's Common Stock has recently been and is likely
to continue to be highly volatile and significantly affected by factors such as
- fluctuations in our operating results,
- announcements of technological innovations or new products by us or
our competitors,
- governmental regulatory action,
- developments with respect to patents or proprietary rights, and
- general market conditions.
Further, our net revenues or operating results in future quarters may be below
the expectations of public market securities analysts and investors. In such
event, the price of the Company's Common Stock would likely decline, perhaps
substantially. In addition, the stock market has from time to time experienced
significant price and volume fluctuations that are unrelated to the operating
performance of particular companies.
ISSUANCE OF PREFERRED STOCK; POTENTIAL ANTI-TAKEOVER EFFECTS OF DELAWARE LAW
The Board of Directors has the authority to issue up to 900,000 shares of
undesignated Preferred Stock and to determine the powers, preferences and rights
and the qualifications, limitations or restrictions granted to or imposed upon
any wholly unissued shares of undesignated Preferred Stock and to fix the number
of shares constituting any series and the designation of such series, without
the consent of the Company's shareholders. The Preferred Stock could be issued
with voting, liquidation, dividend and other rights superior to those of the
holders of Common Stock. The issuance of Preferred Stock under certain
circumstances could have the effect of delaying, deferring or preventing a
change in control of the Company.
On June 11, 1998, the Board of Directors of the Company authorized and declared
a dividend distribution of one right for each outstanding share of its Common
Stock, to stockholders of record at the close of business on July 6,1998 (the
"Record Date"), and authorized the issuance of one right with each share of
Common Stock issued (including shares distributed from Treasury) by the Company
thereafter between the Record Date and the Distribution Date (as defined below).
Each right entitles the registered holder, subject to the terms of the Rights
Agreement (as defined below), to purchase from the Company one one-thousandth of
a share (a "Unit") of Series B Preferred Stock at a purchase price of $270 per
Unit, subject to adjustment. The purchase price is payable in cash or by
certified or bank check or money order payable to the order of the Company. The
description and terms of the rights are set forth in a Rights Agreement between
the Company and American Stock Transfer & Trust Company, as Rights Agent, dated
as of June 22, 1998, as amended from time to time (the "Rights Agreement").
12
<PAGE> 13
Certain provisions contained in the Rights Plan, may have the effect of
discouraging a third party from making an acquisition proposal for the Company
and may thereby inhibit a change in control of the Company. For example, such
provisions may deter tender offers for shares of Common Stock which offers may
be attractive to the stockholders, or deter purchases of large blocks of Common
Stock, thereby limiting the opportunity for stockholders to receive a premium
for their shares of Common Stock over the then-prevailing market prices.
The Company is subject to the provisions of Section 203 of the Delaware General
Corporation Law prohibiting, under certain circumstances, publicly-held Delaware
corporations from engaging in business combinations with certain stockholders
for a specified period of time without the approval of the holders of
substantially all of its outstanding voting stock. Such provisions could delay
or impede the removal of incumbent directors and could make more difficult a
merger, tender offer or proxy contest involving the Company, even if such events
could be beneficial, in the short term, to the interests of the stockholders. In
addition, such provisions could limit the price that certain investors might be
willing to pay in the future for shares of our Common Stock. The Company's
Certificate of Incorporation and Bylaws contain provisions relating to the
limitations of liability and indemnification of its directors and officers,
dividing its Board of Directors into three classes of directors serving
three-year terms and providing that its stockholders can take action only at a
duly called annual or special meeting of stockholders. These provisions also may
have the effect of deterring hostile takeovers or delaying changes in control or
management of the Company.
13
<PAGE> 14
SELLING STOCKHOLDERS
The following table provides the names of and the number of shares of Common
Stock beneficially owned by each Selling Stockholder, and the number of shares
of Common Stock beneficially owned by each Selling Stockholder upon completion
of the offering or offerings pursuant to this Prospectus, assuming each Selling
Stockholder offers and sells all of its or his/her respective Shares. Selling
Stockholders may, however, offer and sell all, or some or none of their Shares.
The respective donees, pledgees and transferees or other successors in interest
of the Selling Stockholders may also sell the shares listed below as being held
by the Selling Stockholders. No Selling Stockholder will beneficially own one
percent or greater of the Company's outstanding Common Stock upon the sale of
their shares offered hereby.
<TABLE>
<CAPTION>
BENEFICIAL PERCENTAGE PRIOR
OWNERSHIP PRIOR TO THE BENEFICIAL
TO OFFERING OFFERING(1) OWNERSHIP AFTER
---------------- ---------------- OFFERED THE OFFERING
NUMBER OF SHARES % NUMBER OF SHARES NUMBER OF SHARES
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
James Breitmeier ............ 213,515 * 213,515 0
Paul W. Casper .............. 213,515 * 213,515 0
James W. Toy ................ 213,515 * 213,515 0
Donald R. Alford ............ 64,055 * 64,055 0
Whitworth W. Cotton ......... 21,351 * 21,351 0
Marc E. Sawyer .............. 2,847 * 2,847 0
Allen S. Henry .............. 712 * 712 0
</TABLE>
* Less than 1%
(1) Percentage of 39,684,309 shares of voting Common Stock, based on shares
outstanding as of January 5, 1999.
14
<PAGE> 15
PLAN OF DISTRIBUTION
This Prospectus relates to the offer and sale from time to time by the holders
of up to 729,510 shares of Common Stock. The Shares were issued in connection
with the Merger Agreement. This Prospectus has been prepared in connection with
registering the Shares to allow for sales of Shares by the applicable Selling
Stockholders to the public in accordance with the terms of the Merger Agreement.
The Company has registered the Shares for sale pursuant to the terms of the
Merger Agreement, but registration of such Shares does not necessarily mean that
any of such Shares will be offered and sold by the holders thereof.
The Company will not receive any proceeds from the offering by the Selling
Stockholders. The Shares may be sold from time to time to purchasers directly by
any of the Selling Stockholders, or donees, pledgees, transferees or other
successors in interest ("Transferees") thereof. Alternatively, the Selling
Stockholders, or Transferees thereof, may from time to time offer the Shares
through dealers or agents, who may receive compensation in the form of
commissions from the Selling Stockholders, or Transferees thereof, and/or the
purchasers of Shares for whom they may act as agent. The Selling Stockholders,
or Transferees thereof, and any dealers or agents that participate in the
distribution of Shares may be deemed to be "underwriters" within the meaning of
the Securities Act and any profit on the sale of Shares by them and any
commissions received by any such dealers or agents might be deemed to be
underwriting commissions under the Securities Act.
At a time a particular offer of Shares is made, a Prospectus Supplement, if
required, will be distributed that will set forth the name and names of any
dealers or agents and any commissions and other terms constituting compensation
from the Selling Stockholders, or Transferees thereof, and any other required
information. The Shares may be sold from time to time at varying prices
determined at the time of sale or at negotiated prices.
In order to comply with the securities laws of certain states, if applicable,
the Shares may be sold only through registered or licensed brokers or dealers.
In addition, in certain states, the Shares may not be sold unless they have been
registered or qualified for sale in such state or an exemption from such
registration or qualification requirement is available and is complied with.
The Shares may also be sold in one or more of the following transactions: (a)
block transactions (which may involve crosses) in which a broker-dealer may sell
all or a portion of such stock as agent but may position and resell all or a
portion of the block as principal to facilitate the transaction; (b) purchases
by any such broker-dealer as principal and resale by such broker-dealer for its
own account pursuant to a Prospectus Supplement; (c) ordinary brokerage
transactions and transactions in which any such broker-dealer solicits
purchasers; (d) sales "at the market" to or through a market maker or into an
existing trading market, on an exchange or otherwise, for such shares; and (e)
sales in other ways not involving market makers or established trading markets,
including direct sales to purchasers. In effecting sales, broker-dealers engaged
by the Selling Stockholders may arrange for other broker-dealers to participate.
EXPERTS
The consolidated financial statements of Uniphase Corporation appearing in
Uniphase Corporation's Annual Report on Form 10-K for the year ended June 30,
1998, have been audited by Ernst & Young LLP, independent auditors, as set
forth in their report thereon included therein and incorporated herein by
reference. Such financial statements are incorporated by reference in reliance
upon such report given upon the authority of such firm as experts in accounting
and auditing.
The supplemental consolidated financial statements of Uniphase Corporation
appearing in Uniphase Corporation's Current Report on Form 8-K dated January 7,
1998, have been audited by Ernst & Young LLP, independent auditors, as set
forth in their report thereon included therein and incorporated herein by
reference. Such supplemental consolidated financial statements are incorporated
herein by reference in reliance upon such report given upon the authority of
such firm as experts in accounting and auditing.
The financial statements of Philips Optoelectronics, a Division of Koninklijke
Philips Electronics N.V. included in its Amendment No. 2 to the Current Report
on Form 8-K/A dated August 25, 1998, have been audited by Moret Ernst & Young
Accountants, independent auditors, as set forth in their report thereon included
therein and incorporated herein by reference. Such financial statements are
incorporated by reference in reliance upon such report given upon the authority
of such firm as experts in accounting and auditing.
LEGAL MATTERS
The validity of the issuance of the shares of Common Stock offered pursuant to
this Prospectus will be passed upon for the Company by Morrison & Foerster LLP,
Palo Alto, California.
INTERESTS OF NAMED EXPERTS
Michael C. Philips, a partner with Morrison & Foerster LLP, counsel to the
Company, also serves as a Senior Vice President of the Company.
15
<PAGE> 16
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the estimated fees and expenses payable by the
Company in connection with the issuance and distribution of the Common Stock
registered hereby. All of such fees and expenses are estimates, except the
Securities Act registration fee.
<TABLE>
<S> <C>
Securities Act Registration Fee............................... $14,284
Printing and duplicating fees................................. 5,000
Legal fees and expenses....................................... 15,000
Accounting fees and expenses.................................. 30,000
Miscellaneous expenses........................................ 5,716
-------
*Total................................................... $70,000
=======
</TABLE>
*None of the expenses listed above will be borne by the Selling Stockholders.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The indemnification and liability of the Company's directors and officers are
governed by Delaware law.
Under Section 145 of the General Corporation Law of the State of Delaware, the
Company has broad powers to indemnify its directors and officers against
liabilities that may incur in such capacities, including liabilities under the
Securities Act of 1933, as amended (the "Securities Act"). The Company's Bylaws
also provide for mandatory indemnification of its directors and executive
officers, and permissive indemnification of its employees and agents, to the
fullest extent permissible under Delaware law.
The Company's Certificate of Incorporation provides that the liability of its
directors for monetary damages shall be eliminated to the fullest extent
permissible under Delaware law. Pursuant to Delaware law, this includes
elimination of liability for monetary damages for breach of the directors'
fiduciary duty of care to the Company and its stockholders. These provisions do
not eliminate the directors' duty of care and, in appropriate circumstances,
equitable remedies such as injunctive or other forms of non-monetary relief will
remain available under Delaware law. In addition, each director will continue to
be subject to liability for breach of the director's duty of loyalty to the
Company, for acts of omissions not in good faith or involving intentional
misconduct, for knowing violations of law, for any transaction from which the
director derived an improper personal benefit, and for payment of dividends or
approval of stock repurchases or redemptions that are unlawful under Delaware
law. The provision also does not affect a director's responsibilities under any
other laws, such as the federal securities laws or state or federal
environmental laws.
The Company has entered into agreements with its directors and certain of its
executive officers that require the Company to indemnify such persons against
expenses, judgments, fines, settlements and other amounts actually and
reasonably incurred (including expenses of a derivative action) in connection
with any proceeding, whether actual or threatened, to which any such person may
be made a party by reason of the fact that such person is or was a director or
officer of the Company or any of its affiliated enterprises, provided such
person acted in good faith and in a manner such person reasonably believed to be
in or not opposed to the best interests of the Company and, with respect to any
criminal proceeding, had no reasonable cause to believe his or her conduct was
unlawful. The indemnification agreement also sets forth certain procedures that
will apply in the event of a claim for indemnification thereunder.
The Company has obtained a policy of directors' and officers' liability
insurance that insures the Company's directors and officers against the cost of
defense, settlement or payment of a judgment under certain circumstances.
ITEM 16. EXHIBITS
<TABLE>
<S> <C>
2.1 - Agreement and Plan of Reorganization by and among Uniphase Corporation,
Phase Acquisition Corporation and Broadband Communications Products,
Inc., dated as of November 23, 1998.
5.1 - Opinion of Morrison & Foerster LLP
23.1 - Consent of Morrison & Foerster LLP (included in Exhibit 5.1)
23.2 - Consent of Ernst & Young LLP, independent auditors
23.3 - Consent of Moret Ernst & Young Accountants, independent auditors
24.1 - Power of Attorney (included on signature page hereto)
</TABLE>
16
<PAGE> 17
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the Securities
Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in this registration statement.
Notwithstanding the foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would not exceed that
which was registered) any deviation from the low or high and of the estimated
maximum offering price may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate changes in volume and
price represent no more than 20 percent change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table in the effective
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 this registration statement; provided,
however, that subparagraphs (i) and (ii) do not apply if the information
required to be included in a post-effective amendment by those paragraphs is
contained in the periodic reports filed by the Registrant pursuant to Section 13
or Section 15(d) of the Securities Exchange Act of 1934 that are incorporated by
reference in this registration statement.
(2) That, for the purpose of determining any liability under the Securities Act
of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered herein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any of
these securities being registered which remain unsold at the termination of the
offering.
The undersigned Registrant hereby further undertakes that, for the purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual reports pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, when applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference to 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.
The undersigned Registrant hereby further undertakes that:
(1) For purposes of determining any liability under the Securities Act of 1933,
the information omitted from the form of prospectus filed as part of this
registration statement in reliance under Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4), or 497(h)
under the Securities Act of 1933 shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act of
1933, each post-effective amendment that contains a form of prospectus 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.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described under Item 15 of this
registration statement, or otherwise (other than insurance), the Registrant has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in such 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 such Act and will be governed by the final adjudication
of such issue.
17
<PAGE> 18
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Company
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of San Jose, State of California on January 8, 1999.
UNIPHASE CORPORATION
By: /s/ Kevin N. Kalkhoven
-------------------------------------
Kevin N. Kalkhoven
President, Chief Executive Officer
and Chairman of the Board
POWER OF ATTORNEY
The undersigned hereby constitutes and appoints Kevin N. Kalkhoven and
Anthony R. Muller as his/her true and lawful attorneys-in-fact and agents,
jointly and severally, with full power of substitution and resubstitution, for
and in his/her stead, in any and all capacities, to sign on his/her behalf the
Registration Statement on Form S-3 in connection with the sale by Uniphase
Corporation of shares of offered securities, and to execute any amendments
thereto (including post-effective amendments) or certificates that may be
required in connection with this Registration Statement, and to file the same,
with all exhibits thereto, and all other documents in connection therewith, with
the Securities and Exchange Commission and granting unto said attorneys-in-fact
and agents, jointly and severally, the full power and authority to do and
perform each and every act and thing necessary or advisable to all intents and
purposes as he/she might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents, jointly and severally, or his/her
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement on Form S-3 has been signed by the following persons in the capacities
and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Kevin N. Kalkhoven President, Chief Executive Officer, Chairman January 8, 1999
----------------------- of the Board and Director (Principal
Kevin N. Kalkhoven Executive Officer)
/s/ Anthony R. Muller Senior Vice President, Chief Financial January 8, 1999
----------------------- Officer and Secretary (Principal Financial
Anthony R. Muller and Accounting Officer)
/s/ Robert C. Fink Director January 8, 1999
-----------------------
Robert C. Fink
/s/ Peter A. Guglielmi Director January 8, 1999
-----------------------
Peter A. Guglielmi
/s/ Stephen C. Johnson Director January 8, 1999
-----------------------
Stephen C. Johnson
/s/ Martin A. Kaplan Director January 8, 1999
-----------------------
Martin A. Kaplan
/s/ Catherine P. Lego Director January 8, 1999
-----------------------
Catherine P. Lego
/s/ Wilson Sibbett Director January 8, 1999
-----------------------
Wilson Sibbett, Ph.D.
/s/ Casimir Skrzypczak Director January 8, 1999
-----------------------
Casimir Skrzypczak
/s/ Willem Haverkamp Director January 8, 1999
-----------------------
Willem Haverkamp
</TABLE>
<PAGE> 19
EXHIBIT INDEX
<TABLE>
<CAPTION>
<S> <C>
NO. DESCRIPTION
--- -----------
2.1* - Agreement and Plan of Reorganization by and among Uniphase Corporation,
Phase Acquisition Corporation and Broadband Communications Products,
Inc., dated as of November 23, 1998.
5.1 - Opinion of Morrison & Foerster LLP
23.1 - Consent of Morrison & Foerster LLP (included in Exhibit 5.1)
23.2 - Consent of Ernst & Young LLP, independent auditors
23.3 - Consent of Moret Ernst & Young Accountants, independent auditors
24.1 - Power of Attorney (included on signature page hereto)
</TABLE>
* Certain detailed schedules to this agreement have been summarized and will be
made available to the SEC on request.
<PAGE> 1
Exhibit 2.1
AGREEMENT AND PLAN OF REORGANIZATION
dated as of November 23, 1998
by and among
UNIPHASE CORPORATION
a Delaware corporation,
PHASE ACQUISITION CORP.
a Delaware corporation,
BROADBAND COMMUNICATIONS PRODUCTS, INC.
a Florida corporation,
and
the Shareholders
of BROADBAND COMMUNICATIONS PRODUCTS, INC.
<PAGE> 2
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made
as of November 23, 1998, by and among Phase Acquisition Corp., a Delaware
corporation ("Merger Subsidiary"), Uniphase Corporation, a Delaware corporation
("Purchaser"), Broadband Communications Products, Inc., a Florida corporation
(the "Company"), James Breitmeier, Paul Casper, James Troy, Donald Alford,
Whitworth Cotten, Marc Sawyer and Allen Henry (each a "Shareholder" and,
collectively, the "Shareholders").
RECITALS
A. The Company is in the business of developing, manufacturing and
selling digital telecommunications optoelectronics transmitters, receivers,
instruments and associated optoelectronics products (the "Business").
B. Purchaser and the Company desire to merge (the "Merger") Merger
Subsidiary with and into the Company with the Company being the surviving
corporation (the "Surviving Corporation") of the Merger.
C. For federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization within the meaning of Section 368(a)(2)(E) of
the Internal Revenue Code of 1986, as amended (the "Code"), and for financial
accounting purposes shall be accounted for as a pooling of interests.
NOW, THEREFORE, the parties hereto hereby agree as follows:
AGREEMENT
ARTICLE 1
MERGER
1.1 THE MERGER. Subject to the terms and conditions of this Agreement
and in accordance with the Delaware General Corporation Law (the "DGCL") and the
corporations laws of the State of Florida (the "Florida Act"), at the Effective
Time (as hereinafter defined), Merger Subsidiary will be merged with and into
the Company, with the Company being the Surviving Corporation of the Merger and
becoming a wholly-owned subsidiary of Purchaser and the separate corporate
existence of Merger Subsidiary shall cease.
1.2 THE CLOSING. Subject to the terms and conditions of this
Agreement, the consummation of the Merger and the other transactions
contemplated hereby (the "Closing") shall take place as promptly as practicable
(and in any event within five (5) business days) after the satisfaction or
waiver of the conditions set forth in Article 7 hereof, at the offices of
Morrison & Foerster LLP, 755 Page Mill Road, Palo Alto, California 94304, or
such other place and time
-1-
<PAGE> 3
as the parties may otherwise agree, and the date of the Closing is referred to
herein as the "Closing Date."
1.3 FILING OF MERGER DOCUMENTS; EFFECTIVE TIME. At the Closing, the
parties shall cause the Merger to be consummated by executing and filing duly
executed Articles of Merger and, in the case of Purchaser, a duly executed
Certificate of Merger (collectively the "Merger Documents") with respect to the
Merger with the Secretary of State of the State of Delaware and the Secretary of
State of the State of Florida, in such form as Purchaser reasonably determines
is required by and in accordance with the relevant provisions of the DGCL and
the Florida Act. The time upon which such filing becomes effective in accordance
with the DGCL and the Florida Act is referred to herein as the "Effective Time."
1.4 EFFECT OF MERGER. At the Effective Time, the effect of the Merger
shall be as provided in the DGCL and the Florida Act. Without limiting the
generality of the foregoing, at the Effective Time:
(a) All property, rights, privileges, policies and franchises of
the Company and the Merger Subsidiary shall vest in the Surviving Corporation
and all debts, liabilities and duties of the Merger Subsidiary and the Company
shall become the debts, liabilities and duties of the Surviving Corporation.
(b) The Articles of Incorporation and the Bylaws of the Company,
as in effect immediately prior to the Closing Date, shall remain the Articles of
Incorporation and Bylaws of the Surviving Corporation, unless and until amended
in accordance with their terms and as provided by law.
(c) The directors of the Merger Subsidiary shall become the
directors of the Surviving Corporation, each to hold a directorship in
accordance with the Articles of Incorporation and Bylaws of the Surviving
Corporation until his successor is duly elected and qualified, and the parties
listed on Schedule 1.4 delivered by the Company to Purchaser concurrent with the
execution and delivery of the Agreement shall be the respective officers of the
Surviving Corporation as identified on such Schedule 1.4.
1.5 TAX AND ACCOUNTING TREATMENT. The parties hereto acknowledge and
agree that the Merger contemplated hereby shall be treated for accounting
purposes as a pooling of interests. The parties also acknowledge and agree that
the Merger is intended to be a tax-free reorganization under Section
368(a)(2)(E) of the Code. Notwithstanding the foregoing or anything else to the
contrary contained in this Agreement, the Company acknowledges and agrees that
neither Purchaser nor Merger Subsidiary makes any representation or warranty as
to the status of the Merger as a tax-free reorganization under Section 368 of
the Code or as to the effect, if any, that any transaction consummated prior to
the Effective Time by the Company or any Affiliate (as hereinafter defined) of
the Company, other than Purchaser or Merger Subsidiary, has or may have on any
such tax-free status.
-2-
<PAGE> 4
ARTICLE 2
CONVERSION OF STOCK
2.1 CONSIDERATION; CONVERSION OF STOCK.
2.1.1 For the purposes of this Agreement, "Consideration" means
1,148,000 shares of Common Stock, $0.001 par value per share, of Purchaser
("Purchaser Common Stock"), minus (a) that portion thereof allocated to the
outstanding Employee Options pursuant to Section 2.3 below, (b) that number of
shares thereof equal to the quotient obtained by dividing (i) the aggregate
amount by which the fees and expenses incurred by or on behalf of the Company in
accordance with Section 13.5 exceed $150,000 by (ii) the Closing Market Value
(as hereinafter defined). At the Effective Time, by virtue of the Merger, and
without further action by any person or entity, all of the shares of Company
Stock (as hereinafter defined) issued and outstanding immediately prior to the
Effective Time shall automatically be converted into and become the right to
receive (subject to the payment of cash for fractional shares as provided in
Section 2.2.3) the Consideration in accordance with Section 2.1.2 and Section
2.2 hereof. All shares of Company Stock held by the Company as treasury stock
shall be canceled and no payment shall be made with respect thereto. Each issued
and outstanding share of capital stock of Merger Subsidiary shall, at the
Effective Time, be automatically converted into one share of the Company Common
Stock (as hereinafter defined). For the purposes hereof, (a) the term "Company
Stock" shall mean all issued and outstanding shares of the Company's common
stock, $1.00 par value per share, as of the Effective Time, and (b) the term
"Closing Market Value" shall mean the average closing market price of one share
of Purchaser Common Stock on the Nasdaq National Market for the thirty-one (31)
trading days ending on the trading day that is three trading days prior to the
Closing Date as reported (absent manifest error) in the Wall Street Journal,
Eastern Edition.
2.1.2 The Consideration shall be allocated among the holders of
shares of Company Stock outstanding immediately prior to the Effective Time at
the rate (the "Exchange Rate") of 711.7173 shares of Purchaser Common Stock for
each share of Company Stock held by such holders; provided, that the Exchange
Rate shall be adjusted, to the extent an adjustment is made pursuant to clause
(b) of Section 2.1.1 above, to an amount equal to the quotient obtained by
dividing the number of shares of Purchaser Common Stock constituting the
Consideration by 1613.
2.2 PAYMENT OF CONSIDERATION. On the Closing Date:
2.2.1 Subject to Section 2.2.2, Purchaser shall issue and deliver
to the holders of Company Stock certificates representing the number of shares
of Purchaser Common Stock comprising the Consideration (other than the Escrowed
Shares (as hereinafter defined)) allocated to such shareholders in accordance
with Section 2.1.2 above and Schedule 2.2.1 delivered by the Company to
Purchaser concurrent with the execution and delivery of this Agreement.
2.2.2 Purchaser shall authorize one or more persons to act as
Exchange Agent hereunder (the "Exchange Agent"). As soon as practicable after
the Effective Time, Purchaser shall cause the Exchange Agent to mail (i) to all
former holders of record Company Stock
-3-
<PAGE> 5
instructions for surrendering their certificates representing Company Stock in
exchange for a certificate or certificates representing shares of Purchaser
Common Stock. Upon surrender of a Company Stock certificate for cancellation to
the Exchange Agent or to such other agent or agents as may be appointed by
Purchaser, the holder of such certificate shall be entitled to receive in
exchange therefor (subject to Section 2.2.4) a certificate representing that
number of whole shares of Purchaser Common Stock into which the shares of
Company Stock theretofore represented by such certificate so surrendered shall
have been converted pursuant to the provisions of this Agreement, and the
certificate so surrendered shall forthwith be canceled. Until surrendered in
accordance with the provisions of this Section, each Company Stock certificate
shall represent for all purposes shares of Purchaser Common Stock. Purchaser
Common Stock into which Company Stock shall be converted in the Merger shall be
deemed to have been issued at the Effective Time. If any Purchaser Common Stock
certificates are to be issued in a name other than that in which the Company
Stock certificate surrendered is registered, it shall be a condition of such
exchange that the person requesting such exchange shall deliver to the Exchange
Agent any transfer or other taxes required by reason of the issuance of
certificates for such shares of Purchaser Common Stock in a name other than that
of the registered holder of the certificate or surrendered or establish to the
satisfaction of the Exchange Agent that such tax has been paid or is not
applicable.
2.2.3 No certificates representing fractional shares of Purchaser
Common Stock shall be issued upon the surrender for exchange of Company Stock
certificates. No fractional interest shall entitle the owner to vote or to any
rights of a security holder. In lieu of fractional shares, each holder of shares
of Company Stock who would otherwise have been entitled to a fractional sharer
of Purchaser Common Stock, will receive upon surrender of a Company Stock
certificate or certificates, as the case may be, an amount in cash (without
interest) determined by multiplying such fraction by the Closing Market Value.
2.2.4 Purchaser shall deposit 72,951 shares of the Purchaser
Common Stock comprising the Consideration (the "Escrowed Shares"), pro rated
with respect to each Shareholder based on the portion of the Consideration
allocated to such Shareholder, with an escrow agent selected by Purchaser and
reasonably satisfactory to the Company (the "Escrow Agent") to be held and
disbursed by the Escrow Agent in accordance with the form of escrow agreement
(the "Escrow Agreement") attached hereto as Exhibit 2.2.4.
2.3 OPTIONS.
2.3.1 At the Effective Time, any and all outstanding and
unexercised Employee Options (as hereinafter defined) shall cease to represent a
right to acquire shares of the Company Common Stock and shall be converted
automatically into Purchaser Options (as hereinafter defined) to purchase shares
of Purchaser Common Stock in an amount and at an exercise price determined as
provided below:
(a) The number of shares of Purchaser Common Stock subject
to the new Purchaser Option shall be equal to the product of the number of
shares of the Company Common Stock subject to the Employee Option and the
Exchange Rate; provided that any
-4-
<PAGE> 6
fractional shares of Purchaser Common Stock resulting from such multiplication
shall be rounded down to the nearest share; and
(b) The exercise price per share of Purchaser Common Stock
under the Purchaser Option shall be equal to the quotient obtained by dividing
the exercise price per share of the Company Common Stock under the Employee
Option by the Exchange Rate, provided that such exercise price shall be rounded
to the nearest cent. For this purpose, each share of Company Stock issuable
pursuant to an Employee Option that is outstanding at the Effective Time will be
deemed to be outstanding immediately prior to the Effective Time. From and after
the Effective Time, the Stock Option Plans (as defined below) shall be assumed
by Purchaser and shall continue in effect, provided that no further options
shall be granted under the Stock Option Plans.
2.3.2 The adjustment provided herein with respect to any Employee
Options that are "incentive stock options" (as defined in the Code) shall be and
is intended to be effected in a manner consistent with Section 424(b) of the
Code. The duration and other terms of the Purchaser Option shall be the same as
the Employee Option except that all references to the Company shall be deemed to
be references to Purchaser.
2.3.3 Prior to the Closing Date and except for any Employee
Options, the Company shall cause all outstanding Warrants and Options (as
hereinafter defined), to be exercised (and all shares of the Company Common
Stock required to be issued pursuant to such exercise to be validly and fully
issued as fully paid, nonassessable shares) or terminated, such that, as of the
Effective Time, (a) no options, warrants or other rights to acquire any shares
of the Company's capital stock or any securities convertible into shares of the
Company's capital stock are outstanding, and (b) no person or entity other than
the holders of Company Stock shall have any right, title or interest in or to
the Company or any securities issued by the Company, all of which holders shall
have no such, right, title or interest in or to the Company, other than their
ownership of Company Stock.
2.4 TAXES AND CLOSING COSTS. All transfer, sales and use taxes
imposed by any governmental entity or with respect to or as the result of the
Merger shall be paid by the Company and accrued prior to the Closing Date.
Except as provided above, each party shall bear their own costs in connection
with the transactions contemplated hereby, as provided in Section 13.5.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF
THE COMPANY AND THE SHAREHOLDERS
The Company and the Shareholders hereby, jointly and severally,
represent and warrant to Purchaser and Merger Subsidiary that the following
facts and circumstances are true and correct, as of the date of this Agreement,
subject to the limitations and exceptions set forth on Schedule 3 delivered by
the Company to Purchaser concurrent with the execution and delivery of this
Agreement (the "Company Disclosure Schedule"). Whenever the term "to the
Company's
-5-
<PAGE> 7
knowledge" or similar expression appears in any representation or warranty in
this Article 3, it means to the actual knowledge of the Company's directors,
officers and employees holding Employee Options and the Shareholders, after
reasonable inquiry and investigation. Whenever the term "the Company has
received no notice" or like expression appears in any representation or warranty
in this Article 3, it means that none of the Company's directors, officers,
employees holding Employee Options or the Shareholders have received actual oral
or written notice of the matter to which such term is applied, after having made
reasonable inquiry as to whether notice has been received.
3.1 ORGANIZATION. The Company: (i) is a corporation duly organized,
validly existing and in good standing under the laws of the State of Florida;
(ii) has all necessary corporate power to own and lease its properties, to carry
on its business as now being conducted and to enter into and perform this
Agreement and all of the other documents and agreements contemplated hereby; and
(iii) is qualified to do business in all jurisdictions in which the failure to
so qualify would have a material adverse effect on the business, operations or
financial condition of the Company. The Company has no Subsidiaries (as
hereinafter defined) and holds no right, title or interest in or to any other
corporation, company, partnership, trust, limited liability company or other
entity.
3.2 AUTHORITY AND CONSENTS. The execution and performance of this
Agreement and the other documents to be executed by the Company pursuant to the
terms hereof will not result in a violation of the Company's Articles of
Incorporation or Bylaws. The Company has full power and authority (corporate and
otherwise) to enter into this Agreement and the other documents to be executed
by the Company pursuant to the terms hereof and to carry out the transactions
contemplated by this Agreement and such other documents. Each of the
Shareholders has the legal capacity and competence to effect and deliver this
Agreement and the other documents to be executed by the Shareholders pursuant to
the terms hereof. This Agreement and the other documents to be executed by the
Company pursuant to the terms hereof and their execution and delivery to Merger
Subsidiary and Purchaser have been duly authorized by the Board of Directors and
the shareholders of the Company, and, no further corporate action prior to the
Closing shall be necessary on the part of the Company or its shareholders to
effect the Merger or to make this Agreement and the other documents to be
executed by the Company pursuant to the terms hereof and the transactions
contemplated by this Agreement and such other documents valid and binding upon
the Company. Upon the filing of the Merger Documents with the Secretaries of
State for the State of Delaware and the State of Florida, the Merger shall be
immediately and automatically effective without further action by any person or
entity. This Agreement and the other documents to be executed by the Company and
the Shareholders pursuant to the terms hereof do and will constitute a legal,
valid and binding obligation of the Company and the Shareholders, enforceable
against the Company and the Shareholders in accordance with their respective
terms, subject as to enforcement only: (i) to bankruptcy, insolvency,
reorganization, arrangement, moratorium and other similar laws of general
applicability relating to or affecting creditors' rights generally; and (ii) to
general principles of equity.
-6-
<PAGE> 8
Each Shareholder hereby consents to the Merger and all of the
transactions contemplated hereby.
The Company has delivered to Purchaser true, complete and correct
copies of (i) its Articles of Incorporation, as amended to date, certified by
the appropriate official of the jurisdiction of incorporation, (ii) its Bylaws,
as amended to date, and (iii) its stock ledger, in each case, certified by the
Company's corporate secretary. The Articles of Incorporation and Bylaws of the
Company are in full force and effect and the Company is in full compliance with
the provisions thereof.
3.3 CAPITALIZATION AND TITLE TO SHARES.
3.3.1 The Company is authorized to issue 10,000 shares of Company
Stock, of which 1,025 shares are issued and outstanding. The Company has never
repurchased any shares of issued Company Stock. All of such shares are owned of
record by the Shareholders in the amounts set forth on Section 3.3.1 of the
Company Disclosure Schedule. No other class of capital stock of the Company is
authorized or outstanding. The Shareholders are the sole shareholders of the
Company. All of the issued and outstanding shares of the Company's capital stock
are duly authorized and are validly issued, fully paid, nonassessable and free
of pre-emptive rights. None of the issued and outstanding shares of the Company
have been issued in violation of any federal or state law or any preemptive
rights or rights to subscribe for or purchase securities.
3.3.2 Section 3.3.2 of the Company Disclosure Schedule includes a
true and complete list of (a) all outstanding rights, subscriptions, warrants,
calls, preemptive rights, options or other agreements of any kind to purchase or
otherwise receive from the Company any shares of the capital stock or any other
security of the Company, and all outstanding securities of any kind convertible
into or exchangeable for such securities (all such rights, subscriptions,
warrants, calls, options, agreements and convertible securities, collectively,
"Warrants and Options"), and (b) all of the Company's stock option plans ("Stock
Option Plans"). True and complete copies of all instruments (or the form of such
instruments) referred to in this Section 3.3.2 have been previously furnished to
Purchaser. There are no shareholder agreements, voting trusts, proxies or other
agreements or understandings with respect to the outstanding shares of capital
stock of the Company to which the Company is a party. Except for options granted
pursuant to the Company's Stock Option Plans ("Employee Options"), all
outstanding unexercised Warrants and Options shall terminate immediately prior
to the Effective Time.
3.3.3 The Company does not own beneficially any shares of capital
stock of Purchaser.
3.4 TITLE TO ASSETS. The Company has good and marketable title to all
of its tangible assets and properties (collectively, the "Assets") reflected as
owned on the Current Financial Statements (as defined hereinafter), and all such
Assets and properties are free and clear of all liens, charges, encumbrances,
security interests and rights and interests in others (collectively, "Liens"),
other than Permitted Liens (as hereinafter defined). The Company does not own
any real property and does not have any options or contractual obligations to
purchase or acquire any
-7-
<PAGE> 9
interest in real property. The Company has a valid, binding and enforceable
leasehold estates and interests, free and clear of all Liens (other than the
interest of the landlord therein) in and to the properties described on Section
3.4 of the Company Disclosure Schedule (collectively, the "Property") pursuant
to leases (collectively, the "Leases") described on Section 3.4 of the Company
Disclosure Schedule. Section 3.4 of the Company Disclosure Schedule contains a
true and complete description of the terms of the Leases (including any and all
option terms), and the rental provisions thereunder.
3.5 PROPERTIES. The Business has, at all times, been owned and
operated by the Company. The tangible Assets are in good working order and in a
state of reasonable maintenance and repair. To the Company's knowledge, the
Business as conducted on the Closing does not violate any covenant or
restriction affecting the Property. To the Company's knowledge, there are no
pending developments affecting or threatening the Company or the Business which
materially interfere with a continuation of the existing use of the Property.
The Assets and Company Intellectual Property include all rights, properties and
other assets necessary to permit the conduct of the Business in the same manner
and to the same extent as it is conducted on, and has been conducted prior to,
the date of this Agreement.
3.6 CONSENTS AND APPROVALS OF GOVERNMENT AUTHORITIES. Except for the
filing of the Merger Documents, no consent, approval or authorization of, or
declaration, filing, notice or registration with, any governmental agency,
regulatory authority or other Person is required in connection with the
execution, delivery and performance of this Agreement or any of the other
documents contemplated hereby by the Company or the consummation of the
transactions contemplated herein and therein.
3.7 ACCOUNTS RECEIVABLE/PREPAYABLE. Subject to the allowances with
respect to accounts receivable set forth on the balance sheet included in the
Current Financial Statements, all accounts receivable reflected on such balance
sheet and all accounts receivable arising subsequent thereto, have arisen in the
ordinary course of business of the Company, represent valid and enforceable
obligations due to the Company, have been and are subject to no set-off,
counterclaim or future performance obligation on the part of the Company, and,
subject to the allowances set forth on such balance sheet, are fully collectible
in the ordinary course of business in the aggregate recorded amounts thereof in
accordance with their terms.
3.8 INVENTORY. The inventory of the Company is and at the Effective
Time will be in good and merchantable condition and saleable or useable in the
manufacture of saleable finished goods in the ordinary course of business.
3.9 CONTRACTS AND OTHER AGREEMENTS. Section 3.9 of the Company
Disclosure Schedule sets forth a list of the following contracts and other
agreements to which the Company is a party or by or to which the Company or the
Company's assets or properties are bound or subject:
(a) any agreement or series of related agreements requiring
aggregate payments after the date hereof by or to the Company of more than
$25,000
-8-
<PAGE> 10
(b) any agreement with any labor union or association
representing any employee of the Company;
(c) any agreement for the purchase or sale of materials,
supplies, equipment, merchandise or services that contains an escalation,
renegotiation or redetermination clause or that obligates the Company to
purchase all or substantially all of its requirements of a particular product
from a supplier, or for periodic minimum purchases of a particular product from
a supplier;
(d) any agreement for sale of any of the assets or properties of
the Company other than in the ordinary course of business or for the grant to
any person of any options, rights of first refusal, or preferential or similar
rights to purchase any such assets or properties;
(e) any partnership, joint venture or similar agreement;
(f) any agreement of surety, guarantee or indemnification, other
than agreements in the ordinary course of business with respect to obligations
in an aggregate amount not in excess of $25,000;
(g) any agreement containing covenants of the Company not to
compete in any line of business, in any geographic area or with any person or
covenants of any other person not to compete with the Company or in any line of
business of the Company;
(h) any license relating to Intellectual Property and any other
agreement granting or restricting the right of the Company to use any
Intellectual Property (as defined hereinafter);
(i) any agreement with customers or suppliers for the sharing of
fees, the rebating of charges or other similar arrangements;
(j) any agreement obligating the Company to deliver services or
product enhancements or containing a "most favored nation" pricing clause;
(k) any agreement relating to the acquisition by the Company of
any operating business or the capital stock of any other person;
(l) any agreement requiring the payment to any person of a
brokerage or sales commission or a finder's or referral fee (other than
arrangements to pay commission or fees to employees in the ordinary course of
business);
(m) any agreement or note relating to or evidencing outstanding
indebtedness for borrowed money;
(n) The Lease and any other lease, sublease or other agreement
under which the Company is lessor or lessee of any real property or equipment or
other tangible property with respect to obligations in excess of $25,000; and
-9-
<PAGE> 11
(o) any other material agreement whether or not made in the
ordinary course of business.
True and complete copies of all the contracts and other
agreements (and all amendments, waivers or other modifications thereto) set
forth on Section 3.9 of the Company Disclosure Schedule have been furnished to
Purchaser. Each of such contracts is valid, subsisting, in full force and
effect, binding upon the Company, and to the best knowledge of the Company,
binding upon the other parties thereto in accordance with their terms, and the
Company is not in default under any of them, nor, to the best knowledge of the
Company, is any other party to any such contract or other agreement in default
thereunder, nor does any condition exist that with notice or lapse of time or
both, would constitute a default thereunder, except, in each case, such defaults
as would not, individually or in the aggregate, have a material adverse effect
on the Business of the Company.
3.10 COMPLIANCE WITH LAWS.
3.10.1 The Company has all licenses, permits, franchises, orders
or approvals of any federal, state, local or foreign governmental or regulatory
body required for the conduct of the Business as the same is currently conducted
and currently anticipated to be conducted (collectively, "Permits"); such
Permits are in full force and effect; and no proceeding is pending or, to the
knowledge of the Company, threatened to revoke or limit any Permit.
3.10.2 The Company is not in violation of any applicable law,
ordinance or regulation or any order, judgment, injunction, decree or other
requirement of any court, arbitrator or governmental or regulatory body. The
Company has not received notice of, and there has not been any citation, fine or
penalty imposed against the Company for, any such violation or alleged
violation.
3.11 BANK ACCOUNTS AND POWERS OF ATTORNEY. Section 3.11 of the
Company Disclosure Schedule identifies all bank and brokerage accounts of the
Company, whether or not such accounts are held in the name of the Company, lists
the respective signatories therefor and lists the names of all persons holding a
power of attorney from the Company and a summary of the terms thereof.
3.12 AGREEMENT WILL NOT CAUSE BREACH OR VIOLATION. Neither the
execution nor delivery of this Agreement or the other documents contemplated
hereby by the Company, nor performance by the Company of the terms and
provisions of this Agreement or such other documents will (a) conflict with or
result in a breach or violation of any of the terms, conditions or provisions of
any Permit or any judgment, order, injunction, decree, regulation or ruling of
any court or governmental authority to which the Company or any assets of the
Company are subject or of any contract to which the Company is a party or any
agreement, contract, or commitment to which the Company is a party or by which
it is bound, or (b) give any person or entity the right to terminate or modify
any contract to which the Company is a party, or accelerate any obligation or
indebtedness of the Company thereunder.
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<PAGE> 12
3.13 FINANCIAL STATEMENTS. The Company has delivered to Purchaser
(all such deliverables, collectively, the "Financial Statements") (a) the
audited balance sheets of the Company as at December 31, 1997 and June 30, 1998,
together with audited statements of income, shareholders' equity and cash flows
for the years ended December 31, 1997 and the six month period ended June 30,
1998, respectively, and (b) the unaudited balance sheet of the Company as at
September 30, 1998 (the "Current Balance Sheet") together with unaudited
statements of income and cash flows for the Company for the nine month period
ended September 30, 1998 (collectively, the "Current Financial Statements"). The
Financial Statements were prepared in accordance with generally accepted
accounting principles ("GAAP") consistently applied in accordance with past
practices of the Business, and are true, complete and accurate in all material
respects and present fairly the financial position and results of operations of
the Company as at such dates and for the periods the ended. All reserves
(including, without limitation, all Inventory-related reserves) set forth on the
balance sheets included in the Financial Statements are or were, as applicable,
reasonable, appropriate and adequate for the purposes for which they were
established.
3.14 NO UNDISCLOSED LIABILITIES. The Company has no liabilities or
obligations of any nature except (a) liabilities which are fully reflected or
reserved against in the Current Financial Statements, (b) liabilities incurred
in the ordinary course of operation of the Business since the date of the
Current Financial Statements, and (c) liabilities or obligations occurring prior
to the date of the Current Balance Sheet which, pursuant to GAAP consistently
applied in accordance with past practices of the Business are not required to be
set forth in the Current Financial Statements.
3.15 CUSTOMERS. Section 3.15 of the Company Disclosure Schedule sets
forth the ten (10) customers who accounted for the largest sales of the Company,
for each of the Company's 1996 and 1997 fiscal years (the "Customers"). No
Customer has canceled or otherwise terminated its relationship with the Company,
or has during fiscal year 1998 to date decreased materially its purchase of the
products or services of the Company. The Company does not know of any plan or
intention of any Customer, and has not received any written threat or notice
from any Customer, to terminate, cancel or otherwise materially and adversely
modify its relationship with the Company or to decrease materially or limit its
purchase of the services or products of the Company.
3.16 TRANSACTIONS WITH MANAGEMENT. No officer, director or employee
of the Company has (whether directly or indirectly through another entity in
which such person has an interest, other than as the holder of less than 1% of a
class of securities of a publicly traded company) any interest in (a) any
property or assets of the Company (except as a shareholder) or (b) to the
Company's knowledge, any current competitor, customer or supplier of the Company
or (c) to the Company's knowledge, any person which is currently a party to any
contract with the Company involving any amount in excess of $10,000.
3.17 ABSENCE OF CERTAIN CHANGES. Since the date of the balance sheet
included in the Current Financial Statements, there have been no material
adverse changes in the condition, financial or otherwise, of any of the Assets
or any of the liabilities, business, prospects or
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operations of the Company or the Business, other than changes in the ordinary
course of business which in the aggregate have not been materially adverse to
the business, finances or operations of the Company. Without limiting the
foregoing, since such date:
(a) the Company has not altered the nature of the Business as
carried on or made any material change in the products and services it supplies;
(b) the Company has not borrowed or agreed to borrow any funds
or incurred, or assumed or become subject to, whether directly or by way of
guarantee or otherwise, any obligation or liability, except trade payables
incurred in the ordinary course of business and consistent with past practice;
(c) the Company has not paid, discharged or satisfied any claim,
liability or obligation other than the payment, discharge or satisfaction in the
ordinary course of business and consistent with past practice of liabilities or
obligations reflected or reserved against in the Current Balance Sheet or trade
payables incurred in the ordinary course of business since the date of the
Current Balance Sheet and consistent with past practice;
(d) the Company has not permitted or allowed any of its property
or assets (real, personal or mixed, tangible or intangible) to be subjected to
any Lien of any kind, except Permitted Liens;
(e) the Company has not written down the value of any inventory
or written off as uncollectable any notes or accounts receivable, except for
write-downs and write-offs in the ordinary course of business and consistent
with past practice, none of which is material;
(f) the Company has not cancelled any debts or waived any claims
or rights of substantial value, waived any statute of limitation or sold,
transferred, or otherwise disposed of any of its properties or assets (real,
personal or mixed, tangible or intangible), except sales of inventory in the
ordinary course of business and consistent with past practice;
(g) the Company has not licensed or disposed of or permitted to
lapse any rights to the use of any the Company Intellectual Property;
(h) the Company has not granted any increase in the compensation
of officers or employees (including any such increase pursuant to any bonus,
pension, profit-sharing or other plan or commitment) or any increase in the
compensation payable or to become payable to any officer or employee, other than
increases in the ordinary course of business consistent with past practice;
(i) the Company has not made any capital expenditure or
commitment therefor in excess of $25,000 individually or in the aggregate;
(j) the Company has not paid, loaned or advanced any amount to,
or sold, transferred or leased any properties or assets (real, personal or
mixed, tangible or intangible) to,
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<PAGE> 14
or entered into any agreement or arrangement with, any of its officers,
directors or any Affiliate or associate of any of its officers, directors or
shareholders;
(k) the Company has not made any change in the accounting
policies or practices of the Company;
(l) the Company has not entered into any other transaction,
other than in the ordinary course of business;
(m) the Company has not issued any shares of its capital stock
or any other securities or made any redemption or other acquisition of any
capital stock of the Company or any declaration, setting aside, or payment of
any dividend or distribution of any kind with respect to any shares of capital
stock of the Company;
(n) the Company has not granted any options to purchase Company
Stock for a number of shares or at terms which are not consistent with past
practice. The Company has not accelerated the exercisability or vesting, or
otherwise changed any of the terms, of any outstanding warrant or employee or
non-employee option;
(o) there have been no losses or damage to any of the Company's
assets due to fire or other casualty, whether or not insured, amounting to more
than $25,000, in the aggregate; and
(p) the Company has not agreed, whether in writing or otherwise,
to do any of the foregoing.
3.18 INTELLECTUAL PROPERTY.
Section 3.18.1 of the Company Disclosure Schedule lists all of
the Company's United States and foreign (i) patent and patent applications; (ii)
registered trademarks and trademark applications; (iii) registered copyrights
and applications for copyright registration; (iv) mask work registrations and
applications to register mask works; and (v) any other Company Intellectual
Property (as hereinafter defined) that is the subject of an application to, or
certificate or registration issued by, any state, government or other public
legal authority. The registrations of the Company Intellectual Property listed
on Section 3.18.1 of the Company Disclosure Schedule are valid and subsisting,
all necessary registration and renewal fees in connection with such
registrations have been filed with the relevant patent, copyright and trademark
authorities in the United States for the purposes of maintaining such
registrations. The Company has complied with all applicable disclosure
requirements and, to the Company's knowledge, neither the Company nor any named
inventor or assignee has committed any fraudulent act in the application for or
maintenance of any patent, trademark or copyright of the Company. For the
purposes hereof, the term "Company Intellectual Property" shall mean all
Intellectual Property owned or licensed and used or held for use by the Company
in the Business or with respect to which the Company otherwise has rights or
interests. Without limitation of the foregoing, the Company Intellectual
Property shall be deemed to further include any drawings, documentation,
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<PAGE> 15
schematics, manuals or other materials, whether in written or magnetic form that
describe, disclose or otherwise set forth any of the Company Intellectual
Property.
3.18.2 The Company owns and has good and valid title to the
Company Intellectual Property listed as owned by the Company on Section 3.18.1
of the Company Disclosure Schedule, free and clear of any Liens other than
licenses in the ordinary course of business. The Company owns, or has the
binding and enforceable right to use or operate under, all the Company
Intellectual Property (a) listed as not owned by the Company on Section 3.18.1
of the Company Disclosure Schedule, or (b) not listed on Section 3.18.1 of the
Company Disclosure Schedule, in each case, free and clear of any Liens (other
than solely as provided in any licenses relating to such the Company
Intellectual Property). No Company Intellectual Property or product and/or
technology of the Company is subject to any outstanding decree, order, judgment,
stipulation, license or agreement restricting in any material manner the use or
licensing thereof by the Company.
3.18.3 To the Company's knowledge, the operation of the Business
as it currently is conducted, including its design, development, manufacture,
use and sale of its products and/or technology, including products and/or
technology currently under development, and provision of services, does not
infringe the Intellectual Property of any other Person. To the Company's
knowledge, no officer, director, employee or consultant of the Company is
infringing or misappropriating the Intellectual Property of any other Person in
the course of performing his or her duties for the Company. Without limiting the
first sentence of this Section 3.18.3, the Company has not received notice from
any Person that the operation of the Business, including its design,
development, manufacture and sale of its products and/or technology (including
with respect to products and/or technology currently under development) and
provision of services, infringes the Intellectual Property of any Person.
3.18.4 To the Company's knowledge, no Person is infringing or
misappropriating any of the Company Intellectual Property.
3.18.5 Neither the consummation of the Merger nor the change in
control of the Company effected thereby will limit, impair or otherwise affect,
in any manner, any of the Company's right, title or interest in or to any of the
Company Intellectual Property.
3.18.6 The Company Intellectual Property includes all
Intellectual Property necessary to conduct the Business as currently conducted
and presently anticipated to be conducted.
3.18.7 To the Company's knowledge, no employee of the Company is
subject to any secrecy or noncompetition agreement or any agreement or
restriction of any kind that would impede in any material way the ability of
such employee to carry out fully all activities of such employee in furtherance
of the business of the Company as currently operated, and anticipated to be
operated, after the Closing Date. To the Company's knowledge, no third party has
claimed that any person employed by or affiliated with the Company has violated
or may be violating any of the terms or conditions of his past employment,
noncompetition or nondisclosure agreement with such third party, or disclosed or
may be disclosing or utilized or may be utilizing any trade
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<PAGE> 16
secret or proprietary information or documentation of such third party or
interfered or may be interfering in the employment relationship between such
third party and any of its present or former employees. Each employee, officer
and consultant of the Company has executed a proprietary information and
inventions agreement in the form provided to Purchaser. The Company has no
knowledge that any of its employees are in violation of any such agreement.
3.19 PRODUCT WARRANTIES AND RETURNS. Except as set forth in Section
3.19 of the Company Disclosure Schedule, the Company has not made any warranties
or guarantees relating to its products that will be in effect as of the Closing
Date. During the twelve (12) month period ended on the date of the Balance
Sheet, the Company has received no customer complaints pursuant to which the
Company gave credit or accepted a product return.
3.20 LITIGATION. None of the Company, or any officer or director of
the Company, is a party to any pending or, to the Company's knowledge,
threatened action, suit, arbitration, mediation, proceeding or investigation, at
law or in equity or otherwise in, for or by any court or other governmental body
or any arbitration, mediation or similar forum (collectively, "Litigation");
nor, to the Company's knowledge, does any basis exist for any such Litigation.
The Company is not subject to any decree, judgment, order, or, to the Company's
knowledge, any law or regulation of any court or other governmental body which
could reasonably be expected to have a material adverse effect on the condition,
financial or otherwise, of any of the Company's assets or the Business or which
could prevent the transactions contemplated by this Agreement.
3.21 PERSONNEL.
3.21.1 Section 3.21.1 of the Company Disclosure Schedule lists:
(i) all contracts or agreements with directors, officers, employees or unions,
or consulting agreements, to which Seller is a party or it or its assets are
subject as of the date of this Agreement; (ii) the names, current salary rates,
bonuses paid during the last fiscal year, and accrued vacation and sick leave
for all the employees of the Company; and (iii) all group insurance programs in
effect for employees of the Company. The Company is not in default with respect
to any of the obligations so listed. The Company has delivered to the Purchaser
true, complete and correct copies of all such written obligations and complete
summaries of all such oral obligations. The Company has no union contracts or
collective bargaining agreements with, or any other obligations to, employee
organizations or groups, nor is the Company currently engaged in any labor
negotiations except in minor grievances not involving any employee organization
or group, nor, to the knowledge of the Company, is the Company subject of any
union organization. There is no pending or, to the Company's knowledge,
threatened labor dispute, strike or work stoppage affecting the Business.
3.21.2 Section 3.21.2 of the Company Disclosure Schedule lists
(i) all "employee benefit plans" within the meaning of Section 3(3) of the
Employee Retirement Income Security Act of 1974 ("ERISA"), and (ii) all other
employee benefit, bonus or other incentive compensation, stock option, stock
purchase, stock appreciation, severance pay, lay-off or reduction in force,
change in control, sick pay, vacation pay, salary continuation, retainer, leave
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of absence, educational assistance, service award, employee discount, fringe
benefit plans, arrangements, policies or practices, whether legally binding or
not, to which the Company contributes to or has any obligation to or liability
for (collectively, the "Employee Plans"). Each Employee Plan provides that it
may be amended or terminated at any time and, except for benefits protected
under Section 411(d) of the Code, all benefits payable to current or terminated
employees or any beneficiary may be amended or terminated by Seller at any time
without liability.
3.21.3 None of the Employee Plans is a Defined Benefit Plan or a
Multiemployer Plan (within the meaning of ERISA) and the Company has never (i)
sponsored, maintained or contributed to, or been obligated to contribute to, a
Defined Benefit Plan or (ii) contributed to, or been obligated to contribute to,
a Multiemployer Plan.
3.21.4 The Company does not maintain or contribute to any
welfare benefit plan that provides health benefits to an employee after the
employee's termination of employment or retirement except as required under
Section 4980B of the Code and Sections 601 through 608 of ERISA.
3.21.5 True, correct and complete copies of (i) all documents
creating or evidencing any Employee Plan listed in Section 3.21.2 of the Company
Disclosure Schedule, (ii) all reports, forms and other documents required to be
filed with any governmental entity (including, without limitation, summary plan
descriptions, Forms 5500 and summary annual reports for all plans subject to
ERISA), and (iii) the latest favorable letters of determination from the
Internal Revenue Service with respect to the Employee Plans that are intended to
qualify under Section 401(a) of the Code have been delivered to the Purchaser.
3.21.6 All expenses and liabilities relating to all of the
Employee Plans described in Section 3.21.2 of the Company Disclosure Schedule
have been, and will on the Closing Date be, fully and properly accrued on the
Company's books and records and are disclosed on the Current Balance Sheet and
such Employee Plans have no unfunded liabilities not reflected on the Current
Balance Sheet.
3.21.7 Without limiting any other representation or warranty of
the Company set forth herein, the termination, if any, of the employment of any
and all officers and employees of the Company prior to the date hereof was
effected in accordance with all applicable laws and the employment arrangements
between the Company and such officers and employees and the Company has no
liability or obligation (including, without limitation, any liability for
severance payments), absolute or contingent, to any former officer or employee
of the Company. No former officer or employee of the Company will, at the
Closing, have any debt, liability or other obligation, absolute or contingent,
owing to the Company.
3.22 OSHA. The Company and the Business have at all times been in
compliance with and have not violated any federal, state or local statutes,
laws, regulations or rules relating to occupational health or safety, including,
without limitation, the rules and regulations of the Occupational Safety and
Health Administration ("OSHA"), the noncompliance with which has had or could
reasonably be expected to have a material adverse effect on the business,
operations
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<PAGE> 18
results or financial condition of the Company. To the Company's knowledge, no
investigation or claim has at any time been commenced or pending against the
Company or the Business by OSHA or any similar state or local agency and, to the
Company's knowledge, no basis exists for any such investigation or claim. To the
Company's knowledge, no claim has at any time been made by any current or former
employee of the Company relating to occupational health or safety.
3.23 TAXES. All material tax returns required to be filed prior to
the date hereof with respect to the Company and the Business have been timely
filed or appropriate extensions have been obtained, each such tax return has
been prepared in compliance in all material respects with all applicable laws
and regulations, and all such tax returns are true and accurate in all material
respects. The Company is not delinquent in the payment of any taxes. All
non-delinquent taxes due and payable by or with respect to the Company or the
Business for the periods prior to the Closing Date have been or will be paid by
the Company prior to the Closing. With respect to each taxable period of the
Company, (i) no deficiency or proposed adjustment which has not been settled or
otherwise resolved for any amount of taxes has been asserted or assessed by any
taxing authority against the Company; (ii) the Company has no pending consent to
extend the time in which any taxes may be assessed or collected by any taxing
authority; (iii) the Company has not requested or been granted an extension of
the time for filing any tax return to a date later than the Closing; (iv) there
is no action, suit, taxing authority proceeding, or audit or claim for refund
now in progress, pending or, to the knowledge of the Company threatened against
or with respect to taxes; (v) there are no Liens for taxes (other than for
current taxes not yet due and payable) upon any of the Company's assets; and
(vi) true, correct and complete copies of all income and sales tax returns filed
by or with respect to the Company for the past three years have been furnished
or made available to Purchaser. The Company has not agreed to, nor is it
required to, make any adjustments under Section 481(a) of the Code by reason of
a change in accounting method or otherwise. The Company has timely and properly
filed an S corporation election under the Code and under applicable state and
local tax laws and has qualified for the prior ten (10) taxable years (or since
the year of its incorporation) and continues to qualify as a Subchapter S
corporation under the Code, and such S election has not been revoked or
terminated and neither the Company nor the Shareholders have taken any action
that would cause a termination of such S election. Upon consummation of the
Merger, the Company's Subchapter S status will terminate.
3.24 INSURANCE. The Company has obtained and maintains in full force
and effect all insurance policies and bonds with respect to the Company and the
Business adequate for the Business as presently conducted and in accordance with
good business practices.
3.25 ENVIRONMENTAL LIABILITY. Without limiting Section 3.11, at all
times the Company has complied with all applicable environmental and hazardous
waste laws, orders, regulations, rules and ordinances adopted, imposed or
promulgated by any governmental or regulatory entity having jurisdiction over
any property owned or leased by the Company the noncompliance with which has had
or could reasonably be expected to have a material adverse effect on the
business, results of operations or financial condition of the Company or the
Business. Neither the Company nor, to the Company's knowledge, any portion of
any property
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<PAGE> 19
owned or leased by the Company is in violation of any federal, state or local
law, ordinance or regulation relating to industrial hygiene, worker safety,
environmental protection, hazardous materials or waste or toxic materials. Prior
to the date hereof, to the Company's knowledge, there has been no spill, release
or discharge of any Hazardous Materials (as defined below) on, under or about
any property owned or leased by the Company. No current use of any property
owned or leased by the Company constitutes a public or private nuisance. All
environmental licenses, permits, clearances, covenants and authorizations
required for the Business have been obtained by the Company and are in full
force and effect. Any handling, generation, transportation, storage, treatment
or use of Hazardous Material by the Company has been in compliance with all
laws, regulations and orders relating to Hazardous Materials. As used herein,
the term "Hazardous Materials" means any hazardous or toxic substance, material
or waste which is or becomes regulated by any local government authority, the
State of Florida, any other state or the United States Government. To the
Company's knowledge, all property owned or leased by the Company, including,
without limitation, the soil and groundwater on or under such property, is free
of Hazardous Materials. No notification of release of Hazardous Materials
pursuant to applicable law has been received by the Company as to any of such
property. No wastes generated by the Company have ever been sent directly or, to
the Company's knowledge, indirectly to any site listed or formally proposed for
listing federal or state list of hazardous substances sites requiring
investigation or clean-up. The Company has not received from any governmental
authority or third party any requests for information, notices of claim, demand
letters, or other notification that they or it are or is or may be potentially
responsible with respect to any investigation or clean-up of Hazardous
Materials. The Company has no knowledge of any fact or circumstance that could
involve the Company or Purchaser in any environmental litigation or proceeding
or impose any environmental liability upon the Company or Purchaser. Section
3.25 of the Company Disclosure Schedule contains a true and complete list of all
environmental surveys, tests and reports performed with respect to the property
owned or leased by the Company by or on behalf of the Company (including,
without limitation, all soil and groundwater surveys, tests and reports.
3.26 PRODUCTS.
3.26.1 Each of the products produced, developed or sold by the
Company is, and at all times up to and including the sale thereof by the Company
has been (a) in compliance in all material respects with all applicable federal,
state, and local laws and regulations and (b) conforms in all material respects
to any promises or affirmations of fact made on the container or label for such
product or in connection with its sale, subject to returns, repairs, defects and
allowances consistent with past practice.
3.26.2 There is no design defect materially adverse to the
functionality of any of such products and, to the knowledge of the Company, each
of such products contains adequate warnings, presented in a reasonably prominent
manner, in accordance with applicable laws, rules and regulations and current
industry practice with respect to its contents and use.
3.27 YEAR 2000 COMPLIANCE. To the Company's knowledge, none of the
Company's systems (including, without limitation, Seller's telecommunications,
automation and computer
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<PAGE> 20
related systems), assets or technology, including without limitation, the Seller
Intellectual Property (including, without limitation, all computer software and
hardware owned or licensed by the Company or used in the Business) has or will
have any Year 2000 Error (as hereinafter defined). For the purposes hereof, the
term "Year 2000 Error" means (a) any failure of computer hardware or software
products or technology properly to record, store, process, calculate or present
calendar dates falling on and after (and if applicable, spans of time including)
January 1, 2000 as a result of the occurrence, or use of data consisting of,
such dates; (b) any failure of computer hardware or software products or
technology to calculate any information dependent on or relating to dates on or
after January 1, 2000 in the same manner, and with the same functionality, data
integrity and performance, as such computer hardware or software products or
technology records, stores, processes, calculates and presents calendar dates on
or before December 31, 1999, or information dependent on or relating to such
dates; or (c) any loss of functionality or performance with respect to the
introduction of records or processing of data containing dates falling on or
after January 1, 2000.
3.28 INVESTMENT REPRESENTATIONS. The Shareholders have had the
opportunity to discuss the transactions contemplated hereby with Purchaser and
have had the opportunity to obtain such information pertaining to Purchaser, its
business, operations, and finances as has been requested, including but not
limited to filings made by Purchaser with the Securities Exchange Commission
("SEC") under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). Each of the Shareholders is an "accredited investor" within the meaning
of Regulation D promulgated under the Securities Act of 1933, as amended (the
"Securities Act"). Each of the Shareholders has such knowledge and experience in
business or financial matters that he or she is capable of evaluating the merits
and risks of an investment in the Purchaser. Each of the Shareholders hereby
represents and warrants that (i) he or she is acquiring the Purchaser Common
Stock for purposes of investment and has no present intention to distribute such
Purchaser Common Stock, (ii) he or she has no contract, undertaking, agreement
or arrangement to sell or otherwise transfer or dispose of any Purchaser Common
Stock or any portion thereof to any Person and (iii) he or she can bear the
economic risk of losing his or her investment in the Purchaser Common Stock and
has adequate means for providing for his or her current financial needs and
contingencies.
3.29 REPRESENTATIONS COMPLETE. The representations and warranties of
the Company and the Shareholders contained in this Article 3 do not contain any
untrue statement of a material fact and do not omit to state any material fact
necessary to make such representations and warranties, in light of the
circumstances under which they were made, not misleading. There is no fact known
to the Company or the Shareholders that has not been disclosed to Purchaser in
this Agreement that is reasonably likely to have a material adverse effect on
the Company's business, operations or financial condition.
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ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF MERGER SUBSIDIARY AND
PURCHASER
Merger Subsidiary and Purchaser hereby, jointly and severally,
represent and warrant to the Company and the Shareholders that the following
facts and circumstances are true and correct:
4.1 AUTHORIZATION; ETC. Each of Merger Subsidiary and Purchaser: (i)
is a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware; (ii) has all necessary corporate power to own and
lease its properties, to carry on its business as now being conducted and to
enter into and perform this Agreement and all of the other documents and
agreements contemplated hereby; and (iii) is qualified to do business in all
jurisdictions in which the failure to so qualify would have a material adverse
effect on the business, operations or financial condition of Merger Subsidiary
or Purchaser, as applicable. Each of Merger Subsidiary and Purchaser has full
corporate power and authority to enter into this Agreement and the other
documents contemplated hereby and to carry out the transactions contemplated
hereby and thereby. Each of Merger Subsidiary and Purchaser has taken all
required action by law to authorize the execution and delivery of this Agreement
and the other documents contemplated hereby and the transactions contemplated
hereby and thereby, and this Agreement and the other documents contemplated
hereby is a valid and binding obligation of Merger Subsidiary and/or Purchaser,
as applicable, enforceable against it in accordance with its terms, subject as
to enforcement only: (i) to bankruptcy, insolvency, reorganization, arrangement,
moratorium and other similar laws of general applicability relating to or
affecting creditors' rights generally; and (ii) to general principles of equity.
4.2 NO VIOLATION. Neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby will
violate any provisions of the Certificate of Incorporation or Bylaws of Merger
Subsidiary or Purchaser, violate, or be in conflict with, or constitute a
default under or cause the acceleration of the maturity of any debt or
obligation pursuant to, any agreement or commitment to which Merger Subsidiary
or Purchaser is a party or by which Merger Subsidiary or Purchaser is bound, or
violate any statute or law or any judgment, decree, order, regulation, or rule
of any court or governmental authority.
4.3 CAPITALIZATION. As of November 10, 1998, the authorized capital
stock of Purchaser consists of 50,000,000 shares of Purchaser Common Stock and
1,000,000 shares of preferred stock. As of November 10, 1998 (a) 38,810,469
shares of Purchaser Common Stock were validly issued and outstanding, (b)
100,000 shares of Series A Preferred Stock were issued or outstanding, and (c)
no shares of Series B Preferred Stock were issued and outstanding. As of
November 10, 1998: (x) 7,120,329 shares of Purchaser Common Stock were subject
to issuance pursuant to outstanding options to purchase shares of Purchaser
Common Stock; and (y) 1,000,000 shares of Purchaser Common Stock were reserved
for future issuance pursuant to Purchaser's 1998 Employee Stock Purchase Plan.
(Stock options granted by Purchaser pursuant to Purchaser's stock option plans
are referred to in this Agreement as "Purchaser Options."). Except for the
Purchaser Options and Purchaser's 1998 Employee Stock Purchase Plan (and
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rights related thereto), as of the date of this Agreement, there is no: (1)
outstanding subscription, option, call, warrant or right (whether or not
currently exercisable) to acquire any shares of capital stock or other
securities of Purchaser; or (2) outstanding security, instrument or obligation
that is or may become convertible into or exchangeable for any shares of capital
stock or other securities of Purchaser (except for the Series A Preferred Stock
and convertible promissory notes, in the aggregate principal amount of
$2,730,000 issued to Chassis Engineering, Inc., all of which are convertible
into shares of Purchaser Common Stock). All outstanding shares of Purchaser
Common Stock and preferred stock and all outstanding Purchaser Options have
been, and all shares of Purchaser Common Stock to be issued in connection with
the transactions contemplated hereby will be, issued and granted in compliance
with all applicable securities laws and other applicable legal requirements.
4.4 SEC FILINGS; FINANCIAL STATEMENTS. Purchaser has delivered to the
Company accurate and complete copies of any report, registration statement and
definitive proxy statement filed by Purchaser with the SEC since June 30, 1998
(the "Purchaser SEC Documents"). All statements, reports, schedules, forms and
other documents required to have been filed with the SEC have been so filed. As
of the time it was filed with the SEC (or, if amended or superseded by a filing
prior to the date of this Agreement, then on the date of such filing): (x) each
of the Purchaser SEC Documents complied in all material respects with the
applicable requirements of the Securities Act or the Exchange Act (as the case
may be); and (y) none of the Purchaser SEC Documents contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading. The
consolidated financial statements contained in the Purchaser SEC Documents: (x)
complied as to form in all material respects with the published rules and
regulations of the SEC applicable thereto; (y) were prepared in accordance with
generally accepted accounting principles applied on a consistent basis
throughout the periods covered (except as may be indicated in the notes to such
financial statements and, in the case of unaudited statements, as permitted by
Form 10-Q of the SEC, and except that unaudited financial statements may not
contain footnotes and are subject to normal and recurring year-end audit
adjustments which will not, individually or in the aggregate, be material in
amount); and (z) fairly present, in all material respects, the consolidated
financial position, in all material respects, of Purchaser and its subsidiaries
as of the respective dates thereof and the consolidated results of operations of
Purchaser and its subsidiaries for the periods covered thereby.
4.5 VALID ISSUANCE. The Purchaser Common Stock to be issued by
Purchaser pursuant to the transactions contemplated hereby will, when issued in
accordance with the provisions of this Agreement, be duly authorized, validly
issued, fully paid and nonassessable.
4.6 CONSENTS AND APPROVALS OF GOVERNMENT AUTHORITIES. Except for the
filing of the Merger Documents or as provided in Article 6, no consent, approval
or authorization of, or declaration, filing or registration with, any
governmental or regulatory authority is required in connection with the
execution, delivery and performance of this Agreement or the other documents
contemplated hereby by Purchaser or Merger Subsidiary and the consummation of
the transactions contemplated hereby or thereby.
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4.7 REPRESENTATIONS COMPLETE. The representations and warranties of
Merger Subsidiary and Purchaser contained in this Article 4 do not contain any
untrue statement of a material fact and do not omit to state any material fact
necessary to make such representations and warranties, in light of the
circumstances under which they were made, not misleading.
ARTICLE 5
THE COMPANY'S AND SHAREHOLDERS' COVENANTS
5.1 ACCESS TO PROPERTIES AND RECORDS. Throughout the period between
the date of this Agreement and the Closing Date, the Company shall give to
Purchaser and Purchaser's authorized representatives reasonable access, during
business hours, to its facilities, and shall provide Purchaser and its
representatives with all records, documents and information reasonably required
by Purchaser relating to the Company and/or the Business. Without limiting the
foregoing, Purchaser shall be permitted to interview during regular business
hours all employees of the Company with the consent of the Company, which
consent shall not be unreasonably withheld or delayed.
5.2 CONDUCT OF THE BUSINESS PRIOR TO CLOSING DATE. Between the date
of this Agreement and the Closing, and except as otherwise required by this
Agreement:
5.2.1 The Business shall be operated in the ordinary course
consistent with past practices and in a normal businesslike fashion (including,
without limitation, its normal accounts receivable practice), and the Company
shall take such actions as are in its business judgment reasonably necessary to
facilitate a smooth transition of the control of operation of the Business from
the Company to Purchaser at the Closing. The Company shall use its best efforts
to preserve and maintain the Business and the Company's goodwill, including
relationships with employees, suppliers and customers. The Company shall
maintain quantities of inventories in a manner consistent with prior practice
and in a normal businesslike fashion. In addition, the Company shall maintain
records and books of account for the Business consistent with past practices and
in a normal businesslike fashion, and shall continue to carry all of the
insurance for the Business consistent with past practice.
5.2.2 The Company shall not take (or permit to be taken) any
action which would cause any material adverse change in any of the items and
matters covered by the representations and warranties set forth in Article 3,
including, without limitation:
(a) incurring or becoming subject to, or agreeing to incur or
become subject to, any obligation or liability (absolute or contingent), except
current liabilities incurred, and obligations under contracts entered into, in
the ordinary course of business consistent with past practices;
(b) mortgaging, pledging or assuming any Lien, or agreeing to do
so, in respect to any of its assets;
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(c) waiving or compromising any material rights or any material
debt owed to the Company;
(d) entering into any transactions, other than in the ordinary
course of business consistent with past practices;
(e) increasing the rate of compensation payable or to become
payable to any employees, other than in the ordinary course of business
consistent with past practice;
(f) terminating or amending any contract to which it is a party,
unless terminated or amended in the ordinary course of business consistent with
past practices and not material to the Business of the Company;
(g) introducing any new method of accounting with respect to the
Business or any of the assets or liabilities of the Company (assumed or not
assumed) (including, without limitation, any change in depreciation or
amortization policies or rates);
(h) making any capital expenditures or entering into commitments
for capital expenditures exceeding, in the aggregate, Twenty-Five Thousand
Dollars ($25,000);
(i) without Purchaser's prior consent (which consent Purchaser
shall not unreasonably withhold or delay), hiring or terminating employees;
(j) issuing any shares of its capital stock or other securities
(or any options or warrants to acquire any such shares of capital stock or other
securities) or making any redemption or other acquisition of any capital stock
of the Company or any declaration, setting aside, or payment of any dividend or
distribution of any kind with respect to any shares of capital stock of the
Company;
(k) the Company will not grant any options to purchase Company
Stock. The Company will not accelerate the exercisability or vesting, or
otherwise change any of the terms, of any outstanding warrant or employee or
non-employee option;
(l) altering its practice for creating or accounting for
inventory; or
(m) commencing, settling or compromising any litigation, except
those related to insured claims or arising in the ordinary course of business
consistent with past practices.
5.3 ADVICE OF DEVELOPMENTS. The Company shall have continuing
obligations after the date of this Agreement through the Closing Date to advise
Purchaser of all significant matters concerning itself and the Business.
5.4 NO SOLICITATION. From the date hereof until the earlier of the
termination of this Agreement or consummation of transactions contemplated
hereby, none of the Shareholders or the Company or any of its officers,
directors, employees, representatives, agents or Affiliates shall directly or
indirectly encourage, solicit, initiate or conduct negotiations with, provide
any information to, or enter into any agreement with, any corporation,
partnership, limited liability
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company, person or other entity or group concerning any merger, combination,
consolidation, sale of assets (other than in the ordinary course of business) or
other similar transaction involving the Company, the Business or the Assets. The
Company shall promptly notify Purchaser of any contact by any third-party with
respect to any of the matters described in this Section 5.4.
5.5 SATISFACTION OF CONDITIONS The Company and the Shareholders shall
take or cause to be taken all actions within their power necessary to satisfy
all conditions to Purchaser's obligations to close and consummate the
transactions contemplated by this Agreement.
5.6 CONSENTS. On or prior to the Closing Date, the Company shall (a)
notify all persons required to be notified pursuant to applicable law or any of
the Permits or contracts to which the Company is a party of the transactions
contemplated hereunder, in the form and manner required thereunder, and (b)
obtain the consent of all persons whose consent is required pursuant to
applicable law or any of the Permits or contracts to which the Company is a
party in connection with the consummation of the transactions contemplated
hereby, in the form and manner required thereunder.
5.7 NOTIFICATION OF CERTAIN MATTERS. Without limiting Section 5.3,
the Company shall give prompt notice to Purchaser of the occurrence or
non-occurrence of any event which causes or is likely to cause any
representation or warranty made by the Company herein to be untrue or inaccurate
or any covenant, condition or agreement contained herein not to be complied with
or satisfied (provided, however, that any such disclosure shall not in any way
be deemed to (a) amend, modify or in any way affect the representations,
warranties and covenants made by such party in or pursuant to this Agreement,
(b) or alter or waive any rights of Merger Subsidiary or Purchaser with respect
to the breach thereof).
5.8 AFFILIATE AGREEMENTS. Schedule 5.8 attached hereto delivered by
the Company to Purchaser concurrent with the execution and delivery of the
Agreement sets forth those persons who may be deemed "Affiliates" of the Company
within the meaning of Rule 145 promulgated under the Securities Act of 1933, as
amended (the "Act"). The Company shall provide Purchaser such information and
documents as Purchaser shall reasonably request for purposes of reviewing such
list. The Company shall use its best efforts to deliver or cause to be delivered
to Purchaser, concurrently with the execution of this Agreement (and in each
case prior to the Effective Time) from each of the Affiliates of the Company, an
executed Affiliate Agreement in the form attached hereto as Exhibit 5.8.
Purchaser and Merger Subsidiary shall be entitled to place appropriate legends
on the certificates evidencing any Purchaser Common Stock to be received by such
Affiliates of the Company pursuant to the terms of this Agreement, and to issue
appropriate stop transfer instructions to the transfer agent for Purchaser
Common Stock, consistent with the terms of such Affiliates Agreements.
5.9 INCOME TAX DISTRIBUTION. Immediately prior to the Closing, the
Company shall distribute to the Shareholders an aggregate amount equal to
$929,271, the amount required to pay the liability of the Shareholders for
income taxes accrued by the Company for the period from and including January 1,
1998, through and including the date immediately preceding the Closing Date,
minus any amounts previously distributed by the Company for such purposes.
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<PAGE> 26
5.10 POOLABILITY REPORT. The Company shall use all reasonable efforts
to cause to be delivered to Purchaser a written determination from Arthur
Andersen LLP, the Company's independent auditors dated as of the Closing Date
indicating their concurrence with management of the Company's conclusion that,
as of the date of such letter, no conditions exist related to the Company that
would preclude the Purchaser's accounting for the Merger as a pooling of
interests.
5.11 COMPANY PERFORMANCE. The Shareholders shall cause the Company to
perform all of its obligations under this Agreement.
5.12 WAIVER OF CERTAIN RIGHTS. Each Shareholder hereby ratifies and
confirms its waiver of any and all prior notice, preemptive rights, first
refusal rights and participation rights it may have had at any time with respect
to the issuance of securities by the Company and the transfer of securities by
other securityholders of the Company, whether pursuant to the Company's Articles
of Incorporation, contract or otherwise, and releases the Company and such
securityholders from any and all claims in respect thereof.
5.13 SHAREHOLDER APPROVAL. Each of the Shareholders, in executing
this Agreement, consents as director or shareholder (as applicable) of the
Company, to the Merger, and other transactions contemplated hereby, waives
notice of any meeting in connection therewith, waives any applicable dissenters'
rights, and hereby releases and waives all rights with respect to the
transactions contemplated hereby under any agreements relating to the sale,
purchase or voting of stock of the Company.
ARTICLE 6
PURCHASER'S COVENANTS
6.1 REGISTRATION STATEMENT.
6.1.1 Purchaser shall use its best efforts to file or cause to be
filed with the Commission on or prior to the date that is forty-five (45) days
after the Effective Time, a registration statement on Form S-3 (the
"Registration Statement") to cover resales of the shares of Purchaser's Common
Stock to be issued to the holders of Company Stock pursuant hereto (the
"Registered Shares"). Purchaser shall use its best efforts to cause such
Registration Statement to be declared effective as soon as practicable
thereafter. Purchaser shall use its best efforts to keep such Registration
Statement continuously effective, supplemented and amended to the extent
necessary to ensure that it is available for resales of the Registered Shares
for a period ending one year from the Closing Date.
6.1.2 Purchaser will bear the costs of all Registration Expenses.
For the purposes hereof, "Registration Expenses" shall mean all expenses
incident to Purchaser's preparation and filing of the Registration Statement,
including, without limitation, all registration and filing fees, fees and
expenses of compliance with federal securities laws or state blue sky laws,
printing expenses, messenger and delivery expenses, fees and disbursements of
custodians
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and fees and disbursements of counsel for Purchaser and all
independent certified public accountants, and other persons retained by
Purchaser.
6.1.3 In connection with the registration and sale of the
Registered Shares Purchaser will:
(a) prepare and file with the SEC the Registration Statement as
set forth above;
(b) provide to each holder of Company Stock a copy of the
Registration Statement and related Prospectus, including each preliminary
Prospectus, and each amendment and supplement thereto.
(c) use its best efforts to register or qualify the Registered
Shares under such other securities or blue sky laws of such jurisdictions as
each holder of Company Stock may reasonably request and do any and all other
acts and things which may be reasonably necessary or advisable to enable each
holder of Company Stock to consummate the disposition in such jurisdictions of
the Registered Shares owned by such holder; provided, however, that Purchaser
will not be required to (i) qualify generally to do business in any jurisdiction
where it would not otherwise be required to qualify but for this subparagraph,
(ii) subject itself to taxation in any such jurisdiction, or (iii) consent to
general service of process in any such jurisdiction;
(d) Upon the occurrence of any event that would cause the
Registration Statement (i) to contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein not misleading or (ii) to be not effective and useable
for resale of the Registered Shares during the period that such Registration
Statement is required to be effective and useable, Purchaser upon knowledge of
such an event, shall as promptly as practicable file an amendment to the
Registration Statement, in the case of clause (a), correcting any such
misstatement or omission, and, in the case of either clause (a) or (b), use its
best efforts to cause such amendment to be declared effective and such
Registration Statement to become useable as soon as practicable thereafter;
(e) Notwithstanding anything to the contrary in Section 6.1.3,
Purchaser may prohibit offers and sales of the Registered Shares pursuant to the
Registration Statement at any time if (A) (i) it is in possession of material
non-public information, (ii) the Board of Directors of Purchaser determines
based on advice of counsel that such prohibition is necessary in order to avoid
a requirement to disclose such material non-public information, and (iii) the
Board of Directors of Purchaser determines in good faith that disclosure of such
material non-public information would not be in the best interests of Purchaser
and its shareholders or (B) Purchaser has made a public announcement relating to
an acquisition or business combination transaction including Purchaser and/or
one or more of its subsidiaries (i) that is material to Purchaser and its
subsidiaries taken as a whole, and (ii) the Board of Directors of Purchaser
determines in good faith that offers and sales of the Registered Shares pursuant
to the Registration Statement prior to the consummation of such transaction (or
such earlier date as the Board of Directors shall determine) is not in the best
interests of Purchaser and its shareholders (the period during which any such
prohibition of offers and sales of Registered Shares pursuant to the
Registration Statement is in effect pursuant to clause (A) or (B) of this
subparagraph (e) is referred to herein
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as a "Suspension Period"). A Suspension Period shall commence on and include the
date on which Purchaser provides written notice to holders of Company Stock
covered by the Registration Statement that offers and sales of Registered Shares
cannot be made thereunder in accordance with this Section 6.1.3 and shall end
three business days after the earlier to occur of (x) the date on which such
material information is disclosed to the public or ceases to be material or
Purchaser is able to so comply with its disclosure obligations and SEC
requirements, or (y) 75 days after written notice is provided by Purchaser to
the holders of Company Stock of such Suspension Period. Each notice shall state
to the extent, if any, as is practicable, an estimate of the expected duration
of the Suspension Period;
(f) Each holder of Company Stock shall furnish to Purchaser such
information regarding the distribution of its Registered Shares as is required
by law to be disclosed in the Registration Statement (the "Requisite
Information") prior to effecting any sale pursuant to such Registration
Statement. Each holder of Company Stock as to which any Registration Statement
is being effected agrees prior to effecting any sale of the Registered Shares
thereunder to furnish promptly to Purchaser all information required to be
disclosed in order to make any Requisite Information previously furnished to
Purchaser by such holder of Company Stock not materially misleading or necessary
to cause such Registration Statement not to omit a material fact with respect to
such holder of Company Stock necessary in order to make the statements therein
not misleading;
(g) Each holder of Company Stock agrees that, upon receipt of any
notice from Purchaser of the existence of any fact of the kind described in
subparagraphs 6.1.3(d) or 6.1.3(e) hereof (an "Amendment Notice"), such holder
of Company Stock will forthwith discontinue disposition of Registered Shares
until such holder's receipt of (i) copies of the supplemented or amended
Prospectus contemplated by subparagraph 6.1.3(d) hereof, or until counsel for
Purchaser shall have determined that such disclosure is not required due to
subsequent events, (ii) notice in writing from Purchaser that the use of the
Prospectus may be resumed, (iii) copies of any additional or supplemental
filings with respect to the Prospectus, or (iv) the expiration of the Suspension
Period. In the event Purchaser shall give any such notice, the time period
regarding the filing of the Registration Statement set forth in subparagraph
6.1.1 hereof shall be extended by the number of days during the period from and
including the date of the giving of such notice pursuant to subparagraph
6.1.3(e) hereof to and including the date when each holder of Company Stock
covered by such Registration Statement shall have received the copies of the
supplemented or amended Prospectus contemplated by this subparagraph 6.1.3(g);
and
(h) Purchaser agrees to use its best efforts to cause the
Registered Shares covered by the Registration Statement to be registered with or
approved by such other governmental agencies or authorities as may be necessary
to enable the holders of Company Stock to consummate the disposition of such
Registered Shares, subject to the proviso contained in subparagraph 6.1.3.(c)
above, and cause all Registered Shares to be listed on each securities exchange
or national quotation system on which Purchaser's Common Stock is then listed.
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6.1.4 INDEMNIFICATION.
(a) Purchaser agrees to indemnify, to the extent permitted by
law, each holder of Company Stock against all losses, claims, damages,
liabilities and expenses including, without limitation, reasonable attorneys'
fees, caused by any untrue or alleged untrue statement of material fact
contained in the Registration Statement, any prospectus or preliminary
prospectus or any amendment thereof or supplement thereto or any omission or
alleged omission of a material fact required to be stated therein or necessary
to make the statements therein not misleading, except insofar as the same are
caused by or contained in any information furnished in writing to Purchaser by
such holder expressly for use therein or by such holder's negligence, willful
misconduct or failure to deliver a copy of the Registration Statement or
prospectus or any amendments or supplements thereto.
(b) In connection with the Registration Statement, each holder of
Registered Shares will furnish to Purchaser in writing such information and
affidavits as Purchaser reasonably requests for use in connection with the
Registration Statement or prospectus contained therein and, to the extent
permitted by law, will indemnify Purchaser, its directors and officers and each
person who controls Purchaser (within the meaning of the Act) against any and
all losses, claims, damages, liabilities and expenses, including, without
limitation, reasonable attorneys' fees, caused by any untrue or alleged untrue
statement of material fact contained in the Registration Statement, any
prospectus or preliminary prospectus or any amendment thereof or supplement
thereto or any omission or alleged omission of a material fact required to be
stated therein or necessary to make the statements therein not misleading,
insofar as such losses, claims, damages, liabilities and expenses are caused by
any such untrue statement or omission or alleged untrue statement or omission
furnished in writing to Purchaser for use therein or such holder's failure to
provide the prospective purchaser with a copy of the current prospectus;
provided, however, that the obligation to indemnify will be several, not joint
and several among the holders of Company Stock, and the liability of each holder
will be limited to the net amount received by such holder of Company Stock from
the sale of Registered Shares pursuant to the Registration Statement.
(c) In order to provide for just and equitable contribution to
joint liability under the Securities Act in any case in which either (i) any
holder of Registered Shares exercising rights under this Section 6.1.4, or any
controlling person of any such holder, makes a claim for indemnification
pursuant to this Section 6.1.4 but is judicially determined by entry of a final
judgment or decree by a court of competent jurisdiction and the expiration of
time to appeal (or the denial of the last right of appeal) that such
indemnification may not be enforced in such case notwithstanding the fact that
this Section 6.1.4 provides for indemnification in such case, or (ii)
contribution under the Securities Act may be required on the part of any holder
of Registered Shares or any controlling person of any such holder in
circumstances for which indemnification is provided under this Section 6.1.4;
then, in each case, the Purchaser and the holder will contribute to the
aggregate losses, claims, damages or liabilities to which they may be subject
(after contribution from others) in such proportions so that such holder is
responsible for the portion represented by the percentage that the public
offering price of its Registered Shares offered by the registration statement
bears to the public offering price of all securities offered by
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<PAGE> 30
such registration statement, and the Purchaser is responsible for the remaining
portion; provided, that in any such case, (A) no such holder will be required to
contribute any amount in excess of the proceeds to it of all Registered Shares
sold by it pursuant to such registration statement, and (B) no person or entity
guilty of fraudulent misrepresentation, within the meaning of Section 11(f) of
the Securities Act, shall be entitled to contribution from any person or entity
that is not guilty of such fraudulent misrepresentation.
6.2 S-8 REGISTRATION. Purchaser shall cause all of the Purchaser
Options set forth in Section 2.3.1 to be registered on Form S-8 on or prior to
the date that is 45 days from and after the Closing Date.
6.3 CONSENTS. On or prior to the Closing Date, Merger Subsidiary and
Purchaser shall (a) notify all persons required to be notified by Merger
Subsidiary or Purchaser pursuant to applicable law of the transactions
contemplated hereby, in the form and manner required thereunder, and (b) obtain
the consent of all persons whose consent is required to be obtained by Merger
Subsidiary or Purchaser pursuant to applicable law in connection with the
consummation of the transactions contemplated hereby, in the form and manner
required thereunder.
6.4 ADVICE OF DEVELOPMENTS. Purchaser shall have continuing
obligations after the date of this Agreement through the Closing Date to advise
the Company of any event, fact or circumstance which has a material adverse
effect on the business, operations or financial condition of Purchaser.
6.5 APPROVAL BY BOARD OF DIRECTORS. Purchaser shall use its
reasonable efforts to cause this Agreement and the transactions contemplated
hereby to be approved by Purchaser's board of directors.
6.6 POOLING LETTERS. Purchaser shall use all reasonable efforts to
cause to be delivered to Purchaser a letter from Ernst & Young LLP, Purchaser's
independent auditors, dated as of the Closing Date, indicating their concurrence
with management of Purchaser's conclusion as to the appropriateness of pooling
of interests accounting for the Merger under Accounting Principles Board Opinion
No. 16 if closed and consummated in accordance with the Agreement.
6.7 AFFILIATE AGREEMENTS. Schedule 6.7 delivered by the Company to
Purchaser concurrent with the execution and delivery of the Agreement sets forth
those persons who may be deemed "Affiliates" of Purchaser within the meaning of
Rule 145. Purchaser shall provide the Company such information and documents as
the Company shall reasonably request for purposes of reviewing such list.
Purchaser shall use its best efforts to deliver or cause to be delivered to the
Company, concurrently with the execution of this Agreement (and in each case
prior to the Effective Time) from each of the Affiliates of Purchaser, an
executed Affiliate Agreement in the form attached hereto as Exhibit 6.7.
6.8 TAX FREE REORGANIZATION. The Purchaser will take no action,
before or after the Effective Time, which could cause the Merger to fail to
qualify as a tax-free reorganization under Section 368(a) of the Code. All
parties agree to report the Merger transaction, for tax purposes, as a tax-free
reorganization under 368(a)(1)(A) and 368(a)(2)(E) of the Code.
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ARTICLE 7
CONDITIONS TO CLOSING
7.1 CONDITIONS TO PURCHASER'S OBLIGATION TO CLOSE. Purchaser's
obligations to consummate the transactions contemplated by this Agreement shall
be subject to the full satisfaction of following conditions, each of which
conditions may be waived in writing by Purchaser:
7.1.1 ESCROW. The Company and the Shareholder's Representative
(in the case of the Escrow Agreement) shall have executed and delivered to
Purchaser the Merger Documents, the Escrow Agreement and any and all other
documents reasonably required by Purchaser to effect the transactions
contemplated hereby.
7.1.2 REPRESENTATIONS AND WARRANTIES TRUE. The representations
and warranties of the Company contained in this Agreement shall be true in all
material respects at the Closing as though made at such time, provided that any
such representations and warranties that are qualified by the term "material" or
otherwise qualified as to materiality shall be true at the Closing in accordance
with the terms thereof.
7.1.3 PERFORMANCE OF COVENANTS. The Company shall have performed
all obligations and complied with all covenants and conditions required by this
Agreement to be performed or complied with by it on or prior to the Closing
Date.
7.1.4 CERTIFICATE. The Company shall have delivered to Purchaser
a certificate executed by its chief executive officer certifying as to the
Company's satisfaction of the conditions set forth in Sections 7.1.2 and 7.1.3
above.
7.1.5 NO MATERIAL CHANGES. There shall not have been any material
adverse change in the assets, liabilities, business, operations or financial
conditions of the Company from the date hereof to the Closing Date, nor shall
there exist any condition which could reasonably be expected to result in such a
material adverse change.
7.1.6 CONSENTS. All consents or approvals required for the
consummation of the transactions contemplated hereby, including any required
consents of the parties to any contract to which the Company is a party, shall
have been obtained.
7.1.7 OPINION. The Company shall have delivered to Purchaser an
opinion of its counsel in the form of Exhibit 7.1.7 previously delivered to
Purchaser.
7.1.8 POOLABILITY REPORT. The Company shall have received a
written determination from Arthur Andersen LLP, independent auditors, indicating
their concurrence with management of the Company's conclusion that, as of the
date of such letter, no conditions exist related to the Company that would
preclude the Purchaser's accounting for the Merger as a pooling of interests.
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7.1.9 NON-COMPETITION AND NON-SOLICITATION AGREEMENTS AND
PROPRIETARY INFORMATION AGREEMENT. The employees of the Company set forth on
Schedule 7.1.9 delivered by the Company to Purchaser concurrent with the
execution and delivery of the Agreement shall have entered into (a)
Non-Competition and Non-Solicitation Agreements substantially in the respective
forms attached hereto as Exhibit 7.1.9, and (b) Proprietary Information
Agreement, in form and content reasonably acceptable to Purchaser.
7.1.10 CLOSING MARKET VALUE. Purchaser and the Company shall have
executed and delivered and agreement setting forth the Closing Market Value.
7.1.11 BROKERS COMMISSIONS. Purchaser, the Company and the
Brokers (as hereinafter defined) shall have agreed on the commissions payable to
the Broker in connection with the transactions set forth in this Agreement.
7.2 CONDITIONS TO THE COMPANY'S OBLIGATIONS AT THE CLOSING. The
Company's obligations to consummate the transactions contemplated by this
Agreement shall be subject to the following conditions, each of which conditions
may be waived in writing by the Company:
7.2.1 INSTRUMENTS. Purchaser and/or Merger Subsidiary, as
applicable, shall have executed and delivered to the Company the Merger
Documents, the Escrow Agreement and any and all other documents reasonably
required by the Company to effect the transactions contemplated hereby.
7.2.2 REPRESENTATIONS AND WARRANTIES TRUE. The representations
and warranties of Merger Subsidiary and Purchaser contained in this Agreement
shall be true in all material respects at the Closing as though made at such
time, provided that any such representations and warranties that are qualified
by the term "material" or otherwise qualified as to materiality shall be true at
the Closing in accordance with the terms thereof.
7.2.3 PERFORMANCE OF COVENANTS. Merger Subsidiary and Purchaser
shall have performed all obligations and complied with all covenants and
conditions required by this Agreement to be performed or complied with by them
at or prior to the Closing Date.
7.2.4 CERTIFICATE. Purchaser shall have delivered to the Company
a certificate executed by an officer of Purchaser certifying as to Purchaser's
and Merger Subsidiary's satisfaction of the conditions set forth in Sections
7.2.2 and 7.2.3.
7.2.5 OPINION. Purchaser shall have delivered to the Company an
opinion of its counsel in the form of Exhibit 7.2.5 previously delivered to the
Company.
7.2.6 TAX FREE REORGANIZATION. The Company shall be reasonably
satisfied that the Merger qualifies as a tax free reorganization under Section
368(a) of the Code.
7.2.7 LETTER FROM ACCOUNTANTS. Purchaser shall have received a
letter from Ernst & Young LLP, independent auditors, indicating their
concurrence with management of
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Purchaser's conclusion as to the appropriateness of pooling of interests
accounting for the Merger under Accounting Principles Board Opinion No. 16.
7.2.8 CLOSING MARKET VALUE. Purchaser and the Company shall have
executed and delivered an agreement setting forth the Closing Market Value.
ARTICLE 8
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
8.1 SURVIVAL. The representations and warranties of the Company and
the Shareholders contained in this Agreement or in any document, certificate or
schedule or instrument contemplated hereby or delivered pursuant hereto, shall
survive the Closing Date to until the date (the "Expiration Date") that is the
earlier of (i) one (1) year from the Effective Time or (ii) the date upon which
the financial statements for Purchaser's fiscal year ended June 30, 1999 are
publicly issued by Purchaser. The representations and warranties of Merger
Subsidiary and Purchaser contained in this Agreement or in any document,
certificate or instrument contemplated hereby or delivered pursuant hereto,
shall survive the Closing Date until the Expiration Date.
8.2 THE COMPANY'S INDEMNITY. The Company and the Shareholders shall,
jointly and severally, indemnify, defend, protect and hold harmless Purchaser
(and Purchaser's Subsidiaries and Affiliates and their respective officers,
directors, shareholders, employees and agents) from and against any and all
losses, costs, expenses, liabilities, obligations, claims, demands, causes of
action, suits, settlements and judgments of every nature, including the costs
and expenses associated therewith and reasonable attorneys', consultants' and
witness fees incurred in connection therewith ("Purchaser's Damages"), which
arise out of: (i) the breach of any representation or warranty made by the
Company and the Shareholders under this Agreement or any document or certificate
delivered by the Company and the Shareholders pursuant to this Agreement; (ii)
the non-performance, partial or total, of any covenant made by the Company and
the Shareholders pursuant to this Agreement or any document or certificate
delivered by the Company and the Shareholders pursuant to this Agreement.
8.3 PURCHASER'S INDEMNITY. Merger Subsidiary and Purchaser shall,
jointly and severally, indemnify, defend, protect and hold harmless the Company
(and the Company's Affiliates and their respective officers, directors,
shareholders, employees and agents) and the Shareholders from and against any
and all losses, costs, expenses, liabilities, obligations, claims, demands,
causes of action, suits, settlements and judgments of every nature, including
the costs and expenses associated therewith and reasonable attorneys',
consultants' and witness fees incurred in connection therewith ("the Company's
Damages"; and when used together with or in the alternative to Purchaser's
Damages, "Damages"), which arise out of: the breach by Merger Subsidiary or
Purchaser of any certification, representation or warranty made by Merger
Subsidiary or Purchaser pursuant to this Agreement or any document or
certificate delivered by the Purchaser or Merger Subsidiary pursuant to this
Agreement; or the non-performance, partial or total, of any covenant made by
Merger Subsidiary or Purchaser pursuant to this Agreement or
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<PAGE> 34
any document or certificate delivered by the Purchaser or Merger Subsidiary
pursuant to this Agreement.
8.4 INDEMNITY PROCEDURES.
8.4.1 In the event that at any time or from time to time after
the Closing Date a person or entity entitled to indemnification pursuant to
Section 8.2 or 8.3 (any such person or entity, an "Indemnitee") shall sustain a
loss of any nature whatsoever against which such Indemnitee is indemnified under
this Agreement, such Indemnitee shall notify the party required to provide such
indemnification and, in the case of the Company, the Company Representative (as
defined in the Escrow Agreement) (such party and the Company Representative, as
applicable, the "Indemnitor") in writing of any such loss so sustained, and
Indemnitor shall within thirty (30) days after transmittal of such notice pay to
such Indemnitee the amount of such loss so sustained, subject to their right to
contest any third-party claim which has not yet resulted in a loss, as
hereinafter provided in Section 8.4.2.
8.4.2 Promptly after receipt by an Indemnitee of written notice
of a claim or the commencement of any proceeding against it, such Indemnitee
shall, if a claim in respect thereof is to be made against an Indemnitor under
Section 8.2 or 8.3, give written notice to the Indemnitor of the commencement
thereof, but the failure so to notify the Indemnitor shall not relieve it of any
liability that it may have to any Indemnitee, except to the extent, the
Indemnitor demonstrates that the defense of such action is or has been
prejudiced thereby. In case any such proceeding shall be brought against an
Indemnitee and it shall give notice to the Indemnitor of the commencement
thereof, the Indemnitor shall be entitled to participate therein and, to the
extent that it shall wish (unless the Indemnitor is also a party to such
proceeding and the Indemnitee determines in good faith that joint representation
would be inappropriate) to assume the defense thereof with counsel which is
reasonably satisfactory to such Indemnitee and, after notice from the Indemnitor
to such Indemnitee of its election so to assume the defense thereof, the
Indemnitor shall not be liable to such Indemnitee under such Section for any
fees of such counsel or any other expenses with respect to the defense of such
proceeding, in each case, subsequently incurred by such Indemnitee in connection
with the defense thereof. If an Indemnitor assumes the defense of such
proceeding, (a) no compromise or settlement thereof may be effected by the
Indemnitor without the Indemnitee's reasonable consent unless (i) there is no
finding or admission of any violation of law or any violation of the rights of
any person or entity and no effect on any other claims that may be made against
the Indemnitee, and (ii) the sole relief provided is monetary damages that are
paid in full by the Indemnitor; and (b) the Indemnitor shall have no liability
with respect to any compromise or settlement thereof effected without its
consent (which shall not be unreasonably withheld). If notice is given to an
Indemnitor of the commencement of any proceeding and it does not, within fifteen
(15) business days after the Indemnitee's notice is given, give notice to the
Indemnitee of its election to assume the defense thereof, the Indemnitor shall
be bound by any determination made in such action or any compromise or
settlement thereof effected by the Indemnitee. Notwithstanding the foregoing, if
an Indemnitee determines in good faith that there is a reasonable probability
that a proceeding may adversely affect it or its Affiliates, other than as a
result of monetary damages, such Indemnitee may, by notice to the Indemnitor,
assume the exclusive right to defend,
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<PAGE> 35
compromise or settle such proceeding, but the Indemnitor shall not be bound by
any determination of a proceeding so defended or any compromise or settlement
thereof effected without its consent (which shall not be unreasonably withheld).
8.4.3 If any Indemnitor contests or challenges any claim or
action asserted against an Indemnitee referred to in this Article, it shall do
so at its own cost and expense, holding Indemnitee harmless from all costs,
fees, expenses, debts, liabilities and charges in connection with such contest;
shall diligently defend against any such claim; and shall hold Indemnitee's
business and assets free and harmless from any attachment, execution, judgment,
lien or other legal process.
8.4.4 The Company further agrees to indemnify Purchaser for taxes
imposed on or with respect to an indemnification payment made by the Company
pursuant to this Article 8.
8.4.5 Any Escrow Shares applied in satisfaction of Purchaser's
Damages shall be valued at $50 per share.
8.5 EXCLUSIVE REMEDY. In the event the Merger is contemplated, as and
when contemplated hereby, the indemnification obligations under this Agreement
shall be a party's sole recourse against each other party for any claims,
disputes, conflicts, damages or otherwise arising out of or related to this
Agreement and the transactions contemplated hereby.
8.6 LIMITATIONS ON INDEMNIFICATION. Notwithstanding the foregoing,
the right to indemnification under this Section 8 shall be subject to the
following terms:
(a) No indemnification shall be payable pursuant to Section 8.2
or Section 8.3 after the Expiration Date, except with respect to claims made
prior to the Expiration Date, but not resolved by the Expiration Date. Subject
to the foregoing, the representations and warranties contained herein or in any
certificate delivered pursuant hereto shall expire at the close of business on
the Expiration Date.
(b) In the event that the Merger is consummated as and when
provided in the Agreement, all indemnification claims under Section 8.2 shall be
satisfied in full from the shares held pursuant to the Escrow Agreement and no
person shall have any right to recovery from any person who was a holder of
Company Stock immediately prior to the Effective Time. Without limitation of the
foregoing, in the event that the Merger is consummated as and when provided in
the Agreement, the maximum liability of any former holder of Company Stock for
any breach of a representation, warranty or covenant of the Company shall be
limited to those shares in which such holder has an interest that are held
pursuant to the Escrow Agreement.
(c) No claim for indemnification shall be made unless the
aggregate amount of damages of the Indemnitee exceeds $50,000, in which event
the Indemnitee shall be entitled to make a claim for indemnification hereunder
to the extent of such excess.
(d) The limitations of Section 8.6(a), (b) and (c) shall not
apply in the case of a fraudulent or intentional misrepresentation or breach by
any party, but no person shall be liable
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<PAGE> 36
for any such misrepresentation or breach by any other person (except to the
extent of its share of the shares held under the Escrow Agreement if such
misrepresentation or breach is by the Company).
ARTICLE 9
EMPLOYMENT MATTERS
9.1 EMPLOYEE PLANS
9.1.1 The Purchaser shall maintain the Employee Plans set forth
in Section 3.21.1 of the Company Disclosure Schedule for the purpose of
providing continued coverage to each employee who was employed by the Company on
the Closing Date and was covered under such Employee Plans. The continuation of
such coverage will commence on the Closing Date and end on the date of such
employee's termination of employment with the Purchaser or December 31, 1998,
whichever is the first to occur.
9.1.2 The Purchaser shall terminate each of the Employee Plans
effective December 31, 1998. Alternatively, with respect to the Corporation's
401(k) Plan (the "401(k) Plan") only, the Purchaser, in its sole discretion, may
merge the 401(k) Plan with another qualified retirement plan maintained by the
Purchaser as of December 31, 1998, rather than terminate said 401(k) Plan.
9.1.3 Effective January 1, 1999, The Purchaser will provide its
current employees who were employed by the Company on the Closing Date with
coverage under the Purchaser group health plan under the same terms and
conditions applicable to other Purchaser employees on such date. The Purchaser
shall waive any preexisting conditions exclusions under said plan that would
otherwise apply to employees who were employed by the Company on the Closing
Date.
9.1.4 Effective January 1, 1999, the Purchaser will permit its
current employees who were employed by the Company on the Closing Date hereof to
commence participation in the Purchaser's 401(k) Plan under the same terms and
conditions as apply to other the Purchaser employees on such date. The Purchaser
shall cause the 401(k) Plan to credit such employees with all years of service
while employed by the Company for all purposes under said plan, including
vesting computation with respect to the future contributions made my the
Purchaser to said plan on their behalf, if any.
9.1.5 Except as expressly provided in this Article 9, so long as
he or she is an employee of Purchaser, Purchaser shall permit each person who
was an employee of the Company on the Closing Date to participate in all of
Purchaser's insurance, severance, profit sharing, vacation and other employee
benefit plans on the same terms and conditions as are applicable generally to
Purchaser's employees of similar position. Purchaser shall credit such employees
with all years of service while employed by the Company for all purposes in
respect of such insurance, severance, profit sharing, vacation and other
employee benefit plans.
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<PAGE> 37
ARTICLE 10
NONDISCLOSURE OF CONFIDENTIAL INFORMATION
10.1 NONDISCLOSURE. Each party recognizes and acknowledges that it
has had in the past, currently have, and in the future may possibly have, access
to certain Confidential Information (as defined below) related to the other
parties to this Agreement. Each party agrees that it will not disclose such
Confidential Information to any person, firm, corporation, association or other
entity for any purpose or reason whatsoever, except to their respective (a) to
authorized representatives, and (b) to counsel and other advisers, provided that
such advisers agree to the confidentiality provisions of this Section 10.1,
unless (i) such information becomes available to or known by the public
generally through no fault of the disclosing party, or (ii) disclosure is
required by law or the order of any governmental authority under color of law,
provided, that prior to disclosing any information pursuant to this clause
(iii), the disclosing party shall, if possible, give prior written notice
thereof to the affected party and provide the affected with the opportunity to
contest such disclosure. Nothing herein shall be construed as prohibiting the
affected party from pursuing any other available remedy for such breach or
threatened breach, including the recovery of damages.
10.2 CONFIDENTIAL INFORMATION. "Confidential information" shall mean
all trade secrets and other confidential and/or proprietary information of the
particular person or entity, including information derived from reports,
investigations, research, work in progress, codes, marketing and sales programs,
financial projections, cost summaries, pricing formulae, contract analyses,
financial information, projections, confidential filings with any state or
federal agency, and all other confidential concepts, methods of doing business,
ideas, materials or information prepared or performed for, by or on behalf of
such person by its employees, officers, directors, agents, representatives, or
consultants.
10.3 NONDISCLOSURE COVENANTS: REMEDY FOR BREACH. The parties agree
that, in the event of breach or threatened breach of the covenants in this
Article 10, the damage or imminent damage to the value and the goodwill of the
non-breaching party will be irreparable and extremely difficult to estimate,
making any remedy at law or in damages inadequate. Accordingly, the parties
agree that the non-breaching party shall be entitled to injunctive relief
against the breaching party, in the event of any breach or threatened breach of
any of such covenants by the breaching party, in addition to any other relief
(including damages) available to the non-breaching party under this Agreement or
under law.
ARTICLE 11
TERMINATION
11.1 GROUNDS FOR TERMINATION. This Agreement may be terminated in
writing at any time prior to the Closing:
11.1.1 by mutual written agreement of the Company and Purchaser;
or
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<PAGE> 38
11.1.2 by either the Company or Purchaser if the Merger shall
not have been consummated on or before November 30, 1998; or
11.1.3 by Purchaser in the event of the Company's breach of any
of its covenants, representations or warranties under this Agreement; or
11.1.4 by the Company in the event of Purchaser's or Purchaser's
breach of any of their respective covenants, representations or warranties under
this Agreement.
11.2 EFFECT OF TERMINATION. If this Agreement is terminated as
permitted by Section 11.1, such termination shall, except as set forth in the
next sentence, the parties hereto shall have no further obligations to each
other, provided that no such termination shall impair, limit or affect, in any
manner, any liability of any party hereto for any breach of any covenant,
representation or warranty set forth in this Agreement, accrued as of the date
of such termination. The provisions of Sections 8.2, 8.3, 8.4, 8.5, 10.1, 10.2,
10.3, 13.1, 13.2, and 13.8 shall survive any termination hereof pursuant to
Section 11.1.
ARTICLE 12
APPOINTMENT OF SHAREHOLDERS' REPRESENTATIVE
12.1 In order to administer efficiently (i) the implementation of the
Agreement by the Shareholders, (ii) the waiver of any condition to the
obligations of the Shareholders to consummate the transactions contemplated
hereby, and (iii) the settlement of any dispute with respect to the Agreement,
the Shareholders hereby designate Allen Henry as their representative (the
Shareholders' Representative").
12.2 The Shareholders hereby authorize the Shareholders'
Representative (i) to take all action necessary in connection with the
implementation of the Agreement on behalf of the Shareholders, the waiver of any
condition to the obligations of the Shareholders to consummate the transactions
contemplated hereby, or the settlement of any dispute, (ii) to give and receive
all notices required to be given under the Agreement and (iii) to take any and
all additional action as is contemplated to be taken on behalf of the
Shareholders by the terms of this Agreement, including, without limitation,
Article 8 and the Escrow Agreement.
12.3 In the event that the Shareholders' Representative dies, becomes
legally incapacitated or resigns from such position, James Breitmeier shall fill
such vacancy and shall be deemed to be the Shareholders' Representative for all
purposes of this Agreement; however, no change in the Shareholder's
Representative shall be effective until Purchaser is given notice of it by the
Shareholders.
12.4 All decisions and actions by the Shareholders' Representative
shall be binding upon all of the Shareholders, and no Shareholder shall have the
right to object, dissent, protest or otherwise contest the same, in the absence
of fraud, gross negligence or willful misconduct of the Shareholder's
Representative.
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<PAGE> 39
12.5 By their execution of this Agreement, the Shareholders agree
that:
12.5.1 Purchaser shall be able to rely conclusively on the
instructions and decisions of the Shareholders' Representative as to any actions
required or permitted to be taken by the Shareholders or the Shareholders'
Representative hereunder, and no party hereunder shall have any cause of action
against Purchaser for any action taken by Purchaser in reliance upon the
instructions or decisions of the Shareholders' Representative;
12.5.2 all actions, decisions and instructions of the
Shareholders' Representative shall be conclusive and binding upon all of the
Shareholders and no Shareholder shall have any cause of action against the
Shareholders' Representative for any action taken, decision made or instruction
given by the Shareholders' Representative under this Agreement, except for
fraud, gross negligence or willful breach of this Agreement by the Shareholders'
Representative;
12.5.3 the Shareholders' Representative shall be deemed to
fulfill any fiduciary obligation to the Shareholders so long as no Shareholder
is adversely affected by any action or failure to act of the Shareholders'
Representative in a disproportionate measure compared to any other Shareholder;
12.5.4 remedies available at law for any breach of the
provisions of this Article 12 are inadequate; therefore, Purchaser shall be
entitled to temporary and permanent injunctive relief without the necessity of
proving damages if Purchaser brings an action to enforce the provisions of this
Article 12; and
12.5.5 the provisions of this Article 12 are independent and
severable, shall constitute an irrevocable power of attorney, coupled with an
interest and surviving death, granted by the Shareholders to the Shareholders'
Representative and shall be binding upon the executors, heirs, legal
representatives and successors of each Shareholder.
12.6 All fees and expenses incurred by the Shareholders'
Representative shall be paid by the Shareholders.
ARTICLE 13
MISCELLANEOUS
13.1 ANNOUNCEMENTS. All parties will consult with each other and will
mutually agree upon any press release or other public statements with respect to
the transactions contemplated by this Agreement, and shall not issue any press
release or make any public statement prior to such consultation and agreement.
13.2 FINDERS AND BROKERS. Except as provided in the next sentence,
each party hereby represents and warrants to the others that neither it nor its
representatives have taken, nor will they take, any action that would cause the
other parties hereto to have any obligation or liability to any person for or
made any arrangements for the payment of any finders' fees, brokerage fees,
agents' commissions, or like payments in connection with the transactions
contemplated hereby.
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The Company has engaged the services of certain brokers (collectively, the
"Brokers"), disclosed in a letter of even date herewith from the Company to
Purchaser ("Broker Letter"), in connection with the transactions described
herein. The fees owed by the Company to the Brokers, up to a maximum aggregate
amount of $5,133,660, shall be paid by Purchaser. Subject to the prior sentence,
the Shareholders shall be solely responsible for any and all fees and
commissions payable to the Brokers all of which shall be paid at or prior to the
Closing. Each party shall indemnify and hold harmless the others from any claim
that is asserted by any person for a finder's fee or like payment with respect
to this Agreement arising from any act, representation or promise of the
indemnifying party or its representative.
13.3 AMENDMENT. Subject to applicable law, this Agreement may only be
amended or supplemented by written agreement of the Company, Merger Subsidiary
and Purchaser.
13.4 WAIVER OF COMPLIANCE. Any failure of the Company, on the one
hand, or Purchaser, on the other, to comply with any provision of this Agreement
may be expressly waived in writing by Purchaser or the Company, respectively,
but such waiver or failure to insist upon strict compliance with such provision
shall not operate as a waiver of, or estoppel with respect to, any subsequent or
other failure. No failure to exercise and no delay in exercising any right,
remedy, or power hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise of any right, remedy, or power hereunder preclude any
other or further exercise thereof or the exercise of any other right, remedy, or
power provided herein or by law or in equity. The waiver by any party of the
time for performance of any act or condition hereunder does not constitute a
waiver of the act or condition itself.
13.5 EXPENSES. Each of the parties hereto shall pay its own fees and
expenses (including the fees of any attorneys, accountants, appraisers or others
engaged by such party) in connection with this Agreement and the transactions
contemplated hereby whether or not the transactions contemplated hereby are
consummated; provided, however, that if the Merger is consummated such fees and
expenses incurred by or on behalf of the Company, shall be borne by the
Shareholders and not the Company or Purchaser to the extent that such fees and
expenses exceed $150,000 (or to the extent that such fees or expenses otherwise
exceed the standard rates of such persons as disclosed to the Company and
Purchaser). To the extent that such fees and expenses of the Company exceed
$150,000 (or to the extent that such fees or expenses otherwise exceed the
standard rates of such persons as disclosed to the Company and Purchaser), and
such excess is not paid by the Shareholders at the Closing, Purchaser shall be
entitled to deduct from the Escrowed Shares that number of shares with a value
equal to such amount as calculated pursuant to the terms of the Escrow
Agreement, notwithstanding any other provision therein.
13.6 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The respective
representations and warranties of each party contained herein shall not be
deemed waived or otherwise affected by any investigation made by or on behalf of
the other party and such representations and warranties shall survive the
Closing and the consummation of the Merger contemplated hereby as provided in
Article 8. All statements contained in this Agreement or in any schedule,
exhibit, certificate, list, or other document delivered pursuant hereto shall be
deemed representations or
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<PAGE> 41
warranties, as the case may be (as such terms are used in this Agreement), of
the party making such statements.
13.7 NOTICES. All notices, demands, and other communications required
or permitted hereunder shall be made in writing and shall be deemed to have been
duly given (i) upon delivery, if delivered in person, (ii) five (5) business
days after mailing if sent registered mail, return receipt requested, or (iii)
the next business day after sending, if sent by commercial overnight courier
(unless returned undelivered or the courier reports a later delivery) and
addressed as follows:
To the Company and the Shareholders at:
Broadband Communications Products, Inc.
305 East Drive
Melbourne, Florida 32904
Attn: Allen Henry
With a copy to:
Lucash, Gresmer & Updegrove LLP
40 Broad Street
Boston, Massachusetts 02109
Attn: Jill Swaim
To Purchaser at:
Uniphase Corporation
163 Baypointe Parkway
San Jose, California 95134
Attn: Michael C. Phillips
With a copy to:
Morrison & Foerster LLP
755 Page Mill Road
Palo Alto, California 94304-1018
Attn: Christopher S. Dewees
Notice of change of address shall be effective only when done in
accordance with this Section. All notices complying with this Section shall be
deemed to have been received on the date of delivery or on the third business
day after mailing.
13.8 ASSIGNMENT; SUCCESSORS AND ASSIGNS. Except as otherwise provided
herein, each party agrees that it will not assign, sell, transfer, delegate, or
otherwise dispose of, whether voluntarily or involuntarily, or by operation of
law, any right or obligation under this Agreement. Notwithstanding the
foregoing, any party may assign its accrued rights and obligations
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hereunder, after any termination of this Agreement pursuant to Section 11.1, to
any purchaser of all or substantially all of such party's assets, or to the
surviving corporation in a merger or consolidation of such party. Any purported
assignment, transfer, or delegation in violation of this Section shall be null
and void. Subject to the foregoing limits on assignment and delegation, this
Agreement shall be binding upon and shall inure to the benefit of the parties
and their respective successors and assigns. Except for those enumerated above,
this Agreement does not create, and shall not be construed as creating, any
rights or claims enforceable by any person or entity not a party to this
Agreement.
13.9 GOVERNING LAW. The validity, interpretation, enforceability, and
performance of this Agreement shall be governed by and construed in accordance
with the law of the State of Delaware.
13.10 JURISDICTION. The parties to this Agreement agree that any
suit, action or proceeding arising out of, or with respect to, this Agreement
(or any of the agreements or documents executed in connection herewith) or any
judgment entered by any court in respect thereof shall be brought in the courts
of the County of New York, State of New York or in the U.S. District Court for
the Southern District of New York and the parties hereto hereby irrevocably
accept the exclusive personal jurisdiction of those courts for the purpose of
any suit, action or proceeding. In addition, the parties hereto each hereby
irrevocably waives, to the fullest extent permitted by law, any objection which
he or it may now or hereafter have to the laying of venue of any suit, action or
proceeding arising out of or relating to this Agreement (or any of the
agreements or documents executed in connection herewith) or any judgment entered
in respect thereof brought in any court located in the County of New York, State
of New York or the U.S. District Court for the Southern District of New York,
and hereby further irrevocably waives any claim that any suit, action or
proceedings brought in any such court has been brought in an inconvenient forum.
13.11 COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
13.12 HEADINGS. The headings of the Sections and Articles of this
Agreement and Table of Contents are for reference purposes only and shall not
constitute a part hereof or affect the meaning or interpretation of this
Agreement.
13.13 ENTIRE AGREEMENT. The parties intend that the terms of this
Agreement, including the Disclosure Schedule and other documents referred to
herein, shall be the final expression of their agreement with respect to the
subject matter hereof and may not be contradicted by evidence of any prior or
contemporaneous agreement. The parties further intend that this Agreement shall
constitute the complete and exclusive statement of its terms and that no
extrinsic evidence whatsoever may be introduced in any judicial, administrative,
or other legal proceeding involving this Agreement.
13.14 THE COMPANY DISCLOSURE SCHEDULE. The Seller Disclosure Schedule
shall be divided into sections corresponding to the sections of this Agreement.
Disclosure in any section
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of the Seller Disclosure Schedule shall only constitute disclosure for purposes
of the corresponding section of the Agreement and not for any other purpose,
unless it is reasonably apparent on the face of the disclosure that it is
applicable to another section of the Agreement.
13.15 PERFORMANCE BY PURCHASER. Purchaser shall cause Merger
Subsidiary to perform all of its covenants and obligations hereunder.
13.16 SEVERABILITY. If any provision of this Agreement, or the
application thereof to any Person, place, or circumstance, shall be held by a
court of competent jurisdiction to be invalid, unenforceable, or void, the
remainder of this Agreement and such provisions as applied to other Persons,
places, and circumstances shall remain in full force and effect.
13.17 RULES OF CONSTRUCTION. The parties acknowledge that each party
has read and negotiated the language used in this Agreement. The parties agree
that, because all parties participated in negotiating and drafting this
Agreement, no rule of construction shall apply to this Agreement which construes
ambiguous language in favor of or against any party by reason of that party's
role in drafting this Agreement.
13.18 ADDITIONAL DOCUMENTS. Each of the parties agree, without
further consideration, to execute and deliver such other documents and take such
further action as may be reasonably required to effectuate the provisions of
this Agreement.
13.19 EXHIBITS. All Exhibits attached hereto shall be deemed to be a
part of this Agreement and are fully incorporated in this Agreement by this
reference.
13.20 CERTAIN DEFINITIONS.
"Affiliate" or "Associate" shall have the meaning assigned thereto in
Rule 405, as presently promulgated under the Securities Act of 1933, as amended.
"Intellectual Property" shall mean all patents, patent applications,
software, trademarks, trademark applications, service marks, service mark
applications, trade and other marks and names (either registered, common law or
registration applied for), copyrights, copyright applications, mask works,
inventions, trade secrets, proprietary information, know-how, processes,
manufacturing or marketing procedures, recipes, formulae, drawings, schematics
and patterns, and all documentation and other media relating to the foregoing.
"Permitted Lien" means any Lien (a) for taxes, assessments or
governmental charges if the same shall not at the time be due and delinquent,
(b) of mechanics and materialmen for sums not yet due, and (c) purchase money
security interests incurred in the ordinary course of business.
"Person" shall include any individual, partnership, joint venture,
corporation, trust, unincorporated organization, any other entity and any
government or any department or agency thereof, whether acting in an individual,
fiduciary, or other capacity.
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<PAGE> 44
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement and Plan of Reorganization as of the date first written above.
THE COMPANY PURCHASER SUBSIDIARY
BROADBAND COMMUNICATIONS PHASE ACQUISITION CORP.
PRODUCTS, INC.
By By
------------------------------ ----------------------------------
Allen S. Henry, Michael C. Phillips,
Chief Executive Officer Vice President and Secretary
PURCHASER
UNIPHASE CORPORATION
By
------------------------------
Michael C. Phillips,
Vice President
SHAREHOLDERS
- ------------------------------
James Breitmeier
- ------------------------------
Paul Casper
- ------------------------------
James Troy
- ------------------------------
Donald Alford
- ------------------------------
Whitworth Cotten
- ------------------------------
Marc Sawyer
- ------------------------------
Allen Henry
<PAGE> 45
LIST OF SCHEDULES AND EXHIBITS
<TABLE>
<CAPTION>
SCHEDULE NAME
<S> <C>
Schedule 1.4 Officers of Surviving Corporation
Schedule 2.2.1 Allocation of Shares
Schedule 3 Company Disclosure Schedule
Schedule 5.8 Company Affiliates
Schedule 6.7 Purchaser Affiliates
Schedule 7.1.9 Certain Employees
</TABLE>
<TABLE>
<CAPTION>
EXHIBIT NAME
<S> <C>
Exhibit 2.2.4 Escrow Agreement
Exhibit 5.8 Company Affiliate Agreement Form
Exhibit 6.7 Purchaser Affiliate Agreement Form
Exhibit 7.1.7 Company Opinion
Exhibit 7.1.9 Non-Competition and Non-Solicitation agreements
Exhibit 7.2.5 Form of Purchaser Opinion
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EXHIBIT 5.1
OPINION OF MORRISON & FOERSTER LLP
January 8, 1999
Uniphase Corporation
210 Baypointe Parkway
San Jose, CA 95134
Ladies and Gentlemen:
At your request, we have examined the Registration Statement on Form S-3 filed
by Uniphase Corporation, a Delaware corporation (the "Company"), with the
Securities and Exchange Commission on January 8, 1999 (the "Registration
Statement") relating to the registration under the Securities Act of 1933, as
amended, of up to 729,510 shares of the Company's common stock, $.001 par value
(the "Stock"), being offered by certain selling stockholders specified therein
(the "Selling Stockholders").
As counsel to the Company, we have examined the proceedings taken by the Company
and the Selling Stockholders in connection with the sale by the Selling
Stockholders of up to 729,510 shares of Stock.
It is our opinion that the 729,510 shares of Stock that may be sold are legally
and validly issued, fully paid and nonassessable.
We consent to the use of this opinion as an exhibit to the Registration
Statement and further consent to all references to us in the Registration
Statement, the prospectus constituting a part thereof and any amendments
thereto.
Very truly yours,
/s/ Morrison & Foerster LLP
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EXHIBIT 23.2
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-3) and related Prospectus of Uniphase
Corporation for the registration of 729,510 shares of its common stock and to
the incorporation by reference therein of our reports dated August 4, 1998,
with respect to the consolidated financial statements of Uniphase Corporation
included in its Annual Report on Form 10-K for the year ended June 30, 1998 and
the related financial statement schedule included therein and our report dated
January 7, 1999 with respect to the supplemental consolidated financial
statements and the related supplemental financial statement schedule of
Uniphase Corporation included in its Current Report on Form 8-K dated
January 7, 1999, filed with the Securities and Exchange Commission.
/s/ Ernst & Young LLP
San Jose, California
January 7, 1999
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EXHIBIT 23.3
CONSENT OF MORET ERNST & YOUNG ACCOUNTANTS, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to the
incorporation by reference in the Registration Statement (Form S-3) and related
Prospectus of Uniphase Corporation for the registration of 729,510 shares of its
common stock of our report dated August 24, 1998, with respect to the financial
statements of Philips Optoelectronics, a division of Koninklijke Philips
Electronics N.V. included in its Amendment No. 2 to the Current Report on Form
8-K/A dated August 25, 1998, filed with the Securities and Exchange Commission.
/s/ Moret Ernst & Young Accountants
Eindhoven, the Netherlands
January 7, 1999
