EXHIBIT 2.1
Execution Copy
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
VERILINK CORPORATION,
SRI ACQUISITION CORP.
AND
LARSCOM INCORPORATED
DATED AS OF
APRIL 28, 2004
TABLE OF CONTENTS
PAGE
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ARTICLE I THE MERGER....................................................................... 2
1.1 The Merger............................................................... 2
1.2 The Closing.............................................................. 2
1.3 Effective Time........................................................... 2
1.4 Certificate of Incorporation and Bylaws of the Surviving Corporation..... 3
1.5 Directors and Officers of the Surviving Corporation...................... 3
1.6 Directors of Verilink.................................................... 3
1.7 Tax Consequences......................................................... 3
ARTICLE II CONVERSION OF SECURITIES........................................................ 3
2.1 Conversion of Capital Stock.............................................. 3
2.2 Exchange of Certificates................................................. 5
2.3 Larscom Stock Plans and Larscom Warrants................................. 8
2.4 Adjustment Factor........................................................ 9
2.5 Taking Necessary and Further Action..................................... 11
ARTICLE III REPRESENTATIONS AND WARRANTIES OF LARSCOM..................................... 11
3.1 Organization, Standing and Power........................................ 11
3.2 Charter Documents....................................................... 12
3.3 Capitalization.......................................................... 12
3.4 Subsidiaries............................................................ 14
3.5 Authority; No Conflict; Required Filings and Consents................... 15
3.6 SEC Filings; Financial Statements; Information Provided................. 16
3.7 No Undisclosed Liabilities.............................................. 17
3.8 Absence of Certain Changes or Events.................................... 18
3.9 Taxes................................................................... 18
3.10 Owned and Leased Real Properties........................................ 19
3.11 Intellectual Property................................................... 20
3.12 Agreements, Contracts and Commitments................................... 23
3.13 Litigation.............................................................. 24
3.14 Environmental Matters................................................... 24
3.15 Employees............................................................... 25
3.16 Employee Benefit Plans.................................................. 27
3.17 Compliance With Laws.................................................... 30
3.18 Permits................................................................. 30
3.19 Insurance............................................................... 31
3.20 Title to Assets......................................................... 31
3.21 Equipment and Leaseholds................................................ 31
3.22 Receivables; Customers; Inventory....................................... 31
3.23 Certain Business Practices.............................................. 32
3.24 Opinion of Financial Advisor............................................ 32
3.25 Section 203 of the DGCL Not Applicable.................................. 32
3.26 Brokers................................................................. 32
3.27 Loans to Executive Officers............................................. 33
3.28 Financial Controls...................................................... 33
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF VERILINK AND THE MERGER SUB.................. 33
4.1 Organization, Standing and Power........................................ 33
4.2 Charter Documents....................................................... 34
4.3 Capitalization.......................................................... 34
4.4 Authority; No Conflict; Required Filings and Consents................... 35
4.5 SEC Filings; Financial Statements; Information Provided................. 37
4.6 No Undisclosed Liabilities.............................................. 38
4.7 Absence of Certain Changes or Events.................................... 38
4.8 Intellectual Property................................................... 38
4.9 Litigation.............................................................. 39
4.10 Compliance With Laws.................................................... 40
4.11 Certain Business Practices.............................................. 40
4.12 Opinion of Financial Advisor............................................ 40
4.13 Brokers................................................................. 40
4.14 Operations of the Merger Sub............................................ 40
4.15 Section 203 of the DGCL Not Applicable.................................. 40
4.16 Loans to Executive Officers............................................. 41
4.17 Financial Controls...................................................... 41
ARTICLE V CONDUCT OF BUSINESS............................................................. 41
5.1 Covenants of Larscom.................................................... 41
5.2 Covenants of Verilink................................................... 44
5.3 Confidentiality......................................................... 45
5.4 Required Communications................................................. 45
ARTICLE VI ADDITIONAL AGREEMENTS.......................................................... 45
6.1 No Solicitation......................................................... 45
6.2 Joint Proxy Statement/Prospectus and Registration Statement............. 49
6.3 [Reserved].............................................................. 50
6.4 Access to Information................................................... 50
6.5 Stockholders Meetings................................................... 51
6.6 Legal Conditions to Merger.............................................. 52
6.7 Public Disclosure....................................................... 53
6.8 Section 368(a) Reorganization........................................... 53
6.9 Affiliate Legends....................................................... 54
6.10 Nasdaq Stock Market Listing............................................. 54
6.11 Stockholder Litigation.................................................. 54
ii
6.12 Indemnification......................................................... 54
6.13 Notification of Certain Matters......................................... 56
6.14 Exemption from Liability Under Section 16(b)............................ 56
6.15 [Reserved].............................................................. 56
6.16 Employee Benefits....................................................... 56
6.17 Termination of Employee Benefit Plans................................... 57
6.18 Tax Matters............................................................. 57
6.19 Registration Rights Agreement........................................... 58
ARTICLE VII CONDITIONS TO MERGER.......................................................... 58
7.1 Conditions to Each Party's Obligation To Effect the Merger.............. 58
7.2 Additional Conditions to the Obligations of Larscom..................... 59
7.3 Additional Conditions to the Obligations of Verilink and Merger Sub..... 60
ARTICLE VIII TERMINATION AND AMENDMENT.................................................... 62
8.1 Termination............................................................. 62
8.2 Effect of Termination................................................... 64
8.3 Fees and Expenses....................................................... 64
8.4 Amendment............................................................... 66
8.5 Extension; Waiver....................................................... 66
ARTICLE IX MISCELLANEOUS.................................................................. 67
9.1 Nonsurvival of Representations and Warranties........................... 67
9.2 Notices................................................................. 67
9.3 Entire Agreement........................................................ 68
9.4 No Third Party Beneficiaries............................................ 68
9.5 Assignment.............................................................. 68
9.6 Severability............................................................ 69
9.7 Counterparts and Signature.............................................. 69
9.8 Interpretation.......................................................... 69
9.9 Governing Law........................................................... 70
9.10 Consent to Jurisdiction; Venue.......................................... 70
9.11 Remedies................................................................ 70
9.12 Waiver of Jury Trial.................................................... 70
Exhibits
Exhibit A Form of Larscom Voting Agreement
Exhibit B Form of Verilink Voting Agreement
Exhibit C Form of Registration Rights Agreement
Exhibit D Form of Rule 145 Affiliate Letter
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TABLE OF DEFINED TERMS
TERM CROSS REFERENCE IN AGREEMENT
- ---- ----------------------------
Accounting Firm Section 2.4(b)
Acquisition Proposal Section 6.1(f)
Acquisition Transaction Section 8.3(f)
Adjustment Date Section 2.4(b)
Adjustment Factor Section 2.4(a)
Affiliate Section 3.3(e)
Agreement Preamble
Allowed Proposal Section 6.1(f)
Antitrust Laws Section 6.6(b)
Antitrust Order Section 6.6(b)
Bankruptcy and Equity Exception Section 3.5(a)
Blue Sky Laws Section 3.5(c)
Certificate of Merger Section 1.1
Certificates Section 2.2(a)
Closing Section 1.2
Closing Date Section 1.2
Closing Net Adjusted Working Capital Amount Section 2.4(c)
Code Preamble
Confidentiality Agreement Section 5.3
Continuing Employee Section 6.16
Delivery Date Section 2.4(b)
DGCL Preamble
DOL Section 3.16(c)
Effective Time Section 1.3
Employee Benefit Plan Section 3.16(a)
Environmental Laws Section 3.14
Environmental Permits Section 3.14
ERISA Section 3.16(a)
ERISA Affiliate Section 3.16(a)
Exchange Act Section 3.5(c)
Exchange Agent Section 2.2(a)
Exchange Fund Section 2.2(a)
Exchange Ratio Section 2.1(b)
GAAP Section 3.6(b)
Governmental Bid Section 3.12(e)
Governmental Contract Section 3.12(e)
Governmental Entity Section 3.5(c)
Hazardous Materials Section 3.14
Hazardous Materials Activity Section 3.14
Indemnified Parties Section 6.12(a)
Intellectual Property Section 3.11(a)
IRS Section 3.16(b)
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TERM CROSS REFERENCE IN AGREEMENT
- ---- ----------------------------
Joint Proxy Statement/Prospectus Section 6.2(a)
Larscom Preamble
Larscom Balance Sheet Section 3.6(b)
Larscom Board Preamble
Larscom Business Facility Section 3.14
Larscom Charter Documents Section 3.2
Larscom Common Stock Section 2.1(b)
Larscom Consents Section 3.5(b)
Larscom Disclosure Schedule Article III
Larscom Employee Plans Section 3.16(a)
Larscom ESPP Section 2.3 (e)
Larscom Expenses Section 8.3(d)
Larscom Insiders Section 6.14(c)
Larscom Insurance Policies Section 3.19
Larscom Intellectual Property Section 3.11(c)
Larscom International Employee Plan Section 3.16(g)
Larscom Leased Property Section 3.10(b)
Larscom Leases Section 3.10 (b)
Larscom Material Adverse Effect Section 3.1
Larscom Material Contracts Section 3.12(a)
Larscom Material Inbound Licenses Section 3.11(b)
Larscom Material Licenses Section 3.11(c)
Larscom Material Outbound Licenses Section 3.11(c)
Larscom Meeting Section 3.5(d)
Larscom Permits Section 3.18
Larscom Preferred Stock Section 3.3(a)
Larscom SEC Reports Section 3.6(a)
Larscom Software Section 3.11(g)
Larscom Stock Option Section 2.3(a)
Larscom Stock Plans Section 2.3(a)
Larscom Stockholder Approval Section 3.5(a)
Larscom Terminating Plan(s) Section 6.17
Larscom Voting Agreement Preamble
Larscom Voting Proposal Section 3.5(a)
Larscom Warrants Section 3.3(a)
Liens Section 3.5(b)
Merger Preamble
Merger Sub Preamble
Ordinary Course of Business Section 3.7
Outside Date Section 8.1(b)
Registration Rights Agreement Section 6.19
Registration Statement Section 6.2(a)
Regulation M-A Filing Section 6.2(b)
Representatives Section 6.1(a)
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TERM CROSS REFERENCE IN AGREEMENT
- ---- ----------------------------
Returns Section 3.9(b)
Review Period Section 2.4(b)
Rule 145 Affiliates Section 6.9
SEC Section 3.6(a)
Section 16 Information Section 6.14(b)
Securities Act Section 3.3(e)
Specified Time Section 6.1(a)
Statement of Closing Net Adjusted Working
Capital Amount Section 2.4(b)
Subsidiary Section 3.4(a)
Superior Proposal Section 6.1(f)
Surviving Corporation Section 1.1
Targeted Net Adjusted Working Capital
Amount Section 2.4(a)
Tax Section 3.9(a)
Taxes Section 3.9(a)
Verilink Preamble
Verilink Balance Sheet Section 4.5(b)
Verilink Benefit Plan Section 6.16
Verilink Board Preamble
Verilink Charter Documents Section 4.2
Verilink Common Stock Section 2.1(b)
Verilink Disclosure Schedule Article IV
Verilink Expenses Section 8.3(b)
Verilink Intellectual Property Section 4.8(b)
Verilink Material Adverse Effect Section 4.1
Verilink Material License Section 4.8(b)
Verilink Meeting Section 4.4(d)
Verilink Preferred Stock Section 4.3(a)
Verilink Rights Plan Section 4.3
Verilink SEC Reports Section 4.5(a)
Verilink Stockholder Approval Section 4.4(a)
Verilink Voting Agreement Preamble
Verilink Voting Proposal Section 4.4(a)
WARN Act Section 3.15(d)
vi
Execution Copy
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of April
28, 2004, is by and among Verilink Corporation, a Delaware corporation
("Verilink"), SRI Acquisition Corp., a Delaware corporation and a wholly-owned
subsidiary of Verilink (the "Merger Sub"), and Larscom Incorporated, a Delaware
corporation ("Larscom") (Larscom, taken together as one party, and Verilink and
Merger Sub, taken together as the other party, are sometimes referred to herein
as a "party" and collectively as the "parties").
WHEREAS, the board of directors of Larscom (the "Larscom Board") and
the board of directors of Verilink (the "Verilink Board") each deems it
advisable and in the best interests of its corporation and its stockholders that
Verilink acquire Larscom, by means of a merger of Merger Sub with and into
Larscom with Larscom surviving as a wholly owned subsidiary of Verilink (the
"Merger") in accordance with the terms of this Agreement and the General
Corporation Law of the State of Delaware (the "DGCL");
WHEREAS, concurrently with the execution and delivery of this Agreement
and as a condition and inducement to Verilink's willingness to enter into this
Agreement, the majority stockholders of Larscom will be entering into the
Larscom Voting Agreement, dated as of the date of this Agreement, in the form
attached hereto as Exhibit A (the "Larscom Voting Agreement"), pursuant to which
each such stockholder will, among other things, agree to give Verilink a proxy
to vote all of the shares of capital stock of Larscom that such stockholder
owns, subject to certain restrictions, in order to consummate the transactions
contemplated hereby;
WHEREAS, concurrently with the execution and delivery of this Agreement
and as a condition and inducement to Larscom's willingness to enter into this
Agreement, certain stockholders of Verilink will be entering into the Verilink
Voting Agreement, dated as of the date of this Agreement, in the form attached
hereto as Exhibit B (the "Verilink Voting Agreement"), pursuant to which each
such stockholder will, among other things, agree to give Larscom a proxy to vote
all of the shares of capital stock of Verilink that such stockholder owns in
order to consummate the transactions contemplated hereby;
WHEREAS, for United States federal income tax purposes, it is intended
that the Merger shall qualify as a reorganization within the meaning of Section
368(a) of the Internal Revenue Code of 1986, as amended (the "Code"), and the
rules and regulations promulgated thereunder, and that each of Verilink, the
Merger Sub and Larscom are a party to a reorganization within the meaning of
Section 368(a) of the Code;
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth below, Verilink,
the Merger Sub and Larscom agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger.
Upon and subject to the terms and conditions of this
Agreement, the Merger Sub shall merge with and into Larscom at the Effective
Time. From and after the Effective Time, the separate corporate existence of the
Merger Sub shall cease, and Larscom shall continue as the surviving corporation
in the Merger. Larscom following the Merger is sometimes referred to herein as
the "Surviving Corporation." The Merger shall be effected by filing a
certificate of merger (the "Certificate of Merger") in a form mutually
acceptable to Verilink and Larscom and executed by the Surviving Corporation in
accordance with Section 251(c) of the DGCL. The Merger shall have the effects
set forth in Section 259 of the DGCL.
1.2 The Closing.
(a) Unless this Agreement is earlier terminated pursuant to
Article VIII, the closing of the Merger (the "Closing") shall take place at 9:00
a.m., eastern time, on a date to be specified by Larscom and Verilink (the
"Closing Date"), which shall be no later than the second business day after
satisfaction or waiver of the conditions set forth in Article VII (other than
delivery of items to be delivered at the Closing and other than satisfaction of
those conditions that by their nature are to be satisfied at the Closing, it
being understood that the occurrence of the Closing shall remain subject to the
delivery of such items and the satisfaction or waiver of such conditions at the
Closing), at the offices of Powell, Goldstein, Frazer & Murphy LLP, 191
Peachtree Street, Atlanta, Georgia 30303, unless another date, place or time is
agreed to in writing by Larscom and Verilink.
(b) At the Closing:
(i) Verilink shall deliver to Larscom the various
certificates, instruments and documents referred to in Section
7.2;
(ii) Larscom shall deliver to Verilink the various
certificates, instruments and documents referred to in Section
7.3; and
(iii) Larscom, on behalf of the Surviving
Corporation, shall file the Certificate of Merger with the
Secretary of State of the State of Delaware.
1.3 Effective Time.
Subject to the provisions of this Agreement, the parties shall
cause the Merger contemplated by this Agreement to be consummated by the filing
of the Certificate of Merger with the Secretary of State of the State of
Delaware. The Merger shall become effective at such time as the Certificate of
Merger has been duly filed with the Secretary of State of the State of Delaware,
or at such subsequent date or time as the parties shall mutually agree upon (the
time the Merger becomes effective referred to herein as the "Effective Time").
2
1.4 Certificate of Incorporation and Bylaws of the Surviving
Corporation.
(a) The Certificate of Incorporation of Larscom shall be
amended and restated, by means of the Certificate of Merger, to substantially
conform to the Certificate of Incorporation of the Merger Sub as in effect
immediately prior to the Effective Time (except that the name of the Surviving
Corporation shall be "Larscom" or such other name as is mutually agreed to by
Verilink and Larscom) and, as so amended, such Certificate of Incorporation
shall be the Certificate of Incorporation of the Surviving Corporation, until
further amended in accordance with the DGCL and such Certificate of
Incorporation.
(b) As of the Effective Time, by virtue of the Merger and
without any action on the part of the Merger Sub and Verilink, the Bylaws of the
Surviving Corporation shall be amended and restated to read the same as the
Bylaws of Merger Sub, as in effect immediately prior to the Effective Time,
until thereafter amended in accordance with the DGCL, the Certificate of
Incorporation of the Surviving Corporation and such Bylaws.
1.5 Directors and Officers of the Surviving Corporation.
(a) The directors of the Merger Sub immediately prior to the
Effective Time shall be the initial directors of the Surviving Corporation, each
to hold office in accordance with the Certificate of Incorporation and Bylaws of
the Surviving Corporation.
(b) The officers of the Merger Sub immediately prior to the
Effective Time shall be the initial officers of the Surviving Corporation, each
to hold office in accordance with the Certificate of Incorporation and Bylaws of
the Surviving Corporation.
1.6 Directors of Verilink.
Prior to the Effective Time, Verilink shall take all necessary
action to cause the number of directors constituting the full Verilink Board to
be increased by one director as of the Effective Time and to cause Desmond P.
Wilson III to be appointed to the Verilink Board to fill such vacancy.
1.7 Tax Consequences.
The parties hereto intend that the Merger shall constitute a reorganization
within the meaning of Section 368(a) of the Code. The parties hereto adopt this
Agreement as a "plan of reorganization" within the meaning of Section 1.368-3(a)
of the U.S. Income Tax Regulations.
ARTICLE II
CONVERSION OF SECURITIES
2.1 Conversion of Capital Stock.
As of the Effective Time, by virtue of the Merger and without any action on
the part of the Merger Sub, Larscom or the holder of any shares of the capital
stock of Larscom or the Merger
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Sub:
(a) Capital Stock of the Merger Sub. Each share of the common
stock of the Merger Sub issued and outstanding immediately prior to the
Effective Time shall be converted into and become one fully paid and
nonassessable share of common stock, $0.01 par value per share, of the Surviving
Corporation. From and after the Effective Time, all certificates representing
the common stock of the Merger Sub shall be deemed for all purposes to represent
the number of shares of common stock of the Surviving Corporation into which
they were converted in accordance with this Section 2.1(a).
(b) Exchange Ratio for Larscom Common Stock. Subject to this
Section 2.1 and Section 2.2 hereof, each share of common stock of Larscom, $0.01
par value (the "Larscom Common Stock") issued and outstanding immediately prior
to the Effective Time, other than shares to be cancelled in accordance with
Section 2.1(c) hereof, shall be automatically converted into the right to
receive the number of validly issued, fully paid and nonassessable shares of
Common Stock, $0.01 par value per share, of Verilink ("Verilink Common Stock")
equal to 1.166 multiplied by the Adjustment Factor as defined in Section 2.4
(the "Exchange Ratio"). As of the Effective Time, all such shares of Larscom
Common Stock shall no longer be outstanding and shall automatically be cancelled
and retired and shall cease to exist, and each holder of a certificate
representing any such shares of Larscom Common Stock shall cease to have any
rights with respect thereto, except the right to receive the Verilink Common
Stock pursuant to this Section 2.1(b) and any cash in lieu of fractional shares
of Verilink Common Stock to be issued or paid in consideration therefor upon the
surrender of such certificate in accordance with Section 2.2, without interest.
(c) Cancellation of Treasury Stock and Verilink-Owned Stock.
All shares of Larscom Common Stock that are owned by Larscom as treasury stock
and any shares of Larscom Common Stock owned by Verilink or the Merger Sub
immediately prior to the Effective Time shall be cancelled and shall cease to
exist and no shares of Verilink or other consideration shall be delivered in
exchange therefor.
(d) Adjustments to Exchange Ratio. The Exchange Ratio shall be
adjusted to reflect fully the effect of any reclassification, share or stock
split, reverse split, share or stock dividend (including any dividend or
distribution of securities convertible into Verilink Common Stock or Larscom
Common Stock), reorganization, recapitalization or other like change with
respect to Verilink Common Stock or Larscom Common Stock occurring (or for which
a record date is established) after the date hereof and prior to the Effective
Time.
(e) Unvested Stock. If any shares of Larscom Common Stock
outstanding immediately prior to the Effective Time are unvested or are subject
to a repurchase option, risk of forfeiture or other condition under any
applicable restricted stock purchase agreement or other agreement with Larscom,
then the shares of Verilink Common Stock issued in exchange for such shares of
Larscom Common Stock will also be unvested or subject to the same repurchase
option, risk of forfeiture or other condition, and the certificates representing
such shares of Verilink Common Stock will accordingly be marked with appropriate
legends. All outstanding rights which Larscom may hold immediately prior to the
Effective Time to repurchase unvested shares of Larscom Common Stock or to
exercise any other right with respect to shares of
4
Larscom Common Stock that are restricted shall be automatically assigned to
Verilink in the Merger at the Effective Time and shall thereafter be exercisable
by Verilink upon the same terms and conditions (including, without limitation,
any provision for acceleration) in effect immediately prior to the Effective
Time, except that the shares purchasable pursuant to such rights and the
purchase price payable per share shall be appropriately adjusted to reflect the
Exchange Ratio. Larscom shall take all reasonable steps necessary to cause the
foregoing provisions of this Section 2.1(e) to occur.
2.2 Exchange of Certificates.
The procedures for exchanging outstanding shares of Larscom Common Stock for
Verilink Common Stock pursuant to the Merger are as follows:
(a) Exchange Agent.
At or promptly following the Effective Time, Verilink shall deposit, or cause
to be deposited, with Verilink's transfer agent or another bank or trust company
designated by Verilink and reasonably acceptable to Larscom (the "Exchange
Agent"), for the benefit of the holders of shares of Larscom Common Stock, for
exchange, in accordance with this Section 2.2: (i) Verilink Common Stock
issuable pursuant to Section 2.1 in exchange for outstanding shares of Larscom
Common Stock, (ii) cash in an amount sufficient to make payments for fractional
shares required pursuant to Section 2.2(c), and (iii) any dividends or
distributions to which holders of certificates which immediately prior to the
Effective Time represented outstanding shares of Larscom Common Stock (the
"Certificates") may be entitled pursuant to Section 2.2(d) (such Verilink Common
Stock, together with the amount of any dividends or other distributions payable
with respect thereto and any cash in lieu of fractional shares, being
collectively hereinafter referred to as the "Exchange Fund").
(b) Exchange Procedures.
Promptly following the Effective Time, the Exchange Agent shall mail to each
holder of record of a Certificate or Certificates whose shares were converted
pursuant to Section 2.1 into the right to receive shares of Verilink Common
Stock (i) a letter of transmittal in customary form, reasonably satisfactory to
Larscom (which shall specify that delivery shall be effected, and risk of loss
and title to the Certificates shall pass, only upon delivery of the Certificates
to the Exchange Agent, and shall contain such other provisions as Verilink may
reasonably require) and (ii) instructions for effecting the surrender of the
Certificates in exchange for Verilink Common Stock (plus cash in lieu of
fractional shares of Verilink Common Stock, if any, and any dividends or
distributions as provided below). Upon surrender of a Certificate for
cancellation to the Exchange Agent or to such other agent or agents as may be
appointed by Verilink, together with such letter of transmittal, duly executed,
and such other documents as may reasonably be required by the Exchange Agent,
the holder of such Certificate shall be entitled to receive in exchange therefor
a certificate representing that number of whole shares of Verilink Common Stock
which such holder has the right to receive pursuant to the provisions of Section
2.1 plus cash in lieu of fractional shares pursuant to Section 2.2(c) and any
dividends or distributions pursuant to Section 2.2(d), and the Certificate so
surrendered shall immediately be cancelled. In the event of a valid transfer of
ownership of Larscom Common Stock which is not registered in
5
the transfer records of Larscom, a certificate representing the proper number of
shares of Verilink Common Stock plus cash in lieu of fractional shares pursuant
to Section 2.2(c) and any dividends or distributions pursuant to Section 2.2(d)
may be issued or paid to a person other than the person in whose name the
Certificate so surrendered is registered, if such Certificate is presented to
the Exchange Agent, accompanied by all documents reasonably required to evidence
and effect such transfer and by evidence that any applicable stock transfer
taxes have been paid or are not payable. Until surrendered as contemplated by
this Section 2.2, each Certificate shall be deemed at any time after the
Effective Time to represent only the right to receive upon such surrender the
Verilink Common Stock issued in consideration therefor plus cash in lieu of
fractional shares pursuant to Section 2.2(c) and any dividends or distributions
pursuant to Section 2.2(d) as contemplated by this Section 2.2.
(c) No Fractional Shares.
No fraction of a share of Verilink Common Stock shall be issued upon the
surrender for exchange of Certificates, and such fractional share interests
shall not entitle the owner thereof to vote or to any other rights of a
stockholder of Verilink. Notwithstanding any other provision of this Agreement,
each holder of shares of Verilink Common Stock converted pursuant to the Merger
who would otherwise have been entitled to receive a fraction of a share of
Verilink Common Stock (after taking into account all Certificates delivered by
such holder and the aggregate number of shares of Larscom Common Stock
represented thereby) shall receive, in lieu thereof, cash (without interest) in
an amount equal to such fractional part of a share of Verilink Common Stock
multiplied by the last reported sale price of a share of Verilink Common Stock
at the 4:00 p.m. Eastern time, end of regular trading hours on The Nasdaq Stock
Market, on the last trading day prior to the Effective Time (or if the Verilink
Common Stock shall not be traded on The Nasdaq Stock Market at such time, the
last reported sale price on such day as reported on the OTC Bulletin Board, if
so reported, or the average of the high and low bid prices in the
over-the-counter market on such day if not so reported).
(d) Distributions with Respect to Unexchanged Shares.
No dividends or other distributions declared or made after the Effective Time
with respect to Verilink Common Stock with a record date after the Effective
Time shall be paid to the holder of any unsurrendered Certificate until the
holder of record of such Certificate shall surrender such Certificate. Subject
to the effect of applicable laws, promptly following surrender of any such
Certificate, the Exchange Agent shall deliver to the record holder thereof,
without interest, (i) the amount of dividends or other distributions with a
record date after the Effective Time previously paid with respect to such whole
shares of Verilink Common Stock, and (ii) at the appropriate payment date, the
amount of dividends or other distributions payable with respect to such whole
shares of Verilink Common Stock having a record date after the Effective Time
but prior to the date of such surrender and a payment date subsequent to the
date of such surrender.
(e) No Further Ownership Rights in Verilink Common Stock. All
shares of Verilink Common Stock issued upon the surrender for exchange of
Certificates in accordance with the terms hereof (including any cash or
dividends or other distributions paid pursuant to Section 2.2(c) or 2.2(d))
shall be deemed to have been issued (and paid) in full satisfaction of all
rights pertaining to such shares of Larscom Common Stock, and from and after the
Effective
6
Time there shall be no further registration of transfers on the stock transfer
books of the Surviving Corporation of the shares of Larscom Common Stock which
were outstanding immediately prior to the Effective Time. If, after the
Effective Time, Certificates are presented to the Surviving Corporation or the
Exchange Agent for any reason, they shall be cancelled and exchanged for the
consideration provided for, and in accordance with the procedures set forth, in
this Article II.
(f) Termination of Exchange Fund/Limitation of Liability. Any
portion of the Exchange Fund (including the proceeds of any investments thereof
and any Verilink Common Stock) that remains unclaimed by the stockholders of
Larscom for six (6) months after the Effective Time shall be paid to Verilink.
Any stockholders of Larscom who have not theretofore complied with this Article
II shall thereafter look only to Verilink for payment of their shares of
Verilink Common Stock and any cash, dividends and other distributions in respect
of Verilink Common Stock payable and/or issuable pursuant to Section 2.1, 2.2(c)
and 2.2(d) upon due surrender of the Certificates (or affidavits of loss in lieu
thereof and, if required, the posting of a bond), in each case, without any
interest thereon. To the extent permitted by applicable law, none of Verilink,
the Merger Sub, Larscom, the Surviving Corporation or the Exchange Agent shall
be liable to any holder of shares of Verilink Common Stock or Larscom Common
Stock, as the case may be, for such shares (or dividends or distributions with
respect thereto) delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law.
(g) Withholding Rights. Each of the Exchange Agent, Verilink
and the Surviving Corporation shall be entitled to deduct and withhold from the
consideration otherwise payable pursuant to this Article II to any holder of
shares of Larscom Common Stock such amounts as it reasonably determines that it
is required to deduct and withhold with respect to the making of such payment
under the Code, or any other applicable provision of state, local or foreign tax
law or any other applicable legal requirement. To the extent that amounts are so
deducted or withheld by the Exchange Agent, the Surviving Corporation or
Verilink, as the case may be, such deducted or withheld amounts shall be treated
for all purposes of this Agreement as having been paid to the holder of the
shares of Larscom Common Stock in respect of which such deduction and
withholding was made by the Exchange Agent, the Surviving Corporation or
Verilink, as the case may be.
(h) Lost Certificates. In the event that any Certificate shall
have been lost, stolen or destroyed, the Exchange Agent may require the
stockholder of such lost, stolen or destroyed Certificate, in exchange for such
lost, stolen or destroyed Certificate, to make and deliver an affidavit of that
fact and provide such other documentation and pay such fees, or post such bonds,
as is the customary practice of the Exchange Agent to require, prior to
delivering the certificates representing the shares of Verilink Common Stock
into which the shares of Larscom Common Stock represented by such lost, stolen
or destroyed Certificate was converted pursuant to Section 2.1 and cash for
fractional shares, if any, as may be required pursuant to Section 2.2(c) and any
dividends or distributions payable pursuant to Section 2.2(d), in each case
without any interest thereon; provided, however, that Verilink may, in its
discretion and as a condition precedent to the issuance of such certificates
representing shares of Verilink Common Stock and other distributions, require
the owner of such lost, stolen or destroyed Certificate to deliver a bond in
such sum as it may reasonably direct as indemnity against any claim that may be
made against Verilink, the Surviving Corporation, or the Exchange Agent with
respect to the
7
Certificates alleged to have been lost, stolen or destroyed; provided, further,
that in no event shall Verilink be required to pay any fee or post any bond
referred to in this Section 2.2(h).
2.3 Larscom Stock Plans and Larscom Warrants.
(a) At the Effective Time, each outstanding option to purchase
Larscom Common Stock under any of the Larscom Incorporated Stock Incentive Plan,
the Larscom Incorporated Stock Option Plan for Non-Employee Directors, the VINA
Technologies, Inc. 2000 Stock Incentive Plan, the VINA Technologies, Inc. 1998
Stock Plan, and the VINA Technologies, Inc. 1996 Stock Option/Stock Issuance
Plan (collectively, the "Larscom Stock Plans"), all of which shall be fully
vested and exercisable (each a "Larscom Stock Option") and each Larscom Warrant
shall be assumed by Verilink and shall thereafter be exercisable, on the same
terms and conditions as were applicable under such Larscom Stock Option (subject
to the applicable Larscom Stock Plan as administered by Verilink from and after
the Effective Time) or Larscom Warrant (in accordance with the past practices of
Larscom with respect to the interpretation and application of such terms and
conditions), as the case may be, prior to the Effective Time, except that (i)
each Larscom Stock Option and Larscom Warrant shall be exercisable for that
number of whole shares of Verilink Common Stock equal to the product obtained by
multiplying (x) the number of shares of Larscom Common Stock that were issuable
upon exercise of such Larscom Stock Option or Larscom Warrant immediately prior
to the Effective Time by (y) the Exchange Ratio, rounded, in the case of a
Larscom Warrant, up, and, in the case of any Larscom Stock Option, down, to the
nearest whole number of shares of Larscom Common Stock, and (ii) the per share
exercise price for the shares of Larscom Common Stock issuable upon exercise of
such assumed Larscom Stock Option or Larscom Warrant shall be equal to the
quotient determined by dividing (x) the exercise price per share of Larscom
Common Stock at which such Larscom Stock Option or Larscom Warrant was
exercisable immediately prior to the Effective Time, by (y) the Exchange Ratio,
rounded up to the nearest whole cent.
(b) The parties intend that, to the extent that any Larscom
Stock Option constituted an incentive stock option immediately prior to the
Effective Time, such option continues to qualify as an incentive stock option to
the maximum extent permitted by Section 422 of the Code, and the assumption of
the Larscom Stock Option provided in Section 2.3(a) satisfy the conditions of
Section 424(a) of the Code. Holders of Larscom Stock Options or Larscom Warrants
will not be entitled to acquire shares of Larscom Common Stock after the Merger.
In addition, prior to the Effective Time, Larscom will make any amendments to
the terms of such Larscom Stock Plans or arrangements that are necessary to give
effect to the transactions contemplated by this Section 2.3.
(c) As soon as practicable after the Effective Time, Verilink
shall deliver to the participants in the Larscom Stock Plans and holders of
Larscom Warrants an appropriate notice evidencing the foregoing assumption of
such Larscom Stock Options or Larscom Warrants, as the case may be, and setting
forth such participants' rights in the Larscom Stock Options and Larscom
Warrants, as provided in this Section 2.3.
(d) Verilink shall take all corporate action necessary to
reserve for issuance a sufficient number of shares of Verilink Common Stock for
delivery upon exercise of Larscom
8
Stock Options and Larscom Warrants assumed in accordance with this Section 2.3.
Within ten (10) business days after the Effective Time, Verilink shall file one
or more registration statements on Form S-8 (or any successor form) with respect
to the shares of Verilink Common Stock subject to such Larscom Stock Options (to
the extent a Form S-8 is available for such options) and shall maintain the
effectiveness of such registration statement or registrations statements (and
maintain the current status of the prospectus or prospectuses contained therein)
for so long as such Larscom Stock Options remain outstanding.
(e) The rights of participants in the Larscom Incorporated
Stock Purchase Plan (the "Larscom ESPP") with respect to any offering then
underway under the Larscom ESPP shall be determined by treating the last
business day prior to the Effective Time as the last day of such offering and by
making such other pro rata adjustments as may be necessary to reflect the
shortened offering but otherwise treating such shortened offering as a fully
effective and completed offering for all purposes under the Larscom ESPP.
Outstanding rights to purchase shares of Larscom Common Stock shall be exercised
in accordance with the Larscom ESPP, and each share of Larscom Common Stock
purchased pursuant to such exercise shall by virtue of the Merger, and without
any action on the part of the holder thereof, be converted into the right to
receive a number of shares of Verilink Common Stock in accordance with Section
2.1(b) hereof without issuance of certificates representing issued and
outstanding shares of Larscom Common Stock to participants under the Larscom
ESPP. As of the Effective Time, the Larscom ESPP shall be terminated. Prior to
the Effective Time, Larscom shall (i) provide Verilink with evidence that the
Larscom ESPP has been terminated pursuant to resolutions of Larscom's Board, the
form and substance of such resolutions shall be subject to prior review and
approval of Verilink (the approval of which shall not be unreasonably withheld)
and (ii) take such other actions (including, but not limited to, if appropriate,
amending the Larscom ESPP) that are necessary to give effect to the transaction
contemplated by this Section 2.3(e).
2.4 Adjustment Factor.
(a) The "Adjustment Factor" shall be equal to the quotient
obtained by dividing (i) the Closing Net Adjusted Working Capital Amount plus
$24,365,600 by (ii) the Targeted Net Adjusted Working Capital Amount plus
$24,365,600; provided, however, if the Closing Net Adjusted Working Capital
Amount is less than the Targeted Net Working Capital Amount by $100,000.00 or
less, or exceeds the Targeted Net Working Capital Amount, then, in either case,
the Adjustment Factor shall be equal to 1. The "Targeted Net Adjusted Working
Capital Amount" shall be:
(i) $5,500,000 if the Closing Date occurs on or
before July 9, 2004;
(ii) $5,000,000 if the Closing Date occurs on or
after July 10, 2004 and before August 15, 2004; or
(iii) $4,500,000 if the Closing Date occurs on or
after August 15, 2004.
(b) Larscom shall cause to be prepared and delivered to
Verilink a "Statement of Closing Net Adjusted Working Capital Amount," which
shall include Larscom's calculation of the Closing Net Adjusted Working Capital
Amount, as of the anticipated Closing Date, which
9
date shall be two business days after the later to occur of the Verilink
Stockholders Meeting or the Larscom Stockholders Meeting or such other date as
may be mutually agreed upon by Verilink and Larscom (the "Adjustment Date").
Verilink shall have an opportunity to participate in Larscom's
preparation of the Statement of Closing Net Adjusted Working Capital Amount and
to review all records and workpapers related thereto. Larscom shall deliver the
Statement of Closing Net Adjusted Working Capital Amount no later than ten (10)
Business Days prior to the Adjustment Date (the "Delivery Date"). If Larscom and
Verilink are unable to agree on the Statement of Closing Net Adjusted Working
Capital Amount within ten (10) Business Days after the Delivery Date, then
Verilink and Larscom agree to retain an accounting firm selected by Verilink and
reasonably acceptable to Larscom (the "Accounting Firm") to read and analyze the
Statement of Closing Net Adjusted Working Capital Amount delivered by Larscom
for correctness and compliance with the calculation described in Section 2.4(c)
below within five (5) Business Days of the date of the delivery of Larscom's
Statement of Closing Net Adjusted Working Capital Amount (the "Review Period")
to the Accounting Firm. Both Verilink and Larscom agree to execute and deliver
such indemnity and other agreements related to the engagement of the Accounting
Firm as may be required by the Accounting Firm. Based upon the foregoing
procedures, the Accounting Firm shall have the right, in its sole discretion, to
modify the Statement of Closing Net Adjusted Working Capital Amount to ensure
that it complies with the calculation described in Section 2.4(c) below. The
Accounting's Firm's procedures and modifications, if any, of the Statement of
Closing Net Adjusted Working Capital Amount, if any, shall be binding on the
Parties. Both Larscom and Verilink shall have an opportunity to participate in
such analysis and comment on the workpapers related thereto prior to the
delivery of the final Statement of Closing Net Adjusted Working Capital Amount
by the Accounting Firm.
(c) For the purposes of this Section 2.4, the "Closing Net
Adjusted Working Capital Amount" shall be calculated as follows:
(i) Current Assets of Larscom (as defined under, and
calculated in accordance with, GAAP on a consistent basis with
the Larscom Balance Sheet), less
(ii) Current Liabilities of Larscom (as defined
under, and calculated in accordance with, GAAP on a consistent
basis with the Larscom Balance Sheet); provided, however, that
(A) up to $690,000 of Larscom's expenses associated with the
transactions contemplated by this Agreement (including,
without limitation, all legal, investment banking and other
professional fees and expenses and all printing, mailing and
transfer agent fees associated with the Joint Proxy
Statement/Prospectus delivered to Larscom's stockholders (such
printing and mailing fees calculated on a pro rata basis
between Larscom's total number of record and beneficial
stockholders as of the record date for the Larscom Meeting and
Verilink's total number of record and beneficial stockholders
as of the record date for the Verilink Meeting)), (B) employee
severance expenses relating to employees whose employment is
terminated immediately prior to or after the Closing, and (C)
expenses relating to retention bonuses payable to Larscom
employees, whether or not any of the expenses set forth in
clauses (A) through
10
(C) have been paid or are payable on or after the Closing
Date, shall not be taken into account for any purpose to
decrease the Closing Net Adjusted Working Capital Amount.
2.5 Taking Necessary and Further Action.
If, at any time after the Effective Time, any further action is necessary or
desirable to carry out the purpose of this Agreement and to vest the Surviving
Corporation with the full right, title and possession to all assets, property,
rights, privileges, powers and franchises of Larscom and the Merger Sub, the
officers and directors of Larscom and the Merger Sub will take all such
reasonable, lawful and necessary action.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF LARSCOM
Larscom represents and warrants to Verilink and the Merger Sub that the
statements contained in this Article III are true and correct, except as
expressly set forth herein or in the disclosure schedule delivered by Larscom to
Verilink on the date of this Agreement which is made a part hereof (the "Larscom
Disclosure Schedule"). The Larscom Disclosure Schedule will be arranged in
paragraphs corresponding to the lettered and numbered paragraphs contained in
this Agreement.
3.1 Organization, Standing and Power.
Larscom is a corporation duly organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation, has all requisite
corporate power and authority to own, lease and operate its properties and
assets and to carry on its business as now being conducted and as presently
proposed to be conducted, and is duly qualified to do business and is in good
standing as a foreign corporation in each jurisdiction where the character of
the properties it owns, operates or leases or the nature of its activities makes
such qualification necessary, except for such failures to be so organized,
qualified or in good standing, individually or in the aggregate, which have not
had, and are not reasonably likely to have a Larscom Material Adverse Effect.
For purposes of this Agreement, the term "Larscom Material Adverse Effect" means
any material adverse change, event, circumstance or development with respect to,
or material adverse effect on, the business, assets, liabilities,
capitalization, condition (financial or other), or results of operations of
Larscom and its Subsidiaries, taken as a whole; provided, however, that none of
the following shall, in and of itself, be taken into account when determining
whether there has been, or will be, a Larscom Material Adverse Effect: (i) any
failure by Larscom to meet or exceed analysts' published revenues or analysts'
published earnings predictions or any change in Larscom's stock price or trading
volume; (ii) with respect to the use of the term "Larscom Material Adverse
Effect" in the representations and warranties contained in Section 3.8, any
effect resulting directly from the announcement or pendency of this Agreement or
the Merger; or (iii) any effect that results from changes affecting generally
the industry or industries in which Larscom or any of its Subsidiaries
participates, the U.S. economy as a whole or foreign economies in any locations
where Larscom or any of its Subsidiaries has material operations, or sales or
customers unless such condition shall disproportionately
11
adversely affect Larscom or any of its Subsidiaries.
3.2 Charter Documents.
Larscom has previously furnished or made available to Verilink a complete and
correct copy of its (i) Certificate of Incorporation and Bylaws as amended to
date (together, the "Larscom Charter Documents") and (ii) each of its
Subsidiaries' Certificate of Incorporation, or equivalent organizational
documents, and Bylaws, or equivalent organizational documents. Such Larscom
Charter Documents and equivalent organizational documents of each of its
Subsidiaries are in full force and effect. Larscom is not in violation of any of
the provisions of the Larscom Charter Documents, and no Subsidiary of Larscom is
in violation of its equivalent organizational documents.
3.3 Capitalization.
(a) The authorized capital stock of Larscom consists of
111,900,000 shares of Larscom Common Stock, $0.01 par value per share, of which
there were 5,100,255 shares issued and outstanding as of the close of business
on April 28, 2004, and 5,000,000 shares of preferred stock, $0.01 par value per
share ("Larscom Preferred Stock"), of which no shares are outstanding. As of the
close of business on April 28, 2004, (i) no shares of Larscom Common Stock were
held in the treasury for Larscom; (ii) 637,010 shares of Larscom Common Stock
were reserved for future issuance pursuant to the Larscom Incorporated Stock
Plans and 586,133 shares were subject to outstanding options; (iii) 44,836
shares of Larscom Common Stock were reserved for future issuance pursuant to the
Larscom ESPP and no shares were subject to outstanding purchase rights; and (iv)
269,319 shares of Larscom Common Stock were reserved for future issuance upon
the exercise of outstanding warrants (the "Larscom Warrants").
(b) Section 3.3(b) of the Larscom Disclosure Schedule lists
all issued and outstanding shares of Larscom Common Stock that constitute
restricted stock or that are otherwise subject to a repurchase or redemption
right or right of first refusal in favor of Larscom, indicating the name of the
applicable stockholder, the vesting schedule for any such shares, including the
extent to which any such repurchase or redemption right or right of first
refusal has lapsed as of the date of this Agreement, the price at which such
stock can be repurchased and redeemed and whether (and to what extent) the
vesting will be accelerated in any way by the Merger or by termination of
employment or change in position following consummation of the Merger.
(c) Section 3.3(c) of the Larscom Disclosure Schedule sets
forth a complete and accurate list, as of the date of this Agreement, of all
Larscom Stock Options, indicating with respect to each such Larscom Stock Option
the name of the holder thereof, the Larscom Stock Plan under which it was
granted, the number of shares of Larscom Common Stock subject to such Larscom
Stock Option, the exercise price, the date of grant and expiration, and the
vesting schedule, including the vesting commencement date and whether (and to
what extent) the vesting will be accelerated in any way by the Merger or by
termination of employment or change in position following consummation of the
Merger. All Larscom Stock Options have been granted under one of the Larscom
Stock Plans. Larscom has provided or made available to Verilink complete and
accurate copies of all Larscom Stock Plans and the forms of all stock option
12
agreements evidencing Larscom Stock Options and Larscom Warrants. No
acceleration of vesting, exercise, or repurchase of any Larscom Stock Option or
Larscom Warrant will occur as a result of or in connection with the Merger or by
termination of employment or change in position following consummation of the
Merger. The exercise period of each Larscom Stock Option terminates within 90
days or less of the termination of the holder's employment or service to
Larscom.
(d) There are no equity securities or other similar ownership
interests of any class or series of capital stock of Larscom, or any securities
convertible into or exercisable or exchangeable for such equity securities or
other similar ownership interests issued, reserved for issuance or outstanding.
Except for securities Larscom owns, directly or indirectly through any of its
Subsidiaries, there are no equity securities, partnership interests or other
similar ownership interests of any class or series of capital stock of any
Subsidiary of Larscom, or any securities convertible into or exercisable or
exchangeable for such equity securities, partnership interests or other similar
ownership interests issued, reserved for issuance or outstanding. There are no
options, warrants, equity securities, partnership interests or other similar
ownership interests, calls, rights (including preemptive rights), commitments or
agreements of any kind or character to which Larscom or any of its Subsidiaries
is a party or by which Larscom or any of its Subsidiaries is bound obligating
Larscom or any of its Subsidiaries to issue, deliver or sell, or cause to be
issued, delivered or sold, or repurchase, redeem or otherwise acquire, or cause
the repurchase, redemption or acquisition, of any shares of capital stock of
Larscom or any of its Subsidiaries or obligating Larscom or any of its
Subsidiaries to grant, extend, accelerate the vesting of or enter into any such
option, warrant, equity security, partnership interest or other similar
ownership interest, call, right, commitment or agreement. There are no
outstanding stock appreciation, phantom stock or similar rights with respect to
Larscom or any of its Subsidiaries.
(e) There is no agreement, written or oral, between Larscom or
any Affiliate of Larscom and any holder of the securities of Larscom relating to
the sale or transfer (including agreements relating to rights of first refusal,
co-sale rights or "drag-along" rights), registration under the Securities Act of
1933, as amended (together with the rules and regulations promulgated
thereunder, the "Securities Act"), or voting, of the capital stock of Larscom.
There is no rights agreement, "poison pill" anti-takeover plan or other
agreement or understanding to which Larscom is a party or by which it is bound
with respect to any equity security of any class of Larscom. For purposes of
this Agreement, the term "Affiliate" when used with respect to any party means
any person who is an "affiliate" of that party within the meaning of Rule 405
promulgated under the Securities Act.
(f) All outstanding shares of Larscom Common Stock are and all
shares of Larscom Common Stock subject to issuance as specified in Section
3.3(a) above will be upon issuance (on the terms and conditions specified in the
instruments pursuant to which they are issuable), duly authorized, validly
issued, fully paid and nonassessable and not subject to or issued in violation
of any purchase option, call option, right of first refusal, preemptive right,
subscription right or any similar right under any provision of the DGCL,
Larscom's Charter Documents or any agreement to which Larscom is a party or is
otherwise bound. All outstanding shares of capital stock, the Larscom Stock
Options, the Larscom Warrants and other securities of Larscom and its
Subsidiaries have been issued and granted in compliance in all material respects
13
with all applicable securities laws and other applicable laws and all
requirements set forth in any applicable contracts.
(g) No consent of the holders of Larscom Stock Options is
required in connection with the actions contemplated by Section 2.3.
(h) Stockholders of Larscom are not entitled to dissenters' or
appraisal rights under applicable state law in connection with the Merger.
3.4 Subsidiaries.
(a) Section 3.4(a) of the Larscom Disclosure Schedule sets
forth, for each Subsidiary of Larscom: (i) its name; (ii) the number and type of
outstanding equity securities owned of record and beneficially by Larscom (as
well as securities exchangeable or exercisable for and convertible into equity
securities thereby) and a list of the holders thereof and the identity of, and
the percentage of outstanding equity securities owned of record and
beneficially, by, any other stockholder of a Subsidiary of Larscom; and (iii)
the jurisdiction of organization. For purposes of this Agreement, the term
"Subsidiary" means, with respect to any party, any corporation, partnership,
trust, limited liability company or other non-corporate business enterprise in
which such party (or another Subsidiary of such party) holds stock or other
ownership interests representing (A) more than 50% of the voting power of all
outstanding stock or ownership interests of such entity or (B) the right to
receive more than 50% of the net assets of such entity available for
distribution to the holders of outstanding stock or ownership interests upon a
liquidation or dissolution of such entity.
(b) Each Subsidiary of Larscom is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, has all requisite corporate power and
authority to own, lease and operate its properties and assets and to carry on
its business as now being conducted and as presently proposed to be conducted,
and is duly qualified to do business and is in good standing as a foreign
corporation in each jurisdiction where the character of its properties owned,
operated or leased or the nature of its activities makes such qualification
necessary, except for such failures to be so organized, qualified or in good
standing that, individually or in the aggregate, have not had, and are not
reasonably likely to have, a Larscom Material Adverse Effect. All of the
outstanding shares of capital stock and other equity securities or interests of
each Subsidiary of Larscom are duly authorized, validly issued, fully paid,
nonassessable and not subject to or were not issued in violation of any purchase
option, call option, right of first refusal, preemptive right, subscription
right or any similar right under any provision of applicable law, such
Subsidiary's charter documents or any agreement to which such Subsidiary is a
party or is otherwise bound, and all such shares are owned, of record and
beneficially, by Larscom or another of its Subsidiaries free and clear of all
security interests, liens, claims, pledges, agreements, limitations in Larscom's
voting rights, charges or other Liens of any nature. There are no voting trusts,
proxies or other agreements or understandings with respect to the voting of any
capital stock of any Subsidiary of Larscom.
(c) Larscom does not control directly or indirectly or have
any direct or indirect equity participation or similar interest in any
corporation, partnership, limited liability company, joint venture, trust or
other business association or entity, which is not a Subsidiary of
14
Larscom. There are no obligations, contingent or otherwise, of Larscom or any of
its Subsidiaries to repurchase, redeem or otherwise acquire any shares of
capital stock of any Subsidiary of Larscom or to provide funds to or make any
material investment (in the form of a loan, capital contribution or otherwise)
in any Subsidiary of Larscom or any other entity.
3.5 Authority; No Conflict; Required Filings and Consents.
(a) Larscom has all requisite corporate power and authority to
execute and deliver this Agreement, subject only to the adoption of this
Agreement and approval of the Merger (the "Larscom Voting Proposal") by
Larscom's stockholders under the DGCL and the rules of The Nasdaq Stock Market,
Inc. and applicable law (the "Larscom Stockholder Approval"), to perform its
obligations hereunder and to consummate the transactions contemplated by this
Agreement. Without limiting the generality of the foregoing, the Larscom Board,
at a meeting duly called and held, by the unanimous vote of all directors (i)
determined that the Merger is fair, advisable and in the best interests of
Larscom and its stockholders, (ii) adopted and approved this Agreement in
accordance with the provisions of the DGCL and the Larscom Charter Documents,
(iii) approved the Larscom Voting Agreement and the transactions contemplated
thereby, and (iv) directed that this Agreement and the Larscom Voting Proposal
be submitted to the stockholders of Larscom for their adoption and approval and
resolved to recommend that the stockholders of Larscom vote in favor of the
adoption of this Agreement and the approval of the Larscom Voting Proposal. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby by Larscom have been duly authorized by all
necessary corporate action on the part of Larscom, subject only to the required
receipt of the Larscom Stockholder Approval. This Agreement has been duly
executed and delivered by Larscom and constitutes the valid and binding
obligation of Larscom, enforceable in accordance with its terms, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or affecting creditors' rights
and to general equity principles (the "Bankruptcy and Equity Exception"). No
takeover statute or similar statute or regulation applies to the Merger, this
Agreement or any of the transactions contemplated hereby.
(b) The execution and delivery of this Agreement by Larscom do
not, and the consummation by Larscom of the transactions contemplated by this
Agreement shall not, (i) conflict with, or result in any violation or breach of,
any provision of the Certificate of Incorporation or Bylaws of Larscom or of the
charter, bylaws, or other organizational document of any Subsidiary of Larscom,
(ii) conflict with, or result in any violation or breach of, or constitute (with
or without notice or lapse of time, or both) a default (or give rise to a right
of termination, cancellation or acceleration of any obligation or loss of any
material benefit) under, or require a consent or waiver under, constitute a
change in control under, require the payment of a penalty under or result in the
imposition of any mortgages, security interests, pledges, liens, charges or
encumbrances of any nature ("Liens") on Larscom's or any of its Subsidiaries'
assets under any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, lease, license, contract or other agreement, instrument or
obligation to which Larscom or any of its Subsidiaries is a party or by which
any of them or any of their properties or assets may be bound, or (iii) subject
to obtaining the Larscom Stockholder Approval and compliance with the
requirements specified in clauses (i) through (vi) of Section 3.5(c), conflict
with or violate any permit, concession, franchise, license, judgment,
injunction, order, decree, statute, law,
15
ordinance, rule or regulation applicable to Larscom or any of its Subsidiaries
or any of its or their properties or assets, except in the case of clauses (ii)
and (iii) of this Section 3.5(b), for any such conflicts, violations, breaches,
defaults, terminations, cancellations, accelerations or losses which,
individually or in the aggregate, are not, reasonably likely to have a Larscom
Material Adverse Effect. Section 3.5(b) of the Larscom Disclosure Schedule lists
all consents, waivers and approvals under any of Larscom's or any of its
Subsidiaries' agreements, licenses or leases required to be obtained in
connection with the consummation of the Merger (collectively, the "Larscom
Consents"). Section 7.3 of the Larscom Disclosure Schedule lists all consents,
waivers and approvals under any of Larscom's or any of its Subsidiaries'
agreements, licenses or leases required to be obtained in connection with the
consummation of the Merger and transactions contemplated hereby, which, if
individually or in the aggregate were not obtained, would result in a material
loss of benefits to Verilink, Larscom or the Surviving Corporation as a result
of the Merger or a Larscom Material Adverse Effect.
(c) No consent, approval, license, permit, order or
authorization of, or registration, declaration, notice or filing with, any
court, arbitrational tribunal, administrative agency or commission or other
governmental or regulatory authority, agency or instrumentality (a "Governmental
Entity") is required by or with respect to Larscom or any of its Subsidiaries in
connection with the execution and delivery of this Agreement by Larscom or the
performance by Larscom of the transactions contemplated by this Agreement,
except for (i) applicable requirements, if any, of the Securities Act or the
Securities Exchange Act of 1934, as amended (together with the rules and
regulations promulgated thereunder, the "Exchange Act"), (ii) the filing of the
Certificate of Merger with the Delaware Secretary of State and appropriate
corresponding documents with the appropriate authorities of other states in
which Larscom is qualified as a foreign corporation to transact business, (iii)
the filing of such reports, schedules or materials under Section 13 of or Rule
14a-12 under the Exchange Act and materials under Rule 165 and Rule 425 of the
Securities Act as may be required in connection with this Agreement and the
transactions contemplated hereby, (iv) such consents, approvals, orders,
authorizations, registrations, declarations and filings as may be required under
applicable state securities laws ("Blue Sky Laws") and the laws of any foreign
country, (v) the rules and regulations of The Nasdaq Stock Market, Inc. and (vi)
such consents, authorizations, orders, filings, approvals and registrations
which, if not obtained or made, would not be reasonably likely to have a Larscom
Material Adverse Effect.
(d) The affirmative vote for adoption of the Larscom Voting
Proposal by the holders of a majority of the outstanding shares of Larscom
Common Stock on the record date for the meeting of Larscom's stockholders to
consider the Larscom Voting Proposal (the "Larscom Meeting") present or
represented by proxy is the only vote of the holders of any class or series of
Larscom's capital stock or other securities necessary to approve the Larscom
Voting Proposal. There are no bonds, debentures, notes or other indebtedness of
Larscom having the right to vote (or convertible into, or exchangeable for,
securities having the right to vote) on any matters on which stockholders of
Larscom may vote.
3.6 SEC Filings; Financial Statements; Information Provided.
(a) Larscom and its Subsidiaries have filed all registration
statements, forms, reports and other documents required to be filed by Larscom
with the Securities and Exchange
16
Commission ("SEC") since January 1, 2001 and has made available to Verilink
copies of all registration statements, forms, reports and other documents
(including, without limitation, all certifications and statements required by
Rule 13a-14 or 15d-14 under the Exchange Act or Section 906 of the
Sarbanes-Oxley Act of 2002) filed by Larscom or its Subsidiaries with or
furnished to the SEC since such date, all of which (other than the
certifications pursuant to said Section 906) are available on the SEC's EDGAR
system. All such required registration statements, forms, reports and other
documents (including those that Larscom may file after the date hereof until the
Closing) are referred to herein as the "Larscom SEC Reports." The Larscom SEC
Reports (i) were or will be filed on a timely basis, (ii) at the time filed,
were or will be prepared in compliance with the applicable requirements of the
Securities Act and the Exchange Act, as the case may be, and the rules and
regulations of the SEC thereunder applicable to such Larscom SEC Reports, and
(iii) did not or will not at the time they were or are filed contain any untrue
statement of a material fact or omit to state a material fact required to be
stated in such Larscom SEC Reports or necessary in order to make the statements
in such Larscom SEC Reports, in the light of the circumstances under which they
were made, not misleading. No Subsidiary of Larscom is subject to the reporting
requirements of Sections 13(a) or 15(d) of the Exchange Act.
(b) Each of the audited consolidated financial statements
(including, in each case, any related notes and schedules) and unaudited interim
consolidated financial statements contained or to be contained in Larscom SEC
Reports at the time filed (i) complied or will comply as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto, (ii) were or will be prepared in
accordance with United States generally accepted accounting principles ("GAAP")
applied on a consistent basis throughout the periods involved (except as may be
indicated in the notes to such financial statements or, in the case of unaudited
interim financial statements, as permitted by the SEC on Form 10-Q under the
Exchange Act) and (iii) fairly presented or will fairly present the consolidated
financial position of Larscom and its Subsidiaries as of the dates indicated and
the consolidated results of Larscom and its Subsidiaries' operations and cash
flows for the periods indicated, consistent with the books and records of
Larscom and its Subsidiaries, except that the unaudited interim financial
statements were or are subject to normal and recurring year-end adjustments
which were not or are not expected to be material in amount. The consolidated,
audited balance sheet of Larscom as of December 31, 2003 is referred to herein
as the "Larscom Balance Sheet."
(c) Larscom has previously furnished to Verilink a complete
and correct copy of any amendments or modifications, which have not yet been
filed with the SEC but which are required to be filed, to agreements, documents
or other instruments which previously had been filed by Larscom with the SEC
pursuant to the Securities Act or the Exchange Act.
(d) Since the Larscom Balance Sheet neither Larscom nor any of
its Subsidiaries has changed any of its methods of accounting or accounting
practices in any material respect.
3.7 No Undisclosed Liabilities.
Except for normal and recurring liabilities incurred since the date of the
Larscom Balance Sheet
17
in the ordinary course of business consistent with past practice (the "Ordinary
Course of Business"), Larscom and its Subsidiaries do not have any material
liabilities, either accrued, contingent or otherwise (whether or not required to
be reflected in financial statements in accordance with generally accepted
accounting principles), and whether due or to become due.
3.8 Absence of Certain Changes or Events.
Except as set forth in Larscom SEC Reports which were available on the SEC's
EDGAR system on the day before the date of this Agreement, since the date of the
Larscom Balance Sheet, Larscom and its Subsidiaries have conducted their
respective businesses only in the Ordinary Course of Business and, since such
date, (a) there has not been any change, event, circumstance, development or
effect that individually or in the aggregate has had, or is reasonably likely to
have, a Larscom Material Adverse Effect, (b) there has not been any material
damage, destruction or other casualty loss with respect to any material asset or
property owned, leased or otherwise used by Larscom or any of its Subsidiaries,
whether or not covered by insurance, (c) neither Larscom nor any of its
Subsidiaries has declared, accrued, set aside or paid any dividend or made any
other distribution in respect of any shares of capital stock or other similar
ownership interests or repurchased, redeemed or otherwise reacquired any shares
of capital stock or other securities or other similar ownership interests, (d)
neither Larscom nor any of its Subsidiaries has made any material Tax elections
and (e) neither Larscom nor any of its Subsidiaries has agreed or committed to
take any of the actions referred to in clauses (c) and (d) above.
3.9 Taxes.
(a) For the purposes of this Agreement, "Tax" or "Taxes"
refers to any and all federal, state, local and foreign taxes, assessments and
other governmental charges, duties, impositions and liabilities relating to
taxes, including, without limitation, taxes based upon or measured by gross
receipts, income, profits, sales, use and occupation, and value added, ad
valorem, transfer, franchise, withholding, payroll, recapture, employment,
excise and property taxes, together with all interest, penalties and additions
imposed with respect to such amounts and any obligations under any agreements or
arrangements with any other person with respect to such amounts and including
any liability for Taxes as a transferee or successor, by contract or otherwise.
(b) Larscom and each of its Subsidiaries have timely filed all
material federal, state, local and foreign returns, estimates, information
statements, reports, elections and all other filings ("Returns") relating to
Taxes required to be filed by Larscom and each of its Subsidiaries with any Tax
authority. Such Returns are true and correct in all material respects,
accurately reflect the liability for Taxes of Larscom and each of its
Subsidiaries, and have been completed in accordance with applicable law, and
Larscom and each of its Subsidiaries have paid or withheld and paid to the
appropriate governmental body all Taxes shown to be due on such Returns.
(c) Neither Larscom nor any of its Subsidiaries has been
delinquent in the payment of any material Tax nor is there any material Tax
deficiency outstanding, proposed or assessed against Larscom or any of its
Subsidiaries, nor has Larscom or any of its Subsidiaries
18
executed any unexpired waiver or extension of any statute of limitations on or
extending the period for the assessment or collection of any Tax, nor has any
such waiver or extension been requested from Larscom or any of its Subsidiaries
other than an extension resulting from the filing of a Tax Return after its due
date in the Ordinary Course of Business.
(d) No audit, action, suit or other examination of any Return
of Larscom or any of its Subsidiaries by any Tax authority is presently in
progress, nor has Larscom or any of its Subsidiaries been notified of any
request for such an audit or other examination.
(e) No adjustment relating to any Returns filed by Larscom or
any of its Subsidiaries has been proposed in writing formally or informally by
any Tax authority to Larscom or any of its Subsidiaries or any representative
thereof and there is no basis for such a claim for which Larscom or any of its
Subsidiaries should be aware.
(f) None of Larscom and its Subsidiaries (i) has been a member
of an affiliated group filing a consolidated federal income Tax Return (other
than a group the common parent of which was Larscom) or (ii) has any liability
for the Taxes of any person (other than Larscom and its Subsidiaries) under
Treasury Regulation 1.1502-6 (or any similar provision of state, local or
foreign law), as a transferee or successor, by contract or otherwise.
(g) Neither Larscom nor any of its Subsidiaries has any
liability for any material unpaid Taxes which has not been accrued for or
reserved on the Larscom Balance Sheet or the Larscom unaudited balance sheet
dated as of March 31, 2004 other than any liability for unpaid Taxes that may
have accrued since March 31, 2004 in connection with the operation of the
business of Larscom and its Subsidiaries in the Ordinary Course of Business, (i)
in accordance with GAAP, whether asserted or unasserted, contingent or otherwise
or (ii) that would result in a material decrease in the net worth of Larscom or
any such Subsidiary.
(h) Neither Larscom nor any of its Subsidiaries has, within
the two (2) year period ending on the Effective Time, made a distribution to
which Code Section 355 applies.
(i) No consent under Section 341(f) of the Code has been filed
with respect to Larscom or any of its Subsidiaries.
(j) Neither Larscom nor any of its Subsidiaries is, or has
been, at any time, a United States real property holding corporation (as defined
in Section 897(c)(2) of the Code) during the applicable period specified in
Section 897(c)(1)(A)(ii) of the Code.
3.10 Owned and Leased Real Properties.
(a) Neither Larscom nor any of its Subsidiaries owns or has
ever owned any real property.
(b) Section 3.10 of the Larscom Disclosure Schedule sets forth
a complete and correct list of all real property leased, subleased, licensed or
occupied by Larscom or any of its Subsidiaries (collectively the "Larscom
Leases") and the locations of each such premises. The premises subject to the
Larscom Leases are hereinafter referred to as collectively as "Larscom Leased
Property." Neither Larscom, nor any of its Subsidiaries nor, to Larscom's
knowledge,
19
any other party, is in default under any of the Larscom Leases (nor does there
exist any condition which, upon the passage of time or the giving of notice or
both, would cause a default). No property subject to a Larscom Lease is occupied
by a third party other than Larscom, and, to Larscom's knowledge, no third party
has a right to occupy such property other than Larscom. Larscom has provided to
Verilink complete and correct copies of all Larscom Leases, including all
amendments thereto; no term or condition of any of the Larscom Leases has been
modified, amended or waived except as shown in such copies; and there are no
other agreements or arrangements whatsoever relating to Larscom's or its
Subsidiaries' use or occupancy of any of the Larscom Leased Property. Larscom
has not transferred, mortgaged, or otherwise pledged or encumbered, or assigned
any interest in any of the Larscom Leases. Larscom or its Subsidiaries occupies
all of the Larscom Leased Property. To Larscom's knowledge, there is no pending
or threatened condemnation, rezoning, or similar proceeding affecting any
Larscom Leased Property or any portion thereof, each Larscom Leased Property is
supplied with utilities and other services sufficient to operate the business of
Larscom as presently conducted and neither the operations of the Larscom on the
Larscom Leased Property, nor the Larscom Leased Property, violate in any
material manner any applicable building code, zoning requirement, or
classification or statute relating to the particular property or such
operations. The Larscom Leased Property is in good operating condition and
repair and is suitable for the conduct of business as presently conducted
therein.
3.11 Intellectual Property.
(a) Larscom and its Subsidiaries own, license or otherwise
possess legally enforceable rights to use all Intellectual Property used in or
necessary to conduct the business of Larscom and its Subsidiaries as currently
conducted. For purposes of this Agreement, the term "Intellectual Property"
means any or all of the following and all rights in, arising out of, or
associated therewith: (i) all United States, international and foreign patents
and applications therefor and all reissues, divisions, renewals, extensions,
provisionals, continuations and continuations-in-part thereof; (ii) all
inventions (whether patentable or not), invention disclosures, improvements,
trade secrets, proprietary information, know how, technology, technical data and
customer lists, and all documentation relating to any of the foregoing; (iii)
all copyrights, copyrights registrations and applications therefor, and all
other rights corresponding thereto throughout the world; (iv) all industrial
designs and any registrations and applications therefor throughout the world;
(v) all mask works and any registrations and applications therefor throughout
the world (vi) all trade names, logos, URLs, common law trademarks and service
marks, trademark and service mark registrations and applications therefor
throughout the world; (vii) all databases and data collections and all rights
therein throughout the world; (viii) all moral and economic rights of authors
and inventors, however denominated, throughout the world, and (ix) any similar
or equivalent rights to any of the foregoing anywhere in the world.
(b) Section 3.11(b) of the Larscom Disclosure Schedule
accurately identifies, as of the date of this Agreement, all licenses,
sublicenses, and other agreements pursuant to which Larscom or any of its
Subsidiaries is authorized or licensed to use any third party Intellectual
Property (i) for incorporation or embedding into Larscom's or any of its
Subsidiaries' products, (ii) in conjunction with, or in the development of,
Larscom's or any of its Subsidiaries' products, or (iii) that is otherwise
material to the conduct of the business of Larscom or any of its Subsidiaries as
currently conducted (it being understood that (1) shrink
20
wrap or "click and accept" licenses for "off-the-shelf" software programs, and
(2) agreements providing for future license fees, royalties, or other payment
obligations by Larscom or any of its Subsidiaries that do not exceed $10,000
annually per agreement (other than contingent or unliquidated amounts) will not
be considered to be agreements to which reference is made in clauses (ii) and
(iii) of this Section 3.11(b)) (collectively, the "Larscom Material Inbound
Licenses").
(c) Section 3.11(c) of the Larscom Disclosure Schedule
accurately identifies, as of the date of this Agreement, all licenses,
sublicenses, and other agreements pursuant to which (i) any third party has been
granted any exclusive license under, or otherwise has received or acquired any
exclusive right or interest in, any Larscom Intellectual Property, or (ii) any
third party has been granted any non-exclusive license under, or otherwise has
received or acquired any non-exclusive right or interest in, any Larscom
Intellectual Property and pursuant to which such third party had or has
aggregate license fee or royalty payment obligations (other than contingent or
unliquidated amounts) in excess of $10,000 annually (collectively, the "Larscom
Material Outbound Licenses" and, together with the Larscom Material Inbound
Licenses, the "Larscom Material Licenses"). As used herein, "Larscom
Intellectual Property" means any Intellectual Property that is owned by, or
purported to be owned by, Larscom or any of its Subsidiaries.
(d) Section 3.11(d) of the Larscom Disclosure Schedule sets
forth, as of the date of this Agreement, a complete and accurate list of each
patent, copyright registration, trademark and service mark or any applications
or registrations therefor (including, where applicable, the jurisdiction of
issuance or application) of Larscom or any of its Subsidiaries. All issued
patents and registered trademarks, service marks, and copyrights, which are held
by, or registered in the name of, Larscom or any of its Subsidiaries, are valid
and in full force and effect. Larscom and each of its Subsidiaries has, in a
timely manner, taken all reasonable actions (including, without limitation, the
payment of any applicable fees) necessary to ensure that that all applications
filed by or on behalf of Larscom or any of its Subsidiaries for any patent,
trademark, service mark, copyright, or other form of Intellectual Property
remain in full force and effect. Larscom and each of its Subsidiaries has taken
reasonable measures to maintain the confidentiality of and otherwise establish,
protect, and enforce its rights in the Larscom Intellectual Property that
Larscom or any of its Subsidiaries holds, or purports to hold, as a trade
secret.
(e) Larscom and its Subsidiaries exclusively own all right,
title, and interest to and in the Larscom Intellectual Property free and clear
of all Liens (other than non-exclusive licenses under the Larscom Intellectual
Property granted by Larscom, its Subsidiaries, or their predecessors in the
Ordinary Course of Business). Without limiting the generality of the foregoing,
each person who is or was an employee or contractor of Larscom or any of its
Subsidiaries and who is or was involved in the creation or development of
Intellectual Property for Larscom or any of its Subsidiaries has signed a valid,
enforceable agreement containing an assignment of the Intellectual Property so
created or developed to Larscom or one of its Subsidiaries and confidentiality
provisions protecting Larscom's or its Subsidiaries' confidential information.
21
(f) To Larscom's knowledge, neither Larscom nor any of its
Subsidiaries have ever infringed, misappropriated, or otherwise violated any
Intellectual Property of any third party. Without limiting the generality of the
foregoing and solely to Larscom's knowledge, neither (i) the products previously
or currently sold or under development by Larscom or any of its Subsidiaries, or
(ii) the business or activities previously or currently conducted by Larscom or
any of its Subsidiaries, has infringed, violated, or constituted a
misappropriation of any Intellectual Property of any third party. Neither
Larscom nor any of its Subsidiaries has received any complaint, claim, or notice
alleging any such infringement, violation, or misappropriation. Neither Larscom
nor any of its Subsidiaries has received any correspondence, requests or demands
since January 1, 2000, by third parties regarding the licensing of such third
party's patents, copyrights, trademarks or other Intellectual Property or
proprietary rights. Larscom and its Subsidiaries have never assumed, or agreed
to discharge or otherwise take responsibility for, any existing or potential
liability of any third party for infringement, misappropriation, or violation of
any Intellectual Property. To Larscom's knowledge, no other person or entity has
infringed, violated, or misappropriated, and no other person or entity is
currently, infringing, violating, or misappropriating, any material Larscom
Intellectual Property or any Intellectual Property that Larscom or any of its
Subsidiaries is authorized or licensed to use under any Larscom Material Inbound
License.
(g) To Larscom's knowledge, none of the software (including
firmware and other software embedded in hardware devices) developed (or
currently being developed), distributed, licensed, or sold by Larscom or any of
its Subsidiaries (collectively, the "Larscom Software") contains any bug,
defect, or error that materially and adversely affects, or would reasonably be
expected to materially and adversely affect, the use, functionality, or
performance of such Larscom Software or any product or system containing or used
in conjunction with such Larscom Software. To Larscom's knowledge, no Larscom
Software contains any "back door," "drop dead device," "time bomb," "Trojan
horse," "virus," or "worm" (as such terms are commonly understood in the
software industry) or any other code designed or intended to have, or capable of
performing, any of the following functions: (i) disrupting, disabling, harming,
or otherwise impeding in any manner the operation of, or providing unauthorized
access to, a computer system or network or other device on which such code is
stored or installed; or (ii) damaging or destroying any data or file without the
user's consent. No source code for any Larscom Software has been delivered,
licensed, or made available to any escrow agent or other person or entity. To
Larscom's knowledge, no event has occurred, and no circumstance or condition
exists, that (with or without notice or lapse of time) will, or could reasonably
be expected to, result in the delivery, license, or disclosure of the source
code for any Larscom Software to any other person.
(h) The execution and delivery of this Agreement and
consummation of the Merger will not result in (i) the breach of, or create on
behalf of any third party the right to terminate or modify, any Larscom Material
License, (ii) a loss of, or Lien on, any Larscom Intellectual Property, (iii)
the release, disclosure, or delivery of any Larscom Intellectual Property by or
to any escrow agent or other person, (iv) the grant, assignment, or transfer to
any other person of any license or other right or interest under, to, or in any
of the Larscom Intellectual Property, (v) either Verilink, the Surviving
Corporation, or any of their Subsidiaries being bound by or subject to, as a
result of Larscom's contracts and other legal obligations, any non-compete or
other restriction on the operation or scope of their respective businesses, or
(vi)
22
Verilink, the Surviving Corporation, or any of their Subsidiaries being
obligated to pay any royalties or other amounts to any third party in excess of
those payable by Larscom or the Surviving Corporation, respectively, prior to
the Closing.
3.12 Agreements, Contracts and Commitments.
(a) Except as set forth in Section 3.12(a) of the Larscom
Disclosure Schedule and other than those material contracts identified on the
exhibit index of Larscom's Annual Report on Form 10-K for the year ended
December 31, 2003, there are no contracts or agreements that are material
contracts (as defined in Item 601(b)(10) of Regulation S-K) with respect to
Larscom and its Subsidiaries (such contracts or agreements, together with any
Larscom Material Licenses, any contracts or agreement listed or required to be
listed in Section 3.12(d) of the Larscom Disclosure Schedule, any contract or
agreement with a material customer or supplier and any other contract or
agreement that is material to the business of Larscom or any of its Subsidiaries
(the "Larscom Material Contracts"). Each Larscom Material Contract is in full
force and effect and is enforceable in accordance with its terms, subject to the
Bankruptcy and Equity Exception. Neither Larscom nor any of its Subsidiaries
nor, to Larscom's knowledge, any other party to any Larscom Material Contract is
in material violation of or in material default under any Larscom Material
Contract, nor, to Larscom's knowledge, has any event occurred or circumstance or
condition exists, that (with or without notice or lapse of time) would
reasonably be expected to (i) result in a material violation of or material
default under any Larscom Material Contract, (ii) give any party the right to
cancel or terminate or modify any Larscom Material Contract or (iii) give any
party the right to seek material damages or other material remedies.
(b) Section 3.12(b) of the Larscom Disclosure Schedule sets
forth a complete and accurate list of each contract or agreement to which
Larscom or any of its Subsidiaries is a party or bound by with any Affiliate of
Larscom (other than any Subsidiary, which is a direct or indirect wholly owned
subsidiary of Larscom). Complete and accurate copies of all the agreements,
contracts and arrangements set forth in Section 3.12(b) of the Larscom
Disclosure Schedule have heretofore been furnished or made available to
Verilink. Neither Larscom nor any of its Subsidiaries has entered into any
transaction with any Affiliate of Larscom or any of its Subsidiaries or any
transaction that would be subject to proxy statement disclosure pursuant to Item
404 of Regulation S-K.
(c) Larscom is not a party to any contract, agreement,
arrangement or course of dealing (i) involving future expenditures (whether
actual, potential, fixed or contingent) by Larscom or (ii) that requires or may
require Larscom to provide services in connection with the sale, upgrade or
maintenance of products to any person after the Closing. Complete and accurate
copies of all contracts listed in Section 3.12(c) of the Larscom Disclosure
Schedule have been made available to Verilink.
(d) There is no non-competition or other similar agreement,
arrangement, understanding, commitment, judgment, injunction or order to which
Larscom or any of its Subsidiaries is a party or to which Larscom or any of its
Subsidiaries is subject that has or could reasonably be expected to have the
effect of prohibiting or impairing the conduct of the business of Larscom or any
of its Subsidiaries or Verilink or any of its Subsidiaries as currently
conducted and as proposed to be conducted in any material respect. Neither
Larscom nor any of its
23
Subsidiaries has entered into (or is otherwise bound by) any agreement under
which it is restricted in any material respect from selling, licensing or
otherwise distributing any of its technology or products, or providing services
to, customers or potential customers or any class of customers, in any
geographic area, during any period of time or any segment of the market or line
of business.
(e) Since January 1, 2000, Larscom has not been a party to any
Governmental Contract or Governmental Bid. "Governmental Bid" means any
quotation bid or proposal submitted to any Governmental Entity or any proposed
prime contractor or higher-tier subcontractor of any Governmental Entity.
"Governmental Contract" means any prime contract, subcontract, letter contract,
purchase order or delivery order executed or submitted to or on behalf of any
Governmental Entity or any prime contractor or higher-tier subcontractor, or
under which any Governmental Entity or any such prime contractor or
subcontractor otherwise has or may acquire any right or interest.
(f) As of the date hereof, Larscom is not a party to any oral
or written (i) consulting, compensation, commission or similar agreement with
any present or former director, officer, employee or independent contractor or
any entity controlled by any such person, (ii) agreement with any executive
officer or other key employee of Larscom the benefits of which are contingent,
or the terms of which are materially altered, upon the occurrence of a
transaction involving Larscom of the nature contemplated by this Agreement, or
(iii) agreement with respect to any executive officer or other key employee of
Larscom providing any term of employment or compensation guarantee. Larscom has
not entered into any current arrangement, oral or written, with any employee to
induce such employee to be employed by Larscom, whether by way of payment, of
"stay bonuses" or otherwise.
3.13 Litigation.
There is no action, suit, proceeding, claim, arbitration or investigation
pending or, to the knowledge of Larscom, threatened against or affecting Larscom
or any of its Subsidiaries or any properties or rights of Larscom or its
Subsidiaries, by any person or by or before any Governmental Entity, arbitrator
or mediator. Neither Larscom nor any of its Subsidiaries has commenced any
action, suit, proceeding or arbitration before any Governmental Entity,
arbitrator or mediator. There are no material judgments, orders or decrees
outstanding against Larscom or any of its Subsidiaries.
3.14 Environmental Matters.
Larscom and its Subsidiaries (i) have obtained all permits, licenses and other
authorizations that are required under Environmental Laws ("Environmental
Permits") and all such Environmental Permits are valid and in full force and
effect, (ii) are in compliance in all respects with all terms and conditions of
such required Environmental Permits and all Environmental Laws, (iii) have
conducted all Hazardous Material Activities in compliance with all Environmental
Laws, other than, as to each of (i), (ii), and (iii), such as would not have a
Larscom Material Adverse Effect. No action, proceeding, revocation proceeding,
amendment procedure, writ, injunction or claim is pending, or to the knowledge
of Larscom, threatened, concerning or relating to any Environmental Permit or
any Hazardous Materials Activity of Larscom or any of its Subsidiaries.
24
Larscom or any of its Subsidiaries have never received any notice or other
communication (in writing or otherwise) from any Governmental Body or other
Person regarding any actual, alleged, possible or potential liability arising
from or relating to Hazardous Material Activity of Larscom or any of its
Subsidiaries. As of the date hereof, except in compliance with Environmental
Laws and in a manner that would not subject Larscom or any Subsidiary of Larscom
to material liability, to the knowledge of Larscom, no Hazardous Materials are
present in, on or under any Larscom Business Facility currently owned, leased,
operated or occupied, by Larscom or any Subsidiary of Larscom or were present on
any other Larscom Business Facility at the time it ceased to be owned, leased,
operated or occupied by Larscom or any Subsidiary of Larscom. Larscom or any of
its Subsidiaries have never permitted (knowingly or otherwise) any Hazardous
Material to be generated, manufactured, produced, used, treated, refined,
processed, handled, stored, discharged, released or disposed of (whether
lawfully or unlawfully): (i) on or beneath the surface of any real property that
is, or that has at any time been, owned by, leased to, controlled by or used by
Larscom or any Subsidiary of Larscom; (ii) in or into any surface water,
groundwater, soil or air associated with or adjacent to any such real property;
or (iii) in or into any well, pit, pond, lagoon, impoundment, ditch, landfill,
building, structure, facility, improvement, installation, equipment, pipe,
pipeline, vehicle or storage container that is or was located on or beneath the
surface of any such real property or that is or has at any time been owned by,
leased to, controlled by or used by Larscom or any Subsidiary of Larscom. Each
storage tank or other storage container that is or has been owned by, leased to,
controlled by or used by Larscom or any of its Subsidiaries or that is located
on or beneath the surface of any real property owned by, leased to, controlled
by or used by Larscom or any of its Subsidiaries: (i) is in sound condition; and
(ii) has been demonstrated by accepted testing methodologies to be free of any
corrosion or leaks. For the purposes of this Section 3.14, "Larscom Business
Facility" means any property, including the land, the improvements thereon, the
groundwater thereunder and the surface water thereon, that is or at any time has
been owned, operated, occupied, controlled, used or leased by Larscom or any
Subsidiary of Larscom in connection with the operation of its business.
"Environmental Laws" means all applicable Federal, state, local and foreign
laws, regulations, rules and statutes which prohibit, regulate or control
Hazardous Materials or any Hazardous Materials Activity or which relate to
pollution of the environment (including ambient air, surface water, ground
water, land surface or subsurface strata) or the protection of human health and
worker safety. "Hazardous Materials" means any material, chemical, or substance
that is prohibited or regulated by any Environmental Law or that has been
designated by any Governmental Entity to be toxic, radioactive, hazardous or
otherwise a danger to health, reproduction or the environment, excluding,
however, Hazardous Materials contained in products typically used for office and
janitorial purposes properly and safely maintained in accordance with
Environmental Laws. "Hazardous Materials Activity" is the transportation,
transfer, recycling, storage, use, treatment, manufacture, removal, remediation,
release, exposure of others to, sale, or distribution of any Hazardous Material
or any product containing a Hazardous Material.
3.15 Employees.
(a) To the knowledge of Larscom, no employee of Larscom or any
Subsidiary of Larscom is in violation of any term of any patent disclosure
agreement, non-competition agreement, or any restrictive covenant to a former
employer relating to the right of any such employee to be employed by Larscom or
any of its Subsidiaries because of the nature of the
25
business conducted or presently proposed to be conducted by Larscom or any of
its Subsidiaries or the Surviving Corporation following the Effective Time or to
the use of trade secrets or proprietary information of others. To the knowledge
of Larscom, no key employee or group of employees has any plans to terminate
employment with Larscom or its Subsidiaries.
(b) There is no pending action, suit, proceeding, claim,
arbitration, charge or investigation involving Larscom or its Subsidiaries with
respect to wages, compensation, bonuses, commissions or awards or payroll
deductions; equal employment or human rights violations under any applicable
equal employment laws or regulations of any Governmental Entity prohibiting
discrimination, retaliation or harassment; representation petitions or unfair
labor practices; grievances or arbitrations pursuant to current or expired
collective bargaining agreements or employment agreements; occupational safety
and health; workers' compensation; wrongful termination; negligent hiring,
retention or supervision; invasion of privacy; defamation; or immigration.
(c) Neither Larscom nor any of its Subsidiaries is presently,
or has been in the past, bound by or subject to (and none of its respective
assets or properties is bound by or subject to) any arrangement with any labor
union or labor organization. Larscom and its Subsidiaries are not a party to and
have no obligations under any agreement, collective bargaining or otherwise,
with any party regarding the rates of pay or working conditions of any of
Larscom's or any of its Subsidiaries' employees, nor is Larscom or any of its
Subsidiaries obligated under any agreement to recognize or bargain with any
labor organization or union. No employees of Larscom or any of its Subsidiaries
is represented by any labor union or covered by any collective bargaining
agreement and, to the knowledge of Larscom, there is no pending question
concerning such representation, and to the knowledge of Larscom there is no
campaign to establish such representation in progress. There is no pending or,
to the knowledge of Larscom, threatened labor dispute, walkout, work stoppage,
slow-down or lockout involving Larscom or any of its Subsidiaries and any group
of its employees nor has Larscom or any of its Subsidiaries experienced any
material labor interruptions, strikes, slowdown, picketing or work stoppage by
any union or other group of employees, whether engaged in collective action or
not, over the past three (3) years. There is no organization activity among any
of Larscom's or its Subsidiaries' employees, and neither Larscom nor its
Subsidiaries, nor any of its officers or directors or employees have been
charged or, threatened with a charge of any unfair labor practice. Larscom and
its Subsidiaries are in compliance in all material respects with all applicable
foreign, federal, state and local laws, rules and regulations respecting
employment, employment practices, terms and conditions of employment and wages
and hours.
(d) Section 3.15(d) of the Larscom Disclosure Schedule
indicates each place of business where Larscom or its Subsidiaries has employees
located, and lists each employee of Larscom or its Subsidiaries who incurred:
(a) an employment termination, other than due to a discharge for cause or
voluntary departure; (b) a layoff for any reason; or (c) a reduction in hours of
work of more than fifty percent (50%), in each case during the ninety (90) days
preceding the date hereof, indicating next to the employee's name, the date of
each such occurrence(s). Larscom and its Subsidiaries have not violated the
Worker Adjustment and Retraining Notification Act (the "WARN Act") or any
similar state or local law
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3.16 Employee Benefit Plans.
(a) Section 3.16(a) of the Larscom Disclosure Schedule sets
forth a complete and accurate list of all Employee Benefit Plans maintained, or
contributed to, or required to be contributed to by Larscom, any of Larscom's
Subsidiaries or any of their ERISA Affiliates or with respect to which Larscom
has or may in the future have any material liability (together, the "Larscom
Employee Plans") (excluding any agreements with individual employees that are
covered by Section 3.16(i) and any employment agreements that are terminable "at
will"). For purposes of this Agreement, the following terms shall have the
following meanings: (i) "Employee Benefit Plan" means any "employee pension
benefit plan" (as defined in Section 3(2) of ERISA), any "employee welfare
benefit plan" (as defined in Section 3(1) of ERISA), and any other written or
oral plan, agreement or arrangement providing for direct or indirect
compensation, including insurance coverage, severance benefits, disability
benefits, deferred compensation, bonuses, stock options, stock purchase, phantom
stock, stock appreciation or other forms of incentive compensation or
post-retirement compensation and all unexpired severance agreements, written or
otherwise, for the benefit of, or relating to, any current or former, officer,
employee, director, or consultant of the entity in question or any of its
Subsidiaries or ERISA Affiliates; (ii) "ERISA" means the Employee Retirement
Income Security Act of 1974, as amended; and (iii) "ERISA Affiliate" means any
entity which is, or at any applicable time was, a member of (1) a controlled
group of corporations (as defined in Section 414(b) of the Code), (2) a group of
trades or businesses under common control (as defined in Section 414(c) of the
Code), or (3) an affiliated service group (as defined under Section 414(m) of
the Code or the regulations under Section 414(o) of the Code), any of which
includes or included the entity in question or any of its Subsidiaries.
(b) Larscom has made available to Verilink a complete and
accurate copy of each Larscom Employee Plan and, for each such Larscom Employee
Plan, (i) the three (3) most recent annual reports (Form 5500) filed with the
U.S. Internal Revenue Service (the "IRS"), if any, required under ERISA or the
Code, (ii) each amendment, trust agreement, group annuity contract,
administrative service agreement, policy pertaining to fiduciary liability
insurance covering the fiduciaries of each Larscom Employee Plan, and summary
plan description together with the summaries of material modifications thereto,
if any, relating to such Larscom Employee Plan, (iii) the most recent financial
statements for each Larscom Employee Plan that is required to be funded, (iv)
the three (3) most recent reports regarding the satisfaction of the
nondiscrimination requirements, if any, applicable to each Larscom Employee Plan
including those of Sections 410(b), 401(a)(4), 401(k) and 401(m) of the Code,
(v) the most recent annual actuarial valuations, if any, prepared for each
Larscom Employee Plan; (vi) the most recent IRS determination, opinion,
notification or advisory letter issued with respect to each Larscom Employee
Plan intended to be qualified under Section 401(a) of the Code; (vii) all
communications material to any employee or employees with respect to any Larscom
Employee Plan and any proposed Larscom Employee Plans, in each case relating to
any amendments, terminations, establishments, increases or decreases in
benefits, acceleration of payments or vesting schedules or other events which
would result in any material liability to Larscom; and (viii) all material
correspondence to or from any governmental agency relating to any Larscom
Employee Plan.
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(c) Each Larscom Employee Plan has been established,
maintained and administered in all material respects in accordance with, and
Larscom, its Subsidiaries and their ERISA Affiliates have performed in all
material respects all obligations required to be performed by them under, are
not in material default under or violation of, and have no knowledge with
respect to any other party to each Larscom Employee Plan of that party's
material default under or violation of ERISA, the Code and all other applicable
laws and the regulations thereunder and the terms of each Larscom Employee Plan,
and each of Larscom, Larscom's Subsidiaries and their ERISA Affiliates has in
all material respects met its obligations with respect to each Larscom Employee
Plan and has made all required contributions thereto (or reserved such
contributions which are required but not yet due on the Larscom Balance Sheet).
All filings and reports as to each Larscom Employee Plan required to have been
submitted to the IRS, the Pension Benefit Guaranty Corporation or to the United
States Department of Labor ("DOL") have been timely submitted, except where
failures to timely submit have been cured and are not reasonably likely,
individually or in the aggregate, to cause material harm to Larscom. There are
no audits, inquiries or proceedings pending or, to the knowledge of Larscom,
Larscom's Subsidiaries or their ERISA Affiliates, threatened by the IRS, DOL or
any other governmental entity with respect to any Larscom Employee Plan. Neither
Larscom nor any of its Subsidiaries or ERISA Affiliates is subject to any
material penalty or tax with respect to any Larscom Employee Plan under Section
502(i) of ERISA or Sections 4975 through 4980 of the Code and no "prohibited
transaction," within the meaning of Section 4975 of the Code or Sections 406 and
407 of ERISA, and not otherwise exempt under Section 4975 of the Code or Section
408 of ERISA (or any administrative class exemption issued thereunder), has
occurred with respect to any Larscom Employee Plan which could reasonably be
expected to have, individually or in the aggregate, a Larscom Material Adverse
Effect. There are no actions, suits or claims pending, or, to the knowledge of
Larscom, threatened or reasonably anticipated (other than routine claims for
benefits) against any Larscom Employee Plan or against the assets of any Larscom
Employee Plan and, to the knowledge of Larscom, no event has occurred, and there
exists no condition or set of circumstances in connection with which Larscom or
any of its Subsidiaries could be subject to any liability that is reasonably
likely, individually or in the aggregate, to have a Larscom Material Adverse
Effect under ERISA, the Code or any other applicable law.
(d) With respect to each Larscom Employee Plan, there are no
benefit obligations for which contributions have not been made or properly
accrued and there are no benefit obligations which have not been accounted for
by reserves, or otherwise properly footnoted in accordance with GAAP, on the
financial statements of Larscom, which obligations are reasonably likely,
individually or in the aggregate, to have a Larscom Material Adverse Effect.
The assets of each Larscom Employee Plan that is funded are
reported at their fair market value on the books and records of such plan.
(e) Neither Larscom nor any ERISA Affiliate has ever
maintained, established, sponsored, participated in, contributed to, or is
obligated to contribute to, or otherwise incurred any obligation or liability
(including, without limitation, any contingent liability) under any
"multiemployer plan" (as defined in Section 3(37) of ERISA), any Employee
Benefit Plan subject to Title IV of ERISA or Section 412 of the Code, any
multiple employer plan (as defined in ERISA or the Code), or any "funded welfare
plan" within the meaning of
28
Section 419 of the Code. Any Larscom Employee Plan intended to be qualified
under Section 401(a) of the Code and each trust intended to qualify under
Section 501(a) of the Code has either applied for or obtained a favorable
determination, notification, advisory and/or opinion letter, as applicable, as
to its qualified status from the IRS (and no such letter has been revoked nor
has revocation been threatened) or still has a remaining period of time under
applicable Treasury Regulations or IRS pronouncements in which to apply for such
letter and to make any amendments necessary to obtain a favorable determination.
To the knowledge of Larscom, for each Larscom Employee Plan that is intended to
be qualified under Section 401(a) of the Code, there has been no event,
condition or circumstance that has adversely affected or is likely to adversely
affect such qualified status. Except as specifically set forth in Section
3.16(e) of the Larscom Disclosure Schedule, no Larscom Employee Plan provides
health or death benefits that are not fully insured through an insurance
contract.
(f) No Larscom Employee Plan is funded by or a member of a
"voluntary employee's beneficiary association" within the meaning of Section
501(c)(9) of the Code. No Larscom Employee Plan holds securities issued by
Larscom, any of Larscom's Subsidiaries or any of their ERISA Affiliates.
(g) Each Larscom International Employee Plan has been
established, maintained and administered in material compliance with its terms
and conditions and with the requirements prescribed by any and all applicable
laws. No Larscom International Employee Plan has unfunded liabilities, that as
of the Effective Time, will not be offset by insurance or fully accrued. For
purposes of this Agreement, "Larscom International Employee Plan" shall mean
each Larscom Employee Plan that has been adopted or maintained by Larscom or any
ERISA Affiliate, whether informally or formally, or with respect to which
Larscom or any ERISA Affiliate will or may have any material liability, for the
benefit of employees who perform services outside the United States.
(h) Each Larscom Employee Plan, including, without limitation,
any Larscom International Employee Plan, is amendable and terminable
unilaterally by Larscom and any of Larscom's Subsidiaries which are a party
thereto or covered thereby at any time, including after the Effective Time,
without material liability to Larscom, the Surviving Corporation or any of their
Subsidiaries as a result thereof (other than for benefits accrued through the
date of termination or amendment and reasonable administrative expenses related
thereto), and no Larscom Employee Plan, plan documentation or agreement, summary
plan description or other written communication distributed generally to
employees by its terms prohibits Larscom or any of its Subsidiaries from
amending or terminating any such Larscom Employee Plan. The investment vehicles
used to fund Larscom Employee Plans may be changed at any time without incurring
a material sales charge, surrender fee or other similar expense.
(i) Neither Larscom nor any of its Subsidiaries is a party to
any oral or written (i) agreement with any current or former stockholder,
director, executive officer or other key employee of Larscom or any of its
Subsidiaries (A) the benefits of which are contingent, or the terms of which are
materially altered, upon the occurrence of a transaction involving Larscom or
any of its Subsidiaries of the nature of any of the transactions contemplated by
this Agreement (either alone or upon the occurrence of any additional or
subsequent event), (B) providing any term of employment or compensation
guarantee or (C) providing severance
29
benefits or other benefits after the termination of employment of such director,
executive officer or key employee; (ii) agreement, plan or arrangement under
which any person may receive payments from Larscom or any of its Subsidiaries
that may be subject to the tax imposed by Section 4999 of the Code or that
constitute an "excess parachute payment" for such person under Section 280G of
the Code, without regard to Section 280G(b)(4); or (iii) agreement or plan
binding Larscom or any of its Subsidiaries, including any stock option plan or
agreement, stock appreciation right plan, restricted stock plan, stock purchase
plan or severance benefit plan, any of the benefits of which shall be increased,
or the vesting of the benefits of which shall be accelerated, by the execution
of this Agreement or the occurrence of any of the transactions contemplated by
this Agreement or the value of any of the benefits of which shall be calculated
on the basis of any of the transactions contemplated by this Agreement.
(j) None of the Larscom Employee Plans promises or provides
retiree medical or other retiree welfare benefits to any person, except as
required by applicable law. Neither Larscom nor any of its Subsidiaries has ever
represented, promised or contracted (whether in oral or written form) to any
employee (either individually or to employees as a group) or any other person
that such employee(s) or other person would be provided with retiree health,
except to the extent required by applicable law.
(k) Larscom has no current or future obligations respecting
any benefit liabilities under the Axel Johnson Inc. Retirement Plan, contingent
or otherwise. The circumstances giving rise to Larscom's relief from any such
current and future liabilities does not create any potential for liability under
Section 4069 of ERISA.
(l) Larscom has no current or future obligations respecting
any benefit liabilities under the Axel Johnson Inc. Retirement Restoration
Program, contingent or otherwise.
3.17 Compliance With Laws.
Larscom and each of its Subsidiaries have complied with, are not in violation
of, and have not received any notice alleging any violation with respect to, any
applicable provisions of any statute, law or regulation, and are, and have been,
in compliance with the Sarbanes-Oxley Act of 2002 and any related statutes, laws
or regulations, including the rules and regulations of The Nasdaq Stock Market,
Inc, except for failures to comply or violations which, individually or in the
aggregate, have not had and are not reasonably likely to have a Larscom Material
Adverse Effect.
3.18 Permits.
Larscom and each of its Subsidiaries have all permits, licenses and franchises
from Governmental Entities required to conduct their businesses as now being
conducted or as presently proposed to be conducted (the "Larscom Permits"),
except for such permits, licenses and franchises the lack of which, individually
or in the aggregate, have not resulted in, and are not reasonably likely to
result in, a Larscom Material Adverse Effect. Larscom and its Subsidiaries are
in compliance with the terms of the Larscom Permits, except where the failure to
so comply, individually or in the aggregate, is not reasonably likely to have a
Larscom Material Adverse Effect.
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3.19 Insurance.
Section 3.19 of the Larscom Disclosure Schedule sets forth a complete and
accurate list of all insurance policies maintained by, at the expense of, or for
the benefit of Larscom and any of its Subsidiaries and identifies any material
claims made thereunder since January 1, 1998. Each of Larscom and its
Subsidiaries maintains insurance policies (the "Larscom Insurance Policies")
with reputable insurance carriers against all risks of a character as are
usually insured against, and in such coverage amounts as are usually maintained,
by similarly situated companies in the same or similar businesses. Each Larscom
Insurance Policy is in full force and effect. Since January 1, 1998, neither
Larscom nor any of its Subsidiaries has received any notice or other
communication (in writing or otherwise) regarding any actual or possible (a)
cancellation or invalidation of any insurance policy (b) refusal of any coverage
or rejection of any material claim under any insurance policy, or (c) material
adjustment in the amount of the premiums payable with respect to any insurance
policy.
3.20 Title to Assets.
Larscom and its Subsidiaries own, and have good and valid title to, all assets
purported to be owned by them, including: (a) all assets reflected on the
Larscom Balance Sheet (except for assets sold or otherwise disposed of in the
Ordinary Course of Business since December 31, 2003); and (b) all other assets
reflected in the books and records of Larscom and its Subsidiaries as being
owned by Larscom and its Subsidiaries. All of said assets are owned by Larscom
and its Subsidiaries free and clear of any Liens, except for (i) any Lien for
current taxes not yet due and payable and (ii) immaterial Liens that have arisen
in the Ordinary Course of Business and that do not (in any case or in the
aggregate) materially detract from the value of the assets subject thereto or
materially impair the operations of Larscom or any of its Subsidiaries.
3.21 Equipment and Leaseholds.
All material items of equipment and other tangible assets owned by or leased
to Larscom or any of its Subsidiaries are adequate for the uses to which they
are being put, are in good and safe condition and repair (ordinary wear and tear
excepted) and are adequate for the conduct of the business of Larscom and its
Subsidiaries in the manner in which such business is currently being conducted
and presently proposed to be conducted.
3.22 Receivables; Customers; Inventory.
(a) All existing accounts receivable of Larscom and its
Subsidiaries as the date hereof (including those accounts receivable reflected
on the Larscom Balance Sheet that have not yet been collected and those accounts
receivable that have arisen since December 31, 2003, and have not yet been
collected) (i) represent valid obligations of customers of Larscom and its
Subsidiaries arising from bona fide transactions entered into in the Ordinary
Course of Business, (ii) are current and, to the knowledge of Larscom, will be
collected in full when due, without any counterclaim or set off (net of an
allowance for doubtful accounts not to exceed the allowance set forth in the
Larscom Balance Sheet).
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(b) The gross revenue of Larscom in the second quarter of
fiscal 2004 will not be below minimum anticipated levels. The condensed
consolidated statement of operations for the quarter ended March 31, 2004 and
condensed consolidated balance sheet as of March 31, 2004 included in Section
3.22(b) of the Larscom Disclosure will be consistent in all material respects
with the unaudited interim financial statements included in Larscom's Form 10-Q
for the quarter ended March 31, 2004.
(c) All of Larscom's and its Subsidiaries' existing inventory
(including all inventory that is reflected on the Larscom Balance Sheet, net of
any inventory reserves, and that has not been disposed of by Larscom or any of
its Subsidiaries since December 31, 2003) is of such quality and quantity as to
be usable and saleable by Larscom or any of its Subsidiaries in the Ordinary
Course of Business.
3.23 Certain Business Practices.
Neither Larscom nor any of its Subsidiaries nor any director, officer, agent,
employee or affiliate of Larscom or any of its Subsidiaries who was acting or
purporting to act on behalf of Larscom or any of its Subsidiaries has (a) used
any funds for unlawful contributions, gifts, entertainment or other unlawful
expenses relating to political activity, (b) made any unlawful payment to
foreign or domestic government officials or employees or to foreign or domestic
political parties or campaigns or violated any provision of the Foreign Corrupt
Practices Act of 1977, as amended, nor (c) made any other unlawful payment.
3.24 Opinion of Financial Advisor.
The financial advisor of Larscom, Standard & Poor's, has delivered to the
Larscom Board an opinion dated the date of this Agreement to the effect that, as
of such date, the Exchange Ratio is fair, from a financial point of view, to the
holders of Larscom Common Stock. A copy of the written opinion of Standard &
Poor's will be provided to Verilink solely for information purposes within one
business day following receipt thereof by Larscom.
3.25 Section 203 of the DGCL Not Applicable.
The Larscom Board has taken the necessary actions to render Section 203 of the
DGCL inapplicable to this Agreement or the Larscom Voting Agreement or the
consummation of the Merger, or the other transactions contemplated by this
Agreement or the Larscom Voting Agreement.
3.26 Brokers.
No agent, broker, investment banker, financial advisor or other firm or person
is or shall be entitled, as a result of any action, agreement or commitment of
Larscom or any of its Affiliates, to any broker's, finder's, financial advisor's
or other similar fee or commission in connection with any of the transactions
contemplated by this Agreement.
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3.27 Loans to Executive Officers.
Since July 30, 2002, Larscom has not extended or maintained credit, arranged
for the extension of credit, or renewed an extension of credit, in the form of a
personal loan to or for any director or executive officer (or equivalent
thereof) of Larscom except to the extent permitted under the second sentence of
Section 13(k)(1) of the Exchange Act.
3.28 Financial Controls.
Larscom maintains accurate books and records reflecting its assets and
liabilities and maintains proper and adequate internal accounting controls which
provide assurance that (a) transactions are executed with management's
authorization; (b) transactions are recorded as necessary to permit preparation
of the consolidated financial statements of Larscom and to maintain
accountability for Larscom's consolidated assets; (c) access to Larscom's assets
is permitted only in accordance with management's authorization; (d) the
reporting of Larscom's assets is compared with existing assets at regular
intervals; and (e) accounts, notes and other receivables and inventory are
recorded accurately, and proper and adequate procedures are implemented to
effect the collection thereof on a current and timely basis.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF VERILINK AND THE MERGER SUB
Verilink and the Merger Sub represent and warrant to Larscom that the
statements contained in this Article IV are true and correct, except as
expressly set forth herein or in the disclosure schedule delivered by Verilink
to Larscom on the date of this Agreement which is made a part hereof (the
"Verilink Disclosure Schedule"). The Verilink Disclosure Schedule will be
arranged in paragraphs corresponding to the lettered and numbered paragraphs
contained in this Agreement.
4.1 Organization, Standing and Power.
Verilink is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation, has all
requisite corporate power and authority to own, lease and operate its properties
and assets and to carry on its business as now being conducted and as proposed
to be conducted, and is duly qualified to do business and is in good standing as
a foreign corporation in each jurisdiction where the character of the properties
it owns, operates or leases or the nature of its activities makes such
qualification necessary, except for such failures to be so organized, qualified
or in good standing, individually or in the aggregate, which have not had, and
are not reasonably likely to have a Verilink Material Adverse Effect. For
purposes of this Agreement, the term "Verilink Material Adverse Effect" means
any material adverse change, event, circumstance or development with respect to,
or material adverse effect on, the business, assets, liabilities,
capitalization, condition (financial or other), or results of operations of
Verilink and its Subsidiaries, taken as a whole; provided, however, that none of
the following shall, in and of itself, be taken into account when determining
whether there has been, or will be, a Verilink Material Adverse Effect: (i) any
failure by Verilink to meet or exceed analysts' published revenues or earnings
predictions or any change in Verilink's stock price or trading volume, (ii) with
respect to the use of the term "Verilink Material Adverse Effect" in the
33
representations and warranties contained in Section 4.7, any effect resulting
from the announcement or pendency of this Agreement or the Merger, or (iii)
other than with respect to the use of the term "Verilink Material Adverse
Effect" in the representations and warranties contained in Section 4.6, any
effect that results from changes affecting generally the industry or industries
in which Verilink or any of its Subsidiaries participates, the U.S. economy as a
whole or foreign economies in any locations where Verilink or any of its
Subsidiaries has material operations, or sales or customers unless such
condition shall disproportionately adversely affect Verilink or any of its
Subsidiaries.
4.2 Charter Documents.
Verilink has previously furnished or made available to Larscom a complete and
correct copy of its (i) Certificate of Incorporation and Bylaws as amended to
date (together, the "Verilink Charter Documents") and (ii) Merger Sub's
Certificate of Incorporation, or equivalent organizational documents, and
Bylaws, or equivalent organizational documents. Such Verilink Charter Documents
and equivalent organizational documents of each of Merger Sub are in full force
and effect. Verilink is not in violation of any of the provisions of the
Verilink Charter Documents, and Merger Sub is not in violation of its equivalent
organizational documents.
4.3 Capitalization.
(a) The authorized share capital of Verilink consists of
40,000,000 shares of Verilink Common Stock, $0.01 par value per share (the
"Verilink Common Stock"), of which 15,398,876 shares of Verilink Common Stock
were issued and outstanding as of the close of business on April 27, 2004, and
1,000,000 shares of preferred stock, $0.01 par value per share ("Verilink
Preferred Stock"), of which none of which were outstanding as of the close of
business April 27, 2004. As of the close of business on April 27, 2004, (i)
40,000 shares of Verilink Preferred Stock, designated Series A Junior
Participating Preferred Stock, were reserved for future issuance upon exercise
of rights pursuant to the rights agreement between Verilink and EquiServe Trust
Company, N.A. dated November 29, 2001, amended as of May 30, 2002 and April 28,
2004 (the "Verilink Rights Plan"); (ii) no shares of Verilink Common Stock were
held in the treasury for Verilink; and (iii) 4,393,112 shares of Verilink Common
Stock were reserved for future issuance pursuant to Verilink's Stock Plans and
3,952,016 shares were subject to outstanding options. The authorized capital
stock of Merger Sub consists of 1,000 shares of Common Stock, par value $0.001
per share, of which all outstanding shares are held by Verilink.
(b) Except as described in Section 3.3(a) above, there are no
equity securities or other similar ownership interests of any class or series of
capital stock of Verilink, or any securities convertible into or exercisable or
exchangeable for such equity securities or other similar ownership interests
issued, reserved for issuance or outstanding. Except for securities Verilink
owns, directly or indirectly through any of its Subsidiaries, there are no
equity securities or other similar ownership interests of any class or series of
capital stock of any Subsidiary of Verilink, or any securities convertible into
or exercisable or exchangeable for such equity securities, partnership interests
or other similar ownership interests issued, reserved for issuance or
outstanding. Except as described in Section 3.3(a) above, there are no options,
warrants, equity securities, partnership interests or other similar ownership
interests, calls, rights (including preemptive rights), commitments or
agreements of any kind or character to which Verilink or
34
any of its Subsidiaries is a party or by which Verilink or any of its
Subsidiaries is bound obligating Verilink or any of its Subsidiaries to issue,
deliver or sell, or cause to be issued, delivered or sold, or repurchase, redeem
or otherwise acquire, or cause the repurchase, redemption or acquisition, of any
shares of capital stock of Verilink or any of its Subsidiaries or obligating
Verilink or any of its Subsidiaries to grant, extend, accelerate the vesting of
or enter into any such option, warrant, equity security, partnership interest or
other similar ownership interest, call, right, commitment or agreement. There
are no outstanding stock appreciation, phantom stock or similar rights with
respect to Verilink or any of its Subsidiaries.
(c) Except for the Verilink Rights Plan, there is no
agreement, written or oral, between Verilink or any Affiliate of Verilink and
any holder of the securities of Verilink relating to the sale or transfer
(including agreements relating to rights of first refusal, co-sale rights or
"drag-along" rights), registration under the Securities Act (including any
rights to include securities in the Registration Statement), or voting, of the
shares of Verilink.
(d) All shares of Verilink Common Stock to be issued pursuant
to this Agreement will be upon issuance (pursuant to the terms of this
Agreement), duly authorized, validly issued, fully paid and nonassessable and
not subject to or issued in violation of any purchase option, call option, right
of first refusal, preemptive right, subscription right or any similar right
under any provision of the DGCL, the Verilink Charter Documents or any agreement
to which Verilink is a party or is otherwise bound.
(e) Stockholders of Verilink are not entitled to dissenters'
or appraisal rights under applicable state or federal law in connection with the
Merger.
4.4 Authority; No Conflict; Required Filings and Consents.
(a) Each of Verilink and the Merger Sub has all requisite
corporate power and authority to execute and deliver this Agreement, subject
only to approval of the issuance of Verilink Common Stock under this Agreement
(collectively, the "Verilink Voting Proposal") by Verilink's stockholders under
the DGCL and the rules of The Nasdaq Stock Market, Inc. and applicable law (the
"Verilink Stockholder Approval"), to perform its obligations hereunder and to
consummate the transactions contemplated by this Agreement. Without limiting the
generality of the foregoing, the Verilink Board, at a meeting duly called and
held, by the unanimous vote of all directors (i) determined that the Merger is
fair, advisable and in the best interests of Verilink and its stockholders, (ii)
adopted and approved this Agreement in accordance with the provisions of the
DGCL and the Verilink Charter Documents, (iii) approved the Registration Rights
Agreement, (iv) approved the Verilink Voting Agreement and the transactions
contemplated thereby, and (v) directed that this Agreement and the Verilink
Voting Proposal be submitted to the stockholders of Verilink for their adoption
and approval and resolved to recommend that the stockholders of Verilink vote in
favor of the adoption of this Agreement and the approval of the Verilink Voting
Proposal. The execution and delivery of this Agreement and the Registration
Rights Agreement and the consummation of the transactions contemplated hereby
and thereby by Verilink and the Merger Sub have been duly authorized by all
necessary corporate action on the part of each of Verilink and the Merger Sub
(including the approval of the Merger by Verilink as the sole stockholder of the
Merger Sub), subject only to the required receipt of the Verilink Stockholder
Approval. This Agreement has been, and the Registration Rights Agreement will
be,
35
duly executed and delivered by each of Verilink and the Merger Sub, as
applicable, and each constitute a valid and binding obligation of each of
Verilink and the Merger Sub, as applicable, enforceable in accordance with its
respective terms, subject to the Bankruptcy and Equity Exception. No takeover
statute or similar statute or regulation applies to the Merger, this Agreement
or any of the transactions contemplated hereby.
(b) The execution and delivery of this Agreement and the
Registration Rights Agreement by each of Verilink and the Merger Sub, as
applicable, do not, and the consummation by Verilink and the Merger Sub, as
applicable, of the transactions contemplated by this Agreement and the
Registration Rights Agreement shall not (i) conflict with, or result in any
violation or breach of, any provision of the Certificate of Incorporation or
Bylaws of Verilink, the Certificate of Incorporation or Bylaws of the Merger Sub
or of the charter, bylaws or other organizational document of any other
Subsidiary of Verilink, (ii) conflict with, or result in any violation or breach
of, or constitute (with or without notice or lapse of time, or both) a default
(or give rise to a right of termination, cancellation or acceleration of any
obligation or loss of any material benefit) under, or require a consent or
waiver under, constitute a change in control under, require the payment of a
penalty under or result in the imposition of any Liens on Verilink's or any of
its Subsidiaries' assets under any of the terms, conditions or provisions of any
note, bond, mortgage, indenture, lease, license, contract or other agreement,
instrument or obligation to which Verilink or any of its Subsidiaries is a party
or by which any of them or any of their properties or assets may be bound, or
(iii) subject to obtaining the Verilink Stockholder Approval and compliance with
the requirements specified in clauses (i) through (vi) of Section 4.4(c),
conflict with or violate any permit, concession, franchise, license, judgment,
injunction, order, decree, statute, law, ordinance, rule or regulation
applicable to Verilink or any of its Subsidiaries or any of its or their
properties or assets, except in the case of clauses (ii) and (iii) of this
Section 4.4(b) for any such conflicts, violations, breaches, defaults,
terminations, cancellations, accelerations or losses which, individually or in
the aggregate, are not, reasonably likely to have a Verilink Material Adverse
Effect. Section 4.4(b) of the Verilink Disclosure Schedule lists all consents,
waivers and approvals under any of Verilink's or any of its Subsidiaries'
agreements, licenses or leases required to be obtained in connection with the
consummation of the transactions contemplated hereby, which, if individually or
in the aggregate were not obtained, would result in a material loss of benefits
to Verilink, Larscom or the Surviving Corporation as a result of the Merger or a
Verilink Material Adverse Effect.
(c) No consent, approval, license, permit, order or
authorization of, or registration, declaration, notice or filing with, any
Governmental Entity is required by or with respect to Verilink or any of its
Subsidiaries in connection with the execution and delivery of this Agreement or
the performance by Verilink or the Merger Sub of the transactions contemplated
by this Agreement, except for (i) applicable requirements, if any, of the
Securities Act or the Exchange Act, (ii) the filing of the Certificate of Merger
and Certificate of Ownership and Merger with the Delaware Secretary of State and
appropriate corresponding documents with the appropriate authorities of other
states in which Verilink is qualified as a foreign corporation to transact
business, (iii) the filing of such reports, schedules or materials under Section
13 of or Rule 14a-12 under the Exchange Act and materials under Rule 165 and
Rule 425 of the Securities Act as may be required in connection with this
Agreement and the transactions contemplated hereby, (iv) such consents,
approvals, orders, authorizations, registrations, declarations and filings as
may be required under Blue Sky Laws and the laws of any foreign
36
country, (v) the filing of a Notification Form: Listing of Additional Shares
with The Nasdaq Stock Market, Inc. for the shares of Verilink Common Stock to be
issued in the transactions contemplated by this Agreement and (vi) such
consents, authorizations, orders, filings, approvals and registrations which, if
not obtained or made, would not be reasonably likely to have a Verilink Material
Adverse Effect.
(d) The affirmative vote for adoption of the Verilink Voting
Proposal by the holders of a majority of the voting power of the outstanding
shares of Verilink Common Stock on the record date for the meeting of Verilink's
stockholders to consider the Verilink Voting Proposal (the "Verilink Meeting")
present or represented by proxy is the only vote of the holders of any class or
series of Verilink's capital stock or other securities necessary to approve the
Verilink Voting Proposal. There are no bonds, debentures, notes or other
indebtedness of Verilink having the right to vote (or convertible into, or
exchangeable for, securities having the right to vote) on any matters on which
stockholders of Verilink may vote.
4.5 SEC Filings; Financial Statements; Information Provided.
(a) Verilink has filed all registration statements, forms,
reports and other documents required to be filed by Verilink with the SEC since
June 30, 2001 and has made available to Larscom copies of all registration
statements, forms, reports and other documents (including, without limit, all
certifications and statements required to by Rule 13a-14 or 15d-14 under the
Exchange Act or Section 906 of the Sarbanes-Oxley Act of 2002) filed by Verilink
with or furnished to the SEC since such date, all of which (other than the
certifications pursuant to said Section 906) are available on the SEC's EDGAR
system. All such required registration statements, forms, reports and other
documents (including those that Verilink may file after the date hereof until
the Closing) are referred to herein as the "Verilink SEC Reports." The Verilink
SEC Reports (i) were or will be filed on a timely basis, (ii) at the time filed,
were or will be prepared in compliance with the applicable requirements of the
Securities Act and the Exchange Act, as the case may be, and the rules and
regulations of the SEC thereunder applicable to such Verilink SEC Reports, and
(iii) did not or will not at the time they were or are filed contain any untrue
statement of a material fact or omit to state a material fact required to be
stated in such Verilink SEC Reports or necessary in order to make the statements
in such Verilink SEC Reports, in the light of the circumstances under which they
were made, not misleading. No Subsidiary of Verilink is subject to the reporting
requirements of Sections 13(a) or 15(d) of the Exchange Act.
(b) Each of the audited consolidated financial statements
(including, in each case, any related notes and schedules) and unaudited interim
consolidated financial statements contained or to be contained in Verilink SEC
Reports at the time filed (i) complied or will comply as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto, (ii) were or will be prepared in
accordance with GAAP applied on a consistent basis throughout the periods
involved (except as may be indicated in the notes to such financial statements
or, in the case of unaudited interim financial statements, as permitted by the
SEC on Form 10-Q under the Exchange Act) and (iii) fairly presented or will
fairly present the consolidated financial position of Verilink and its
Subsidiaries as of the dates indicated and the consolidated results of Verilink
and its Subsidiaries' operations and cash flows for the periods indicated,
consistent with the books and
37
records of Verilink and its Subsidiaries, except that the unaudited interim
financial statements were or are subject to normal and recurring year-end
adjustments which were not or are not expected to be material in amount. The
consolidated, audited balance sheet of Verilink as of June 27, 2003 is referred
to herein as "Verilink Balance Sheet."
(c) Verilink has previously furnished to Larscom a complete
and correct copy of any amendments or modifications, which have not yet been
filed with the SEC but which are required to be filed, to agreements, documents
or other instruments which previously had been filed by Verilink with the SEC
pursuant to the Securities Act or the Exchange Act.
4.6 No Undisclosed Liabilities.
Except for normal and recurring liabilities incurred since the date of the
Verilink Balance Sheet in the Ordinary Course of Business, Verilink and its
Subsidiaries do not have any liabilities, either accrued, contingent or
otherwise (whether or not required to be reflected in financial statements in
accordance with generally accepted accounting principles), and whether due or to
become due, which individually or in the aggregate, are reasonably likely to
have a Verilink Material Adverse Effect.
4.7 Absence of Certain Changes or Events.
Except as set forth in the Verilink SEC Reports which were available on the
SEC's EDGAR system on the day before the date of this Agreement, there has not
been any change, event, circumstance, development or effect that individually or
in the aggregate has had, or is reasonably likely to have, a Verilink Material
Adverse Effect.
4.8 Intellectual Property.
(a) Verilink and its Subsidiaries own, license or otherwise
possess legally enforceable rights to use all Intellectual Property used in or
necessary to conduct the business of Verilink and its Subsidiaries as currently
conducted.
(b) The execution and delivery of this Agreement and
consummation of the Merger will not result in (i) the breach of, or create on
behalf of any third party the right to terminate or modify, any Verilink
Material License, (ii) a loss of, or Lien on, any Verilink Intellectual
Property, (iii) the release, disclosure, or delivery of any Verilink
Intellectual Property by or to any escrow agent or other person, (iv) the grant,
assignment, or transfer to any other person of any license or other right or
interest under, to, or in any of the Verilink Intellectual Property, (v) either
Larscom or its Subsidiaries being bound by or subject to, as a result of
Verilink's contracts and other legal obligations, any non-compete or other
restriction on the operation or scope of their respective businesses, or (vi)
Verilink, the Surviving Corporation, or any of their Subsidiaries being
obligated to pay any royalties or other amounts to any third party in excess of
those payable by Verilink or the Surviving Corporation, respectively, prior to
the Closing. As used herein, "Verilink Intellectual Property" means any
Intellectual Property that is owned by, or purported to be owned by, Verilink or
any of its Subsidiaries, and "Verilink Material License" means as of the date of
this agreement any licenses, sublicenses, and other agreements pursuant to which
either: (A) Verilink or any of its Subsidiaries is authorized or
38
licensed to use any third party Intellectual Property (i) for incorporation or
embedding into Verilink's or any of its Subsidiaries' products, (ii) in
conjunction with, or in the development of, Verilink's or any of its
Subsidiaries' products, or (iii) that is otherwise material to the conduct of
the business of Verilink or any of its Subsidiaries as currently conducted (it
being understood that (1) shrink wrap or "click and accept" licenses for
"off-the-shelf" software programs, and (2) agreements providing for future
license fees, royalties, or other payment obligations by Verilink or any of its
Subsidiaries that do not exceed $10,000 annually per agreement (other than
contingent or unliquidated amounts) will not be considered to be agreements to
which reference is made in clauses (A)(ii) and (A)(iii) of this Section 4.8(b)),
or (B) (i) any third party has been granted any exclusive license under, or
otherwise has received or acquired any exclusive right or interest in, any
Verilink Intellectual Property, or (ii) any third party has been granted any
non-exclusive license under, or otherwise has received or acquired any
non-exclusive right or interest in, any Verilink Intellectual Property and
pursuant to which such third party had or has aggregate license fee or royalty
payment obligations (other than contingent or unliquidated amounts) in excess of
$10,000 annually.
(c) To Verilink's knowledge, neither Verilink nor any of its
Subsidiaries have ever infringed, misappropriated, or otherwise violated any
Intellectual Property of any third party. Without limiting the generality of the
foregoing and solely to Verilink's knowledge, neither (i) the products
previously or currently sold or under development by Verilink or any of its
Subsidiaries, or (ii) the business or activities previously or currently
conducted by Verilink or any of its Subsidiaries, has infringed, violated, or
constituted a misappropriation of any Intellectual Property of any third party.
Neither Verilink nor any of its Subsidiaries has received any complaint, claim,
or notice alleging any such infringement, violation, or misappropriation.
Neither Verilink nor any of its Subsidiaries has received any correspondence,
requests or demands since January 1, 2000, by third parties regarding the
licensing of such third party's patents, copyrights, trademarks or other
Intellectual Property or proprietary rights. Verilink and its Subsidiaries have
never assumed, or agreed to discharge or otherwise take responsibility for, any
existing or potential liability of any third party for infringement,
misappropriation, or violation of any Intellectual Property. To Verilink 's
knowledge, no other person or entity has infringed, violated, or
misappropriated, and no other person or entity is currently, infringing,
violating, or misappropriating, any material Verilink Intellectual Property or
any Intellectual Property that Verilink or any of its Subsidiaries is authorized
or licensed to use under any Verilink Material Inbound License.
4.9 Litigation.
There is no action, suit, proceeding, claim, arbitration or investigation
pending or, to the knowledge of Verilink, threatened against or affecting
Verilink or any of its Subsidiaries or any properties or rights of Verilink or
its Subsidiaries, by any person or by or before any Governmental Entity,
arbitrator or mediator. Neither Verilink nor any of its Subsidiaries has
commenced any action, suit, proceeding or arbitration before any Governmental
Entity, arbitrator or mediator. There are no material judgments, orders or
decrees outstanding against Verilink or any of its Subsidiaries.
39
4.10 Compliance With Laws.
Verilink and each of its Subsidiaries have complied with, are not in violation
of, and have not received any notice alleging any violation with respect to, any
applicable provisions of any statute, law or regulation and are, and have been,
in compliance with the Sarbanes-Oxley Act of 2002 and any related statutes, laws
or regulations, including the rules and regulations of The Nasdaq Stock Market,
Inc., except for failures to comply or violations which, individually or in the
aggregate, have not had, and are not reasonably likely to have, a Verilink
Material Adverse Effect,.
4.11 Certain Business Practices.
Neither Verilink nor any of its Subsidiaries nor any director, officer, agent,
employee or affiliate of Verilink or any of its Subsidiaries who was acting or
purporting to act on behalf of Verilink or any of its Subsidiaries has (a) used
any funds for unlawful contributions, gifts, entertainment or other unlawful
expenses relating to political activity, (b) made any unlawful payment to
foreign or domestic government officials or employees or to foreign or domestic
political parties or campaigns or violated any provision of the Foreign Corrupt
Practices Act of 1977, as amended, nor (c) made any other unlawful payment.
4.12 Opinion of Financial Advisor.
The financial advisor of Verilink, Raymond James & Associates, Inc., has
delivered to the Verilink Board an opinion dated the date of this Agreement to
the effect that, as of such date, the Exchange Ratio is fair, from a financial
point of view, to Verilink. A copy of the written opinion of Raymond James &
Associates, Inc. will be provided to Larscom solely for information purposes
within one business day following receipt thereof by Verilink.
4.13 Brokers.
No agent, broker, investment banker, financial advisor or other firm or person
is or shall be entitled, as a result of any action, agreement or commitment of
Verilink or any of its Affiliates, to any broker's, finder's, financial
advisor's or other similar fee or commission in connection with any of the
transactions contemplated by this Agreement.
4.14 Operations of the Merger Sub.
The Merger Sub was formed solely for the purpose of engaging in an acquisition
transaction, has engaged in no other business activities and has conducted its
operations only as contemplated by this Agreement.
4.15 Section 203 of the DGCL Not Applicable.
The Verilink Board has taken the necessary actions to render Section 203 of
the DGCL inapplicable to this Agreement or the Verilink Voting Agreement or the
consummation of the Merger, or the other transactions contemplated by this
Agreement or the Verilink Voting Agreement.
40
4.16 Loans to Executive Officers.
Since July 30, 2002, Verilink has not extended or maintained credit, arranged
for the extension of credit, or renewed an extension of credit, in the form of a
personal loan to or for any director or executive officer (or equivalent
thereof) of Verilink except to the extent permitted under the second sentence of
Section 13(k)(1) of the Exchange Act.
4.17 Financial Controls.
Verilink maintains accurate books and records reflecting its assets and
liabilities and maintains proper and adequate internal accounting controls which
provide assurance that (a) transactions are executed with management's
authorization; (b) transactions are recorded as necessary to permit preparation
of the consolidated financial statements of Verilink and to maintain
accountability for Verilink's consolidated assets; (c) access to Verilink's
assets is permitted only in accordance with management's authorization; (d) the
reporting of Verilink's assets is compared with existing assets at regular
intervals; and (e) accounts, notes and other receivables and inventory are
recorded accurately, and proper and adequate procedures are implemented to
effect the collection thereof on a current and timely basis.
ARTICLE V
CONDUCT OF BUSINESS
5.1 Covenants of Larscom.
Except as expressly provided herein or as consented to in writing by Verilink,
from and after the date of this Agreement until the earlier of the termination
of this Agreement in accordance with Article VIII and the Effective Time,
Larscom shall, and shall cause each of its Subsidiaries to, (a) act and carry on
its business in the Ordinary Course of Business and pay its debts and Taxes and
perform its other obligations when due (subject to good faith disputes over such
debts, Taxes or obligations), (b) comply in all material respects with
applicable laws, rules and regulations, and (c) use commercially reasonable
efforts, consistent with past practices, to maintain and preserve its and each
of its Subsidiaries' business organization, assets and properties, keep
available the services of its present officers and key employees and preserve
its advantageous business relationships with customers, strategic partners,
suppliers, distributors and others having business dealings with it. Without
limiting the generality of the foregoing, from and after the date of this
Agreement until the earlier of the termination of this Agreement in accordance
with Article VIII and the Effective Time, Larscom shall not, and shall not
permit any of its Subsidiaries to, directly or indirectly, do any of the
following (i) except with the prior written consent of Verilink (which consent
will not be unreasonably withheld or delayed) or (ii) except as specifically
permitted by any other provision of this Agreement or (iii) except as expressly
provided in Section 5.1 of the Larscom Disclosure Schedule:
(a) (i) declare, set aside or pay any dividends on, or make
any other distributions (whether in cash, securities or other property) in
respect of, any of its capital stock (other than dividends and distributions by
a direct or indirect wholly owned Subsidiary of
41
Larscom to its parent); (ii) split, combine or reclassify any of its capital
stock or issue or authorize the issuance of any other securities in respect of,
in lieu of or in substitution for shares of its capital stock or any of its
other securities, or (iii) purchase, redeem or otherwise acquire any shares of
its capital stock or any other of its securities or any rights, warrants or
options to acquire any such shares or other securities (except, in the case of
this clause (iii), for the acquisition of shares of Larscom Common Stock from
former employees, directors and consultants in accordance with agreements
providing for the repurchase of shares at their original issuance price in
connection with any termination of services to Larscom);
(b) issue, deliver, sell, grant, pledge or otherwise dispose
of or encumber any shares of its capital stock, any other voting securities or
any securities convertible into or exchangeable for, or any rights, warrants or
options to acquire, any such shares, voting securities or convertible or
exchangeable securities (other than (i) the issuance of shares of Larscom Common
Stock upon the exercise of Larscom Stock Options and Larscom Warrants (A)
outstanding on the date of this Agreement in accordance with their present terms
or (B) granted after the date of this Agreement as permitted by the provisions
of this Agreement, and (ii) the issuance of Larscom Common Stock in the Ordinary
Course of Business under Larscom's ESPP as currently in effect;
(c) amend the Larscom Charter Documents or other comparable
charter or organizational documents;
(d) form any Subsidiary or acquire any equity interest or
ownership interest in any other person;
(e) acquire (i) by merging or consolidating with, or by
purchasing all or a substantial portion of the assets or any stock of, or by any
other manner, any business or any corporation, partnership, joint venture,
limited liability company, association or other business organization or
division thereof or (ii) any assets that are material, individually or in the
aggregate, to Larscom and its Subsidiaries, taken as a whole;
(f) whether or not in the Ordinary Course of Business, sell,
lease, license, encumber, dispose of or otherwise transfer any assets material
to Larscom and its Subsidiaries, taken as a whole (including any accounts,
leases, contracts or Intellectual Property or any assets or the stock of any of
its Subsidiaries, but excluding the sale or license of products in the Ordinary
Course of Business);
(g) except for a confidentiality agreement as permitted by
Section 6.1, enter into an agreement with respect to any merger, consolidation,
liquidation or business combination, or any acquisition or disposition of all or
substantially all of the assets or securities of Larscom or any of its
Subsidiaries;
(h) authorize, recommend, propose or announce an intention to
authorize, recommend or propose, or enter into any agreement in principle or an
agreement with respect to, any plan of liquidation or dissolution of Larscom;
(i) (i) incur or suffer to exist any indebtedness for borrowed
money or guarantee any such indebtedness of another person, (ii) issue, sell or
amend any debt securities or
42
warrants or other rights to acquire any debt securities of Larscom or any of its
Subsidiaries, guarantee any debt securities of another person, enter into any
"keep well" or other agreement to maintain any financial statement condition of
another person or enter into any arrangement having the economic effect of any
of the foregoing, or (iii) make any loans, advances (other than routine advances
to employees of Larscom in the Ordinary Course of Business) or capital
contributions to, or investment in, any other person, other than Larscom or any
of its direct or indirect wholly owned Subsidiaries;
(j) make any capital expenditures or other expenditures with
respect to property, plant or equipment for Larscom and its Subsidiaries, taken
as a whole in excess of $25,000 in the aggregate;
(k) make any changes in accounting methods, principles or
practices, except insofar as may have been required by the SEC or a change in
GAAP or, except as so required, change any assumption underlying, or method of
calculating, any bad debt, contingency or other reserve;
(l) except in the Ordinary Course of Business, modify, amend
or terminate any material contract or agreement to which Larscom or any of its
Subsidiaries is party, or knowingly waive, release or assign any material rights
or claims (including any write-off or other compromise of any accounts
receivable of Larscom of any of its Subsidiaries);
(m) except as otherwise expressly contemplated by this
Agreement and except with respect to commitments or liabilities incurred in
connection with this Agreement and the transactions contemplated hereby,
including the incurrence of reasonable legal and accounting fees and expenses
and the investment banker fees and expenses set forth in the agreement to be
delivered pursuant to Section 3.26 hereof, except in the Ordinary Course of
Business, (i) enter into any material contract, agreement or transaction or take
any other material action or (ii) license any material Intellectual Property
rights to or from any third party;
(n) except as required to comply with applicable law or
agreements, plans or arrangements existing on the date hereof, (i) take any
action with respect to, adopt, enter into, terminate or amend any employment,
severance or similar agreement or benefit plan for the benefit or welfare of any
future, current or former director, officer, employee or consultant or any
collective bargaining agreement, (ii) increase in any material respect the
compensation or fringe benefits of, or pay any bonus to, any director, officer,
employee or consultant (whether in cash, stock, equity securities, property or
otherwise), (iii) waive any stock repurchase rights, accelerate, amend or change
the period of exercisability of options or restricted stock or reprice options
granted under any employee, consultant, director or other stock plans or
authorize cash payments in exchange for any options granted under any of such
plans, (iv) pay any material benefit not provided for as of the date of this
Agreement under any Larscom Employee Plan, (v) grant any awards under any bonus,
incentive, performance or other compensation plan or arrangement or benefit
plan, or (vi) take any action other than in the Ordinary Course of Business to
fund or in any other way secure the payment of compensation or benefits under
any employee plan, agreement, contract or arrangement or benefit plan;
43
(o) hire any new employee at the level of director or above or
with an annual base salary in excess of $100,000 or promote any employee to the
level of executive officer or above;
(p) make or change any material Tax election, change any
annual tax accounting period, adopt or change any method of tax accounting, file
any material amended Tax Return, settle or compromise any material Tax claim,
assessment, or proposed assessment, or take any other action, if any such action
would have the effect of increasing the post-closing Tax liability of Larscom,
and of its Subsidiaries or any person related to Larscom by a material amount;
(q) initiate, compromise, pay, discharge or settle any
material claims, liabilities or obligations (absolute, accrued, asserted or
unasserted, contingent or otherwise), litigation or arbitration proceeding,
exclusive of any amounts covered by Larscom Insurance Policies;
(r) fail to maintain insurance at levels substantially
comparable to levels existing as of the date of this Agreement;
(s) enter into any agreement to purchase or sell any interest
in real property, grant or accept any security interest in any real property,
enter into any lease, sublease, license or other occupancy agreement with
respect to any real property or alter, amend, modify or terminate any of the
terms of any Larscom Lease; or
(t) authorize any of, or commit or agree, in writing or
otherwise, to take any of, the foregoing actions or any action which would make
any representation or warranty of Larscom in this Agreement untrue or incorrect
in any material respect, or would materially impair or prevent the satisfaction
of any conditions in Article VII hereof.
5.2 Covenants of Verilink.
Except as expressly provided herein or as consented to in writing by Larscom,
from and after the date of this Agreement until the earlier of the termination
of this Agreement in accordance with Article VIII and the Effective Time,
Verilink shall, and shall cause each of its Subsidiaries to, (a) act and carry
on its business in the Ordinary Course of Business and pay its debts and Taxes
and perform its other obligations when due (subject to good faith disputes over
such debts, Taxes or obligations), (b) comply in all material respects with
applicable laws, rules and regulations, and (c) use commercially reasonable
efforts, consistent with past practices, to maintain and preserve its and each
of its Subsidiaries' business organization, assets and properties, keep
available the services of its present officers and key employees and preserve
its advantageous business relationships with customers, strategic partners,
suppliers, distributors and others having business dealings with it. Without
limiting the generality of the foregoing, from and after the date of this
Agreement until the earlier of the termination of this Agreement in accordance
with Article VIII and the Effective Time, Verilink shall not, and shall not
permit any of its Subsidiaries to, directly or indirectly, do any of the
following (i) except with the prior written consent of Larscom (which consent
will not be unreasonably withheld or delayed) or (ii) except as specifically
permitted by any other provision of this Agreement or (iii) except as
44
expressly provided in Section 5.2 of the Verilink Disclosure Schedule:
(a) (i) declare, set aside or pay any dividends on, or make
any other distributions (whether in cash, securities or other property) in
respect of, any of its capital stock (other than dividends and distributions by
a direct or indirect wholly owned Subsidiary of Verilink to its parent or (ii)
split, combine or reclassify any of its capital stock or issue or authorize the
issuance of any other securities in respect of, in lieu of or in substitution
for any shares of its capital stock or any of its other securities;
(b) amend the Verilink Charter Documents or other comparable
charter or organizational documents, except as otherwise expressly provided by
this Agreement;
(c) authorize, recommend, propose or announce an intention to
authorize, recommend or propose, or enter into any agreement in principle or an
agreement with respect to, any plan of liquidation or dissolution of Verilink;
or
(d) authorize any of, or commit or agree, in writing or
otherwise, to take any of, the foregoing actions or any action which would make
any representation or warranty of Verilink in this Agreement untrue or incorrect
in any material respect, or would materially impair or prevent the satisfaction
of any conditions in Article VII hereof.
5.3 Confidentiality.
The parties acknowledge that Larscom and Verilink have previously executed a
Mutual Confidentiality Agreement dated as of December 4, 2003 (the
"Confidentiality Agreement"), which Confidentiality Agreement shall continue in
full force and effect in accordance with its terms, except as expressly modified
by this Agreement.
5.4 Required Communications.
Until the earlier of the termination of this Agreement in accordance with
Article VIII and the Effective Time, Larscom shall not without the prior consent
of Verilink, which consent shall not be unreasonably withheld or delayed, agree
to any new or modify any existing material commitments with its customers,
suppliers and distributors.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 No Solicitation.
(a) No Solicitation or Negotiation.
From and after the date of this Agreement until the Effective Time or the
termination of this Agreement pursuant to Article VIII hereof, and except as set
forth in this Section 6.1, Verilink and Larscom shall not, shall cause their
respective Subsidiaries not to, and shall cause their or their Subsidiaries'
respective directors, officers, investment bankers, attorneys, accountants or
other advisors or representatives (such directors, officers, investment bankers,
attorneys,
45
accountants, affiliates, other advisors and representatives, collectively,
"Representatives") not to, directly or indirectly:
(i) solicit, initiate, knowingly encourage or take
any other action to facilitate any inquiries or the making,
submission or announcement of any proposal or offer that
constitutes, or could reasonably be expected to lead to, any
Acquisition Proposal, with respect to itself;
(ii) enter into, continue or otherwise participate in
any discussions or negotiations regarding, furnish to any
person any information with respect to, knowingly assist or
participate in any effort or attempt by any person with
respect to, or otherwise knowingly cooperate in any way with
any proposal or offer that constitutes, or could reasonably be
expected to lead to, any Acquisition Proposal, except
discussions as to the existence of these provisions;
(iii) approve, endorse or recommend any Acquisition
Proposal with respect to itself; or
(iv) enter into any letter of intent or similar
document or any contract, agreement or commitment
contemplating or otherwise relating to any Acquisition
Proposal or transaction contemplated thereby with respect to
itself.
Notwithstanding the foregoing, in the event that, to the
extent required by their respective fiduciary obligations, as determined in good
faith by the applicable Board of Directors, prior to (A) in the case of
Verilink, the approval of the Verilink Voting Proposal at the Verilink Meeting
or, (B) in the case of Larscom, the approval of the Larscom Voting Proposal at
the Larscom Meeting (in each case, the "Specified Time"), Verilink or Larscom,
as the case may be, receives an Acquisition Proposal with respect to itself from
a third party which (1) constitutes a Superior Proposal or (2) which its Board
of Directors in good faith concludes is more favorable to its stockholders than
the transactions contemplated by this Agreement and which could reasonably be
expected to result in a Superior Proposal in all other respects, and such
Acquisition Proposal did not result from a breach by Verilink or Larscom, as the
case may be, of this Section 6.1, and subject to compliance with Section 6.1(c),
then Verilink or Larscom, as the case may be, or any of their respective
Representatives may take the following actions: (x) furnish nonpublic
information to the party which is the subject of the Acquisition Proposal to the
person making such Acquisition Proposal and its Representatives pursuant to a
customary confidentiality agreement not less restrictive of the other party than
the Confidentiality Agreement and (y) participate in discussions or negotiations
with such person and its Representatives regarding any such Acquisition
Proposal.
(b) No Change in Recommendation or Alternative Acquisition
Agreement. Beginning immediately upon the execution of this Agreement, neither
the Verilink Board nor the Larscom Board nor any committee thereof shall:
(i) except as set forth in this Section 6.1, withdraw
or modify, or publicly propose to withdraw or modify, in a
manner adverse to the other party,
46
its approval or recommendation with respect to the Verilink
Voting Proposal or the Larscom Voting Proposal, as the case
may be;
(ii) cause or permit Verilink or Larscom to enter
into any letter of intent, memorandum of understanding,
agreement in principle, acquisition agreement, merger
agreement or similar agreement constituting or relating to any
Acquisition Proposal (other than a confidentiality agreement
referred to in Section 6.1(a) entered into in the
circumstances referred to in Section 6.1(a)); or
(iii) adopt, approve or recommend, or propose to
adopt, approve or recommend, any Acquisition Proposal.
Notwithstanding the foregoing, the Verilink Board or the
Larscom Board may, in compliance with this Section 6.1, withdraw or modify or
propose to withdraw or modify its recommendation with respect to the Verilink
Voting Proposal or the Larscom Voting Proposal, as the case may be, publicly
indicate that it is doing so (and to the extent required in order to comply with
such Board's fiduciary duties under applicable law, as determined in good faith
by the applicable Board of Directors, may endorse or recommend such Superior
Proposal) if the Verilink Board or the Larscom Board, as the case may be,
determines in good faith (after consultation with outside counsel) that its
fiduciary obligations require it to do so, but only at a time that is prior to
the Specified Time and is after the second business day following receipt by
Larscom or Verilink, as the case may be, of written notice advising (x) whether
such action is taken in connection with an Acquisition Proposal and if so,
specifying the material terms and conditions of such Superior Proposal and
identifying the person making such Superior Proposal and (y) otherwise
specifying in reasonable detail the reasons and basis for such action.
(c) Notices; Additional Negotiations.
Each party shall immediately advise the other party orally, with written
confirmation to follow promptly, of any Acquisition Proposal or any request for
nonpublic information in connection with any Acquisition Proposal, or of any
inquiry with respect to, or that could reasonably be expected to lead to, any
Acquisition Proposal, the material terms and conditions of any such Acquisition
Proposal or inquiry and the identity of the person making any such Acquisition
Proposal or inquiry. Neither party shall provide any information to or
participate in discussions or negotiations with (except for discussions as to
the existence of these provisions) the person or entity making any Acquisition
Proposal which constitutes a Superior Proposal or which could reasonably be
expected to result in a Superior Proposal until two business days after such
party has first notified the other party of such Acquisition Proposal as
required by the preceding sentence. The party receiving an Acquisition Proposal
shall (i) orally, and in writing within 24 hours of receipt thereof, keep the
other party fully informed of the status and material terms of any such
Acquisition Proposal, request or inquiry (including notifying the other party
orally and in writing of the identity of the person making such Acquisition
Proposal, request or inquiry, and of any material change to the terms of such
Acquisition Proposal) and (ii) if the other party to this Agreement shall make a
competing proposal, consider and cause its financial and legal advisors to
negotiate on its behalf in good faith with respect to the terms of such
competing proposal. Contemporaneously with providing any information to a third
party in connection with any such Acquisition Proposal, the party receiving such
Acquisition Proposal shall furnish a
47
copy of such information to the other party to the extent that such copy has not
previously been provided to the other party. In addition to the foregoing,
Verilink or Larscom shall (A) provide the other party with at least 24 hours
prior notice (or such lesser prior notice as provided to the members of the
Verilink Board or to the members of the Larscom Board but in no event less than
eight hours) of any meeting of the Verilink Board or the Larscom Board at which
the Verilink Board or the Larscom Board is reasonably expected to consider an
Acquisition Proposal which constitutes a Superior Proposal or which could
reasonably be expected to result in a Superior Proposal and (B) provide the
other party with at least two business days prior written notice of a meeting of
the Verilink Board or the Larscom Board at which the Verilink Board or the
Larscom Board is reasonably expected to recommend a Superior Proposal to its
stockholders and together with such notice a copy of the definitive
documentation relating to such Superior Proposal to the extent that such copy
has not previously been provided to the other party.
(d) Certain Permitted Disclosure. Nothing contained in this
Section 6.1 or in Section 6.5 shall be deemed to prohibit either party from
taking and disclosing to its stockholders a position with respect to a tender
offer contemplated by Rules 14d-9 or 14e-2 promulgated under the Exchange Act
with regard to an Acquisition Proposal, if, in the good faith judgment of the
Verilink Board or the Larscom Board, as the case may be, based on the advice of
outside counsel, failure to so disclose would be inconsistent with its
obligations under applicable law.
(e) Cessation of Ongoing Discussions. Each party shall, and
shall cause its Subsidiaries and its and their Representatives to, cease
immediately all discussions and negotiations regarding any proposal that
constitutes, or could reasonably be expected to lead to, an Acquisition
Proposal. As of the date of this Agreement, each of Verilink and Larscom
represents that neither it nor any of its Subsidiaries is engaged, directly or
indirectly, in any discussions or negotiations with any other party with respect
to an Acquisition Proposal.
(f) Definitions. For purposes of this Agreement.
"Acquisition Proposal" means, with respect to any party, (i)
any inquiry, proposal or offer for a merger, consolidation, dissolution, sale of
substantial assets, tender offer, recapitalization, share exchange or other
business combination involving such party or any of its Subsidiaries, (ii) any
proposal for the issuance by such party or any of its Subsidiaries of over 20%
of its equity securities or the voting power of its equity securities or (iii)
any proposal or offer to acquire in any manner, directly or indirectly, over 20%
of the equity securities or the voting power of its equity securities or
consolidated total assets of such party; provided, however, in each case
Acquisition Proposal shall not include the Merger contemplated by this
Agreement; provided, further, that in the case of Verilink the term Acquisition
Proposal shall not include any inquiry, proposal or offer that does not require,
propose, contemplate, or would not be reasonably expected to result in, the
termination or abandonment of this Agreement and the Merger (an "Allowed
Proposal").
"Superior Proposal" means, with respect to any party, any
unsolicited, bona fide written proposal made by a third party to acquire,
directly or indirectly, pursuant to a tender or exchange offer, merger,
consolidation or other business combination or asset purchase, all or
substantially all of the assets of Verilink or Larscom, as the case may be, or a
majority of the total outstanding voting securities in the case of Verilink or
Larscom, as the case may be, and as
48
a result of which the stockholders of Verilink or Larscom, as the case may be,
immediately preceding such transaction would hold less than fifty percent (50%)
of the voting power of the total outstanding equity interests in the surviving
or resulting entity of such transaction or any direct or indirect parent or
subsidiary thereof, on terms that the Board of Directors of Larscom or Verilink,
as the case may be, has in good faith concluded to be more favorable, from a
financial point of view, to its stockholders generally (in their capacities as
stockholders) than the transactions contemplated by this Agreement (following
consultation with outside and independent legal and financial advisors and after
taking into account all the terms and conditions of such proposal and this
Agreement (including any proposal by either party to amend the terms of this
Agreement) and on the terms proposed, taking into account all financial,
regulatory, legal and other aspects of such proposal; provided, however, that no
Acquisition Proposal shall be deemed to be a Superior Proposal if any financing
required to consummate the Acquisition Proposal is not committed, and in the
case of Verilink, is an Allowed Proposal.
6.2 Joint Proxy Statement/Prospectus and Registration Statement.
(a) As promptly as practicable after the execution of this
Agreement, Larscom and Verilink shall jointly prepare and file with the SEC a
joint proxy statement/prospectus (together with any amendments thereof or
supplements thereto, the "Joint Proxy Statement/Prospectus") to be sent to the
stockholders of Larscom and Verilink in connection with the Larscom Meeting and
Verilink Meeting, respectively, and Verilink shall prepare and file with the SEC
a registration statement on Form S-4 in which the Joint Proxy
Statement/Prospectus will be included as a prospectus, to register under the
Securities Act the issuance of shares of Verilink Common Stock in connection
with the Merger (together with all amendments thereto, the "Registration
Statement"). Each of Verilink and Larscom shall provide promptly to the other
party such information concerning its business and financial statements and
affairs as, in the reasonable judgment of the providing party or its counsel,
may be required or appropriate for inclusion in the Joint Proxy Statement/
Prospectus and the Registration Statement, or in any supplements or amendments
thereto, and cause its counsel and auditors to cooperate with the other's
counsel and auditors in the preparation of the Joint Proxy Statement/Prospectus
and the Registration Statement. Each of Larscom and Verilink shall respond to
any comments of the SEC and shall use its respective commercially reasonable
efforts to have the Joint Proxy Statement/Prospectus cleared by the SEC and the
Registration Statement declared effective under the Securities Act as promptly
as practicable after such filings and Larscom and Verilink shall cause the Joint
Proxy Statement/Prospectus to be mailed to their respective stockholders at the
earliest practicable time after both the Joint Proxy Statement/Prospectus is
cleared by the SEC and the Registration Statement is declared effective under
the Securities Act; provided, however, that the parties shall consult and
cooperate with each other in determining the appropriate time for mailing the
Joint Proxy Statement/Prospectus in light of the date sets for the Larscom
Meeting and the Verilink Meeting. Each of Larscom and Verilink shall notify the
other promptly upon the receipt of any comments from the SEC or its staff or any
other government officials and of any request by the SEC or its staff or any
other government officials for amendments or supplements to the Registration
Statement, the Joint Proxy Statement/Prospectus or any filing pursuant to
Section 6.2(c) or for additional information and shall supply the other with
copies of all correspondence between such party or any of its representatives,
on the one hand, and the SEC, or its staff or any other government officials, on
the other hand, with respect to the Registration Statement, the Joint Proxy
Statement/Prospectus,
49
the Merger or any filing pursuant to Section 6.2(c). Each of Larscom and
Verilink shall use commercially reasonable efforts to cause all documents that
it is responsible for filing with the SEC or other regulatory authorities under
this Section 6.2 to comply in all material respects with all applicable
requirements of law and the rules and regulations promulgated thereunder.
Whenever any event occurs which is required to be set forth in an amendment or
supplement to the Joint Proxy Statement/Prospectus, the Registration Statement
or any filing pursuant to Section 6.2(b), Larscom or Verilink, as the case may
be, shall promptly inform the other of such occurrence and cooperate in filing
with the SEC or its staff or any other Governmental Entity or government
officials, and/or mailing to stockholders of Larscom and Verilink, such
amendment or supplement.
(b) Each of Verilink and Larscom agrees, as to itself and its
Subsidiaries, that none of the information supplied or to be supplied by it for
inclusion or incorporation by reference in (i) the Registration Statement will,
at the time the Registration Statement becomes effective under the Securities
Act, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading, (ii) the Joint Proxy Statement/Prospectus will, at the
time of first mailing to the Verilink stockholders or Larscom stockholders or at
the time of the Verilink Meeting or Larscom Meeting, contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements therein, in the light of the circumstances under
which they are made, not misleading, or (iii) any filing pursuant to Rule 165
and 425 under the Securities Act or Rule 14a-12 under the Exchange Act (each a
"Regulation M-A Filing"), when taken together with the Joint Proxy
Statement/Prospectus, will, at the time of filing with the SEC or, if
applicable, at the time first mailed or otherwise communicated to Verilink or
Larscom stockholders, contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements therein, in
the light of the circumstances under which they are made, not misleading.
Notwithstanding the foregoing, no representation or warranty is made by Verilink
with respect to statements made or incorporated by reference therein about
Larscom or supplied by Larscom for inclusion or incorporation by reference in
the Registration Statement, Joint Prospectus/Proxy Statement or Regulation M-A
Filing and no representation or warranty is made by Larscom with respect to
statements made or incorporated by reference therein about Verilink that are
supplied by the Verilink for inclusion or incorporation by reference in the
Registration Statement, the Joint Proxy Statement/ Prospectus or any Regulation
M-A Filing.
(c) Larscom and Verilink shall promptly make all necessary
filings with respect to the Merger under the Securities Act, the Exchange Act,
applicable Blue Sky Laws, the applicable laws of any other jurisdiction and the
rules and regulations thereunder; provided, however, that neither Verilink,
Larscom nor the Surviving Corporation shall be required (i) to qualify to do
business as a foreign corporation in any jurisdiction in which it is not now
qualified or (ii) to file a general consent to service of process in any
jurisdiction.
6.3 [Reserved]
6.4 Access to Information.
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From and after the date of this Agreement until the earlier of the termination
of this Agreement in accordance with Article VIII and the Effective Time, each
of Larscom and Verilink shall (and shall cause each of its Subsidiaries to)
afford to the other party's Representatives, reasonable access, during normal
business hours during the period prior to the Effective Time, to all its
properties, books, work papers, Tax Returns, contracts, commitments, personnel,
customers, suppliers and vendors and records and, during such period, each of
Larscom and Verilink shall (and shall cause each of its Subsidiaries to) furnish
promptly to the other party (a) a copy of each report, schedule, registration
statement and other document filed or received by it during such period pursuant
to the requirements of federal or state securities laws or the securities laws
of any other applicable jurisdiction and (b) all other information concerning
its business, properties, assets and personnel as the other party may reasonably
request. Each of Larscom and Verilink will hold any such information which is
nonpublic in confidence in accordance with the Confidentiality Agreement. No
information or knowledge obtained in any investigation pursuant to this Section
6.4 or otherwise shall affect or be deemed to modify any representation or
warranty contained in this Agreement or the conditions to the obligations of the
parties to consummate the Merger.
6.5 Stockholders Meetings.
(a) Verilink, acting through the Verilink Board, shall take
all actions in accordance with applicable law, its Certificate of Incorporation
and Bylaws and the rules of The Nasdaq Stock Market, Inc. to promptly and duly
call, give notice of, convene and hold as promptly as practicable after the
declaration of effectiveness of the Registration Statement, the Verilink
Stockholders Meeting for the purpose of considering and voting upon the Verilink
Voting Proposal. Except as expressly permitted by Section 6.1(b), to the fullest
extent permitted by applicable law, (i) the Verilink Board shall unanimously
recommend approval and adoption of the Verilink Voting Proposal by the
stockholders of Verilink and include such unanimous recommendation in the Joint
Proxy Statement/Prospectus, and (ii) neither the Verilink Board nor any
committee thereof shall withdraw or modify, or propose or resolve to withdraw or
modify, in a manner adverse to Larscom, the recommendation of the Verilink Board
that Verilink's stockholders vote in favor of the Verilink Voting Proposal.
Notwithstanding anything to the contrary contained in this Agreement, after
consultation with Larscom, Verilink may adjourn or postpone the Verilink
Stockholder Meeting to the extent necessary to ensure that any required
supplement or amendment to the Joint Proxy Statement/Prospectus is provided to
Verilink's stockholders or, if, as of the time for which the Verilink
Stockholders Meeting is originally scheduled (as set forth in the Joint Proxy
Statement/Prospectus), there are insufficient shares of Verilink Common Stock
represented (either in person or by proxy) to constitute a quorum necessary to
conduct the business of the Verilink Stockholders Meeting.
(b) Larscom, acting through the Larscom Board, shall take all
actions in accordance with applicable law, its Certificate of Incorporation and
Bylaws and the rules of The Nasdaq Stock Market, Inc. to promptly and duly call,
give notice of, convene and hold as promptly as practicable after the
declaration of effectiveness of the Registration Statement, the Larscom
Stockholders Meeting for the purpose of considering and voting upon the Larscom
Voting Proposal. Except as expressly permitted by Section 6.1(b), to the fullest
extent permitted by applicable law, (i) the Larscom Board shall unanimously
recommend approval and adoption of the Larscom Voting Proposal by the
stockholders of Larscom and include such unanimous
51
recommendation in the Joint Proxy Statement/Prospectus, and (ii) neither the
Larscom Board nor any committee thereof shall withdraw or modify, or propose or
resolve to withdraw or modify, in a manner adverse to Verilink, the
recommendation of the Larscom Board that Larscom's stockholders vote in favor of
the Larscom Voting Proposal. Notwithstanding anything to the contrary contained
in this Agreement, after consultation with Verilink, Larscom may adjourn or
postpone the Larscom Stockholders Meeting to the extent necessary to ensure that
any required supplement or amendment to the Joint Proxy Statement/Prospectus is
provided to Larscom's stockholders or, if, as of the time for which the Larscom
Stockholders Meeting is originally scheduled (as set forth in the Joint Proxy
Statement/ Prospectus), there are insufficient shares of Larscom Common Stock
represented (either in person or by proxy) to constitute a quorum necessary to
conduct the business of the Larscom Stockholders Meeting.
6.6 Legal Conditions to Merger.
(a) Subject to the terms hereof, including Section 6.6(b), and
applicable law, Verilink and Larscom shall each use commercially reasonable
efforts to (i) take, or cause to be taken, all actions, and do, or cause to be
done, and to assist and cooperate with the other parties in doing, all things
necessary, proper or advisable to consummate and make effective the transactions
contemplated hereby as promptly as practicable, (ii) as promptly as practicable,
obtain from any Governmental Entity or any other third party any consents,
licenses, permits, waivers, approvals, authorizations, or orders required to be
obtained or made by Verilink or Larscom or any of their Subsidiaries in
connection with the authorization, execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby, (iii) as promptly as
practicable, make all necessary filings, and thereafter make any other required
submissions, with respect to this Agreement and the Merger required under (A)
the Securities Act and the Exchange Act, and any other applicable federal or
state securities laws, (B) the HSR Act, if applicable, and any related
governmental request thereunder, and (C) any other applicable law, and (iv)
execute or deliver any additional instruments necessary to consummate the
transactions contemplated by, and to fully carry out the purposes of, this
Agreement. Verilink and Larscom shall cooperate with each other in connection
with the making of all such filings, including providing copies of all such
documents to the non-filing party and its advisors prior to filing and, if
requested, accepting all reasonable additions, deletions or changes suggested in
connection therewith. Verilink and Larscom shall use their respective
commercially reasonable efforts to furnish to each other all information
required for any application or other filing to be made pursuant to the rules
and regulations of any applicable law (including all information required to be
included in the Joint Proxy Statement/Prospectus and the Registration Statement)
in connection with the transactions contemplated by this Agreement. For the
avoidance of doubt, Larscom and Verilink agree that nothing contained in this
Section 6.6(a) shall modify or affect their respective rights and
responsibilities under Section 6.6(b).
(b) Subject to the terms hereof, Larscom and Verilink agree,
and shall cause each of their respective Subsidiaries, to cooperate and to use
their respective commercially reasonable efforts to obtain any government
clearances or approvals required for Closing under the HSR Act, if applicable,
and any other federal, state or foreign law or, regulation or decree designed to
prohibit, restrict or regulate actions for the purpose or effect of
monopolization or restraint of trade reasonably determined by the parties to
apply (collectively "Antitrust Laws"), to respond to any government requests for
information under any Antitrust Law, and to contest
52
and resist any action, including any legislative, administrative or judicial
action, and to have vacated, lifted, reversed or overturned any decree,
judgment, injunction or other order (whether temporary, preliminary or
permanent) (an "Antitrust Order") that restricts, prevents or prohibits the
consummation of the Merger or any other transactions contemplated by this
Agreement under any Antitrust Law. The parties hereto will consult and cooperate
with one another, and consider in good faith the views of one another, in
connection with any analyses, appearances, presentations, memoranda, briefs,
arguments, opinions and proposals made or submitted by or on behalf of any party
hereto in connection with proceedings under or relating to any Antitrust Law.
Notwithstanding anything in this Agreement to the contrary in this Section 6.6,
neither Larscom nor Verilink shall be under any obligation to (i) make
proposals, execute or carry out agreements or submit to orders providing for the
sale or other disposition or holding separate (through the establishment of a
trust or otherwise) of any material assets or categories of assets of Larscom or
Verilink or the holding separate of the shares of Larscom Common Stock (or
shares of stock of the Surviving Corporation) or imposing or seeking to impose
any material limitation on the ability of Larscom or Verilink to conduct its
business or own such assets or to acquire, hold or exercise full rights of
ownership of the shares of Larscom Common Stock (or shares of stock of the
Surviving Corporation) or (ii) take any action under this Section 6.6 if the
United States Department of Justice or the United States Federal Trade
Commission or any applicable foreign regulatory agency authorizes its staff to
seek a preliminary injunction or restraining order to enjoin consummation of the
Merger.
(c) Each of Verilink and Larscom shall give (or shall cause
their respective Subsidiaries to give) any notices to third parties, and use,
and cause their respective Subsidiaries to use, their commercially reasonable
efforts to obtain any third party consents related to or required in connection
with the Merger that are (A) necessary to consummate the transactions
contemplated hereby, (B) disclosed or required to be disclosed in the Verilink
Disclosure Schedule or Larscom Disclosure Schedule, as the case may be, or (C)
required to prevent a Verilink Material Adverse Effect or a Larscom Material
Adverse Effect from occurring prior to or at the Effective Time.
6.7 Public Disclosure.
From and after the date of this Agreement until the earlier of the termination
of this Agreement in accordance with Article VIII and the Effective Time each
party shall not, and shall not permit any of its Representatives to, issue any
press release or otherwise publicly disseminate any document or other written
material relating to the Merger or any other transaction contemplated by this
Agreement unless (a) the other party shall have approved such press release or
written material (such approval not to be unreasonably withheld or delayed) or
(b) such party shall have been advised by its outside legal counsel that the
issuance of such press release or dissemination of such written material is
required by law or The Nasdaq Stock Market, Inc. rules and regulations and such
party shall have consulted with the other party prior to issuing such press
release or disseminating such written material.
6.8 Section 368(a) Reorganization.
Neither Larscom nor Verilink nor any of their Subsidiaries shall take any
action that would reasonably be expected to cause the Merger to fail to qualify
as a reorganization within the
53
meaning of Section 368(a) of the Code. Verilink and Larscom shall each make all
commercially reasonable efforts to cause the Merger to be treated as a
reorganization within the meaning of Section 368(a) of the Code.
6.9 Affiliate Legends.
Section 6.9 of the Larscom Disclosure Schedule sets forth a list of those
persons who are, in Larscom's reasonable judgment, "affiliates" of Larscom
within the meaning of Rule 145 promulgated under the Securities Act ("Rule 145
Affiliates"). Larscom shall notify Verilink in writing of any change in the
identity of its Rule 145 Affiliates prior to the Closing. Verilink shall be
entitled to place appropriate legends on the Verilink Common Stock to be
received by Rule 145 Affiliates of Larscom in the Merger reflecting the
restrictions set forth in Rule 145 promulgated under the Securities Act and to
issue appropriate stop transfer instructions to the transfer agent for Verilink
Common Stock.
6.10 Nasdaq Stock Market Listing.
Verilink shall use commercially reasonable best efforts (a) to cause the
Verilink Common Stock to be issued pursuant to this Agreement to the holders of
Larscom Common Stock in connection with the Merger to be approved for listing
upon the Effective Time on the Nasdaq Stock Market, if applicable, and (b) to
cause the Verilink Common Stock issued upon the exercise of converted Larscom
Stock Options and Larscom Warrants to be approved for listing on the Nasdaq
Stock Market, if applicable, and shall, if required by the rules of The Nasdaq
Stock Market, Inc., file timely with The Nasdaq Stock Market, Inc. a
Notification Form: Listing of Additional Shares with respect to such shares of
Verilink Common Stock.
6.11 Stockholder Litigation.
From and after the date of this Agreement until the earlier of the termination
of this Agreement in accordance with Article VIII and the Effective Time, each
party shall give the other party the opportunity to participate in the defense
or settlement of any stockholder litigation relating to this Agreement or any of
the transactions contemplated by this Agreement, and shall not settle any such
litigation without the other party's prior written consent, which shall not be
unreasonably withheld or delayed.
6.12 Indemnification.
(a) From and after the Effective Time, Verilink shall, and
shall cause the Surviving Corporation to, for a period of six years from the
Effective Time, indemnify, defend and hold harmless each present and former
director and officer of Larscom (the "Indemnified Parties"), against any costs
or expenses (including reasonable attorneys' fees), judgments, fines, losses,
claims, damages, liabilities or amounts paid in settlement incurred in
connection with any claim, action, suit, proceeding or investigation, whether
civil, criminal, administrative or investigative, arising out of or pertaining
to matters existing or occurring at or prior to the Effective Time (including
for acts or omissions occurring in connection with the approval of this
Agreement and the consummation of the transactions contemplated hereby), whether
asserted or claimed prior to, at or after the Effective Time, to the fullest
extent that Larscom would have
54
been permitted under Delaware law, the Sarbanes-Oxley Act of 2002 and any
related statutes laws or regulations, the Larscom Charter Documents and any
agreements for indemnification in effect on the date hereof to indemnify an
Indemnified Party, in the forms provided by Larscom to Verilink prior to the
date hereof, (and Verilink and the Surviving Corporation shall also advance
expenses as incurred to the fullest extent permitted under Delaware law, the
Sarbanes-Oxley Act of 2002 and any related statutes laws or regulations and such
Larscom Charter Documents and the agreements set forth on Section 6.12(a) of the
Larscom Disclosure Schedule, provided the Indemnified Party to whom expenses are
advanced provides an undertaking to repay such advances if it is ultimately
determined that such Indemnified Party is not entitled to indemnification).
Neither Verilink nor the Surviving Corporation shall amend, appeal or otherwise
modify the indemnification or exculpation from liability or other similar
provisions set forth in the Restated Certificate or the current bylaws of
Verilink for a period of six years after the Effective Time in any manner that
would adversely affect the rights thereunder of any person who, immediately
prior to the Effective Time, was an indemnified party under the indemnification
or exculpation from liability provisions of the Larscom Charter Documents.
(b) Prior to the Effective Time, Larscom shall purchase and
pay for directors' and officers' liability insurance tail coverage covering
those persons who are currently covered by Larscom's directors' and officers'
liability insurance policy (a copy of which has been heretofore delivered or
made available to Verilink) with coverage in the amount of $10,000,000 and scope
at least as favorable as provided to Larscom's directors and officers with
respect to claims arising from facts or events which occurred on or before the
Effective Time (including for acts or omissions occurring in connection with the
approval of this Agreement and the consummation of the transactions contemplated
hereby); provided that Verilink will pay one-half the cost of such tail coverage
to Larscom at the time Larscom purchases such coverage and to the extent such
payment does not exceed the limit set forth on Schedule 6.12(b) of the Verilink
Disclosure Schedule.
(c) In the event that Verilink or the Surviving Corporation or
any of their respective successors or assigns (i) consolidates with or merges
into any other person and is not the continuing or surviving corporation or
entity of such consolidation or merger or (ii) transfers or conveys all or
substantially all its properties and assets to any person, then, and in each
such case, Verilink shall cause proper provisions to be made so that the
successors and assigns of Verilink or the Surviving Corporation, as the case may
be, assume the obligations set forth in this Section 6.12.
(d) The provisions of this Section 6.12 are intended to be in
addition to the rights otherwise available to the current officers and directors
of Larscom by law, charter, statute, bylaw or agreement, and shall operate for
the benefit of, and shall be enforceable by, each of the Indemnified Parties,
their heirs and their representatives. The obligations of Verilink and the
Surviving Corporation under this Section 6.12 shall not be terminated or
modified in such a manner as to adversely affect any Indemnified Party to whom
this Section 6.12 applies without the express written consent of such affected
Indemnified Party (it being expressly agreed that the Indemnified Parties to
whom this Section 6.12 applies shall be third party beneficiaries of this
Section 6.12).
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6.13 Notification of Certain Matters.
Larscom shall give prompt notice to Verilink, and Verilink shall give prompt
notice to Larscom, of the occurrence, or failure to occur, of any event, which
occurrence or failure to occur would be reasonably likely to cause (a) (i) any
representation or warranty of such party contained in this Agreement that is
qualified as to materiality to be untrue or inaccurate in any respect or (ii)
any other representation or warranty of such party contained in this Agreement
to be untrue or inaccurate in any material respect, in each case at any time
from and after the date of this Agreement until the Effective Time, or (b) any
material failure of Verilink and the Merger Sub or Larscom, as the case may be,
or of any officer, director, employee or agent thereof, to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied by
it under this Agreement. Notwithstanding the above, the delivery of any notice
pursuant to this Section will not limit or otherwise affect the remedies
available hereunder to the party receiving such notice or the conditions to such
party's obligation to consummate the Merger.
6.14 Exemption from Liability Under Section 16(b).
(a) The Larscom Board, or a committee thereof consisting of
non-employee directors (as such term is defined for purposes of Rule 16b-3(d)
under the Exchange Act), and the Verilink Board, or a committee thereof
consisting of non-employee directors (as such term is defined for purposes of
Rule 16b-3(d) under the Exchange Act) shall, respectively, adopt resolutions in
advance of the Effective Time providing that the receipt by Larscom Insiders (as
defined below) of Verilink securities in exchange for shares of Larscom Common
Stock, and of options and warrants to purchase Verilink securities upon
assumption and conversion of Larscom Stock Options and Warrants, in each case
pursuant to the transactions contemplated hereby and to the extent such
securities are listed in the Section 16 Information, is intended to be exempt
pursuant to Rule 16b-3 under the Exchange Act.
(b) For purposes of Section 6.14(a), "Section 16 Information"
shall mean information regarding Larscom Insiders and the number of shares of
Larscom Common Stock or other Larscom equity securities deemed to be
beneficially owned by each such Larscom Insider and expected to be exchanged for
Verilink securities, or options or warrants to purchase Verilink securities, in
each case, in connection with the Merger which shall be provided by Larscom to
Verilink no later than 10 business days prior to the Closing.
(c) For purposes of Section 6.14(a), "Larscom Insiders" shall
mean those officers and directors of Larscom who are subject to the reporting
requirements of Section 16(a) of the Exchange Act as listed in the Section 16
Information.
6.15 [Reserved]
6.16 Employee Benefits.
Following the Effective Time, Verilink will give each Continuing Employee full
credit for (i) prior service with Larscom or its Subsidiaries for purposes of
(A) eligibility and vesting under any Employee Benefit Plan of Verilink (each a
"Verilink Benefit Plan"), (B) determination of benefits levels under any
Verilink Employee Plan or policy relating to vacation or severance, (C)
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determination of "retiree" status under any Verilink Employee Plan, and (ii) any
annual deductibles, co-payments or such other expenses required under any
Larscom health or other Larscom Employee Plan that are paid during the year of
the Merger prior to the Effective Time in satisfying any applicable deductible,
out-of-pocket or other such requirements for the corresponding period under any
Verilink health or other Verilink Employee Plan, in each case for which the
Continuing Employee is otherwise eligible and in which the Continuing Employee
is offered participation, but except where such crediting would (i) result in a
duplication of benefits or (ii) otherwise cause Verilink or its Subsidiaries or
any Verilink Employee Plan or trust relating thereto to accrue or pay for
benefits that accrued in or are payable for any time period prior to the
Effective Time. Verilink agrees that each Continuing Employee shall be eligible
to either: (A) participate in Verilink Employee Plans as permitted by the terms
of such Verilink Employee Plans, (B) participate in Larscom Employee Plans that
are continued by Verilink, or (C) a combination of clauses (A) and (B) so that
each Continuing Employee is eligible for benefits that are substantially similar
in the aggregate to those of similarly situated employees of Verilink, and so
that no Continuing Employee incurs a gap in coverage solely as a result of the
Merger. "Continuing Employee" shall mean any employee of Larscom who continues
employment with Verilink or the Surviving Corporation after the Effective Time.
Nothing in this Section 6.16 or elsewhere in this Agreement shall be construed
to create a right in any employee to employment with Verilink or the Surviving
Corporation and the employment with any Continuing Employee shall be "at will"
employment. Following the Effective Time, Verilink agrees to comply with
Larscom's severance policies with respect to Larscom employees that are not
Continuing Employees to the extent such severance policies are set forth in
Section 3.16(a) of the Larscom Disclosure Schedule and such severance benefits
are not paid prior to the Effective Time.
6.17 Termination of Employee Benefit Plans.
Effective immediately prior to the Effective Time, Larscom shall terminate any
and all group severance, separation or salary continuation plans, programs or
arrangements, and shall terminate any and all Larscom Employee Plans which are
intended to include a Code Section 401(k) arrangement (unless Verilink consents,
as evidenced by written notice to Larscom, to the continuation of any such plan,
program or arrangement, which consent shall not be unreasonably withheld)
(collectively, "Larscom Terminating Plan(s)"). Verilink agrees that the
Continuing Employees shall be eligible to participate, to substantially the
extent they were eligible to participate in any Larscom Terminating Plan, in the
corresponding Verilink Employee Plan regarding group severance, separation or
salary continuation and in the corresponding Verilink Employee Plan intended to
include a Code Section 401(k) arrangement, program or arrangement, as promptly
following the Effective Time, as is permitted by the terms of such Verilink
Employee Plan, program or arrangement. Unless Verilink provides such written
consent to Larscom, no later than three business days prior to the Effective
Time, Larscom shall provide Verilink with evidence that such Larscom Terminating
Plan(s) have been terminated (effective immediately prior to the Effective Time)
pursuant to resolutions of the Larscom Board. The form and substance of such
resolutions shall be subject to review and approval of Verilink. Larscom also
shall take such other actions in furtherance of terminating such Larscom
Terminating Plan(s) as Verilink may reasonably require.
6.18 Tax Matters.
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At or prior to the filing of the Registration Statement, Verilink and Larscom
shall execute and deliver to Powell, Goldstein, Frazer & Murphy LLP and to
Cooley Godward LLP tax representation letters in customary form. Verilink and
Larscom shall each confirm to Powell, Goldstein, Frazer & Murphy LLP and to
Cooley Godward LLP the accuracy and completeness as of the Effective Time of the
tax representation letters delivered pursuant to the immediately preceding
sentence. Verilink and Larscom shall use all reasonable efforts prior to the
Effective Time to cause the Merger to qualify as a tax-free reorganization under
Section 368(a)(1) of the Code. Following delivery of the tax representation
letters pursuant to the first sentence of this Section 6.18, each of Verilink
and Larscom shall use its reasonable efforts to cause Powell, Goldstein, Frazer
& Murphy LLP and Cooley Godward LLP, respectively, to deliver to it a tax
opinion satisfying the requirements of Item 601 of Regulation S-K promulgated
under the Securities Act. In rendering such opinions and the opinions required
pursuant to Sections 7.2(c) and 7.3(c), each of such counsel shall be entitled
to rely on the tax representation letters referred to in this Section 6.18.
6.19 Registration Rights Agreement.
Prior to the Closing, Verilink shall enter into a Registration Rights
Agreement, substantially in the form attached hereto as Exhibit C (the
"Registration Rights Agreement"), with the stockholders listed on the signature
pages thereto, which agreement will be effective at the Effective Time.
ARTICLE VII
CONDITIONS TO MERGER
7.1 Conditions to Each Party's Obligation To Effect the Merger.
The respective obligations of each party to this Agreement to effect the
Merger shall be subject to the satisfaction prior to the Closing Date of the
following conditions:
(a) Stockholder Approvals.
The Verilink Voting Proposal shall have been approved and adopted at the
Verilink Meeting, at which a quorum is present, by the requisite vote of the
stockholders of Verilink under applicable law, the rules of The Nasdaq Stock
Market, Inc. and the Verilink Charter Documents. The Larscom Voting Proposal
shall have been approved at the Larscom Meeting, at which a quorum is present,
by the requisite vote of the stockholders of Larscom under applicable law, the
rules of The Nasdaq Stock Market, Inc. and the Larscom Charter Documents.
(b) HSR Act.
If applicable, the waiting period applicable to the consummation of the Merger
under the HSR Act shall have expired or been terminated.
(c) Governmental Approvals. Other than the filing of the
Certificate of Merger, all authorizations, consents, orders or approvals of, or
declarations or filings with, or
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expirations of waiting periods imposed by, any Governmental Entity in connection
with the Merger and the consummation of the other transactions contemplated by
this Agreement, the failure of which to file, obtain or occur is reasonably
likely to have a Larscom Material Adverse Effect or a Verilink Material Adverse
Effect shall have been filed, been obtained or occurred on terms and conditions
which are not reasonably be likely to have a Larscom Material Adverse Effect or
a Verilink Material Adverse Effect.
(d) Registration Statement; Joint Proxy Statement/Prospectus.
The Registration Statement shall have become effective under the Securities Act
and no stop order suspending the effectiveness of the Registration Statement
shall have been issued and no proceeding for that purpose, and no similar
proceeding with respect to the Joint Proxy Statement/Prospectus, shall have been
initiated or threatened in writing by the SEC or its staff.
(e) No Injunctions or Proceedings. No Governmental Entity of
competent jurisdiction shall have (i) enacted, issued, promulgated, enforced or
entered any order, executive order, stay, decree, judgment or injunction
(preliminary or permanent) or statute, rule or regulation which is in effect and
which has the effect of making the Merger illegal or otherwise prohibiting
consummation of the Merger or the other transactions contemplated by this
Agreement or (ii) commenced any action or proceeding seeking any of the
foregoing.
(f) Statement of Closing Net Adjusted Working Capital Amount.
The final Statement of Closing Net Adjusted Working Capital Amount shall have
been agreed to by the parties or delivered by the Accounting Firm in accordance
with the provisions of Section 2.4.
7.2 Additional Conditions to the Obligations of Larscom.
The obligations of Larscom to effect the Merger shall be subject to the
satisfaction on or prior to the Closing Date of each of the following additional
conditions, any of which may be waived in writing exclusively by Larscom:
(a) Representations and Warranties.
(i) The representations and warranties of Verilink
set forth in Section 4.5 and Section 4.6 shall be true and
correct in all material respects as of the Closing Date as
though made on and as of the Closing Date (except (x) to the
extent such representations and warranties are specifically
made as of a particular date, in which case such
representations and warranties shall be true and correct in
all material respects as of such date, (y) for changes
expressly contemplated by this Agreement, including the
Verilink Disclosure Schedule hereto); and
(ii) The representations and warranties of Verilink
set forth in this Agreement and in any certificate or other
writing delivered by Verilink pursuant hereto shall be true
and correct as of the Closing Date as though made on and as of
the Closing Date (except (x) to the extent such
representations and warranties are specifically made as of a
particular date, in which case such representations and
warranties shall be true and correct in all material respects
as of such date, (y) for changes expressly contemplated by
this Agreement, including the Verilink
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Disclosure Schedule hereto and (z) where the failure to be
true and correct (without regard to any materiality, Verilink
Material Adverse Effect or knowledge qualifications contained
therein), individually or in the aggregate, have not had, and
are not reasonably likely to have, a Verilink Material Adverse
Effect) and Larscom shall have received a certificate signed
on behalf of Verilink by the chief executive officer and the
chief financial officer of Verilink with respect to the
matters in Sections 7.2(a)(i) and (ii).
(b) Performance of Obligations of Verilink and the Merger Sub.
Verilink and the Merger Sub shall have performed in all material respects all
obligations required to be performed by it under this Agreement on or prior to
the Closing Date; and Larscom shall have received a certificate signed on behalf
of Verilink by the chief executive officer and the chief financial officer of
Verilink to such effect.
(c) Tax Opinion. Larscom shall have received the written
opinion of Cooley Godward LLP, counsel to Larscom, to the effect that the Merger
will qualify as a reorganization within the meaning of Section 368(a) of the
Code; provided that if Cooley Godward LLP does not render such opinion, this
condition shall nonetheless be deemed satisfied if Powell, Goldstein, Frazer &
Murphy LLP, counsel to Verilink, renders such opinion to Larscom.
(d) Nasdaq Notification. Verilink shall have submitted to The
Nasdaq Stock Market, Inc. a Notification Form: Listing of Additional Shares with
respect to the Verilink Common Stock to be issued pursuant to the transactions
contemplated by this Agreement.
(e) Registration Rights Agreement. The Registration Rights
Agreement shall have been executed by Verilink and delivered to the stockholders
listed on the signature pages thereto.
7.3 Additional Conditions to the Obligations of Verilink and
Merger Sub.
The obligations of Verilink and the Merger Sub to effect the Merger shall be
subject to the satisfaction on or prior to the Closing Date of each of the
following additional conditions, any of which may be waived in writing
exclusively by Verilink:
(a) Representations and Warranties.
(i) The representations and warranties of Larscom set
forth in Section 3.6 and Section 3.7 shall be true and correct
in all material respects as of the Closing Date as though made
on and as of the Closing Date (except (x) to the extent such
representations and warranties are specifically made as of a
particular date, in which case such representations and
warranties shall be true and correct in all material respects
as of such date, (y) for changes expressly contemplated by
this Agreement, including the Larscom Disclosure Schedule
hereto); and
(ii) the representation in Section 3.22(b) shall be
true and correct as of the Closing Date as though made on and
as of the Closing Date; and
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(iii) The representations and warranties of Larscom
set forth in this Agreement and in any certificate or other
writing delivered by Larscom pursuant hereto shall be true and
correct as of the Closing Date as though made on and as of the
Closing Date (except (x) to the extent such representations
and warranties are specifically made as of a particular date,
in which case such representations and warranties shall be
true and correct in all material respects as of such date, (y)
for changes expressly contemplated by this Agreement,
including the Larscom Disclosure Schedule hereto and (z) where
the failure to be true and correct (without regard to any
materiality, Larscom Material Adverse Effect or knowledge
qualifications contained therein), individually or in the
aggregate, have not had, and are not reasonably likely to
have, a Larscom Material Adverse Effect) and Verilink shall
have received a certificate signed on behalf of Larscom by the
chief executive officer and the chief financial officer of
Larscom with respect to the matters in Sections 7.3(a)(i),
(ii) and (iii).
(b) Performance of Obligations of Larscom. Larscom shall have
performed in all material respects all obligations required to be performed by
them under this Agreement on or prior to the Closing Date, and Verilink shall
have received a certificate signed on behalf of Larscom by the chief executive
officer and the chief financial officer of Larscom to such effect.
(c) Tax Opinion. Verilink shall have received the written
opinion of Powell, Goldstein, Frazer & Murphy LLP, counsel to Verilink, to the
effect that the Merger will qualify as a reorganization within the meaning of
Section 368(a) of the Code; provided that if Powell, Goldstein, Frazer & Murphy
LLP does not render such opinion, this condition shall nonetheless be deemed
satisfied if Cooley Godward LLP, counsel to Larscom, renders such opinion to
Verilink.
(d) Required Consents. The Larscom Consents set forth on
Section 7.3 of the Larscom Disclosure Schedule shall have been obtained.
(e) Other Agreements. The following agreements and documents
shall have been delivered to Verilink and shall be in full force and effect:
(i) Affiliate Letters in the form of Exhibit D
executed by each Rule 145 Affiliate.
(ii) The Registration Rights Agreement executed by
each stockholder on the signature pages thereto.
(f) Employees. At least seventy-five percent (75%) of the
individuals identified in Section 7.3(f) of the Verilink Disclosure Schedule
shall not have ceased to be employed by Larscom; provided that Verilink shall
(i) have offered employment to all such individuals, (ii) have provided for
retention bonuses consistent with its past practice to such individuals and
(iii) offered compensation that is comparable to such individuals' current
compensation.
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ARTICLE VIII
TERMINATION AND AMENDMENT
8.1 Termination.
This Agreement may be terminated at any time prior to the Effective Time (with
respect to Sections 8.1(b) through 8.1(j), by written notice by the terminating
party to the other party), whether before or after approval and adoption of the
Verilink Voting Proposal by the stockholders of Verilink or approval of the
Larscom Voting Proposal by the stockholders of Larscom:
(a) by mutual written consent duly authorized by the Boards of
Directors of Larscom and Verilink;
(b) by either Larscom or Verilink if the Merger shall not have
been consummated by September 30, 2004 (the "Outside Date") (provided that the
right to terminate this Agreement under this Section 8.1(b) shall not be
available to any party whose action or failure to act, in breach of this
Agreement, has been a principal cause of or resulted in the failure of the
Merger to occur on or before the Outside Date);
(c) by either Larscom or Verilink if a Governmental Entity of
competent jurisdiction shall have issued a nonappealable final order, decree or
ruling or taken any other nonappealable final action, in each case having the
effect of permanently restraining, enjoining or otherwise prohibiting the
Merger;
(d) by either Larscom or Verilink if at the Verilink Meeting
(including any adjournment or postponement permitted by this Agreement), at
which a vote on the Verilink Voting Proposal is taken, the requisite vote of the
stockholders of Verilink in favor of the Verilink Voting Proposal shall not have
been obtained (provided that the right to terminate this Agreement under this
Section 8.1(d) shall not be available (x) to any party whose failure to fulfill
any obligation under this Agreement has been a principal cause of or resulted in
the failure to obtain such requisite vote or (y) to Verilink, if the failure to
obtain such requisite vote has been caused by a breach of the Verilink Voting
Agreement by any party thereto other than Larscom);
(e) by either Larscom or Verilink if at the Larscom Meeting
(including any adjournment or postponement permitted by this Agreement), at
which a vote on the Larscom Voting Proposal is taken, the requisite vote of the
stockholders of Larscom in favor of the Larscom Voting Proposal shall not have
been obtained (provided that the right to terminate this Agreement under this
Section 8.1(e) shall not be available (x) to any party whose failure to fulfill
any obligation under this Agreement has been a principal cause of or resulted in
the failure to obtain such requisite vote or (y) to Larscom, if the failure to
obtain such requisite vote has been caused by a breach of the Larscom Voting
Agreement by any party thereto other than Verilink);
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(f) by Larscom, if: (i) the Verilink Board shall have failed
to give its recommendation to the approval of the Verilink Voting Proposal in
the Joint Proxy Statement/Prospectus or shall have withdrawn or modified in a
manner adverse to Larscom its recommendation of the Verilink Voting Proposal;
(ii) the Verilink Board (or any committee thereof) shall have approved or
recommended to the stockholders of Verilink an Acquisition Proposal; (iii) a
tender offer or exchange offer for outstanding shares of Verilink Common Stock
is commenced, and the Verilink Board fails to reconfirm its recommendation of
this Agreement or the Merger within 10 business days after its receipt of a
request by Larscom to do so following the public announcement of an Acquisition
Transaction; or (iv) Verilink shall have materially breached its obligations
under Section 6.1 or Section 6.5 of this Agreement;
(g) by Verilink, if: (i) the Larscom Board shall have failed
to give its recommendation to the approval of the Larscom Voting Proposal in the
Joint Proxy Statement/Prospectus or shall have withdrawn or modified in a manner
adverse to Verilink its recommendation of the Larscom Voting Proposal; (ii) the
Larscom Board (or any committee thereof) shall have approved or recommended to
the stockholders of Larscom an Acquisition Proposal; (iii) a tender offer or
exchange offer for outstanding shares of Larscom Common Stock is commenced, and
the Larscom Board (or any committee thereof) (A) recommends that the
stockholders of Larscom tender their shares in such tender or exchange offer,
(B) within 10 business days after the commencement of such tender or exchange
offer, the Larscom Board fails to recommend rejection of such offer, or (C) the
Larscom Board fails to reconfirm its recommendation of this Agreement or the
Merger within 10 business days after its receipt of a request by Verilink to do
so following the public announcement of an Acquisition Transaction; or (iv)
Larscom shall have materially breached its obligations under Section 6.1 or
Section 6.5 of this Agreement;
(h) by Larscom, if at anytime prior to the Larscom Meeting (i)
the Larscom Board shall have failed to give its recommendation to the approval
of the Larscom Voting Proposal in the Joint Proxy Statement/Prospectus or shall
have withdrawn or modified in a manner adverse to Verilink its recommendation of
the Larscom Voting Proposal or (ii) the Larscom Board (or any committee thereof)
shall have approved or recommended to the stockholders of Larscom an Acquisition
Proposal, so long as (A) the Larscom Board has determined in good faith, after
consultation with outside and independent legal and financial advisors, that an
Acquisition Proposal is a Superior Proposal (and the Acquisition Proposal did
not result from a breach of Section 6.1) and, after consultation with
independent legal counsel, determines in good faith that such action is required
for the Larscom Board to comply with its fiduciary obligations to stockholders
under applicable law and (B) Larscom pays to Verilink all amounts due under
Section 8.3;
(i) by Verilink, if at anytime prior to the Verilink Meeting
(i) the Verilink Board shall have failed to give its recommendation to the
approval of the Verilink Voting Proposal in the Joint Proxy Statement/
Prospectus or shall have withdrawn or modified in a manner adverse to Larscom
its recommendation of the Verilink Voting Proposal or (ii) the Verilink Board
(or any committee thereof) shall have approved or recommended to the
stockholders of Verilink an Acquisition Proposal, so long as (A) the Verilink
Board has determined in good faith, after consultation with outside and
independent legal and financial advisors, that an Acquisition Proposal is a
Superior Proposal (and the Acquisition Proposal did not result from a
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breach of Section 6.1) and, after consultation with independent legal counsel,
determines in good faith that such action is required for the Verilink Board to
comply with its fiduciary obligations to stockholders under applicable law and
(B) Verilink pays to Larscom all amounts due under Section 8.3;
(j) [Reserved];
(k) by Larscom, if there has been a breach of or failure to
perform any representation, warranty, covenant or agreement on the part of
Verilink set forth in this Agreement or if any such representation or warranty
shall be untrue as of the date of this Agreement or shall have become untrue as
of a date subsequent to the date of this Agreement (as if made on such
subsequent date), which breach or failure (i) would cause the conditions set
forth in Section 7.2(a) or (b) not to be satisfied as of the time of such breach
or failure or as of the time any such representation or warranty shall have
become untrue, and (ii) shall not have been cured within 20 days following
receipt by Verilink of written notice of such breach from Larscom (it being
agreed that Larscom may not terminate this Agreement pursuant to this paragraph
(k) if it shall be in material breach of this Agreement or if such breach by
Verilink is cured during such 20 day period); or
(l) by Verilink, if there has been a breach of or failure to
perform any representation, warranty, covenant or agreement on the part of
Larscom set forth in this Agreement or if any such representation or warranty
shall be untrue as of the date of this Agreement or shall have become untrue as
of a date subsequent to the date of this Agreement (as if made on such
subsequent date), which breach or failure (i) would cause the conditions set
forth in Section 7.3(a) or (b) not to be satisfied as of the time of such breach
or failure or as of the time any such representation or warranty shall have
become untrue, and (ii) shall not have been cured within 20 days following
receipt by Larscom of written notice of such breach from Verilink (it being
agreed that Verilink may not terminate this Agreement pursuant to this paragraph
(l) if it shall be in material breach of this Agreement or if such breach by
Larscom is cured during such 20 day period).
8.2 Effect of Termination.
In the event of termination of this Agreement as provided in Section 8.1, this
Agreement shall immediately become void and there shall be no liability or
obligation on the part of Larscom, Verilink, the Merger Sub or their respective
officers, directors, stockholders or Affiliates, provided that (i) any such
termination shall not relieve any party from liability for any willful or
intentional misrepresentation or breach of this Agreement, and (ii) the
provisions of this Section 8.2, Section 8.3 and Article IX of this Agreement and
the Confidentiality Agreement shall remain in full force and effect and survive
any termination of this Agreement.
8.3 Fees and Expenses.
(a) Except as set forth in this Section 8.3, all fees and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such fees and expenses,
whether or not the Merger is consummated; provided, however, that Verilink and
Larscom shall share equally (i) the aggregate filing fees of both
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parties' pre-merger notification report under the HSR Act, if applicable, and
(ii) all fees and expenses, other than accountants' and attorneys' fees,
incurred with respect to the printing and filing of the Joint Proxy
Statement/Prospectus (including any related preliminary materials) and the
Registration Statement and any amendments or supplements thereto.
(b) Larscom shall pay Verilink a termination fee of $1,000,000
plus an amount equal to the aggregate amount of all fees and expenses (including
all financial advisory fees, investment banking fees, attorneys' fees and filing
and mailing fees) that have been paid or that may become payable by or on behalf
of Verilink in connection with the preparation and negotiation of this Agreement
and otherwise in connection with the Merger (collectively, and excluding the
termination fee, "Verilink Expenses"), not to exceed $1,200,000 in the
aggregate, in the event of the termination of this Agreement (i) by Verilink or
Larscom pursuant to Section 8.1(e), (ii) by Verilink pursuant to Section 8.1(g)
or (iii) by Larscom pursuant to Section 8.1(h). The termination fees due under
this Section 8.3(b) shall be paid by wire transfer of same-day funds (A) within
two business days after the date of termination of this Agreement pursuant to
Section 8.1(e) or Section 8.1(g) and (B) prior to the date of termination of
this Agreement pursuant to Section 8.1(h).
(c) If this Agreement is terminated pursuant to Section 8.1(b)
or (k) and at or prior to the time of termination of this Agreement an
Acquisition Proposal for Larscom shall have been disclosed, announced,
commenced, submitted or made, then Larscom shall make a non-refundable cash
payment to Verilink, within two business days of Verilink's invoice, in an
amount equal to the Verilink Expenses, and if Larscom shall consummate within 12
months of such termination an Acquisition Transaction that was first disclosed,
announced, commenced, submitted or made prior to termination or within 60 days
after termination, then Larscom shall prior to the date of such consummation pay
Verilink an additional $1,000,000 provided that the aggregate of all such
payments by Larscom to Verilink pursuant to this Section 8.3(c) shall not exceed
$1,200,000.
(d) Verilink shall pay Larscom a termination fee of $1,000,000
plus an amount equal to the aggregate amount of all fees and expenses (including
all financial advisory fees, investment banking fees, attorneys' fees and filing
and mailing fees) that have been paid or that may become payable by or on behalf
of Larscom in connection with the preparation and negotiation of this Agreement
and otherwise in connection with the Merger (collectively, and excluding the
termination fee, "Larscom Expenses"), not to exceed $1,200,000 in the aggregate,
in the event of the termination of this Agreement (i) by Verilink pursuant to
Section 8.1(i) or (ii) by Larscom pursuant to Section 8.1(f). The termination
fees due under this Section 8.3(d) shall be paid by wire transfer of same-day
funds within two business days after the date of termination of this Agreement
pursuant to Section 8.1(i) or Section 8.1(f).
(e) If this Agreement is terminated pursuant to Section 8.1(b)
and at or prior to the time of termination of this Agreement an Acquisition
Proposal for Verilink shall have been disclosed, announced, commenced, submitted
or made and if Verilink shall consummate within 12 months of such termination an
Acquisition Transaction that was first disclosed, announced, commenced,
submitted or made prior to termination or within 60 days after termination, then
Verilink shall prior to the date of such consummation pay Larscom a fee of
$1,000,000 plus the
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Larscom Expenses provided that the aggregate of all such payments by Larscom to
Verilink pursuant to this Section 8.3(e) shall not exceed $1,200,000.
(f) For purposes of this Agreement, "Acquisition Transaction"
shall mean any of the following transactions (other than the transaction
contemplated by this Agreement): (i) a sale or other disposition by Larscom or
Verilink of business or assets representing more than 50% of its net revenues,
net income or assets immediately prior to such sale; (ii) the acquisition by any
person or group (including by way of a tender offer or an exchange offer or
issuance by Larscom or Verilink), directly or indirectly, of beneficial
ownership or a right to acquire beneficial ownership of more than 50% of the
outstanding voting power or equity interest in Larscom or Verilink; or (iii) a
merger, consolidation, business combination or similar transaction involving
Larscom or Verilink in which the stockholders of Larscom or Verilink, as the
case may be, own less than a majority of the voting power or equity interest in
the surviving or acquiring entity in such transaction.
(g) The parties acknowledge that the agreements contained in
this Section 8.3 are an integral part of the transactions contemplated by this
Agreement, and that, without these agreements, the parties would not enter into
this Agreement. If one party fails to promptly pay to the other any termination
fee due hereunder, the defaulting party shall pay the costs and expenses
(including legal fees and expenses) in connection with any action, including the
filing of any lawsuit or other legal action, taken to collect payment, together
with interest on the amount of any unpaid fee at the publicly announced prime
rate of Citibank, N.A., plus two percent per annum, compounded quarterly, from
the date such termination fee was required to be paid. Payment of the
termination fee described in this Section 8.3 shall not be in lieu of damages
incurred in the event of a breach of this Agreement described in clause (i) of
Section 8.2.
8.4 Amendment.
This Agreement may be amended by the parties hereto, by action taken or
authorized by their respective Boards of Directors, at any time before or after
approval of the matters presented in connection with the Merger by the
stockholders of any of the parties; provided, however, that after any such
approval, no amendment shall be made which by applicable law requires further
approval by such stockholders without such further approval; and provided,
further, that an amendment made subsequent to adoption of the Agreement by the
stockholders of Verilink or Larscom without such further approval shall not (a)
alter or change the amount or kind of consideration to be received upon
conversion of the Larscom Common Stock, or (b) alter or change any of the terms
and conditions of the Agreement if such alteration or change would adversely
affect the stockholders of Verilink or Larscom. This Agreement may not be
amended except by an instrument in writing signed on behalf of each of the
parties hereto.
8.5 Extension; Waiver.
At any time prior to the Effective Time, the parties hereto, by action taken
or authorized by their respective Boards of Directors, may, to the extent
legally allowed, (a) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (b) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto and (c) waive compliance with any of the
agreements or conditions contained
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herein. Any agreement on the part of a party hereto to any such extension or
waiver shall be valid only if set forth in a written instrument signed on behalf
of such party. No extension or waiver in any one instance shall be deemed to
extend to any prior or subsequent instance. The failure of any party to this
Agreement to assert any of its rights under this Agreement or otherwise shall
not constitute a waiver of such rights.
ARTICLE IX
MISCELLANEOUS
9.1 Nonsurvival of Representations and Warranties.
The respective representations and warranties of Verilink, the Merger Sub and
Larscom contained in this Agreement or in any instrument delivered pursuant to
this Agreement shall expire with, and be terminated and extinguished upon, the
Effective Time and only the covenants that by their terms survive the Effective
Time shall survive the Effective Time. This Section 9.1 shall have no effect
upon any other obligations of the parties hereto, whether to be performed before
or after the consummation of the Merger.
9.2 Notices.
All notices and other communications hereunder shall be in writing and shall
be deemed duly delivered (a) four business days after being sent by registered
or certified mail, return receipt requested, postage prepaid, or (b) one
business day after being sent for next business day delivery, fees prepaid, via
a reputable nationwide overnight courier service or (c) if delivered by
facsimile transmission to the facsimile number as provided for in this Section
9.2, be deemed given upon facsimile confirmation during business hours or if
after business hours, then one business day after facsimile confirmation, in
each case to the intended recipient as set forth below:
(i) if to Larscom, to
Larscom Incorporated
1845 McCandless Drive
Milpitas, California 95035
Attn: Chief Executive Officer
with a copy to:
Cooley Godward LLP
One Maritime Plaza
20th Floor
San Francisco, California 94111
Attention: Jamie E. Chung, Esq.
Facsimile No.: (415) 951-3699
(ii) if to Verilink or the Merger Sub, to
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Verilink Corporation
127 Jetplex Circle
Madison, Alabama 35758
Attn: Chief Executive Officer
with a copy to:
Powell, Goldstein, Frazer & Murphy LLP
191 Peachtree Street
16th Floor
Atlanta, Georgia 30303
Attention: Eliot Robinson, Esq.
Facsimile No.: (404) 572-6999
Any party to this Agreement may give any notice or other communication
hereunder using any other means (including personal delivery, messenger service,
telecopy, telex, ordinary mail or electronic mail), but no such notice or other
communication shall be deemed to have been duly given unless and until it
actually is received by the party for whom it is intended. Any party to this
Agreement may change the address to which notices and other communications
hereunder are to be delivered by giving the other parties to this Agreement
notice in the manner herein set forth.
9.3 Entire Agreement.
This Agreement (including the Schedules and Exhibits hereto and the documents
and instruments referred to herein that are to be delivered at the Closing)
constitutes the entire agreement among the parties to this Agreement and
supersedes any prior understandings, agreements or representations by or among
the parties hereto, or any of them, written or oral, with respect to the subject
matter hereof; provided that the Confidentiality Agreement shall remain in
effect in accordance with its terms.
9.4 No Third Party Beneficiaries.
Except as provided in Section 6.12, this Agreement is not intended, and shall
not be deemed, to confer any rights or remedies upon any person other than the
parties hereto and their respective successors and permitted assigns, to create
any agreement of employment with any person or to otherwise create any
third-party beneficiary hereto.
9.5 Assignment.
Neither this Agreement nor any of the rights, interests or obligations under
this Agreement may be assigned or delegated, in whole or in part, by operation
of law or otherwise by any of the parties hereto without the prior written
consent of the other parties, and any such assignment without such prior written
consent shall be null and void. Subject to the preceding sentence, this
Agreement shall be binding upon, inure to the benefit of, and be enforceable by,
the parties hereto and their respective successors and permitted assigns.
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9.6 Severability.
Any term or provision of this Agreement that is invalid or unenforceable in
any situation in any jurisdiction shall not affect the validity or
enforceability of the remaining terms and provisions hereof or the validity or
enforceability of the offending term or provision in any other situation or in
any other jurisdiction. If the final judgment of a court of competent
jurisdiction declares that any term or provision hereof is invalid or
unenforceable, the parties hereto agree that the court making such determination
shall have the power to limit the term or provision, to delete specific words or
phrases, or to replace any invalid or unenforceable term or provision with a
term or provision that is valid and enforceable and that comes closest to
expressing the intention of the invalid or unenforceable term or provision, and
this Agreement shall be enforceable as so modified. In the event such court does
not exercise the power granted to it in the prior sentence, the parties hereto
agree to replace such invalid or unenforceable term or provision with a valid
and enforceable term or provision that will achieve, to the extent possible, the
economic, business and other purposes of such invalid or unenforceable term.
9.7 Counterparts and Signature.
This Agreement may be executed in two or more counterparts, each of which
shall be deemed an original but all of which together shall be considered one
and the same agreement and shall become effective when counterparts have been
signed by each of the parties hereto and delivered to the other parties, it
being understood that all parties need not sign the same counterpart. This
Agreement may be executed and delivered by facsimile transmission.
9.8 Interpretation.
When reference is made in this Agreement to an Article or a Section, such
reference shall be to an Article or Section of this Agreement, unless otherwise
indicated. The table of contents, table of defined terms and headings contained
in this Agreement are for convenience of reference only and shall not affect in
any way the meaning or interpretation of this Agreement. The language used in
this Agreement shall be deemed to be the language chosen by the parties hereto
to express their mutual intent, and no rule of strict construction shall be
applied against any party. Whenever the context may require, any pronouns used
in this Agreement shall include the corresponding masculine, feminine or neuter
forms, and the singular form of nouns and pronouns shall include the plural, and
vice versa. Any reference to any federal, state, local or foreign statute or law
shall be deemed also to refer to all rules and regulations promulgated
thereunder, unless the context requires otherwise. Whenever the words "include,"
"includes" or "including" are used in this Agreement, they shall be deemed to be
followed by the words "without limitation." No summary of this Agreement
prepared by any party shall affect the meaning or interpretation of this
Agreement. For purposes of this Agreement, (a) the term "knowledge" means with
respect to a party hereto, with respect to any matter in question, that any of
the executive officers of such party and the executive officers of each of its
Subsidiaries has actual knowledge of such matter; and (b) the term "person"
shall mean any individual, corporation (including any non-profit corporation),
general partnership, limited partnership, limited liability partnership, joint
venture, estate, trust, company (including any limited liability company or
joint stock company), firm or other enterprise, association, organization,
entity or Governmental
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Entity.
9.9 Governing Law.
This Agreement shall be governed by and construed in accordance with the
internal laws of the State of Delaware without giving effect to any choice or
conflict of law provision or rule (whether of the State of Delaware or any other
jurisdiction) that would cause the application of laws of any jurisdictions
other than those of the State of Delaware.
9.10 Consent to Jurisdiction; Venue.
In any action or proceeding between any of the parties arising out of or
relating to this Agreement or any of the transactions contemplated by this
Agreement, each of the parties: (a) irrevocably and unconditionally consents and
submits to the exclusive jurisdiction and venue of the state courts of the State
of Delaware and to the jurisdiction of the United States District Court for the
District of Delaware, and (b) agrees that all claims in respect of such action
or proceeding may be heard and determined exclusively in any Delaware state or
federal court sitting in the State of Delaware.
9.11 Remedies.
Except as otherwise provided herein, any and all remedies herein expressly
conferred upon a party will be deemed cumulative with and not exclusive of any
other remedy conferred hereby, or by law or equity upon such party, and the
exercise by a party of any one remedy will not preclude the exercise of any
other remedy. The parties hereto agree that irreparable damage would occur in
the event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement, this being in addition to any other
remedy to which they are entitled at law or in equity.
9.12 Waiver of Jury Trial.
EACH OF LARSCOM, THE MERGER SUB AND VERILINK HEREBY IRREVOCABLY WAIVES ALL
RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED
ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR
THE TRANSACTIONS CONTEMPLATED HEREBY OR THE ACTIONS OF LARSCOM, THE MERGER SUB
OR VERILINK IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT OF
THIS AGREEMENT.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK - SIGNATURE
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IN WITNESS WHEREOF, each of Larscom, the Merger Sub and Verilink has
caused this Agreement to be signed by their respective officers thereunto duly
authorized as of the date first written above.
LARSCOM INCORPORATED
By: /s/ Daniel L. Scharre
----------------------------------
Name: Daniel L. Scharre
Title: Chief Executive Officer
SRI ACQUISITION CORP.
By: /s/ Leigh S. Belden
----------------------------------
Name: Leigh S. Belden
Title: President
VERILINK CORPORATION
By: /s/ Leigh S. Belden
----------------------------------
Name: Leigh S. Belden
Title: President and Chief
Executive Officer
[Signature page to Merger Agreement]
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