EXHIBIT 2.1
EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
dated as of
March 27, 2003
by and among
NETRO CORPORATION,
SR TELECOM INC.
and
NORWAY ACQUISITION CORPORATION
TABLE OF CONTENTS1
Page
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ARTICLE 1
DEFINITIONS
Section 1.01 Definitions.................................................1
ARTICLE 2
THE MERGER
Section 2.01 The Merger..................................................7
Section 2.02 Conversion of Shares........................................7
Section 2.03 Surrender and Payment.......................................8
Section 2.04 Stock Options...............................................9
Section 2.05 Adjustments.................................................9
Section 2.06 [Reserved].................................................10
Section 2.07 Withholding Rights.........................................10
Section 2.08 Lost Certificates..........................................10
ARTICLE 3
THE SURVIVING CORPORATION
Section 3.01 Certificate of Incorporation...............................10
Section 3.02 Bylaws.....................................................10
Section 3.03 Directors and Officers.....................................10
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Section 4.01 Corporate Existence and Power..............................11
Section 4.02 Corporate Authorization....................................11
Section 4.03 Governmental Authorization.................................11
Section 4.04 Non-contravention..........................................12
Section 4.05 Capitalization.............................................12
Section 4.06 Subsidiaries...............................................13
Section 4.07 SEC Filings................................................14
Section 4.08 Financial Statements.......................................15
Section 4.09 Disclosure Documents.......................................15
Section 4.10 Absence of Certain Changes.................................16
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1 The Table of Contents is not a part of this Agreement.
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Section 4.11 No Undisclosed Material Liabilities........................17
Section 4.12 Compliance with Laws and Court Orders......................17
Section 4.13 Litigation.................................................17
Section 4.14 Finders' Fees..............................................18
Section 4.15 Opinion of Financial Advisor...............................18
Section 4.16 Taxes......................................................18
Section 4.17 [Reserved].................................................19
Section 4.18 Employee Benefit Plans.....................................19
Section 4.19 Environmental Matters......................................20
Section 4.20 Antitakeover Statutes and Rights Agreement.................21
Section 4.21 Intellectual Property......................................21
Section 4.22 Labor Relations............................................23
Section 4.23 Employment.................................................23
Section 4.24 WARN Act...................................................24
Section 4.25 Restrictions on Business Activities........................24
Section 4.26 Agreements, Contracts and Commitments......................24
Section 4.27 Insurance..................................................24
Section 4.28 Change of Control Payments.................................24
Section 4.29 No Existing Discussions....................................24
Section 4.30 Canadian Operations........................................24
Section 4.31 Cash Dividend..............................................25
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Section 5.01 Corporate Existence and Power..............................25
Section 5.02 Corporate Authorization....................................25
Section 5.03 Governmental Authorization.................................26
Section 5.04 Non-contravention..........................................26
Section 5.05 Capitalization.............................................27
Section 5.06 Subsidiaries...............................................27
Section 5.07 CSA Filings................................................28
Section 5.08 Financial Statements.......................................28
Section 5.09 Disclosure Documents.......................................29
Section 5.10 Absence of Certain Changes.................................29
Section 5.11 No Undisclosed Material Liabilities........................30
Section 5.12 Compliance with Laws and Court Orders......................30
Section 5.13 Litigation.................................................31
Section 5.14 Finders' Fees..............................................31
Section 5.15 Taxes......................................................31
Section 5.16 [Reserved].................................................32
Section 5.17 Environmental Matters......................................32
Section 5.18 Intellectual Property......................................32
Section 5.19 Antitakeover Statutes and Rights Agreement.................33
Section 5.20 Restrictions on Business Activities........................33
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ARTICLE 6
COVENANTS OF THE COMPANY
Section 6.01 Conduct of the Company.....................................34
Section 6.02 Stockholder Meeting........................................36
Section 6.03 No Solicitation; Other Offers..............................37
Section 6.04 Tax Matters................................................39
Section 6.05 WARN Covenant..............................................39
Section 6.06 Termination of Company 401(k) Plan.........................40
ARTICLE 7
COVENANTS OF PARENT AND MERGER SUB
Section 7.01 Conduct of Parent..........................................40
Section 7.02 Voting of Shares...........................................40
Section 7.03 Director and Officer Liability.............................40
Section 7.04 Stock Exchange Listing.....................................42
Section 7.05 Employee Matters...........................................42
Section 7.06 Tax Matters................................................43
ARTICLE 8
COVENANTS OF PARENT, MERGER SUB AND THE COMPANY
Section 8.01 Commercially Reasonable Efforts............................43
Section 8.02 Certain Filings............................................44
Section 8.03 Public Announcements.......................................44
Section 8.04 Further Assurances.........................................44
Section 8.05 Access to Information......................................44
Section 8.06 Notices of Certain Events..................................45
Section 8.07 [Reserved].................................................45
Section 8.08 Affiliates.................................................45
Section 8.09 Section 16 Matters.........................................46
Section 8.10 Proxy Statement; Registration Statement....................46
Section 8.11 Board of Directors of Parent...............................47
ARTICLE 9
CONDITIONS TO THE MERGER
Section 9.01 Conditions to Obligations of Each Party....................47
Section 9.02 Conditions to the Obligations of Parent and Merger Sub.....48
Section 9.03 Conditions to the Obligations of the Company...............49
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ARTICLE 10
TERMINATION
Section 10.01 Termination................................................49
Section 10.02 Effect of Termination......................................51
ARTICLE 11
MISCELLANEOUS
Section 11.01 Notices....................................................51
Section 11.02 Survival of Representations and Warranties.................53
Section 11.03 Amendments; Waivers........................................53
Section 11.04 Fees; Expenses.............................................53
Section 11.05 Right of First Negotiation and First Refusal...............55
Section 11.06 Binding Effect; Benefit; Assignment........................55
Section 11.07 Governing Law..............................................55
Section 11.08 Jurisdiction...............................................56
Section 11.09 WAIVER OF JURY TRIAL.......................................56
Section 11.10 Counterparts; Effectiveness................................56
Section 11.11 Entire Agreement...........................................56
Section 11.12 Captions...................................................56
Section 11.13 Severability...............................................56
Section 11.14 Specific Performance.......................................56
Exhibits
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Exhibit A Form of Company Affiliate Agreement
Exhibit B Form of Company Certificate that it is not a "United
States Real Property Holding Corporation"
Exhibit C Company Disclosure Schedule
Exhibit D Parent Disclosure Schedule
Exhibit E Form of Company Voting Agreement
Exhibit F List of Directors and Officers Subject to Company
Voting Agreement
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (together with all exhibits and
schedules hereto, this "Agreement") is dated as of March 27, 2003 by and among
Netro Corporation, a Delaware corporation (the "Company"), SR Telecom Inc.
("Parent"), a corporation organized under the Canada Business Corporations Act
(the "CBCA"), and Norway Acquisition Corporation, a Delaware corporation and a
wholly owned Subsidiary of Parent ("Merger Sub").
RECITALS
WHEREAS, the respective Boards of Directors of Parent, Merger Sub and the
Company have approved this Agreement, and declared advisable the Merger (as
defined herein) of Merger Sub with and into the Company upon the terms and
subject to the conditions of this Agreement and in accordance with Delaware Law
(as defined herein), and the Board of Directors of the Company has determined
to recommend that the stockholders of the Company approve and adopt this
Agreement and approve the Merger.
WHEREAS, concurrently with the execution of this Agreement, and as a
condition to and as an inducement to Parent's willingness to enter into this
Agreement, the directors and officers of the Company listed on Exhibit F hereto
are entering into Voting Agreements in substantially the form attached hereto
as Exhibit E (the "Company Voting Agreements").
WHEREAS, pursuant to the Merger, all of the issued and outstanding shares
of Company Stock (as defined herein) shall be converted into the right to
receive consideration consisting of ADSs (as defined herein).
WHEREAS, contingent upon approval of the Merger by the stockholders of the
Company and to the extent permissible under applicable law, the Board of
Directors of the Company will approve and will declare advisable the
declaration of the Cash Dividend (as defined herein) with respect to each
outstanding share of Company Stock upon the terms and subject to the conditions
of this Agreement and in accordance with Delaware Law.
NOW THEREFORE, the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
Section 1.01 Definitions. (a) The following terms, as used herein, have
the following meanings:
"Acquisition Proposal" means, other than the transactions contemplated by
this Agreement (including the Cash Dividend), any Third-Party offer, proposal
or inquiry relating to, or any Third-Party indication of interest in, (i) any
acquisition or purchase, direct or indirect, of 15% or more of the consolidated
assets of the Company and its Subsidiaries or beneficial ownership of
securities representing 15% or more of the outstanding securities of any class
of equity or voting securities of the Company or of any of its Subsidiaries
whose assets,
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individually or in the aggregate, constitute more than 15% of the consolidated
assets of the Company, (ii) any tender offer (including a self-tender offer) or
exchange offer that, if consummated, would result in any Third Party's
beneficially owning 15% or more of the outstanding securities of any class of
equity or voting securities of the Company or of any of its Subsidiaries whose
assets, individually or in the aggregate, constitute more than 15% of the
consolidated assets of the Company, (iii) a merger, consolidation, share
exchange, business combination, sale or transfer of all or substantially all
the assets, exclusive license, reorganization, recapitalization, liquidation,
dissolution, extraordinary dividend (other than a Liquidation Alternative or
the Cash Dividend) or other similar transaction involving the Company or any of
its Subsidiaries whose assets, individually or in the aggregate, constitute
more than 15% of the consolidated assets of the Company, (iv) the sale or
transfer of all or substantially all of the Technology or the exclusive license
thereof (other than a Liquidation Alternative) or (v) any other transaction
(other than a Liquidation Alternative) the consummation of which could
reasonably be expected to impede, interfere with, prevent or materially delay
the Merger or that could reasonably be expected to dilute materially the
benefits to Parent of the transactions contemplated hereby.
"Affiliate" means, with respect to any Person, any other Person directly
or indirectly controlling, controlled by, or under common control with such
Person.
"Business Day" means a day, other than Saturday, Sunday or other day on
which commercial banks in New York, New York, San Francisco, California or
Montreal, Quebec, Canada are authorized or required by law to close.
"C$" means Canadian dollars.
"Canadian Securities Laws" means the Securities Act (Quebec) and the
equivalent legislation in the other provinces and territories of Canada and the
applicable rules and regulations made or promulgated under such statutes,
including all published instruments of the CSA as well as the rules and
regulations of the TSX.
"Code" means the Internal Revenue Code of 1986.
"Company Balance Sheet" means the consolidated balance sheet of the
Company as of December 31, 2002 and the footnotes thereto set forth in the
Company 10-K.
"Company Balance Sheet Date" means December 31, 2002.
"Company Stock" means the common stock, $.001 par value, of the Company.
"Company 10-K" means the Company's annual report on Form 10-K for the
fiscal year ended December 31, 2002.
"Competition Act" means the Competition Act (Canada).
"CSA" means the Canadian securities regulatory authorities.
"Delaware Law" means the General Corporation Law of the State of Delaware.
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"Environmental Permits" means all permits, licenses, franchises,
certificates, approvals and other similar authorizations of governmental
authorities relating to or required by Environmental Laws and affecting, or
relating in any way to, the business of the Company or any of its Subsidiaries
as currently conducted.
"ERISA" means the Employee Retirement Income Security Act of 1974.
"ERISA Affiliate" of any entity means any other entity that, together with
such entity, would be treated as a single employer under Section 414 of the
Code.
"Governmental Entity" means any government or governmental or regulatory
body, agency, authority thereof, or political subdivision thereof, or any
agency, commission or instrumentality thereof, or any court or arbitrator, or
any quasi-governmental or private body exercising any regulatory, taxing,
importing or other governmental or quasi-governmental authority, whether
federal, state, local, municipal, foreign, supranational or otherwise.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976.
"Intellectual Property Right" means any trademark, trademark application,
service mark, trade name, domain name, slogans, invention, patent, patent
application, trade secret, know-how, show-how, customer lists, business
information, copyright (registered or unregistered), software program,
technical information, or any other similar type of proprietary intellectual
property right.
"Knowledge" of any Person that is not an individual means (i) in the case
of the Company or any of its Subsidiaries, the actual knowledge after
reasonable inquiry of Gideon Ben-Efraim (President and Chief Executive
Officer), Sanjay Khare (Chief Financial Officer), Shlomo Yariv (Chief Operating
Officer) or Peter Carson (Senior Vice President, Worldwide Sales) or (ii) in
the case of Parent or Merger Sub, the actual knowledge after reasonable inquiry
of Pierre St. Arnaud (Chief Executive Officer), David Adams (Chief Financial
Officer), Benoit Pinsonnault (Senior Vice President Customer Service and
Operations) or Gerald LaCroix (Managing Director, Comunicacion y Telefonica
Rural S.A.).
"Lien" means, with respect to any property or asset, any mortgage, lien,
pledge, charge, security interest, encumbrance or other adverse claim of any
kind in respect of such property or asset. For purposes of this Agreement, a
Person shall be deemed to own subject to a Lien any property or asset that it
has acquired or holds subject to the interest of a vendor or lessor under any
conditional sale agreement, capital lease or other title retention agreement
relating to such property or asset.
"Liquidation Alternative" means any proposal or inquiry involving the
liquidation, dissolution or winding up of the Company that is not initiated by
and (prior to the time of the determination that a Superior Alternative exists)
does not involve, a Third Party (other than the Company and its officers and
directors in their capacity as such).
"Material Adverse Effect" means, with respect to any Person, a material
adverse effect on (x) the business, assets, liabilities, operations, financial
condition or results of operations of such Person and its Subsidiaries, taken
as a whole, or (y) such Person's ability to perform its
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obligations under or to consummate the transactions contemplated by this
Agreement, it being understood that none of the following shall be deemed, in
and of itself, to constitute a Material Adverse Effect: (i) changes
attributable to this Agreement or the transactions contemplated hereby or the
announcement hereof, (ii) changes or conditions affecting the U.S., Canadian or
any foreign telecommunications or data networking industry generally, (iii)
changes in U.S., Canadian or any foreign economic, regulatory or political
conditions generally or in U.S., Canadian or any foreign financial markets,
(iv) changes attributable to any attack on, outbreak or escalation of
hostilities or act of terrorism in the United States, Canada or abroad, any
declaration of war or any other national or foreign calamity, (v) the failure
of such Person to meet published revenue or earnings projections (including
with respect to the quarter ended March 31, 2003) or (vi) any change in such
Person's stock price or trading volume.
"Merger Sub Stock" means the common stock, $.01 par value, of Merger Sub.
"Nasdaq" means the Nasdaq National Market.
"1933 Act" means the Securities Act of 1933.
"1934 Act" means the Securities Exchange Act of 1934.
"Parent Annual Report" means Parent's annual report, including Parent's
audited consolidated financial statements and Management's Discussion and
Analysis, filed with the CSA for the fiscal year ended December 31, 2002.
"Parent Balance Sheet" means the audited consolidated balance sheet of
Parent as of December 31, 2002 and the footnotes therein as provided to the
Company prior to the date hereof.
"Parent Balance Sheet Date" means December 31, 2002.
"Parent Stock" means the common shares, without par value, of Parent.
"Person" means an individual, corporation, partnership, limited liability
company, association, trust or other entity or organization, including a
Governmental Entity.
"SEC" means the U.S. Securities and Exchange Commission.
"Shares" means the shares of common stock, $.001 par value, of the
Company.
"Subsidiary" means, with respect to any Person, any entity of which
securities or other ownership interests having ordinary voting power to elect a
majority of the board of directors or other persons performing similar
functions are at any time directly or indirectly owned by such Person.
"Superior Alternative" means a determination by the Board of Directors of
the Company in its reasonable judgment by a majority vote, after considering
the advice of its financial and legal advisors, including Goldman, Sachs & Co.
and Davis Polk & Wardwell, that a Liquidation Alternative would be more
favorable to the stockholders of the Company from a
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financial point of view than the terms of the Merger (including the Cash
Dividend) or that consummation of the transactions contemplated by this
Agreement (including the Cash Dividend and the Merger) are unlawful under
applicable law.
"Superior Proposal" means any bona fide, unsolicited written Acquisition
Proposal for at least 80% of the outstanding Shares on terms that the Board of
Directors of the Company determines in its reasonable judgment by a majority
vote, after considering the advice of Goldman, Sachs & Co., its financial
advisor, to be more favorable to the stockholders of the Company from a
financial point of view than the terms of the Merger (taking into account all
the terms and conditions of the Acquisition Proposal, including any break-up
fees, expense reimbursement provisions, conditions to consummation, the timing
of the consummation, the risk of nonconsummation and the need for any required
governmental consents, filings and approvals).
"Surviving Corporation Stock" means the common stock, $.001 par value, of
Surviving Corporation.
"Technology" means all Company Intellectual Property Rights relating to
the Company's AirStar and Angel products and platforms, including any related
hardware and software.
"Third Party" means any Person as defined in this Agreement or in Section
13(d) of the 1934 Act, other than Parent or any of its Affiliates.
"TSX" means the Toronto Stock Exchange.
Any reference in this Agreement to a statute shall be to such statute, as
amended from time to time, and to the rules and regulations promulgated
thereunder.
All dollar amounts in this Agreement shall mean United States dollars
unless a different currency is specifically indicated.
(b) Each of the following terms is defined in the Section set forth
opposite such term:
Term Section
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1934 Act Registration Statement .................... 5.03
ADSs................................................ 2.02
ADS Registration Statement.......................... 5.09
Agreement........................................... Preamble
Business Plan ...................................... 6.01
Canadian GAAP....................................... 5.08
Cash Dividend....................................... 6.01
CBCA................................................ Preamble
Certificates........................................ 2.03
Change of Recommendation............................ 6.03
Change of Recommendation Notice .................... 6.03
Closing Date........................................ 2.01
Company............................................. Preamble
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Term Section
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Company Disclosure Schedule......................... Article 4
Company Employee.................................... 7.05
Company Intellectual Property Rights................ 4.21
Company Option...................................... 2.04
Company Proxy Statement............................. 4.09
Company SEC Documents............................... 4.07
Company Securities ................................. 4.05
Company Stockholder Meeting ........................ 6.02
Company Subsidiary Securities....................... 4.06
Company Voting Agreements........................... Recitals
Confidentiality Agreement........................... 8.05
Effective Time...................................... 2.01
Employee Plans...................................... 4.18
Environmental Laws.................................. 4.19
Expiration Date..................................... 11.05
ESPP................................................ 7.05
Exchange Agent...................................... 2.03
Indemnified Person.................................. 7.03
Insurance Policies.................................. 4.27
Merger.............................................. 2.01
Merger Consideration................................ 2.02
Merger Sub.......................................... Preamble
Parent.............................................. Preamble
Parent Disclosure Schedule.......................... Article 5
Parent CSA Documents................................ 5.07
Parent Intellectual Property Rights................. 5.18
Parent Preferred Shares............................. 5.05
Parent Stock Registration Statement................. 5.09
Payment Events...................................... 11.04
Preferred Stock..................................... 4.05
PTO................................................. 4.21
Registration Statements............................. 5.09
Qualifying Transaction.............................. 11.04
Right(s)............................................ 4.05
Rights Agreement.................................... 4.05
Series A Preferred Stock............................ 4.05
Surviving Corporation............................... 2.01
Tax................................................. 4.16
Tax Return.......................................... 4.16
Taxing Authority.................................... 4.16
Uncertificated Shares............................... 2.03
U.S. GAAP........................................... 4.08
WARN Act............................................ 4.24
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ARTICLE 2
THE MERGER
Section 2.01 The Merger. (a) At the Effective Time and subject to and upon
the terms and conditions of this Agreement and the applicable provisions of
Delaware Law, Merger Sub shall be merged with and into the Company (the
"Merger"), whereupon the separate existence of Merger Sub shall cease and the
Company shall continue as the surviving corporation. The Company as the
surviving corporation after the Merger is hereinafter sometimes referred to as
the "Surviving Corporation." The closing of the Merger shall take place at the
offices of Pillsbury Winthrop LLP, Palo Alto, California, at a time and date to
be specified by the parties, which shall be no later than the third Business
Day after the satisfaction or, to the extent permitted hereunder, waiver of the
conditions set forth in Article 9, or at such other time, date and location as
the parties hereto agree in writing (the "Closing Date").
(b) As soon as practicable on the Closing Date, the Company and Parent
shall file a certificate of merger with the Delaware Secretary of State and
make all other filings or recordings required by Delaware Law in connection
with the Merger. The Merger shall become effective at such time (the "Effective
Time") as the certificate of merger is duly filed with the Delaware Secretary
of State (or at such later time as may be specified in the certificate of
merger).
(c) From and after the Effective Time, the effect of the Merger shall be
as provided in this Agreement and the applicable provisions of Delaware Law. At
such time, the Surviving Corporation shall possess all the rights, powers,
privileges and franchises and be subject to all of the obligations,
liabilities, restrictions and disabilities of the Company and Merger Sub, all
as provided under Delaware Law.
Section 2.02 Conversion of Shares. At the Effective Time, by virtue of the
Merger and without any action on the part of the holder of any Shares or any
shares of capital stock of Parent or Merger Sub:
(a) except as otherwise provided in Sections 2.02(b) and 2.05, each share
of Company Stock (along with each Right attached thereto) outstanding
immediately prior to the Effective Time, shall be automatically converted into
the right to receive the number of American Depositary Shares ("ADSs")
representing shares of Parent Stock equal to a fraction (rounded to the nearest
whole number, with any fraction equal to or higher than one-half rounded up to
the next succeeding whole number), the numerator of which is 41,500,000 and the
denominator of which is the number of shares of Company Stock outstanding
immediately prior to the Effective Time (the "Merger Consideration");
(b) each share of Company Stock held by the Company as treasury stock
(other than shares in an Employee Plan of the Company) or owned by Merger Sub,
Parent or any of its Subsidiaries immediately prior to the Effective Time
(other than shares held for the account of clients, customers or other Persons)
shall be canceled, and no payment shall be made with respect thereto;
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(c) each share of Merger Sub Stock issued and outstanding immediately
prior to the Effective Time shall be converted into one validly issued, fully
paid and nonassessable share of Surviving Corporation Stock. Each certificate
evidencing ownership of shares of Merger Sub Stock shall evidence ownership of
such shares of capital stock of the Surviving Corporation; and
(d) the Surviving Corporation shall issue shares of Surviving Corporation
Stock to Parent in consideration for Parent issuing Parent Stock in respect of
the ADSs to former stockholders of the Company pursuant to Section 2.02(a), the
number of shares of Surviving Corporation Stock issued to Parent pursuant to
this Section 2.02(d) to be equal to the number of shares of Company Stock
outstanding immediately prior to the Effective Time (other than shares of
Company Stock to which Section 2.02(b) applies).
Section 2.03 Surrender and Payment. (a) Prior to the Effective Time,
Parent shall appoint an agent (the "Exchange Agent") reasonably acceptable to
the Company for the purpose of exchanging for the Merger Consideration (i)
certificates representing shares of Company Stock and the Rights attached
thereto (the "Certificates") or (ii) uncertificated shares of Company Stock and
the Rights attached thereto (the "Uncertificated Shares"). Parent shall make
available to the Exchange Agent, as needed, the Merger Consideration to be paid
in respect of the Certificates and the Uncertificated Shares. Promptly after
the Effective Time, Parent shall send, or shall cause the Exchange Agent to
send, to each holder of shares of Company Stock at the Effective Time a letter
of transmittal and instructions (which shall specify that the delivery shall be
effected, and risk of loss and title shall pass, only upon proper delivery of
the Certificates or transfer of the Uncertificated Shares to the Exchange
Agent) for use in such exchange.
(b) Each holder of shares of Company Stock that have been converted into
the right to receive the Merger Consideration shall be entitled to receive,
upon (i) surrender to the Exchange Agent of a Certificate, together with a
properly completed letter of transmittal, or (ii) receipt of an "agent's
message" by the Exchange Agent (or such other evidence, if any, of transfer as
the Exchange Agent may reasonably request) in the case of a book-entry transfer
of Uncertificated Shares, the Merger Consideration in respect of the Company
Stock represented by a Certificate or Uncertificated Share. The ADSs
constituting part of such Merger Consideration, at Parent's option, shall be in
uncertificated book-entry form, unless a physical certificate is requested by a
holder of shares of Company Stock or is otherwise required under applicable
law. Until so surrendered or transferred, as the case may be, each such
Certificate or Uncertificated Share shall represent after the Effective Time
for all purposes only the right to receive such Merger Consideration. No
interest shall be paid or will accrue on any cash payable to holders of
Certificates pursuant to the provisions of this Article 2.
(c) If any portion of the Merger Consideration is to be paid to a Person
other than the Person in whose name the surrendered Certificate or the
transferred Uncertificated Share is registered, it shall be a condition to such
payment that (i) either such Certificate shall be properly endorsed or shall
otherwise be in proper form for transfer or such Uncertificated Share shall be
properly transferred and (ii) the Person requesting such payment shall pay to
the Exchange Agent any transfer or other taxes required as a result of such
payment to a Person other than the registered holder of such Certificate or
Uncertificated Share or establish to the satisfaction of the Exchange Agent
that such tax has been paid or is not payable.
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(d) After the Effective Time, there shall be no further registration of
transfers on the records of the Surviving Corporation of shares of Company
Stock which were outstanding immediately prior to the Effective Time. If, after
the Effective Time, Certificates or Uncertificated Shares are presented to the
Surviving Corporation, they shall be canceled and exchanged for the Merger
Consideration provided for, and in accordance with the procedures set forth, in
this Article 2.
(e) Any portion of the Merger Consideration made available to the Exchange
Agent pursuant to Section 2.03(a) that remains unclaimed by the holders of
shares of Company Stock one year after the Effective Time shall be returned to
Parent, upon demand, and any such holder who has not exchanged shares of
Company Stock for the Merger Consideration in accordance with this Section 2.03
prior to that time shall thereafter look only to Parent for payment of the
Merger Consideration, and any dividends and distributions with respect thereto,
in respect of such shares without any interest thereon. Notwithstanding the
foregoing, Parent, Merger Sub, the Company, the Surviving Corporation and the
Exchange Agent shall not be liable to any holder of ADSs or shares of Parent
Stock or Company Stock for any amounts paid to a public official pursuant to
applicable abandoned property, escheat or similar laws. Any amounts remaining
unclaimed by holders of shares of Company Stock two years after the Effective
Time (or such earlier date, immediately prior to such time when the amounts
would otherwise escheat to or become property of any governmental authority)
shall become, to the extent permitted by applicable law, the property of Parent
free and clear of any claims or interest of any Person previously entitled
thereto.
(f) No dividends or other distributions with respect to securities of
Parent constituting part of the Merger Consideration, shall be paid to the
holder of any Certificates not surrendered or of any Uncertificated Shares not
transferred until such Certificates or Uncertificated Shares are surrendered or
transferred, as the case may be, as provided in this Section 2.03. Following
such surrender or transfer, there shall be paid, without interest, to the
Person in whose name the securities of Parent have been registered, (i) at the
time of such surrender or transfer, the amount of all dividends or other
distributions with a record date after the Effective Time previously paid or
payable on the date of such surrender with respect to such securities, and (ii)
at the appropriate payment date, the amount of dividends or other distributions
with a record date after the Effective Time and prior to surrender or transfer
and with a payment date subsequent to surrender or transfer payable with
respect to such securities.
Section 2.04 Stock Options. As of the Effective Time, each outstanding
option to purchase shares of Company Stock under any stock option or
compensation plan or arrangement of the Company (a "Company Option"), whether
or not exercised or vested, shall be terminated and no consent of any holder of
any stock option or any employee shall be required under any Company stock
option or compensation plan or other arrangement of the Company for such
termination.
Section 2.05 Adjustments. If, during the period between the date of this
Agreement and the Effective Time, any reclassification, recapitalization, stock
split or combination, exchange or readjustment of shares, any stock dividend
thereon or other like change occurs with respect to Parent Stock or the Company
Stock having a record date during such period, the Merger
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Consideration and any other amounts payable pursuant to this Agreement shall be
appropriately adjusted.
Section 2.06 [Reserved].
Section 2.07 Withholding Rights. Each of the Surviving Corporation, Parent
and the Exchange Agent shall be entitled to deduct and withhold from the
consideration payable to any Person pursuant to this Article 2 such amounts as
it is required to deduct and withhold with respect to the making of such
payment under the Code, or any provision of state, local or foreign tax law. If
the Surviving Corporation, Parent or the Exchange Agent, as the case may be, so
withholds such amounts, such withheld amounts shall be treated for all purposes
of this Agreement as having been paid to the holder of the shares of Company
Stock in respect of which the Surviving Corporation, Parent or the Exchange
Agent, as the case may be, made such deduction and withholding. Parent and
Merger Sub represent, warrant and agree that no amount will be withheld or
deducted from the Merger Consideration payable to any Person in respect of
Canadian withholding taxes.
Section 2.08 Lost Certificates. If any Certificate shall have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the Person
claiming such Certificate to be lost, stolen or destroyed and, if required by
Parent, the posting by such Person of a bond, in such reasonable amount as
Parent may direct, as indemnity against any claim that may be made against it
with respect to such Certificate, the Exchange Agent will issue, in exchange
for such lost, stolen or destroyed Certificate, the Merger Consideration to be
paid in respect of the shares of Company Stock represented by such Certificate,
as contemplated by this Article 2.
ARTICLE 3
THE SURVIVING CORPORATION
Section 3.01 Certificate of Incorporation. The certificate of
incorporation of the Company as in effect at the Effective Time shall be
amended in the Merger to be the same as the certificate of incorporation of
Merger Sub, except that the name of the Surviving Corporation shall be Netro
Corporation, and as so amended, shall be the certificate of incorporation of
the Surviving Corporation until amended in accordance with applicable law.
Section 3.02 Bylaws. The bylaws of Merger Sub as in effect at the
Effective Time shall be the bylaws of the Surviving Corporation until amended
in accordance with applicable law.
Section 3.03 Directors and Officers. From and after the Effective Time,
until successors are duly elected or appointed and qualified in accordance with
applicable law, (i) the directors of Merger Sub at the Effective Time shall be
the directors of the Surviving Corporation and (ii) the officers of Merger Sub
at the Effective Time shall be the officers of the Surviving Corporation.
10
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the disclosure schedule delivered by the Company to
Parent and Merger Sub prior to the execution of this Agreement, which
disclosure schedule shall specifically identify by section the representations
and warranties of the Company qualified by such disclosure (the "Company
Disclosure Schedule"), the Company represents and warrants to Parent and Merger
Sub that:
Section 4.01 Corporate Existence and Power. The Company is a corporation
duly incorporated, validly existing and in good standing under the laws of the
State of Delaware and has all corporate powers and all governmental licenses,
authorizations, permits, consents and approvals required to own, lease and
operate its assets and properties and to carry on its business as it is now
being conducted, except for those licenses, authorizations, permits, consents
and approvals the absence of which would not have, individually or in the
aggregate, a Material Adverse Effect on the Company. The Company is duly
qualified to do business as a foreign corporation and is in good standing in
each jurisdiction where such qualification is necessary, except for those
jurisdictions where failure to be so qualified would not have, individually or
in the aggregate, a Material Adverse Effect on the Company. The Company has
heretofore delivered to Parent true and complete copies of the certificate of
incorporation and bylaws of the Company as currently in effect. The Company is
not in violation of any of the provisions of its certificate of incorporation
or bylaws.
Section 4.02 Corporate Authorization. (a) The execution, delivery and
performance by the Company of this Agreement and the consummation by the
Company of the transactions contemplated hereby (including the Merger) are
within the Company's corporate powers and, except for the required approval of
the Company's stockholders in connection with the consummation of the Merger,
have been duly authorized by all necessary corporate action on the part of the
Company. The affirmative vote of the holders of a majority of the outstanding
shares of Company Stock is the only vote of the holders of any of the Company's
capital stock necessary in connection with the consummation of the Merger. This
Agreement has been duly and validly executed and delivered by the Company and
constitutes a valid and binding agreement of the Company.
(b) At a meeting duly called and held, the Company's Board of Directors
(i) unanimously determined that this Agreement and the transactions
contemplated hereby are fair to and in the best interests of the Company's
stockholders, (ii) unanimously approved and adopted this Agreement and the
transactions contemplated hereby and (iii) unanimously resolved (subject to
Section 6.03) to recommend approval and adoption of this Agreement, the Merger
and the Cash Dividend by its stockholders, in each case with Gideon Ben-Efraim
abstaining.
Section 4.03 Governmental Authorization. The execution, delivery and
performance by the Company of this Agreement and the consummation by the
Company of the transactions contemplated hereby require no action by or in
respect of, or filing with, any Governmental Entity, other than (i) the filing
of a certificate of merger with respect to the Merger with the Delaware
Secretary of State and appropriate documents with the relevant authorities of
other
11
states in which the Company is qualified to do business, (ii) compliance
with any applicable requirements of the HSR Act, of the Competition Act and of
laws, rules and regulations analogous to the HSR Act existing in foreign
jurisdictions, (iii) compliance with any applicable requirements of the 1933
Act, the 1934 Act and any other applicable securities or takeover laws, whether
state or non-U.S., and (iv) any actions or filings the absence of which would
not be reasonably expected to have, individually or in the aggregate, a
Material Adverse Effect on the Company (or after the Effective Time, Parent).
Section 4.04 Non-contravention. The execution, delivery and performance by
the Company of this Agreement, and the consummation by the Company of the
transactions contemplated hereby, do not and will not (i) contravene, conflict
with, or result in any violation or breach of any provision of the certificate
of incorporation or bylaws of the Company or any of its Subsidiaries, (ii)
assuming compliance with the matters referred to in Section 4.03, contravene,
conflict with or result in a violation or breach of any provision of any
applicable law, statute, ordinance, rule, regulation, judgment, injunction,
order, or decree, (iii) require any consent or other action by any Person
under, constitute a default (or an event that with notice or lapse of time, or
both, would become a default) under, or cause or permit the termination,
cancellation, acceleration or other change of any right or obligation or the
loss of any benefit to which the Company or any of its Subsidiaries is entitled
under any provision of any agreement or other instrument binding upon the
Company or any of its Subsidiaries or any license, franchise, permit,
certificate, approval or other similar authorization affecting, or relating in
any way to, the assets or business of the Company and its Subsidiaries or (iv)
result in the creation or imposition of any Lien on any asset of the Company or
any of its Subsidiaries, except for such contraventions, conflicts and
violations referred to in clause (ii) and for such failures to obtain any such
consent or other action, defaults, terminations, cancellations, accelerations,
changes, losses or Liens referred to in clauses (iii) and (iv) that would not
be reasonably expected to have, individually or in the aggregate, a Material
Adverse Effect on the Company.
Section 4.05 Capitalization. (a) The authorized capital stock of the
Company consists of 105,000,000 shares consisting of 100,000,000 shares of
Company Stock and 5,000,000 shares of preferred stock, par value $.001 per
share (the "Preferred Stock"), of which 800,000 shares are designated Series A
Participating Cumulative Preferred Stock (the "Series A Preferred Stock"). Each
share of Company Stock has attached thereto a right (each, a "Right" and
collectively, the "Rights") to purchase one one-hundredth of a share of Series
A Preferred Stock at a price of $20 per one one-hundredth of a share, subject
to adjustment. The Rights were issued pursuant to an Amended and Restated
Rights Agreement dated as of July 31, 2002, between the Company and American
Stock Transfer & Trust Company, as Rights Agent (the "Rights Agreement"). As of
the close of business on March 24, 2003, there were outstanding 38,700,354
shares of Company Stock and no shares of Preferred Stock and stock options to
purchase an aggregate of 8,597,988 shares (of which options to purchase an
aggregate of 4,792,206 shares were exercisable). All outstanding shares of
capital stock of the Company have been, and all shares that may be issued
pursuant to the Employee Plans will be, when issued in accordance with the
respective terms thereof, duly authorized and validly issued and are fully paid
and nonassessable and are not subject to preemptive rights created under
Delaware Law, the certificate of incorporation or bylaws of the Company or any
agreement or document to which the Company is a party or by which it or its
assets are bound. All outstanding shares of capital stock of the Company, and
Company Options have been issued and granted in compliance with
12
all applicable securities law and other legal requirements and all requirements
set forth in applicable agreements or instruments. None of the outstanding
Shares is unvested or is subject to a repurchase option, risk of forfeiture or
other condition providing that such Shares may be forfeited or repurchased by
the Company or otherwise vest upon termination of stockholder's or grantee's
employment, directorship or other relationship with the Company or any of its
Subsidiaries under the terms of any restricted stock agreement or other
agreement with the Company.
(b) Except for changes since the close of business on March 24, 2003,
resulting from the issuance of shares of Company Stock pursuant to the ESPP and
from the exercise of Company Options outstanding on such date, there are no (i)
shares of capital stock of or other voting securities or ownership interests in
the Company, (ii) securities of the Company convertible into or exchangeable
for shares of capital stock or other voting securities or ownership interests
in the Company or (iii) options or other rights (including preemptive rights)
to acquire from the Company, or other obligation of the Company to issue,
deliver or sell, or cause to be issued, delivered or sold, any capital stock or
other voting securities or ownership interests in or any securities convertible
into or exchangeable for capital stock or other voting securities or ownership
interests in the Company (the items in clauses (i), (ii) and (iii) being
referred to collectively as the "Company Securities"). There are no
registration rights and, except for the Rights Agreement, there is no voting
trust, proxy, rights plan, antitakeover plan or other agreement or
understanding to which the Company or any of its Subsidiaries is a party or by
which it is bound with respect to any Company Securities. Assuming that ADSs
are quoted on Nasdaq at the Effective Time, stockholders of the Company will
not be entitled to dissenters' or appraisal rights under applicable state law
in connection with the Merger. There are no outstanding obligations of the
Company or any of its Subsidiaries to repurchase, redeem or otherwise acquire
any of the Company Securities.
(c) No shares of Company Stock are owned by any Subsidiary of the Company.
Section 4.06 Subsidiaries. (a) Schedule 4.06(a) contains a correct and
complete list identifying each of the Company's Subsidiaries, together with a
list of each other entity in which the Company holds (directly or indirectly,
other than through an interest in a mutual fund) an equity interest, whether
voting or otherwise, indicating the name and the Company's equity interest in
such entity. Each Subsidiary of the Company is a corporation duly incorporated,
validly existing and in good standing under the laws of its jurisdiction of
incorporation, has all corporate powers and all governmental licenses,
authorizations, permits, consents and approvals required to own, lease and
operate its assets and properties and to carry on its business as it is now
being conducted, except for those licenses, authorizations, permits, consents
and approvals the absence of which would not have, individually or in the
aggregate, a Material Adverse Effect on the Company. Each such Subsidiary is
duly qualified to do business as a foreign corporation and is in good standing
in each jurisdiction where such qualification is necessary, except for those
jurisdictions where failure to be so qualified would not have, individually or
in the aggregate, a Material Adverse Effect on the Company.
(b) All of the outstanding capital stock of or other voting securities or
ownership interests in each Subsidiary of the Company is owned by the Company,
directly or indirectly, free and clear of any Lien and free of any other
limitation or restriction (including any restriction
13
on the right to vote, sell or otherwise dispose of such capital stock or other
voting securities or ownership interests). There are no outstanding (i)
securities of the Company or any of its Subsidiaries convertible into or
exchangeable for shares of capital stock of or other voting securities or
ownership interests in any Subsidiary of the Company or (ii) options or other
rights (including preemptive rights) to acquire from the Company or any of its
Subsidiaries, or other obligation of the Company or any of its Subsidiaries to
issue, deliver or sell, or cause to be issued, delivered or sold, any capital
stock of or other voting securities or ownership interests in, or any
securities convertible into or exchangeable for any capital stock of or other
voting securities or ownership interests in, any Subsidiary of the Company (the
items in clauses (i) and (ii) being referred to collectively as the "Company
Subsidiary Securities"). There are no registration rights and there is no
voting trust, proxy, rights plan, antitakeover plan or other agreement or
understanding to which any Subsidiary is a party or by which it is bound with
respect to any Company Subsidiary Securities. There are no outstanding
obligations of the Company or any of its Subsidiaries to repurchase, redeem or
otherwise acquire any of the Company Subsidiary Securities.
Section 4.07 SEC Filings. (a) The Company has made available to Parent (i)
the Company's annual reports on Form 10-K for its fiscal years ended December
31, 2002, 2001 and 2000, (ii) its quarterly reports on Form 10-Q for its fiscal
quarters ended March 31, 2002, June 30, 2002 and September 30, 2002, (iii) its
proxy or information statements relating to meetings of the stockholders of the
Company held (or actions taken without a meeting by such stockholders) since
December 31, 2000, (iv) all of its other reports, statements, schedules and
registration statements filed with the SEC since its initial public offering
(the documents referred to in this Section 4.07(a), collectively, the "Company
SEC Documents"), which are all the reports, statements, schedules and
registration statements required to be filed by the Company with the SEC since
its initial public offering and (v) complete and correct copies of any
correspondence with, and inquiries from the SEC since January 1, 2001 with
respect to the Company SEC Documents.
(b) As of its filing date, each Company SEC Document complied as to form
in all material respects with the applicable requirements of the 1933 Act and
the 1934 Act, as the case may be.
(c) As of its filing date (and, if amended or superseded by a filing prior
to the date hereof, on the date of such filing), each Company SEC Document
filed pursuant to the 1934 Act did not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements made therein, in the light of the circumstances under which they
were made, not misleading.
(d) Each Company SEC Document that is a registration statement, as amended
or supplemented, if applicable, filed pursuant to the 1933 Act, as of the date
such registration statement or amendment became effective, did not 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.
(e) The Company has in place the "disclosure controls and procedures" (as
defined in Rules 13a-14(c) and 15d-14(c) of the 1934 Act) required in order for
the principal
14
executive officer and principal financial and accounting officer
of the Company to engage in the review and evaluation process mandated by the
1934 Act. The Company's "disclosure controls and procedures" are reasonably
designed to ensure that all information (both financial and non-financial)
required to be disclosed by the Company in the reports that it files or submits
under the 1934 Act is recorded, processed, summarized and reported within the
time periods specified in the rules and forms of the SEC, and that all such
information is accumulated and communicated to the Company's management as
appropriate to allow timely decisions regarding required disclosure and to make
the certifications of the principal executive officer and principal financial
and accounting officer of the Company required under the 1934 Act with respect
to such reports.
Section 4.08 Financial Statements. The audited consolidated financial
statements and unaudited consolidated interim financial statements of the
Company included in the Company SEC Documents (i) were prepared in accordance
with and accurately reflect in all material respects, the Company's books and
records as of the times and for the periods referred to therein, (ii) complied
in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto in effect
during the periods included and (iii) fairly present in all material respects,
in conformity with United States generally accepted accounting principles
("U.S. GAAP") applied on a consistent basis during the periods involved (except
as may be indicated in the notes thereto and except in the unaudited financial
statements as may be permitted by Form 10-Q), the consolidated financial
position of the Company and its consolidated Subsidiaries as of the dates
thereof and their consolidated results of operations and cash flows for the
periods then ended (subject to normal year end adjustments in the case of any
unaudited interim financial statements which were not and are not expected to
have a Material Adverse Effect on the Company).
Section 4.09 Disclosure Documents. (a) The proxy statement/prospectus to
be filed with the SEC in connection with the Merger (the "Company Proxy
Statement") and any amendments or supplements thereto will, when filed, comply
as to form in all material respects with the applicable requirements of the
1934 Act. At the time the Company Proxy Statement or any amendment or
supplement thereto is first mailed to stockholders of the Company, at the time
such stockholders vote on adoption of this Agreement and as of the Effective
Time, the Company Proxy Statement, as supplemented or amended, if applicable,
will not contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements made therein, in the
light of the circumstances under which they were made, not misleading. The
representations and warranties contained in this Section 4.09(a) will not apply
to statements or omissions included in the Company Proxy Statement based upon
information furnished by Parent.
(b) None of the information provided or to be provided by the Company for
inclusion or incorporation by reference in the Registration Statements or any
amendment or supplement thereto, at the time each Registration Statement or any
amendment or supplement becomes effective, and at the Effective Time, will
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
made therein, in the light of the circumstances under which they were made, not
misleading.
15
Section 4.10 Absence of Certain Changes. Since the Company Balance Sheet
Date, the business of the Company and its Subsidiaries has been conducted in
the ordinary course consistent with past practices and, except as disclosed in
the Company SEC Documents filed prior to the date hereof and as contemplated by
this Agreement, there has not been:
(a) any event, occurrence, development or state of circumstances or facts
that has had or would reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on the Company;
(b) any declaration, setting aside or payment of any dividend (other than
the Cash Dividend) or other distribution with respect to any shares of capital
stock of the Company, or any repurchase, redemption or other acquisition by the
Company or any of its Subsidiaries of any outstanding shares of capital stock
or other securities of, or other ownership interests in, the Company or any of
its Subsidiaries, or any options, warrants, calls or rights to acquire any such
stock or other securities;
(c) any amendment of any material term of any outstanding security of the
Company or any of its Subsidiaries;
(d) any incurrence, assumption or guarantee by the Company or any of its
Subsidiaries of any indebtedness for borrowed money other than (i) borrowings
under existing credit facilities (or any renewals, replacements or extensions
that do not increase the aggregate commitments thereunder) and (ii) in the
ordinary course of business and in amounts and on terms consistent with past
practices;
(e) any making of any material loan, advance or capital contributions to
or investment in any Person other than loans, advances or capital contributions
to or investments in its wholly owned Subsidiaries made in the ordinary course
of business consistent with past practices;
(f) any transaction or commitment made, or any contract or agreement
entered into, by the Company or any of its Subsidiaries relating to its assets
or business (including the acquisition or disposition of any assets) or any
relinquishment by the Company or any of its Subsidiaries of any contract or
other right, in either case, material to the Company and its Subsidiaries,
taken as a whole, other than transactions and commitments in the ordinary
course of business consistent with past practices and those contemplated by
this Agreement or the Business Plan;
(g) any change in any method of accounting or accounting principles or
practice by the Company or any of its Subsidiaries materially affecting the
assets, liabilities or business of the Company and its Subsidiaries, except for
any such change required by reason of a concurrent change in U.S. GAAP or
Regulation S-X under the 1934 Act;
(h) any (i) grant of any material severance or termination pay to (or
amendment to any existing arrangement with) any director, officer or employee
of the Company or any of its Subsidiaries, (ii) material increase in benefits
payable under any existing severance or termination pay policies or employment
agreements, (iii) any entering into any employment, deferred compensation or
other similar agreement (or any amendment to any such existing
16
agreement) with any director, officer or employee of the Company or any of its
Subsidiaries, (iv) establishment, adoption or amendment (except as required by
applicable law) of any collective bargaining, bonus, profit-sharing, thrift,
pension, retirement, deferred compensation, compensation, stock option,
restricted stock or other benefit plan or arrangement covering any director,
officer or employee of the Company or any of its Subsidiaries or (v) material
increase in compensation, bonus or other benefits payable to any director,
officer or employee of the Company or any of its Subsidiaries, other than in
the ordinary course of business consistent with past practice;
(i) entry by the Company or any of its Subsidiaries into any licensing or
other agreement with regard to the acquisition or disposition of any Company
Intellectual Property Rights other than licenses in the ordinary course of
business consistent with past practice or any amendment or consent with respect
to any licensing agreement filed or required to be filed by the Company with
the SEC; or
(j) any revaluation by the Company or any of its Subsidiaries of any of
its assets, including, without limitation, writing down the value of
capitalized inventory or writing off notes or accounts receivable or any sale
of assets of the Company or any of its Subsidiaries other than in the ordinary
course of business.
Section 4.11 No Undisclosed Material Liabilities. There are no liabilities
or obligations of the Company or any of its Subsidiaries of any kind
whatsoever, whether accrued, contingent, absolute, determined, determinable or
otherwise, other than:
(a) liabilities or obligations disclosed and provided for in the Company
Balance Sheet or in the notes thereto or in the Company SEC Documents filed
prior to the date hereof; and
(b) liabilities or obligations incurred in the ordinary course of business
consistent with past practices since the Company Balance Sheet Date that would
not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on the Company.
Section 4.12 Compliance with Laws and Court Orders. The Company and each
of its Subsidiaries is and, since January 1, 2001, has been in compliance with,
and to the Knowledge of the Company is not under investigation with respect to
and has not been threatened to be charged with or given notice of any violation
of, any applicable law, statute, ordinance, rule, regulation, judgment,
injunction, order or decree, except for failures to comply or violations that
have not had and would not reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect on the Company.
Section 4.13 Litigation. Except as set forth in the Company SEC Documents
filed prior to the date hereof, there is no action, suit, investigation or
proceeding pending against, or, to the Knowledge of the Company, threatened
against or affecting, the Company, any of its Subsidiaries, any of their
respective officers or directors in their capacity as officers or directors of
the Company or any of its Subsidiaries or any of their respective properties
before any court or arbitrator or before or by any Governmental Entity, that,
if determined or resolved adversely in accordance with the plaintiff's demands,
would reasonably be expected to have, individually
17
or in the aggregate, a Material Adverse Effect on the Company, or that in any
manner challenges or seeks to prevent, enjoin, alter or materially delay the
Merger or any of the other transactions contemplated hereby.
Section 4.14 Finders' Fees. Except for Goldman, Sachs & Co., a complete
copy of whose engagement agreement (including all schedules and fee
information) has been provided to Parent, the Company has not incurred
(directly or indirectly), nor will it incur, directly or indirectly, any
liability for any broker's, finder's, financial advisor's or other similar fee,
charge or commission in connection with this Agreement or the transactions
contemplated by this Agreement.
Section 4.15 Opinion of Financial Advisor. The Company has received the
opinion of Goldman, Sachs & Co., financial advisor to the Company, to the
effect that, as of the date of this Agreement, the Merger Consideration and the
Dividend, in the aggregate, are fair to the Company's stockholders from a
financial point of view.
Section 4.16 Taxes. (a) All material Tax Returns required by applicable
law to be filed with any Taxing Authority by, or on behalf of, the Company or
any of its Subsidiaries have been filed when due in accordance with all
applicable laws, and all such material Tax Returns are, or shall be at the time
of filing, true and complete in all material respects.
(b) The Company and each of its Subsidiaries has paid (or has had paid on
its behalf) or has withheld and remitted to the appropriate Taxing Authority
all Taxes due and payable, or, where payment is not yet due, has established
(or has had established on its behalf and for its sole benefit and recourse) in
accordance with U.S. GAAP an adequate reserve for all Taxes, whether or not
shown as being due on any Tax Return, through the end of the last period for
which the Company and its Subsidiaries ordinarily record items on their
respective books except to the extent any failure to pay or reserve would not,
individually or in the aggregate, have a Material Adverse Effect.
(c) The income and franchise Tax Returns of the Company and its
Subsidiaries through the Tax year ended December 31, 1997 have been examined
and closed or are Tax Returns with respect to which the applicable period for
assessment under applicable law, after giving effect to extensions or waivers,
has expired. No extension of the statute of limitations on the assessment of
any Taxes has been granted by the Company or any of its Subsidiaries and is
currently in effect.
(d) There is no claim, audit, action, suit, proceeding or investigation
now pending or threatened in writing against or with respect to the Company or
its Subsidiaries in respect of any Tax or Tax asset. No Liens for Taxes exist
with respect to any of the assets of the Company or any of its Subsidiaries
that are currently in effect.
(e) During the five-year period ending on the date hereof, neither the
Company nor any of its Subsidiaries was a distributing corporation or a
controlled corporation in a transaction intended to be governed by Section 355
of the Code.
(f) Schedule 4.16(f) contains a list of all jurisdictions (whether foreign
or domestic) in which the Company or any of its Subsidiaries currently files
Tax Returns.
18
(g) "Tax" means any tax, governmental fee or other like assessment or
charge of any kind whatsoever (including, but not limited to, withholding on
amounts paid to or by any Person), together with any interest, penalty,
addition to tax or additional amount imposed by any governmental authority (a
"Taxing Authority") responsible for the imposition of any such tax (domestic or
foreign), and any liability for any of the foregoing as transferee. "Tax
Return" means any report, return, document, declaration or other information or
filing required to be supplied to any Taxing Authority with respect to Taxes,
including information returns, any documents with respect to or accompanying
payments of estimated Taxes, or with respect to or accompanying requests for
the extension of time in which to file any such report, return, document,
declaration or other information.
(h) Neither the Company nor any of its Subsidiaries is or may be liable
for the Taxes of any other Person under U.S. Treasury Regulation 1.1502-6 or
similar provision of state, local, provincial or foreign law, as a transferee
or successor, by contract or otherwise except for agreements applicable to
members of the affiliated group of which the Company is the common parent and
for liability for Taxes under U.S. Treasury Regulation Section 1.1502-6 for the
affiliated group of which the Company is the common parent.
Section 4.17 [Reserved].
Section 4.18 Employee Benefit Plans. (a) Schedule 4.18(a) contains a
correct and complete list identifying each "employee benefit plan," as defined
in Section 3(3) of ERISA, each employment, change of control severance or
similar contract, plan, arrangement or policy and each other plan or
arrangement (written or oral) providing for compensation, bonuses,
profit-sharing, stock option or other stock related rights or other forms of
incentive or deferred compensation, vacation benefits, insurance (including any
self-insured arrangements), health or medical benefits, employee assistance
program, disability or sick leave benefits, workers' compensation, supplemental
unemployment benefits, severance benefits and post-employment or retirement
benefits (including compensation, pension, health, medical or life insurance
benefits) which is maintained, administered or contributed to by the Company or
any ERISA Affiliate and covers any employee or former employee of the Company
or any of its Subsidiaries, or with respect to which the Company or any of its
Subsidiaries has any liability; and form of employee confidentiality or other
agreement protecting Company Intellectual Property Rights. Copies of such plans
(including the plan document, any trust agreement and any other funding or
insurance instruments relating thereto) have been furnished or made available
to Parent together with annual reports (Form 5500 including, if applicable,
Schedule B thereto) for the most recent two years prepared in connection with
any such plan and, to the extent applicable, copies of the most recent
determination or opinion letter (and any outstanding request for a
determination or opinion letter). Such plans are referred to collectively
herein as the "Employee Plans." None of the Employee Plans is a plan described
in Section 201(2) of ERISA. The Company has separately provided or made
available to Parent a correct and complete list identifying the current annual
compensation rate (including bonus), current base salary rate, accrued bonus,
accrued sick leave, accrued severance pay and accrued vacation benefits of each
present employee of the Company or any of its Subsidiaries without identifying
such employees by name.
19
(b) Neither the Company nor any ERISA Affiliate nor any predecessor
thereof sponsors, maintains or contributes to, or has in the past six years
sponsored, maintained or contributed to, any Employee Plan subject to Title IV
of ERISA or to the minimum funding requirement of Section 412 of the Code or
Part 3 of Title I of ERISA.
(c) Neither the Company nor any ERISA Affiliate nor any predecessor
thereof contributes to, or has in the past six years contributed to, any
multiemployer plan, as defined in Section 3(37) of ERISA.
(d) Each Employee Plan that is intended to be qualified under Section
401(a) of the Code has received a favorable determination or opinion letter,
and no event has occurred since the date of such determination or opinion
letter that could reasonably be expected to adversely affect such
qualification. Each Employee Plan has been maintained in material compliance
with its terms and with the requirements prescribed by any and all statutes,
orders, rules and regulations, including but not limited to ERISA and the Code,
which are applicable to such Employee Plan. No events have occurred with
respect to any Employee Plan that could result in payment or assessment by or
against the Company of any material fine under ERISA or material excise taxes
under Sections 4972, 4975, 4976, 4977, 4979, 4980B, 4980D, 4980E or 5000 of the
Code.
(e) Neither the Company nor any of its Subsidiaries has any liability in
respect of post-retirement health, medical or life insurance benefits for
retired, former or current employees of the Company or its Subsidiaries except
as required to avoid excise tax under Section 4980B of the Code.
(f) There is no action, suit, investigation, audit or proceeding pending
against or involving or, to the Knowledge of the Company, threatened against or
involving, any Employee Plan before any court or arbitrator or any state,
federal or local governmental body, agency or official which would reasonably
be expected to result in a material liability.
(g) With respect to each Employee Plan, all forms, documents and other
materials have been filed with the SEC or otherwise distributed, in each case,
as required by the 1933 Act or the 1934 Act.
(h) The execution of this Agreement and the transaction contemplated
herein (whether alone of in connection with any other event) could not,
pursuant to the terms of the Employee Plans, result in the payment of cash or
property to any employee or the increase, acceleration or provision of any
payments, other rights or benefits to any employee, whether or not any such
payment, right or benefit would constitute a parachute payment within the
meaning of Section 280G of the Code.
(i) Each individual who is treated by the Company or any of its
Subsidiaries as an independent contractor is properly so treated under
applicable law, except as would not result in a material liability to the
Company.
Section 4.19 Environmental Matters. (a) Except as set forth in the Company
SEC Documents filed prior to the date hereof and except as would not reasonably
be expected to have, individually or in the aggregate, a Material Adverse
Effect on the Company:
20
(i) no written notice, order, complaint or penalty has been received
by the Company or any of its Subsidiaries arising out of any statute, law,
regulation or rule, in each case as in effect on the date hereof, relating
to pollution or protection of the environment or human health or safety
("Environmental Laws"), and there are no judicial, administrative or other
actions, suits or proceedings pending or, to the Company's Knowledge,
threatened which allege a violation by the Company or any of its
Subsidiaries of any Environmental Laws;
(ii) the Company and each of its Subsidiaries have all Environmental
Permits necessary for their operations to comply with all applicable
Environmental Laws and are in compliance with the terms of such
Environmental Permits; and
(iii) the operations of the Company and each of its Subsidiaries are
in compliance with the terms of applicable Environmental Laws.
(b) Except as set forth in this Section 4.19, no representations or
warranties are being made with respect to matters arising under or relating to
environmental matters.
Section 4.20 Antitakeover Statutes and Rights Agreement. (a) The Company
has taken all action necessary to exempt the Merger, the execution, delivery
and performance of this Agreement and the transactions contemplated hereby from
the provisions of Section 203 of Delaware Law and any other state takeover
statute or similar law or regulations or any antitakeover provision in the
Company's certificate of incorporation or bylaws that otherwise would be
applicable, and, accordingly, no such Section applies or purports to apply to
any such transactions.
(b) The Company has taken all action necessary to render the Rights
Agreement inapplicable to the Merger, the execution, delivery and performance
of this Agreement and the transactions contemplated hereby. Without limiting
the generality of the foregoing, the Company has taken all action so that none
of the foregoing will result in the grant of any Rights to any Person under the
Rights Agreement or enable or require the Rights to be exercised, distributed
or triggered, and Parent will not be an "Acquiring Person" under the Rights
Agreement.
Section 4.21 Intellectual Property. (a) Schedule 4.21 contains a list of
all material patents, patent applications, invention disclosures, registered
trademarks, trademark applications for registration, common law trademarks,
domain names, software programs and registered copyrights, and any material
Intellectual Property Rights owned or licensed and used or held for use by the
Company or any Subsidiary ("Company Intellectual Property Rights"). The Company
is duly listed (without break in title) in the records of the United States
Patent and Trademark Office ("PTO") as the holder of record of each of the
patents, patent applications, trademark registrations, trademark applications
for registration and registered copyrights for which it is delineated as holder
on Schedule 4.21, and the Company is duly listed (without break in title) in
the records of the appropriate foreign intellectual office as holder of record
with respect to the same. To the Knowledge of the Company, all of the issued
and registered Company Intellectual Property Rights were obtained in material
compliance with all applicable rules, policies, and procedures of the PTO or
applicable foreign intellectual property agency.
21
(b) With respect to licensed Company Intellectual Property Rights, to the
Knowledge of the Company, each material license agreement is duly executed,
valid, and binding on all parties thereto and enforceable in accordance with
its terms, and the Company has no Knowledge suggesting other than that all
parties to each material license agreement is in compliance with, and have not
breached any term of any such license agreements in such a manner that would
give rise to a termination right. With respect to each material license
affecting Company Intellectual Property Rights, acquisition of the same through
Merger will not affect the exercise of the rights provided thereunder to the
Company or its Subsidiaries that would be available had the Merger not
occurred, and the acquisition through Merger does not result in payment of any
additional material amounts or consideration other than ongoing fees, royalties
or payments which the Company or its Subsidiaries would otherwise be required
to be paid.
(c) No Company Intellectual Property Right is subject to any outstanding
judgment, injunction, lien, security interest, forebearance to sue, order,
decree or agreement restricting the use thereof by the Company or any
Subsidiary or restricting the licensing thereof by the Company or any
Subsidiary to any Person, except for any judgment, injunction, lien, security
interest, forebearance to sue, order, decree or agreement which would not
reasonably be expected to have a Material Adverse Effect.
(d) To the Knowledge of the Company, none of the Company's (or any of its
Subsidiaries') products or processes infringe or otherwise violate the
Intellectual Property Rights of any third party and the Company is not aware of
any pending intellectual property applications for registration or issuance
that would, if granted, limit or prohibit the business of the Company.
(e) The Company has no Knowledge which would form a basis for a finding
that any of the patents or patent applications owned or licensed by the Company
is unpatentable, unenforceable or invalid, or any of its registered or common
law trademarks or copyrights are unenforceable or invalid. To the Company's
Knowledge, all registered or issued Company Intellectual Property Rights on
Schedule 4.21(a) are subsisting, in full force and effect, have not been
cancelled or abandoned, and have not expired. All maintenance and renewal fees
presently due, or due in the past, with respect to the Company Intellectual
Property Rights have been paid, as well as have any registration, filing, or
other governmental fees. The Company and its Subsidiaries have taken all
commercially reasonable steps to protect their respective trade secrets, and
have entered into confidentiality agreements with employees and consultants to
protect such trade secrets. To the Knowledge of the Company, except pursuant to
such confidentiality agreements, there has been no disclosure by the Company or
any of its Subsidiaries of any such trade secrets. Any confidentiality
agreements executed by employees, consultants or other advisors of the Company,
or any of its Subsidiaries, are valid binding and enforceable in accordance
with their terms.
(f) To the Knowledge of the Company, there is no action, suit, allegation
claim or proceeding relating to the Company Intellectual Property Rights.
Neither the Company nor any of its Subsidiaries has received any communications
from a third party alleging or suggesting past, present or future infringement,
or proferring a license to intellectual property that the third party suggests
might be necessary for the Company or any of its Subsidiaries to
22
conduct business. Neither the Company nor any of its Subsidiaries has obtained
written opinions or memoranda of counsel relating to actual or potential third
party claims relating to third party Intellectual Property Rights.
(g) To the Knowledge of the Company, all of the Company Intellectual
Property Rights were duly obtained, and there are no ownership or right-to-use
disputes with respect thereto. To the Knowledge of the Company, no government
funding, facilities of a university, college or other education institution or
research center, or funding from third parties, was used in the development of
Company Intellectual Property Rights. No current or former stockholder,
director, officer or employee of the Company or any of its Subsidiaries will,
after the consummation of the Merger, own or retain any rights in, to or under
any of the Company Intellectual Property Rights.
Section 4.22 Labor Relations. Neither the Company nor any of its
Subsidiaries is party to any collective bargaining agreement or any work rules
or practices agreed to with any labor union, employee association or similar
organization, nor do the Company nor any of its Subsidiaries have Knowledge of
any such union, employee association or similar organization that represents or
claims to represent any of their employees or intends to organize any of their
employees; (ii) there is no labor strike, dispute, slowdown, stoppage or
lockout actually pending, or to the Knowledge of the Company or any of its
Subsidiaries, threatened against or affecting the Company or any of its
Subsidiaries and, during the past five years, there has not been any such
action; (iii) neither the Company nor any of its Subsidiaries is engaged in any
unfair labor practices as defined in the National Labor Relations Act or other
applicable law, ordinance or regulation; (iv) there is no unfair labor practice
charge or complaint against the Company or any of its Subsidiaries pending or,
to the Knowledge of the Company and each of its Subsidiaries, threatened before
the National Labor Relations Board or any similar state agency; and (v) there
is no grievance arising out of any collective bargaining agreement or other
grievance procedure.
Section 4.23 Employment. (i) There are no written personnel policies,
rules or procedures applicable to employees of the Company or any of its
Subsidiaries, other than those which would not result in a material liability
to the Company and those set forth in Schedule 4.23, true and correct copies of
which have heretofore been delivered to Parent; (ii) the Company and each of
its Subsidiaries is, and at all times has been, in material compliance with all
applicable laws respecting employment and employment practices, terms and
conditions of employment, wages, hours of work and occupational safety and
health and no complaints, lawsuits or other proceedings are pending by or on
behalf of any present or former employee of the Company or any of its
Subsidiaries, or any applicant for employment, alleging breach of any such law,
breach of any contract for employment or other discriminatory or tortious
conduct in connection with the employment relationship other than (A) those
which would not result in a material liability to the Company and (B) lawsuits
against the Company related to, arising out of or resulting from the
transactions contemplated hereby; provided that, such lawsuits in the case of
(B), will be promptly disclosed to Parent; and (iii) no charges with respect to
or relating to the Company or any of its Subsidiaries are pending before any
federal, state or local agency responsible for the enforcement of labor or
employment laws, neither the Company nor any of its Subsidiaries has received
notice from any such agency of the intent to conduct an investigation with
respect to or relating to the Company or any of its Subsidiaries, and no such
investigation is
23
in progress, in each case other than those which would not result in a material
liability to the Company.
Section 4.24 WARN Act. The Company has complied in all material respects
with the requirements of the Workers Adjustment and Retraining Notification Act
("WARN Act") with respect to its employees. None of the Company's or any of its
Subsidiaries' employees has suffered an "employment loss" (as defined in the
WARN Act) since six months prior to the date hereof.
Section 4.25 Restrictions on Business Activities. There is no agreement,
commitment, judgment, injunction, order or decree binding upon the Company or
any of its Subsidiaries or to which the Company or any of its Subsidiaries is a
party which limits in any material respect the right of the Company or any of
its Subsidiaries (i) to engage in any line of business, (ii) to develop, market
or distribute products or services or (iii) to compete with any Person, or
granting any exclusive distribution rights.
Section 4.26 Agreements, Contracts and Commitments. Neither the Company
nor any of its Subsidiaries has breached, or received in writing any claim or
notice that it has breached, any of the terms or conditions of any agreement,
contract or commitment to which it is a party or by which it is bound in such a
manner as, individually or in the aggregate, are reasonably likely to have a
Material Adverse Effect on the Company. Each agreement, contract or commitment
to which the Company or any of its Subsidiaries is a party or by which it is
bound that has not expired by its terms is in full force and effect, except
where such failure to be in full force and effect is not reasonably likely to
have a Material Adverse Effect on the Company.
Section 4.27 Insurance. The Company maintains the insurance policies and
fidelity bonds covering the assets, business, equipment, properties,
operations, employees, officers and directors of the Company and its
Subsidiaries as set forth in Section 4.27 of the Company Disclosure Schedule
(collectively, the "Insurance Policies"). There is no claim pending under any
of the Insurance Policies as to which coverage has been questioned, denied or
disputed by the underwriters of such policies or bonds. All premiums due and
payable under all such policies and bonds have been paid and the Company and
its Subsidiaries are otherwise in compliance in all material respects with the
terms of such policies and bonds.
Section 4.28 Change of Control Payments. Section 4.28 of the Company
Disclosure Schedule sets forth each plan or agreement pursuant to which any
amounts may become payable (whether currently or in the future) to current or
former employees, officers and directors of the Company or any of its
Subsidiaries as a result of or in connection with the Merger.
Section 4.29 No Existing Discussions. Neither the Company nor any of its
Subsidiaries is engaged, directly or indirectly, in any discussions or
negotiations with any Third Party with respect to an Acquisition Proposal.
Section 4.30 Canadian Operations. The aggregate gross book value of the
assets in Canada of the Company and its "affiliates" (within the meaning of
Section (2) of the Competition Act) and the gross revenues from sales in or
from Canada generated from those assets determined in each case as prescribed
in Part IX of the Competition Act and the
24
regulations thereunder do not exceed C$35 million. The Company is not a
reporting issuer or equivalent for the purposes of any Canadian Securities
Laws. The Company has not made a prospectus offering or a distribution exempt
from the prospectus requirements under Canadian Securities Laws in any
jurisdiction in Canada.
Section 4.31 Cash Dividend. As of the date of this Agreement, after giving
effect to the transactions contemplated hereby (including, without limitation,
the Merger) the Board of Directors of the Company, after considering the advice
of its advisors and after reviewing other alternatives available to the Company
(including liquidation, dissolution or winding up of the Company), has
determined that the Cash Dividend and the Merger are in the best interests of
the Company's stockholders and that, based on the information available to the
Company as of the date of this Agreement and on reasonable assumptions based on
such information and after consultation with its advisors, the declaration and
payment of the Cash Dividend as of the date of this Agreement would not be
illegal under applicable law.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Except as set forth in the disclosure schedule delivered by Parent to the
Company prior to the execution of this Agreement, which disclosure schedule
shall specifically identify by section the representations and warranties of
Parent and the Merger Sub qualified by such disclosure (the "Parent Disclosure
Schedule"), Parent and Merger Sub jointly and severally represent and warrant
to the Company that:
Section 5.01 Corporate Existence and Power. Each of Parent and Merger Sub
is a corporation duly incorporated, validly existing and in good standing under
the laws of its jurisdiction of incorporation and has all corporate powers and
all governmental licenses, authorizations, permits, consents and approvals
required to own, lease and operate its assets and properties and to carry on
its business as it is now being conducted, except for those licenses,
authorizations, permits, consents and approvals the absence of which would not
have, individually or in the aggregate, a Material Adverse Effect on Parent.
Each of Parent and Merger Sub is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction where such
qualification is necessary, except for those jurisdictions where failure to be
so qualified would not have, individually or in the aggregate, a Material
Adverse Effect on the Parent and its Subsidiaries, taken as a whole. Parent has
heretofore delivered to the Company true and complete copies of the certificate
of incorporation and bylaws of Parent and Merger Sub as currently in effect.
Neither Parent nor Merger Sub is in violation of any of the provisions of its
certificate of incorporation or bylaws.
Section 5.02 Corporate Authorization. (a) The execution, delivery and
performance by each of Parent and Merger Sub of this Agreement and the
consummation by each of Parent and Merger Sub of the transactions contemplated
hereby (including the Merger) are within the corporate powers of Parent and
Merger Sub and have been duly authorized by all necessary corporate action, and
no other corporate proceedings on the part of Parent or Merger Sub are
necessary to authorize this Agreement or to consummate the transactions
contemplated hereby.
25
This Agreement has been duly and validly executed and delivered by Parent and
Merger Sub and constitutes a valid and binding agreement of Parent and Merger
Sub.
(b) At a meeting duly called and held, Parent's Board of Directors has (i)
unanimously determined that this Agreement and the transactions contemplated
hereby are fair to and in the best interests of Parent's stockholders and (ii)
unanimously approved and adopted this Agreement and the transactions
contemplated hereby.
Section 5.03 Governmental Authorization. The execution, delivery and
performance by Parent and Merger Sub of this Agreement and the Company Voting
Agreements and the consummation by Parent and Merger Sub of the transactions
contemplated hereby require no action by or in respect of, or filing with, any
Governmental Entity, other than (i) the filing of a certificate of merger with
respect to the Merger with the Delaware Secretary of State and appropriate
documents with the relevant authorities of other jurisdictions in which Parent
or Merger Sub is qualified to do business, (ii) compliance with any applicable
requirements of the HSR Act, the Competition Act and of laws, rules and
regulations analogous to the HSR Act existing in foreign jurisdictions, (iii)
the filing and effectiveness of the Registration Statements and of a
registration statement on Form 8-A with respect to the ADSs and the underlying
Parent Stock under the 1934 Act (the "1934 Act Registration Statement") and
compliance with any other applicable requirements of the 1933 Act, the 1934
Act, the Canadian Securities Laws and any other applicable securities laws or
takeover laws, whether state or foreign, (iv) compliance with the requirements
of the TSX and Nasdaq, (v) any actions or filings the absence of which would
not be reasonably expected to have, individually or in the aggregate, a
Material Adverse Effect on Parent and (vi) filings and notices not required to
be made or given until after the Effective Time.
Section 5.04 Non-contravention. The execution, delivery and performance by
Parent and Merger Sub of this Agreement and the Company Voting Agreements and
the consummation by Parent and Merger Sub of the transactions contemplated
hereby do not and will not (i) contravene, conflict with, or result in any
violation or breach of any provision of the certificate of incorporation or
bylaws of Parent or Merger Sub or the equivalent organizational documents of
any of Parent's Subsidiaries, (ii) assuming compliance with the matters
referred to in Section 5.03, contravene, conflict with or result in a violation
or breach of any provision of any applicable law, statute, ordinance, rule,
regulation, judgment, injunction, order or decree, (iii) require any consent or
other action by any Person under, constitute a default (or an event that with
notice or lapse of time, or both, would become a default) under, or cause or
permit the termination, cancellation, acceleration or other change of any right
or obligation or the loss of any benefit to which Parent or any of its
Subsidiaries is entitled under any provision of any agreement or other
instrument binding upon Parent or any of its Subsidiaries or any license,
franchise, permit, certificate, approval or other similar authorization
affecting, or relating in any way to, the assets or business of Parent and its
Subsidiaries or (iv) result in the creation or imposition of any Lien on any
asset of Parent or any of its Subsidiaries, except for such contraventions,
conflicts and violations referred to in clause (ii) and for such failures to
obtain any such consent or other action, defaults, terminations, cancellations,
accelerations, changes, losses or Liens referred to in clauses (iii) and (iv)
that would not be reasonably expected to have, individually or in the
aggregate, a Material Adverse Effect on Parent.
26
Section 5.05 Capitalization. (a) The authorized capital stock of Parent
consists of an unlimited number of shares of Parent Stock and an unlimited
number of preferred shares, without par value, of Parent ("Parent Preferred
Shares"). As of March 24, 2003, there were 55,227,982 outstanding shares of
Parent Stock and no Parent Preferred Shares and employee stock options to
purchase an aggregate of 3,287,300 shares of Parent Stock (of which options to
purchase an aggregate of 846,340 shares of Parent Stock were exercisable). All
outstanding shares of capital stock of Parent have been duly authorized and
validly issued and are fully paid and nonassessable and are not subject to
preemptive rights created under the CBCA, the certificate of incorporation or
bylaws of Parent or any agreement or document to which Parent is a party or by
which it or its assets are bound.
(b) Except for changes since the close of business on March 24, 2003
resulting from the exercise of stock options or the grant of stock based
compensation to directors or employees, there are no outstanding (i) shares of
capital stock or voting securities of Parent, (ii) securities of Parent
convertible into or exchangeable for shares of capital stock or other voting
securities or ownership interests in Parent or (iii) options or other rights
(including preemptive rights) to acquire from Parent or other obligation of
Parent to issue, deliver, or sell or cause to be issued, delivered or sold, any
capital stock or other voting securities or ownership interests in or any
securities convertible into or exchangeable for capital stock or other voting
securities or ownership interests in Parent. There are no outstanding
obligations of Parent or any of its Subsidiaries to repurchase, redeem or
otherwise acquire any of the securities referred to in clause (i), (ii) or
(iii) above. There are no registration rights and there is no voting trust or
other similar agreement or understanding to which Parent or any of its
Subsidiaries is a party with respect to any securities referred to in clause
(i), (ii) or (iii) above.
(c) The shares of Parent Stock to be issued as part of the Merger
Consideration have been duly authorized and, when issued and delivered in
accordance with the terms of this Agreement, will have been validly issued and
will be fully paid and nonassessable and the issuance thereof is not subject to
any preemptive or other similar right; Parent will use commercially reasonable
efforts to cause any such shares issued to Canadian residents to be freely
tradable under applicable Canadian Securities Laws (subject to the filing by
Parent of all required documents and notices with the appropriate Governmental
Entities in Canada and to the extent that such shares are not holdings of a
"control block" as defined under applicable Canadian Securities Laws and the
other conditions set forth in applicable Canadian Securities Laws)
Section 5.06 Subsidiaries. (a) Schedule 5.06(a) contains a correct and
complete list identifying each Subsidiary of Parent. Each Subsidiary of Parent
is a corporation duly incorporated, validly existing and in good standing under
the laws of its jurisdiction of incorporation, has all corporate powers and all
governmental licenses, authorizations, permits, consents and approvals required
to carry on its business as now conducted, except for those licenses,
authorizations, permits, consents and approvals the absence of which would not
have, individually or in the aggregate, a Material Adverse Effect on Parent.
Each Subsidiary of Parent is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction where such
qualification is necessary, except for those jurisdictions where failure to be
so qualified would not have, individually or in the aggregate, a Material
Adverse Effect on Parent.
27
(b) All of the outstanding capital stock of, or other voting securities or
ownership interests in, each Subsidiary of Parent, is owned by Parent, directly
or indirectly, free and clear of any Lien and free of any other limitation or
restriction (including any restriction on the right to vote, sell or otherwise
dispose of such capital stock or other voting securities or ownership
interests). There are no outstanding (i) securities of Parent or any of its
Subsidiaries convertible into or exchangeable for shares of capital stock or
other voting securities or ownership interests in any of its Subsidiaries or
(ii) options or other rights to acquire from Parent or any of its Subsidiaries,
or other obligation of Parent or any of its Subsidiaries to issue, any capital
stock or other voting securities or ownership interests in, or any securities
convertible into or exchangeable for any capital stock or other voting
securities or ownership interests in, any Subsidiary of Parent. There are no
outstanding obligations of Parent or any of its Subsidiaries to repurchase,
redeem or otherwise acquire any of the securities referred to in clauses (i) or
(ii) above.
(c) Merger Sub was formed solely for the purpose of engaging in the
transactions contemplated hereby, has engaged in no other business activities
and has conducted its operations only as contemplated hereby.
Section 5.07 CSA Filings. (a) Parent has made available to the Company (i)
Parent's annual reports for its fiscal years ended December 31, 2000, 2001 and
2002, (ii) annual information forms for the fiscal years ended December 31,
1999, 2000 and 2001, (iii) its quarterly reports for its fiscal quarters ended
March 31, 2002, June 30, 2002 and September 30, 2002, (iv) its proxy or
information statements relating to meetings of or actions taken without a
meeting by Parent's stockholders held since December 31, 1999, and (v) all of
its other reports, statements, schedules, prospectuses and registration
statements filed with the CSA since December 31, 1999 (the documents referred
to in this Section 5.07(a), collectively, the "Parent CSA Documents"), which
are all the reports, statements and prospectuses required to be filed by Parent
with the CSA since December 31, 1999.
(b) As of its filing date, each Parent CSA Document complied as to form in
all material respects with the applicable requirements of the Canadian
Securities Laws.
(c) As of its filing date, each Parent CSA Document did not contain any
untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading.
(d) Each Parent CSA Document that is a prospectus, as amended or
supplemented, if applicable, filed pursuant to the Canadian Securities Laws, as
of the date of such prospectus or amendment, contained full, true and plain
disclosure of all material facts, did not 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.
Section 5.08 Financial Statements. The audited consolidated financial
statements and unaudited consolidated interim financial statements of Parent
included in the Parent CSA Documents (i) were prepared in accordance with and
accurately reflect in all material respects, Parent's books and records as of
the times and for the periods referred to therein, (ii) complied in
28
all material respects with applicable accounting requirements and the published
rules and regulations of the CSA with respect thereto in effect during the
periods included and (iii) fairly present in all material respects, in
conformity with Canadian generally accepted accounting principles ("Canadian
GAAP") applied on a consistent basis during the periods involved (except as may
be indicated in the notes thereto and except that the unaudited financial
statements may not contain footnotes as permitted by Canadian Securities Laws),
the consolidated financial position of Parent and its consolidated Subsidiaries
as of the dates thereof and their consolidated results of operations and cash
flows for the periods then ended (subject to normal year end adjustments in the
case of any unaudited interim financial statements which were not and are not
expected to have a Material Adverse Effect on Parent).
Section 5.09 Disclosure Documents. (a) None of the information provided or
to be provided by Parent for inclusion in the Company Proxy Statement or any
amendment or supplement thereto, at the time the Company Proxy Statement or any
amendment or supplement thereto is first mailed to stockholders of the Company,
at the time the stockholders vote on adoption of this Agreement and the Merger
and at the Effective Time, will contain any untrue statement of a material fact
or omit to state any material fact necessary in order to make the statements
made therein, in the light of the circumstances under which they were made, not
misleading.
(b) The Registration Statement of Parent on Form F-4 to be filed with the
SEC with respect to the offering of Parent Stock in connection with the Merger
(the "Parent Stock Registration Statement") and the Registration Statement on
Form F-6 relating to the ADSs (the "ADS Registration Statement" and, together
with the Parent Stock Registration Statement, the "Registration Statements")
and any amendments or supplements thereto, when filed, will comply as to form
in all material respects with the requirements of the 1933 Act. At the time
each Registration Statement or any amendment or supplement thereto becomes
effective and at the Effective Time, such Registration Statement, as amended or
supplemented, will not contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements therein not misleading. The representations and
warranties contained in this Section 5.09 will not apply to statements or
omissions in the Registration Statements or any amendment or supplement thereto
based upon information furnished by the Company.
Section 5.10 Absence of Certain Changes. Since the Parent Balance Sheet
Date, the business of Parent and its Subsidiaries has been conducted in the
ordinary course consistent with past practice and, except as disclosed in the
Parent CSA Documents filed prior to the date hereof and as contemplated by this
Agreement, there has not been:
(a) any event, occurrence, development or state of circumstances or facts
that has had or would reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on Parent;
(b) any declaration, setting aside or payment of any dividend or other
distribution with respect to any shares of capital stock of Parent, or any
repurchase, redemption or other acquisition by Parent or any of its
Subsidiaries of any outstanding shares of capital stock or other
29
securities of, or other ownership interests in, Parent or any of its
Subsidiaries, or any options, warrants, calls or rights to acquire any such
stock or other securities;
(c) any amendment of any material term of any outstanding security of
Parent or any of its Subsidiaries;
(d) any incurrence, assumption or guarantee by Parent or any of its
Subsidiaries of any indebtedness for borrowed money other than Error! Bookmark
not defined. borrowings under existing credit facilities (or any renewals,
replacements or extensions that do not increase the aggregate commitments
thereunder) and Error! Bookmark not defined. in the ordinary course of business
and in amounts and on terms consistent with past practices;
(e) any making of any material loan, advance or capital contributions to
or investment in any Person other than loans, advances or capital contributions
to or investments in its wholly-owned Subsidiaries made in the ordinary course
of business consistent with past practices;
(f) any change in any method of accounting or accounting principles or
practice by Parent or any of its Subsidiaries materially affecting the assets,
liabilities or business of Parent and its Subsidiaries, except for any such
change required by reason of a concurrent change in Canadian GAAP;
(g) entry by Parent or any of its Subsidiaries into any licensing or other
agreement with regard to the acquisition or disposition of any Intellectual
Property Right of Parent other than licenses in the ordinary course of business
consistent with past practice; or
(h) any revaluation by the Parent of any of its assets, including, without
limitation, writing down the value of capitalized inventory or writing off
notes or accounts receivable or any sale of assets of Parent or any of its
Subsidiaries other than in the ordinary course of business.
Section 5.11 No Undisclosed Material Liabilities. There are no liabilities
or obligations of Parent or any of its Subsidiaries of any kind whatsoever,
whether accrued, contingent, absolute, determined, determinable or otherwise,
and there is no existing condition, situation or set of circumstances that
would reasonably be expected to result in such a liability, other than:
(a) liabilities or obligations disclosed and provided for in the Parent
Balance Sheet or in the notes thereto or in the Parent CSA Documents filed
prior to the date hereof; and
(b) liabilities or obligations incurred in the ordinary course of business
consistent with past practices since the Parent Balance Sheet Date that would
not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on Parent.
Section 5.12 Compliance with Laws and Court Orders. Parent and each of its
Subsidiaries is and, since January 1, 2000, has been in compliance with, and to
the Knowledge of Parent is not under investigation with respect to and has not
been threatened to be charged with or given notice of any violation of, any
applicable law, rule, regulation, judgment, injunction, order or decree, except
for failures to comply or violations that have not had and would not
30
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on Parent.
Section 5.13 Litigation. Except as set forth in the Parent CSA Documents
prior to the date hereof, there is no action, suit, investigation or proceeding
(or any basis therefor) pending against, or, to the Knowledge of Parent,
threatened against or affecting, Parent, any of its Subsidiaries, any of their
respective officers or directors in their capacity as officers or directors of
Parent or any of its Subsidiaries or any of their respective properties before
any court or arbitrator or any Governmental Entity, that, if determined or
resolved adversely in accordance with the plaintiff's demands, would reasonably
be expected to have, individually or in the aggregate, a Material Adverse
Effect on Parent or that in any manner challenges or seeks to prevent, enjoin,
alter or materially delay the Merger or any of the other transactions
contemplated hereby.
Section 5.14 Finders' Fees. Except for TD Securities Inc., a complete copy
of whose engagement agreement (including all schedules and fee information) has
been provided to the Company, Parent has not incurred (directly or indirectly),
nor will it incur (directly or indirectly) any liability for any broker's,
finder's, financial advisor's or other similar fee, charge or commission in
connection with this Agreement or the transactions contemplated by this
Agreement.
Section 5.15 Taxes. (a) All material Tax Returns required by applicable
law to be filed with any Taxing Authority by, or on behalf of, Parent or any of
its Subsidiaries have been filed when due in accordance with all applicable
laws, and all such material Tax Returns are, or shall be at the time of filing,
true and complete in all material respects.
(b) Parent and each of its Subsidiaries has paid (or has had paid on its
behalf) or has withheld and remitted to the appropriate Taxing Authority all
Taxes due and payable, or, where payment is not yet due, has established (or
has had established on its behalf and for its sole benefit and recourse) in
accordance with Canadian GAAP an adequate reserve for all Taxes, whether or not
being shown as due on any Tax Return, through the end of the last period for
which Parent and its Subsidiaries ordinarily record items on their respective
books except to the extent any failure to pay or reserve would not,
individually or in the aggregate, have a Material Adverse Effect.
(c) The income and franchise Tax Returns of Parent and its material
Subsidiaries through the Tax year ended December 31, 1997 have been examined
and closed or are Tax Returns with respect to which the applicable period for
assessment under applicable law, after giving effect to extensions or waivers,
has expired.
(d) There is no claim, audit, action, suit, proceeding or investigation
now pending or threatened in writing against or with respect to Parent or its
material Subsidiaries in respect of any Tax or Tax asset. No lien for Taxes
exists with respect to any of the assets of Parent or any of its Subsidiaries
that are currently in effect.
31
(e) During the five-year period ending on the date hereof, neither Parent
nor any of its Subsidiaries was a distributing corporation or a controlled
corporation in a transaction intended to be governed by Section 355 of the
Code.
(f) Schedule 5.15(f) contains a list of all jurisdictions (whether foreign
or domestic) in which Parent or any of its material Subsidiaries currently
files Tax Returns.
(g) Neither Parent nor any of its Subsidiaries is or may be liable for the
Taxes of any other Person.
Section 5.16 [Reserved].
Section 5.17 Environmental Matters. (a) Except as set forth in the Parent
Annual Report filed prior to the date hereof and except as would not reasonably
be expected to have, individually or in the aggregate, a Material Adverse
Effect on Parent:
(i) no written notice, order, complaint or penalty has been received
by Parent or any of its Subsidiaries arising out of any Environmental
Laws, and there are no judicial, administrative or other actions, suits or
proceedings pending or, to Parent's Knowledge, threatened which allege a
violation by Parent or any of its Subsidiaries of any Environmental Laws;
(ii) Parent and each of its Subsidiaries have all Environmental
Permits necessary for their operations to comply with all applicable
Environmental Laws and are in compliance with the terms of such
Environmental Permits; and
(iii) the operations of Parent and each of its Subsidiaries are in
compliance with the terms of applicable Environmental Laws.
(b) Except as set forth in this Section 5.17, no representations or
warranties are being made with respect to matters arising under or relating to
environmental matters.
Section 5.18 Intellectual Property. (a) To the Knowledge of Parent, all of
the patents, patent applications, invention disclosures, registered trademarks,
trademark applications for registration, common law trademarks, domain names,
software programs and registered copyrights, and any material Intellectual
Property Rights owned or licensed and used or held for use by Parent or any
Subsidiary ("Parent Intellectual Property Rights") were obtained in material
compliance with all applicable rules, policies, and procedures of the PTO or
applicable foreign intellectual property agency.
(b) No Parent Intellectual Property Right is subject to any outstanding
judgment, injunction, lien, security interest, forebearance to sue, order,
decree or agreement restricting the use thereof by Parent or any Subsidiary or
restricting the licensing thereof by Parent or any Subsidiary to any Person,
except for any judgment, injunction, lien, security interest, forebearance to
sue, order, decree or agreement which would not reasonably be expected to have
a Material Adverse Effect.
32
(c) To the Knowledge of Parent, none of Parent's (or any of its
Subsidiaries') products or processes infringe or otherwise violate the
Intellectual Property Rights of any third party and Parent is not aware of any
pending intellectual property applications for registration or issuance that
would, if granted, limit or prohibit the business of Parent.
(d) Parent has no Knowledge which would form a basis for a finding that
any of the patents or patent applications owned or licensed by Parent is
unpatentable, unenforceable or invalid, or any of its registered or common law
trademarks or copyrights are unenforceable or invalid. Parent and its
Subsidiaries have taken all commercially reasonable steps to protect their
respective trade secrets, and have entered into confidentiality agreements with
employees and consultants to protect such trade secrets. To the Knowledge of
Parent, except pursuant to such confidentiality agreements, there has been no
disclosure by Parent or any of its Subsidiaries of any such trade secrets. Any
confidentiality agreements executed by employees, consultants or other advisors
of Parent, or any of its Subsidiaries, are valid binding and enforceable in
accordance with their terms.
(e) To the Knowledge of Parent, there is no action, suit, allegation claim
or proceeding relating to Parent Intellectual Property Rights. Neither Parent
or any of its Subsidiaries has received any communications from a third party
alleging or suggesting past, present or future infringement, or proferring a
license to intellectual property that the third party suggests might be
necessary for Parent or any of its Subsidiaries to conduct business. Neither
Parent nor any of its Subsidiaries has obtained written opinions or memoranda
of counsel relating to actual or potential third party claims relating to third
party Intellectual Property Rights.
(f) To the knowledge of Parent, all of the Parent Intellectual Property
Rights were duly obtained, and there are no ownership or right to use disputes
with respect thereto.
Section 5.19 Antitakeover Statutes and Rights Agreement. The execution and
delivery of this Agreement by Parent and the consummation of the transactions
contemplated hereby will not constitute a takeover bid under applicable
Canadian Securities Laws or, based on the information contained in the Company
SEC documents and on filings made pursuant to Canadian Securities Laws, be
subject to Policy Q-27 of the Quebec Securities Commission. Parent's
certificate of incorporation and bylaws do not create, and Parent is not a
party to, any shareholder rights plan, poison pill, rights agreement or other
similar plan or agreement.
Section 5.20 Restrictions on Business Activities. There is no agreement,
commitment, judgment, injunction, order or decree binding upon Parent or any of
its Subsidiaries or to which Parent or any of its Subsidiaries is a party which
limits in any material respect the right of the Company or any of its
Subsidiaries (i) to engage in any line of business, (ii) to develop, market or
distribute products or services or (iii) to compete with any Person, or
granting any exclusive distribution rights.
33
ARTICLE 6
COVENANTS OF THE COMPANY
The Company agrees that:
Section 6.01 Conduct of the Company. Prior to the date hereof, the Company
has furnished Parent with the previously prepared budget for operating expenses
of the Company, which has been approved by the Company's Board of Directors
(the "Business Plan"). During the period from the date of this Agreement and
continuing until the earlier of the termination of this Agreement pursuant to
its terms and the Effective Time, unless Parent shall have otherwise consented
in writing, the Company and each of its Subsidiaries shall conduct their
respective business operations in the ordinary course consistent with past
practice (to the extent contemplated by the Business Plan) and in accordance
with all applicable laws and regulations and pay or provide for all of their
liabilities and obligations (including, without limitation, all customers,
suppliers, licensors, and licensees), in each case, in accordance with the
Business Plan, in an orderly fashion, so as to reasonably maximize the cash and
cash equivalents available to the Surviving Corporation and, to the extent
contemplated by the Business Plan, shall use their commercially reasonably
efforts to preserve intact the Company's and each of its Subsidiaries' business
organizations and relationships. The Company agrees not to materially deviate
from the Business Plan without Parent's advance written approval, including
incurring or paying any expense or liability the amount of which exceeds by
more than $75,000, the amount therefor reflected in the Business Plan, or
expenses or liabilities the aggregate amount of which exceeds by more than
$250,000, the respective amounts therefor reflected in the Business Plan. The
Company agrees to promptly advise Parent in writing of all material
developments relating to the conduct of the business of the Company and its
Subsidiaries, including resolution of litigation, disposition of tangible and
intangible assets and satisfaction of liabilities. If Parent requests the
written consent of the Company under Section 7.01 prior to taking any action
for which such consent is required thereunder, the Company shall respond to
such request as promptly as practicable and shall not unreasonably withhold
such consent. Without limiting the generality of the foregoing, without the
prior written consent of Parent, from the date hereof until the Effective Time,
the Company shall not, and shall not permit any of its Subsidiaries, to:
(a) adopt or propose any change to its certificate of incorporation or
bylaws;
(b) merge or consolidate with any other Person or acquire a material
amount of stock or assets of any other Person;
(c) incur or pay any fees and expenses of counsel and accountants in
amounts in excess of the sum of (1) $600,000 plus (2) the excess (if any) of
budgeted operating expenses under the Business Plan over actual operating
expenses, to the extent the Company reasonably expects (and the Chief Financial
Officer of the Company certifies) that such excess will exist throughout the
period reflected in the Business Plan and on the Closing Date, in the
aggregate, arising out of, or in connection with or related to, the
transactions contemplated by this Agreement;
34
(d) sell, lease, license or otherwise dispose of any material Subsidiary
or material amount of assets, securities or property except (i) pursuant to
existing contracts or commitments and (ii) in the ordinary course consistent
with past practice or in accordance with the Business Plan;
(e) (i) take any action that would make any representation and warranty of
the Company hereunder inaccurate in any material respect at, or as of any time
prior to, the Effective Time or (ii) omit to take any action reasonably
necessary to prevent any such representation or warranty from being inaccurate
in any material respect at any such time;
(f) other than as disclosed on the Company Disclosure Schedule, 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;
(g) purchase, redeem or otherwise acquire, directly or indirectly, any
shares of capital stock of the Company or any of its Subsidiaries, except
repurchases of unvested shares at cost in connection with the termination of
the employment relationship with any employee pursuant to stock option or
purchase agreements in effect on the date hereof;
(h) issue, deliver, sell, authorize, pledge or otherwise encumber, or
agree to any of the foregoing with respect to, any shares of capital stock or
any securities convertible into or exchangeable for shares of capital stock, or
subscriptions, rights, warrants or options to acquire any shares of capital
stock or any securities convertible into or exchangeable for shares of capital
stock, or enter into other agreements or commitments of any character
obligating it to issue any such shares or convertible or exchangeable
securities, other than (i) the issuance, delivery, sale of shares of Company
Stock pursuant to the exercise of stock options therefor outstanding as of the
date of this Agreement and (ii) the granting of stock options (and the issuance
of Company Stock upon exercise thereof), in the ordinary course of business and
consistent with past practices, in an amount not to exceed options to purchase
(and the issuance of Company Stock upon exercise thereof) 100,000 shares in the
aggregate (provided that, the vesting of these options shall not accelerate
(and these options shall terminate) upon the closing of the Merger);
(i) incur any indebtedness for borrowed money or guarantee any such
indebtedness of another Person, issue or sell any debt securities or options,
warrants, calls or other rights to acquire any debt securities of the Company
or any of its Subsidiaries, enter into any "keep well" or other agreements to
maintain any financial statement condition or enter into any arrangement having
the economic effect of any of the foregoing;
(j) (a) pay, discharge, settle or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), or litigation (whether or not commenced prior to the date of this
Agreement) in an amount that exceeds $75,000 individually or $250,000 in the
aggregate, other than the payment, discharge, settlement or satisfaction, in
the ordinary course of business consistent with past practices or in accordance
with their terms, of liabilities recognized or disclosed in the most recent
consolidated financial statements (or the notes thereto) of the Company
included in Company SEC Documents or in accordance with the
35
Business Plan, or (b) waive the benefits of, agree to modify in any manner,
terminate, release any Person from, or knowingly fail to enforce any
confidentiality or similar agreement to which the Company or any of its
Subsidiaries is a party or of which the Company or any of its Subsidiaries is a
beneficiary;
(k) incur or enter into any agreement, contract or commitment requiring
the Company to pay in excess of $75,000 individually or $250,000 in the
aggregate in any 12 month period other than in the ordinary course of business
or in accordance with the Business Plan;
(l) grant any severance or termination pay to any employee, except as
required by applicable law or as described on the Company Disclosure Schedule
or pursuant to written agreements in effect or policies existing on the date
hereof and as previously disclosed in writing to Parent or except to
non-executive employees in the ordinary course consistent with past practice,
or adopt any new severance, retention or change in control plan;
(m) declare, set aside, or pay any dividends on or make any other
distributions (whether in cash, stock, equity securities or property) in
respect of any capital stock or split, combine or reclassify any capital stock
or issue or authorize the issuance of any other securities in respect of, in
lieu of or in substitution for any capital stock; and
(n) except as set forth in Section 4.20, the Company shall not redeem the
Rights or terminate the Rights Agreement prior to the Effective Time;
provided, however, that nothing in this Agreement shall prohibit the Board of
Directors of the Company from declaring and paying, and the Company hereby
agrees to declare and pay (subject to permissibility under applicable law) a
cash dividend (the "Cash Dividend") in respect of each outstanding share of
Company Stock in an amount equal to a fraction (rounded to the nearest whole
cent), the numerator of which shall be $100,000,000 and the denominator of
which shall be the number of outstanding shares of Company Stock outstanding
immediately prior to the Effective Time, such dividend to be segregated and set
aside immediately prior to the Effective Time with respect to each share of
Company Stock outstanding on the record date for such dividend (which shall be
the Closing Date) and distributed to the holders of such shares promptly
following the Effective Time.
Section 6.02 Stockholder Meeting. The Company shall cause a meeting of its
stockholders (the "Company Stockholder Meeting") to be duly called and held as
soon as reasonably practicable for the purpose of voting on the approval and
adoption of this Agreement and the Merger. Except as permitted by Section
6.03(b), the Company will use its commercially reasonable efforts to solicit
from its stockholders proxies in favor of the approval and adoption of this
Agreement and approval of the transactions contemplated by this Agreement and
will take all other action reasonably necessary or advisable to secure the vote
or consent of its stockholders required by the rules of Nasdaq or Delaware Law
to obtain such approvals. Notwithstanding anything to the contrary contained in
this Agreement, the Company may adjourn or postpone the Company Stockholder
Meeting to the extent necessary to ensure that any necessary supplement or
amendment to the Company Proxy Statement is provided to the Company's
stockholders in advance of a vote on the Merger and this Agreement or, if as of
the time for which the Company Stockholder Meeting is originally scheduled (as
set forth in the
36
Company Proxy Statement), there are insufficient shares of Company Stock
represented (either in person or by proxy) to constitute a quorum necessary to
conduct the business of the Company Stockholder Meeting. The Company shall
ensure that the Company Stockholder Meeting is called, noticed, convened, held
and conducted, and that all proxies solicited by the Company in connection with
the Company Stockholder Meeting are solicited, in compliance with Delaware Law,
the Company's certificate of incorporation and bylaws, the rules of Nasdaq and
all other applicable legal requirements. Notwithstanding anything in this
Agreement to the contrary, the Company's obligation to call, give notice of,
convene and hold the Company Stockholder Meeting in accordance with this
Section 6.02 shall not be limited to or otherwise affected by the commencement,
disclosure, announcement or submission to the Company of any Acquisition
Proposal or of any Change of Recommendation (as defined herein) and the Company
shall not submit to the vote of its stockholders any Acquisition Proposal, or
propose to do so.
Section 6.03 No Solicitation; Other Offers. (a) Until the earlier of the
Effective Time and termination of this Agreement pursuant to Article 10,
neither the Company nor any of its Subsidiaries shall, nor shall the Company or
any of its Subsidiaries authorize or permit any of its or their officers,
directors, employees, investment bankers, attorneys, accountants, consultants
or other agents or advisors to, directly or indirectly, (i) solicit, initiate,
induce or take any action to facilitate or encourage any inquiry with respect
to, or the making, submission or announcement of, any Acquisition Proposal,
(ii) enter into, continue or otherwise participate in any discussions or
negotiations with, furnish any information relating to the Company or any of
its Subsidiaries or afford access to the business, properties, assets, books or
records of the Company or any of its Subsidiaries to, otherwise cooperate in
any way with, or knowingly assist, participate in, facilitate or encourage any
inquiries or effort by any Third Party that is seeking to make, or has made, or
that may reasonably be expected to lead to, an Acquisition Proposal, (iii)
grant any waiver or release under any standstill or similar agreement with
respect to any class of equity securities of the Company or any of its
Subsidiaries, (iv) authorize, approve or recommend any Acquisition Proposal or
Liquidation Alternative (except to the extent permitted pursuant to Section
6.03(b)(iii)), or (v) enter into any letter of intent, memorandum of
understanding, agreement in principle, merger agreement, acquisition agreement,
option agreement, joint venture agreement, partnership agreement or other
similar agreement constituting, contemplating or related to, or an agreement
that is intended to or would reasonably be expected to lead to, any Acquisition
Proposal.
(b) Notwithstanding Section 6.03(a), if and only if none of the Company,
its Subsidiaries nor any of their officers, directors, employees, investment
bankers, attorneys, accountants, consultants or other agents or advisors,
directly or indirectly, shall have breached any of the restrictions or the
obligations under this Section 6.03, the Board of Directors of the Company,
directly or indirectly through advisors, agents or other intermediaries, may
(i) engage in negotiations or discussions with any Third Party that, subject to
the Company's compliance with Section 6.03(a), has made an unsolicited bona
fide written Acquisition Proposal that the Board of Directors reasonably
believes (considering advice from Davis Polk & Wardwell, outside legal counsel
to the Company, and Goldman, Sachs & Co., financial advisor to the Company)
will (x) lead to a Superior Proposal and (y) is from a Person reasonably
capable of consummating such Acquisition Proposal; (ii) in the case of such
Acquisition Proposal referred to in Section 6.03(b)(i), furnish to such Third
Party nonpublic information relating to the Company or any of its Subsidiaries
pursuant to a confidentiality agreement with terms no less
37
favorable to the Company than those contained in the Confidentiality Agreement
and terms which shall not include any provision calling for an exclusive right
to negotiate with such Third Party or having the effect of prohibiting the
Company from satisfying its obligations hereunder (a copy of which shall be
provided for informational purposes only to Parent); provided that,
contemporaneously with furnishing any such nonpublic information to such Third
Party, it furnishes such nonpublic information to Parent (to the extent such
nonpublic information has not been previously so furnished); (iii) following
receipt of a Superior Proposal or a determination that a Superior Alternative
exists, fail to make, withdraw, or modify in a manner adverse to Parent its
recommendation to its stockholders ("Change of Recommendation"); provided that,
(A) the Company Stockholder Meeting has not occurred, (B) the Company delivers
to Parent, promptly following the Board of Directors resolution to make the
Change of Recommendation, written notice ("Change of Recommendation Notice") of
the Change of Recommendation, which notice shall state the material terms and
conditions of the Superior Proposal, and the identity of the Third Party making
any Superior Proposal, or, in the case of a Superior Alternative, that such
Superior Alternative exists, (C) the Board of Directors of the Company
determines in its reasonable judgment by a majority vote, after considering
advice from Davis Polk & Wardwell, outside legal counsel to the Company, and
the Company's financial advisors (including Goldman, Sachs & Co.), that failure
to make a Change of Recommendation would cause the Board of Directors to breach
its fiduciary duties or otherwise be unlawful under applicable law, and (D) for
a period ending at 5:00 p.m. San Francisco time on the third Business Day after
delivering the Change of Recommendation Notice, the Company shall provide
Parent a reasonable opportunity to make adjustments in the terms and conditions
of this Agreement, and negotiate in good faith with respect thereto; and/or
(iv) take any non-appealable, final action that any court of competent
jurisdiction orders the Company to take. Nothing contained herein shall prevent
the Board of Directors of the Company from complying with Rule 14e-2(a) under
the 1934 Act with regard to an Acquisition Proposal or from making any
disclosure to the stockholders of the Company if, in the reasonable judgment of
the Board of Directors of the Company, after considering the advice of outside
counsel, failure so to disclose would breach its obligations under applicable
law.
(c) The Board of Directors of the Company shall not take any of the
actions referred to in clauses (i) through (iv) of the preceding subsection
unless the Company shall have delivered to Parent a prior written notice
advising Parent that it intends to take such action, and the Company shall
continue to advise Parent after taking such action. In addition, the Company
shall notify Parent by 5:00 p.m. San Francisco time on the first Business Day
following receipt by the Company (or any of its advisors) of any Acquisition
Proposal, any indication that any Third Party is considering making an
Acquisition Proposal or any request for information relating to the Company or
any of its Subsidiaries or for access to the business, properties, assets,
books or records of the Company or any of its Subsidiaries by any Third Party
that may be considering making, or has made, an Acquisition Proposal. The
Company shall use its commercially reasonable efforts to provide such notice
orally and shall provide such notice in writing in accordance with Section
11.01 hereof and shall identify the Third Party making, and the terms and
conditions of, any such Acquisition Proposal, indication or request. The
Company shall use its commercially reasonable efforts to keep Parent fully
informed, on a current basis, of the status and material details of any such
Acquisition Proposal, indication or request, including of any meeting of its
Board of Directors at which its Board of Directors is reasonably expected to
consider any Acquisition Proposal. The Company shall, and shall cause its
Subsidiaries and the
38
officers, directors, employees, investment bankers, attorneys, accountants,
consultants or other agents or advisors of the Company and its Subsidiaries to,
cease immediately and cause to be terminated any and all existing activities,
discussions and negotiations, if any, with any Third Party conducted prior to
the date hereof with respect to any Acquisition Proposal and shall use its
commercially reasonable efforts to cause any such Party (or its agents or
advisors) in possession of confidential information about the Company that was
furnished by or on behalf of the Company to return or destroy all such
information.
Section 6.04 Tax Matters. (a) Neither the Company nor any of its
Subsidiaries shall 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 Returns or claims for material Tax refunds, enter into any
material closing agreement, surrender any material Tax claim, audit or
assessment, surrender any right to claim a material Tax refund, offset or other
reduction in Tax liability surrendered, consent to any extension or waiver of
the limitations period applicable to any Tax claim or assessment or take or
omit to take any other action, if any such action or omission would have the
effect of increasing the Tax liability or reducing any Tax asset of the Company
or any of its Subsidiaries.
(b) The Company and each of its Subsidiaries shall establish or cause to
be established in accordance with U.S. GAAP on or before the Effective Time an
adequate accrual for all material Taxes, whether or not shown as being due on
any Tax Return, due with respect to any period ending prior to or as of the
Effective Time.
(c) All transfer, documentary, sales, use, stamp, registration, value
added and other such Taxes and fees (including any penalties and interest)
incurred in connection with the Merger and imposed on the Company or any of its
Subsidiaries (including any real property transfer tax and any similar Tax)
shall be paid by the Company when due, and the Company shall, at its own
expense, file all necessary Tax Returns and other documentation with respect to
all such Taxes and fees, and, if required by applicable law, the Company shall,
and shall cause its Affiliates to, join in the execution of any such Tax
Returns and other documentation.
(d) Notwithstanding any other provision of this Agreement, the Company
shall, on or prior to the Effective Time, pay all Taxes, and file all Tax
Returns, directly relating to the Cash Dividend if such payments or filings are
due on or prior to the Effective Time. If any such payment or filing is not due
on or prior to the Effective Time, the Company shall make such payment or
filing on or before the due date thereof. The Company shall elect to reduce to
zero the amount of federal withholding Tax payable in respect of the Cash
Dividend pursuant to Code Sections 1441, 1442 and 1443 by making the election
provided in Treas. Regulations Section 1.1441-3(c)(2)(i)(C), which election
shall be based on a "reasonable estimate" of the Company's accumulated and
current earnings and profits on the date of payment of the Cash Dividend, as
provided in U.S. Treasury Regulations Section 1.1441-3(c)(2)(ii).
Section 6.05 WARN Covenant. The Company shall not, at any time within 90
days before the Closing Date, without complying fully with the notice and other
requirements of the WARN Act, effectuate (i) a "plant closing" as defined in
the WARN Act affecting any site of employment or one or more facilities or
operating units within any site of employment of the Company; or (ii) a "mass
layoff" as defined in the WARN Act affecting any site of employment
39
of the Company; or any similar action under applicable state or local law
requiring notice to employees in the event of a plant closing or layoff.
Section 6.06 Termination of Company 401(k) Plan. The Company agrees to
terminate its 401(k) plan, in accordance with reasonable directions from
Parent, effective immediately prior to the Effective Time, at which time
participants in the plan will become fully vested in their accounts under such
plan, subject to Parent's agreement in Section 7.05(f).
ARTICLE 7
COVENANTS OF PARENT AND MERGER SUB
Parent and Merger Sub, jointly and severally, each agrees that:
Section 7.01 Conduct of Parent. From the date hereof until the earlier of
the termination of this Agreement pursuant to its terms and the Effective Time,
unless Parent shall have otherwise consented in writing, Parent and its
Subsidiaries shall conduct their business in the ordinary course consistent
with past practice and shall use their commercially reasonable efforts to
preserve intact their business organizations and relationships with third
parties and to keep available the services of their present officers and
employees. If the Company requests the written consent of Parent under Section
6.01 prior to taking any action for which such consent is required thereunder,
Parent shall respond to such request as promptly as practicable and shall not
unreasonably withhold such consent. Without limiting the generality of the
foregoing, without the prior written consent of the Company, from the date
hereof until the Effective Time, Parent shall not, and shall not permit any of
its Subsidiaries, to:
(a) adopt or propose any change in its certificate of incorporation,
except that Parent may adopt a new general bylaw to conform to recent
amendments to the CBCA as has been previously disclosed by Parent to the
Company; and
(b) take any action that would make any representation and warranty of
Parent hereunder inaccurate in any respect at, or as of any time prior to, the
Effective Time;
provided, however, that Parent may, in its sole discretion, repay in whole or
in part C$5,000,000 principal amount (plus interest and other fees due with
respect to such amount) outstanding under Parent's credit facility with
Canadian Imperial Bank of Commerce.
Section 7.02 Voting of Shares. Parent shall vote all shares of Company
Stock beneficially owned by it or any of its Subsidiaries in favor of adoption
of this Agreement at the Company Stockholder Meeting.
Section 7.03 Director and Officer Liability. (a) For six years after the
Effective Time, the Surviving Corporation shall indemnify and hold harmless
each present and former officer and director of the Company (each an
"Indemnified Person") in respect of acts or omissions occurring at or prior to
the Effective Time (including acts or omissions in connection with this
Agreement and the confirmation of the transactions contemplated hereby, to the
fullest extent permitted by Delaware Law or any other applicable laws and in
accordance with the indemnification agreement in effect on the date hereof
between the Company and such
40
Indemnified Person and as provided under the Company's certificate of
incorporation and bylaws in effect on the date hereof; provided that, such
indemnification shall be subject to any limitation imposed from time to time
under applicable law.
(b) For three years after the Effective Time, the Surviving Corporation
shall provide officers' and directors' liability insurance, to the extent such
insurance can be obtained by the Surviving Corporation using its commercially
reasonable efforts, in respect of acts or omissions occurring prior to the
Effective Time (including acts or omissions in connection with this Agreement
and the confirmation of the transactions contemplated hereby) covering each
such Indemnified Person currently covered by the Company's officers' and
directors' liability insurance policy on terms with respect to coverage and
amount comparable to those of such policy in effect on the date hereof;
provided that, in satisfying its obligation under this Section 7.03(b), the
Surviving Corporation shall not be obligated to pay premiums in excess of 200%
of the current annual premium therefor, which amount is not more than
$1,200,000, and if such insurance cannot be so maintained at a cost equal to or
less than 200% of the current annual premium, Parent shall use commercially
reasonable efforts to maintain as much of such insurance as can be so
maintained at a cost equal to 200% of the current annual premiums of the
Company for such insurance.
(c) The certificate of incorporation and bylaws of the Surviving
Corporation shall include provisions for exculpation of director and officer
liability and indemnification that are at least as favorable as those set forth
in the Company's certificate of incorporation and bylaws in effect on the date
hereof. For six years after the Effective Time, the Surviving Corporation shall
maintain in effect the provisions in its certificate of incorporation and
bylaws providing for indemnification of Indemnified Persons, with respect to
the facts or circumstances occurring at or prior to the Effective Time, to the
fullest extent permitted from time to time under Delaware Law, which provisions
shall not be amended except as required by applicable law or except to make
changes permitted by applicable law that would enlarge the scope of the
Indemnified Persons' indemnification rights thereunder.
(d) If Parent, the Surviving Corporation or any of its successors or
assigns (i) consolidates with or merges into any other Person and shall not be
the continuing or surviving corporation or entity of such consolidation or
merger, or (ii) transfers or conveys all or substantially all of its properties
and assets to any Person, then, and in each such case, to the extent necessary,
proper provision shall be made so that the successors and assigns of Parent or
the Surviving Corporation, as the case may be, shall assume the obligations set
forth in this Section 7.03. Subject to the immediately preceding sentence,
nothing in this Section 7.03 shall in any way restrict or preclude the sale,
liquidation or dissolution of any Subsidiary of Parent at any time after the
Effective Time.
(e) The rights of each Indemnified Person under this Section 7.03 shall be
in addition to any rights such Person may have under the certificate of
incorporation or bylaws of the Company or any of its Subsidiaries, under
Delaware Law or any other applicable laws or under any agreement of any
Indemnified Person with the Company or any of its Subsidiaries. These rights
shall survive consummation of the Merger and are intended to benefit, and shall
be enforceable by, each Indemnified Person.
41
Section 7.04 Stock Exchange Listing. Parent shall use its commercially
reasonable efforts to cause the ADSs to be issued in connection with the Merger
to be approved for quotation on Nasdaq and the shares of Parent Stock to be
issued in connection with the Merger to be listed on the TSX, subject to, in
the case of Nasdaq, official notice of issuance.
Section 7.05 Employee Matters. (a) As of the Effective Time, Parent shall
cause the Surviving Corporation to maintain compensation and employee benefits
plans and arrangements for employees of the Company and its Subsidiaries as of
the Effective Time that, in the aggregate, are substantially comparable to
those provided to similarly situated employees of Parent (other than
equity-based benefits).
(b) Prior to the Effective Time, the Company Board of Directors shall
pursuant to Section 19 of the Company's 1999 Employee Stock Purchase Plan (the
"ESPP"), shorten the Purchase Periods and Offering Periods (each as defined in
the ESPP) then in progress by setting a New Purchase Date (as defined in the
ESPP) that is prior to the Effective Time and notifying all participants in the
ESPP of such New Purchase Date at least ten (10) Business Days prior to the New
Purchase Date, and each participant's option under the ESPP shall be exercised
automatically on the New Purchase Date, unless prior to such date such
participant has withdrawn from the Offering Period, and any Purchase Periods
and Offering Periods then in progress shall end on the New Exercise Date.
(c) Parent shall, with respect to each employee of the Company that
becomes an employee of Parent (a "Company Employee"), cause such Company
Employee's service with the Company to be recognized as service for purposes of
eligibility, vesting and for purposes of vacation, paid time off and severance,
benefit accrual, in each benefit plan of Parent that is extended to any Company
Employee on or after the Closing Date; provided, however, that such crediting
of service shall not operate to duplicate the payment or funding of any benefit
under such plan.
(d) Parent shall use its best efforts to cause its benefit plans to waive
any preexisting condition, exclusion or waiting period limitation that was
likewise waived or otherwise satisfied as to each Company Employee under the
terms of any corresponding Employee Plan immediately prior to the Effective
Time; provided that, the applicable insurance carrier, third party provider or
the like agrees to do so; provided further that, Parent agrees that it will
comply with Section 9801 of the Code with respect to Company Employees.
(e) For the period from the Effective Time through December 31, 2003,
Parent will, or will cause the Surviving Corporation to, honor the severance
policies set forth in Section 4.18(a) of the Company Disclosure Schedule with
respect to employees of the Company as of the date hereof and on the terms of
such plans and agreements as in effect on the date hereof; provided, however,
that in no event shall additional severance benefits granted under the
authority of the resolution of the Company Board of Directors as of February
21, 2003 listed on Schedule 4.18(a) exceed $100,000 in the aggregate.
(f) If the Company's 401(k) plan is terminated pursuant to Section 6.06,
Parent agrees to take, or cause to be taken, such actions as are necessary to
permit participants in the Company's 401(k) plan to roll over their accounts
under such plan into (or to have their accounts
42
under such plan directly transferred to), and to continue to be eligible to
participate in, a plan or plans qualified under Section 401 of the Code
maintained by Parent after the Effective Time.
Section 7.06 Tax Matters. (a) Neither Parent nor any of its Subsidiaries
shall 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 Returns or claims for material Tax refunds, enter into any
material closing agreement, surrender any material Tax claim, audit or
assessment, surrender any right to claim a material Tax refund, offset or other
reduction in Tax liability surrendered, consent to any extension or waiver of
the limitations period applicable to any Tax claim or assessment or take or
omit to take any other action, if any such action or omission would have the
effect of increasing the Tax liability or reducing any Tax asset of Parent or
any of its Subsidiaries.
(b) Parent and each of its Subsidiaries shall establish or cause to be
established in accordance with Canadian GAAP on or before the Effective Time an
adequate accrual for all material Taxes due with respect to any period ending
prior to or as of the Effective Time.
(c) All transfer, documentary, sales, use, stamp, registration, value
added and other such Taxes and fees (including any penalties and interest)
incurred in connection with the Merger and imposed on Parent (including any
real property transfer Tax and any similar Tax) shall be paid by Parent when
due, and Parent shall, at its own expense, file all necessary Tax Returns and
other documentation with respect to all such Taxes and fees, and, if required
by applicable law, Parent shall, and shall cause its Affiliates to, join in the
execution of any such Tax Returns and other documentation.
ARTICLE 8
COVENANTS OF PARENT, MERGER SUB AND THE COMPANY
The parties hereto agree that:
Section 8.01 Commercially Reasonable Efforts. (a) Subject to the terms and
conditions of this Agreement, the Company, Parent and Merger Sub shall use
commercially reasonable efforts to take, or cause to be taken, all actions and
to do, or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations to consummate the transactions contemplated by
this Agreement, including (i) preparing and filing as promptly as practicable
with any Governmental Entity or other Third Party all documentation to effect
all necessary filings, assignments, notices, petitions, statements,
registrations, submissions of information, applications and other documents and
(ii) obtaining and maintaining all approvals, consents, registrations, permits,
authorizations and other confirmations required to be obtained from any
Governmental Entity or other Third Party that are necessary, proper or
advisable to consummate the transactions contemplated by this Agreement. In
connection with and without limiting the foregoing, the Company and its Board
of Directors shall, if any state takeover statute or similar statute or
regulation is or becomes applicable to the Merger, this Agreement or any of the
transactions contemplated by this Agreement, use its commercially reasonable
efforts to enable the Merger and the other transactions contemplated by this
Agreement to be
43
consummated as promptly as practicable on the terms contemplated by this
Agreement. Notwithstanding anything herein to the contrary, nothing in this
Agreement shall be deemed to require Parent or the Company or any Subsidiary or
affiliate thereof to agree to any divestiture by itself or any of its
affiliates of shares of capital stock or of any business, assets or property,
or the imposition of any material limitation on the ability of any of them to
conduct their business or to own or exercise control of such assets, properties
and stock.
(b) In furtherance and not in limitation of the foregoing, each of Parent
and the Company shall make an appropriate filing of a Notification and Report
Form pursuant to the HSR Act with respect to the transactions contemplated
hereby as promptly as practicable and in any event within ten Business Days of
the date hereof and to supply as promptly as practicable any additional
information and documentary material that may be requested pursuant to the HSR
Act and to take all other actions necessary to cause the expiration or
termination of the applicable waiting periods under the HSR Act as soon as
practicable.
Section 8.02 Certain Filings. The Company, Parent and Merger Sub shall
cooperate with one another (i) in connection with the preparation of the
Company Proxy Statement and the Registration Statements, (ii) in determining
whether any action by or in respect of, or filing with, any Governmental Entity
is required, or any actions, consents, approvals or waivers are required to be
obtained from parties to any material contracts, in connection with the
consummation of the transactions contemplated by this Agreement and (iii) in
taking such actions or making any such filings, furnishing information required
in connection therewith or with the Company Proxy Statement or the Registration
Statements and seeking on a timely basis to obtain any such actions, consents,
approvals or waivers.
Section 8.03 Public Announcements. Parent and the Company shall consult
with each other before issuing any press release or making any other public
statement with respect to this Agreement or the transactions contemplated
hereby (including, without limitation, in the event of termination of this
Agreement) and, except as may be required by applicable law, order of a court
of competent jurisdiction or any listing agreement with or rule of any national
securities exchange or association, shall not issue any such press release or
make any such other public statement prior to such consultation. In addition,
the Company shall give Parent a reasonable opportunity to review and comment on
any documents to be filed with the SEC, or any other public company statements
by the Company, to be made, to the extent such filings or statements contain
information concerning the Company's financial condition or results of
operations, prior to their being publicly filed with the SEC or publicly
released, as the case may be.
Section 8.04 Further Assurances. At and after the Effective Time, the
officers and directors of the Surviving Corporation shall be authorized to
execute and deliver, in the name and on behalf of the Company, any deeds, bills
of sale, assignments or assurances and to take and do, in the name and on
behalf of the Company, any other actions and things to vest, perfect or confirm
of record or otherwise in the Surviving Corporation any and all right, title
and interest in, to and under any of the rights, properties or assets of the
Company acquired or to be acquired by the Surviving Corporation as a result of,
or in connection with, the Merger.
Section 8.05 Access to Information. (a) From the date hereof until the
Effective Time and subject to applicable law and the Confidentiality Agreement
dated as of December 10, 2002
44
between the Company and Parent (the "Confidentiality Agreement"), the Company
and Parent shall, upon reasonable notice, (i) give to the other party, its
officers, employees, accountants, counsel, financial advisors and other
representatives reasonable access (in the case of Parent, including access for
the purpose of coordinating integration activities and transition planning with
the employees of the Company and its Subsidiaries) to the offices, properties,
books and records of such party during normal business hours, (ii) furnish to
the other party, its officers, employees, accountants, counsel, financial
advisors and other representatives such financial and operating data and other
information as such party may reasonably request and (iii) instruct its
employees, counsel, financial advisors, auditors and its other representatives
to cooperate with the other party in its investigation. Any investigation
pursuant to this Section shall be conducted in such manner as not to interfere
unreasonably with the conduct of the business of the other party. No
information or knowledge obtained in any investigation pursuant to this Section
shall affect or be deemed to modify any representation or warranty made by any
party hereunder. The parties shall hold such information that is non-public in
confidence in accordance with the Confidentiality Agreement.
(b) Notwithstanding anything to the contrary in this Agreement or any
other agreement relating to the transactions contemplated by this Agreement,
the parties hereto shall be permitted to disclose the U.S. federal income tax
treatment and tax structure of the transaction (including any materials,
opinions or analyses relating to such tax treatment or tax structure, but
without disclosure of identifying information or, except to the extent relating
to such tax structure or tax treatment, any nonpublic commercial or financial
information) on and after the date hereof. Moreover, notwithstanding any other
provision of this agreement, there shall be no limitation on either party's
ability to consult any tax advisor, whether or not independent from the
parties, regarding the U.S. federal income tax treatment or tax structure of
the transaction.
Section 8.06 Notices of Certain Events. Each of the Company, on the one
hand and Parent and Merger Sub, on the other, shall promptly notify the other
of:
(a) any notice or other communication from any Person alleging that the
consent of such Person is or may be required in connection with the
transactions contemplated by this Agreement;
(b) any notice or other communication from any Governmental Entity or
stock exchange in connection with the transactions contemplated by this
Agreement; and
(c) any actions, suits, claims, investigations or proceedings commenced
or, to its Knowledge, threatened against, relating to or involving or otherwise
affecting the Company or any of its Subsidiaries or Parent or any of its
Subsidiaries, as the case may be, that, if pending on the date of this
Agreement, would have been required to have been disclosed pursuant to Sections
4.12, 4.13, 4.16, 4.18, 4.19, 5.12, 5.13, 5.15, 5.17 or 5.18, as the case may
be, or that relate to the consummation of the transactions contemplated by this
Agreement.
Section 8.07 [Reserved].
Section 8.08 Affiliates. Within 30 days following the date of this
Agreement, the Company shall deliver to Parent a letter identifying all known
Persons who may be deemed
45
affiliates of the Company under Rule 145 of the 1933 Act. As soon as
practicable and, in any event, at least ten days prior to the Effective Time,
the Company shall use its commercially reasonable efforts to obtain a written
agreement, substantially in the form of Exhibit A hereto, from each Person who
may be so deemed.
Section 8.09 Section 16 Matters. Prior to the Effective Time, Parent and
the Company shall take all such steps as may be required to cause any
dispositions of Company Stock (including derivative securities with respect to
Company Stock) or acquisitions of Parent Stock (including derivative securities
with respect to Parent Stock) resulting from the transactions contemplated by
this Agreement by each individual who is subject to the reporting requirements
of Section 16(a) of the 1934 Act with respect to the Company, to be exempt
under Rule 16b-3 promulgated under such Act, such steps to be taken in
accordance with the No-Action Letter dated January 12, 1999, issued by the SEC
to Skadden, Arps, Slate, Meagher & Flom LLP.
Section 8.10 Proxy Statement; Registration Statement. (a) As promptly as
practicable after the execution of this Agreement, Parent and the Company shall
prepare and file the Company Proxy Statement, and Parent shall prepare and file
the Parent Stock Registration Statement (in which the Company Proxy Statement
shall be included) and the ADS Registration Statement, with the SEC. Each of
Parent and the Company shall provide promptly to the other 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 Company Proxy Statement and the Registration
Statements, or in any amendments or supplements thereto, and to cause its
counsel and auditors to cooperate with the other's counsel and auditors in the
preparation of the Company Proxy Statement and the Registration Statements.
Parent and the Company shall use all commercially reasonable efforts to cause
the Registration Statements to become effective under the 1933 Act as soon
after such filing as practicable and to keep the Registration Statements
effective (in the case of the Parent Stock Registration Statement, as long as
is necessary to consummate the Merger). The Company Proxy Statement shall
include the recommendation of the Board of Directors of the Company in favor of
approval and adoption of this Agreement and the Merger, except to the extent
the Board of Directors shall have withdrawn or modified its approval or
recommendation pursuant to Section 6.03(b). Parent and the Company shall use
all commercially reasonable efforts to cause the Company Proxy Statement to be
mailed to Company stockholders as promptly as practicable after the Parent
Stock Registration Statement becomes effective. Parent and the Company shall
promptly provide to each other copies of, consult with each other regarding and
together prepare written responses with respect to any written comments
received from the SEC with respect to the Company Proxy Statement and the
Registration Statements and shall promptly advise each other of any oral SEC
comments. The Registration Statements and the Company Proxy Statement shall
comply as to form in all material respects with the 1933 Act and the 1934 Act,
respectively.
(b) Parent and the Company shall make all necessary filings with respect
to the Merger and the transactions contemplated thereby under the 1933 Act, the
1934 Act, Canadian Securities Laws and applicable foreign or state securities
or "blue sky" laws. Each party hereto shall advise the other, promptly after
receipt of notice thereof, of the time of the effectiveness of the Registration
Statements, the filing of any supplement or amendment thereto, the issuance of
any stop order relating thereto, the suspension of the qualification of the
ADSs issuable in
46
connection with the Merger for offering or sale in any jurisdiction, or of any
SEC request for amendment to the Company Proxy Statement or the Registration
Statements, SEC comments thereon and each party's responses thereto or SEC
request for additional information. No amendment or supplement to the Company
Proxy Statement or the Registration Statements shall be filed without the
approval of the parties hereto, which approval shall not be unreasonably
withheld or delayed. If, at any time prior to the Effective Time, Parent or the
Company should discover any information relating to any party, or any of their
respective Affiliates, officers or directors, that should be set forth in an
amendment or supplement to the Registration Statements or the Company Proxy
Statement, so that such documents would not include any misstatement of a
material fact or omit to state any material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, the party that discovers such information shall promptly notify
the other parties hereto and an appropriate amendment or supplement describing
such information shall be promptly filed with the SEC and, to the extent
required by law, disseminated to the stockholders of Parent and the Company.
Section 8.11 Board of Directors of Parent. Following the Effective Time,
the Board of Directors of Parent will take all actions necessary such that one
member of the Company's Board of Directors, designated by the Company and
reasonably acceptable to Parent, shall be appointed to Parent's Board of
Directors with a term expiring at the next annual meeting of Parent's
stockholders following the Effective Time and shall include such person in the
slate of nominees recommended by Parent's Board of Directors to the
stockholders of Parent at such annual meeting.
ARTICLE 9
CONDITIONS TO THE MERGER
Section 9.01 Conditions to Obligations of Each Party. The obligations of
the Company and Parent to consummate the Merger are subject to the satisfaction
of the following conditions:
(a) this Agreement and the Merger shall have been approved and adopted by
the stockholders of the Company in accordance with Delaware Law, the rules of
Nasdaq and the Company's organizational documents;
(b) no provision of any applicable law or regulation and no judgment, and
no temporary, preliminary or permanent injunction, order or decree (which the
parties shall have used all reasonable efforts to resist, resolve or lift)
shall have the effect of making the Merger illegal or otherwise prohibit the
consummation of the Merger;
(c) any applicable waiting period under the HSR Act or the Competition
Act, if any, relating to the Merger shall have expired or been terminated;
(d) the Registration Statements and the 1934 Act Registration Statement
shall have been declared effective and no stop order suspending the
effectiveness of the Registration Statements or the 1934 Act Registration
Statement shall be in effect and no proceedings for such purpose, and no
similar proceeding in respect of the Company Proxy Statement, shall be pending
before or threatened by the SEC; all authorizations pursuant to Canadian
Securities Laws
47
necessary to carry out the transactions contemplated hereby shall have been
obtained and be in effect; and all state securities and blue sky authorizations
necessary to carry out the transactions contemplated hereby shall have been
obtained and be in effect;
(e) the ADSs to be issued in the Merger shall have been approved for
quotation on Nasdaq and the underlying Parent Stock shall have been reserved
for listing on the TSX, subject, in the case of Nasdaq, to official notice of
issuance, and such underlying Parent Stock shall be freely tradable under the
Canadian Securities Laws (to the extent that such shares are not holdings out
of a "control block" as defined thereunder);
(f) all actions by or in respect of, or filings with, any Governmental
Entity, required to permit the consummation of the Merger shall have been
taken, made or obtained;
(g) the declaration and payment of the Cash Dividend shall be permissible
under applicable law; and
(h) notice shall have been given to the National Association of Securities
Dealers, Inc. 10 days in advance of the record date for the Cash Dividend in
accordance with Rule 10b-17 of the 1934 Act (unless the SEC exempts the Company
from compliance with such rule).
Section 9.02 Conditions to the Obligations of Parent and Merger Sub. The
obligations of Parent and Merger Sub to consummate the Merger are subject to
the satisfaction of the following further conditions:
(a) (i) the representations and warranties of the Company contained in
this Agreement that are qualified as to materiality or Material Adverse Effect
shall be true and correct, and the representations and warranties of the
Company contained in this Agreement that are not so qualified shall be true and
correct in all material respects, in each case as of the date of this Agreement
and as of the Closing Date as though made on the Closing Date, except to the
extent such representations and warranties expressly relate to an earlier date,
in which case as of such earlier date, (ii) the Company shall have performed in
all material respects all obligations required to be performed by it under this
Agreement at or prior to the Closing Date, and (iii) Parent shall have received
a certificate signed by the Chief Executive Officer of the Company to the
foregoing effect;
(b) there shall not be pending or threatened any suit, action or
proceeding by any Governmental Entity prohibiting the transactions contemplated
by this Agreement or otherwise making them illegal;
(c) the Company shall have delivered a certification in the form attached
as Exhibit B hereto dated not more than 30 days prior to the Effective Time and
signed by the Company to the effect that the Company is not, nor has it been
within five years of the date of the certification, a "United States real
property holding corporation" as defined in Section 897 of the Code;
(d) the Company shall have delivered to Parent evidence satisfactory to
Parent of the resignation of all directors of the Company, effective as of the
Effective Time; and
48
(e) the Company shall have declared the Cash Dividend.
Section 9.03 Conditions to the Obligations of the Company. The obligations
of the Company to consummate the Merger are further subject to the satisfaction
of the following further conditions:
(a) (i) the representations and warranties of Parent and Merger Sub
contained in this Agreement that are qualified as to materiality or Material
Adverse Effect shall be true and correct, and the representations and
warranties of Parent and Merger Sub contained in this Agreement that are not so
qualified shall be true and correct in all material respects, in each case as
of the date of this Agreement and as of the Closing Date as though made on the
Closing Date, except to the extent such representations and warranties
expressly relate to an earlier date, in which case as of such earlier date,
(ii) Parent and Merger Sub shall have performed in all material respects all
obligations required to be performed by them under this Agreement at or prior
to the Closing Date, and (iii) the Company shall have received a certificate
signed by the Chief Executive Officer of Parent to the foregoing effect; and
(b) there shall not be pending or threatened any suit, action or
proceeding by any Governmental Entity prohibiting the transactions contemplated
by this Agreement or otherwise making them illegal.
ARTICLE 10
TERMINATION
Section 10.01 Termination. This Agreement may be terminated and the Merger
may be abandoned at any time prior to the Effective Time (notwithstanding any
approval of this Agreement by the stockholders of the Company):
(a) by mutual written agreement of the Company and Parent;
(b) by either the Company or Parent, if:
(i) the Merger has not been consummated on or before August 31, 2003;
provided that, the right to terminate this Agreement pursuant to this
Section 10.01(b)(i) shall not be available to any party whose breach of
any provision of this Agreement results in the failure of the Merger to be
consummated by such time;
(ii) (A) there shall be any law or regulation (other than relating to
declaration or payment of the Cash Dividend) that makes consummation of
the Merger illegal or otherwise prohibited or (B) any judgment,
injunction, order or decree (which the parties shall have used their
commercially reasonable efforts to resist, resolve or lift) of any
Governmental Entity having competent jurisdiction enjoining the Company or
Parent from consummating the Merger is entered and such judgment,
injunction, order or decree shall have become final and nonappealable; or
(iii) this Agreement shall not have been approved and adopted in
accordance with Delaware Law by the Company's stockholders at the Company
49
Stockholder Meeting (or any adjournment thereof); provided, however, that
the right to terminate this Agreement under this Section 10.01(b)(iii)
shall not be available to the Company where the failure to obtain the
Company stockholder approval shall have been caused by the action or
failure to act of the Company and such action or failure to act
constitutes a material breach by the Company of this Agreement.
(c) by Parent (at any time prior to the adoption and approval of this
Agreement and the Merger by the required vote of the stockholders of the
Company) if any of the following shall be deemed to have occurred: (i) the
Company's Board of Directors shall have made a Change of Recommendation, (ii)
the Company shall have failed to include in the Company Proxy Statement the
recommendation of its Board of Directors in favor of the adoption and approval
of the Agreement and the approval of the Merger, (iii) the Company's Board of
Directors fails to reaffirm (publicly, if so requested) its recommendation in
favor of the adoption and approval of the Agreement and the approval of the
Merger within ten Business Days after Parent requests in writing that such
recommendation be reaffirmed following the public announcement of any
Acquisition Proposal, (iv) the Company's Board of Directors or any committee
thereof shall have approved or recommended any Acquisition Proposal, or (v) a
tender or exchange offer relating to its securities shall have been commenced
by a Third Party and the Company shall not have sent to its securityholders
pursuant to Rule 14e-2 promulgated under the Securities Act, within 10 Business
Days after such tender or exchange offer is first published, sent or given, a
statement disclosing that the Company Board of Directors recommends rejection
of such tender or exchange offer;
(d) by the Company, upon a material breach of any (i) covenant or
agreement on the part of Parent set forth in this Agreement or (ii)
representation or warranty, or if any representation or warranty of Parent
shall have become materially untrue, in either case such that the conditions
set forth in Section 9.03(a) would not be satisfied as of the time of such
breach or as of the time such representation or warranty shall have become
untrue; provided that, if such inaccuracy in Parent's representations and
warranties or breach by Parent is curable by Parent prior to the Closing Date,
then the Company may not terminate this Agreement under this Section 10.01(d)
for 30 days after delivery of written notice from the Company to Parent of such
breach, provided that, Parent continues to exercise commercially reasonable
efforts to cure such breach (it being understood that the Company may not
terminate this Agreement pursuant to this Section 10.01(d) if it shall have
materially breached this Agreement or if such breach by Parent is cured during
such 30-day period); and provided further, that, Parent shall not be deemed to
be in breach of any of its covenants or agreements contained in this Agreement
(and no termination event shall be available) to the extent such breach was
caused by the Company's failure to respond to a request for written consent
under Section 7.01 or unreasonable withholding of such consent;
(e) by Parent, upon a material breach of any (i) covenant or agreement on
the part of the Company set forth in this Agreement or (ii) representation or
warranty, or if any representation or warranty of the Company shall have become
materially untrue, in either case such that the conditions set forth in Section
9.02(a) would not be satisfied as of the time of such breach or as of the time
such representation or warranty shall have become untrue; provided that, if
such inaccuracy in the Company's representations and warranties or breach by
the Company is curable by the Company prior to the Closing Date, then Parent
may not terminate this Agreement
50
under this Section 10.01(e) for 30 days after delivery of written notice from
Parent to the Company of such breach, provided that, the Company continues to
exercise commercially reasonable efforts to cure such breach (it being
understood that Parent may not terminate this Agreement pursuant to this
Section 10.01(e) if it shall have materially breached this Agreement or if such
breach by the Company is cured during such 30-day period); and provided
further, that, the Company shall not be deemed to be in breach of any of its
covenants or agreements contained in this Agreement (and no termination event
shall be available) to the extent such breach was caused by Parent's failure to
respond to a request for written consent under Section 6.01 or unreasonable
withholding of such consent;
(f) by (i) Parent, if within a reasonable time following the request of
Parent, the Company's Board of Directors, based on the information available to
the Company as of the date of the request for such reaffirmation and on
reasonable assumptions based on such information and after consultation with
its advisors, fails to reaffirm that the declaration and payment of the Cash
Dividend as of the date of the request for such reaffirmation would not be
illegal under applicable law or (ii) the Company, if the Company's Board of
Directors determines in its reasonable judgment, after considering the advice
of its advisors, that the declaration and payment of the Cash Dividend shall
not be permissible under applicable law.
The party desiring to terminate this Agreement pursuant to this Section 10.01
(other than pursuant to Section 10.01(a)) shall give notice of such termination
to the other party.
Section 10.02 Effect of Termination. If this Agreement is terminated
pursuant to Section 10.01, this Agreement shall become void and of no effect
with no liability on the part of any party (or any stockholder, director,
officer, employee, agent, consultant or representative of such party) to the
other party hereto; provided that, if such termination shall result from the
willful (i) failure of either party to fulfill a condition to the performance
of the obligations of the other party or (ii) failure of either party to
perform a covenant hereof, such party shall be fully liable for any and all
liabilities and damages incurred or suffered by the other party as a result of
such failure. The provisions of this Section 10.02 and Sections 8.03, 11.04,
11.05, 11.07, 11.08 and 11.09 shall survive any termination hereof pursuant to
Section 10.01.
ARTICLE 11
MISCELLANEOUS
Section 11.01 Notices. All notices, requests and other communications to
any party hereunder shall be in writing (including facsimile transmission) and
shall be given,
if to the Company, to:
Sanjay K. Khare
Netro Corporation
3860 North First Street
San Jose, California 95134
Fax: (408) 216-1772
51
with a copy to:
Francis S. Currie
Davis Polk & Wardwell
1600 El Camino Real
Menlo Park, California 94025
Fax: (650) 752-2111
and
Patricia Olasker
Davies Ward Phillips & Vineberg LLP
44th Floor, 1 First Canadian Place
Toronto, ON M5X 1B1
Fax: (416) 863-0871
if to Parent, to:
David Adams
SR Telecom Inc.
8150 Trans-Canada Highway
Montreal, Quebec, Canada H4S 1M5
Fax: (514) 956-4405
with a copy to:
Peter Villani
Fasken Martineau Du Moulin LLP
The Stock Exchange Tower
PO Box 242, 34th Floor
800 Victoria Square
Montreal, QC H4Z 1E9
Canada
Fax: (514) 397 7600
and
Ronald A. Fleming, Jr.
Pillsbury Winthrop LLP
One Battery Park Plaza
New York, New York 10004
Fax: (212) 858-1500
or to such other address or facsimile number as such party may hereafter
specify for the purpose by notice to the other parties hereto. All such
notices, requests and other communications shall be deemed received on the date
of receipt by the recipient thereof if received prior to 5:00 p.m. on a
Business Day in the place of receipt. Otherwise, any such notice, request or
communication shall be deemed to have been received on the next succeeding
Business Day in the place of receipt.
52
Section 11.02 Survival of Representations and Warranties. The
representations and warranties and agreements contained herein and in any
certificate or other writing delivered pursuant hereto shall not survive the
Effective Time, except for those agreements contained herein and any other
agreements that by their terms apply or are to be performed in whole or in part
after the Effective Time (including the provisions regarding director and
officer liability set forth in Section 7.03).
Section 11.03 Amendments; Waivers. (a) Any provision of this Agreement may
be amended or waived prior to the Effective Time if, but only if, such
amendment or waiver is in writing and is signed, in the case of an amendment,
by each party to this Agreement or, in the case of a waiver, by each party
against whom the waiver is to be effective; provided that, after the adoption
of this Agreement by the stockholders of the Company and without their further
approval, no such amendment or waiver shall reduce the amount or change the
kind of consideration to be received in exchange for any shares of capital
stock of the Company.
(b) No failure or delay by any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law.
Section 11.04 Fees; Expenses. (a) Except as otherwise provided in this
Section, all costs and expenses incurred in connection with this Agreement, the
Merger and the other transactions contemplated by this Agreement shall be paid
by the party incurring such cost or expense, whether or not the Merger is
consummated; provided, however that, the costs and expenses incurred in
connection with (i) the printing, filing and mailing to stockholders of the
Company Proxy Statement and the Registration Statements and the solicitation of
the stockholder approval of the Company, and all SEC and other regulatory
filing fees incurred in connection with the Company Proxy Statement and (ii)
the filing fee for the notification and report forms filed with the Federal
Trade Commission and Department of Justice under the HSR Act and premerger
notification and report forms under similar applicable laws of other
jurisdictions, shall be shared equally by the Company and Parent.
(b) The Company shall pay Parent (by wire transfer of immediately
available funds) the amounts set forth below within four Business Days after
any of the following events ("Payment Events"):
(i) $6,000,000 upon termination of this Agreement for one or more of
the following reasons: (x) by Parent pursuant to Section 10.01(c), (y) by
either Parent or the Company pursuant to Section 10.01(b)(iii) but only if
there has been a Change of Recommendation or (z) by Parent pursuant to
Section 10.01(e)(i) (but only if the breach referred to in Section
10.01(e)(i) is a willful and material breach of a material covenant or
agreement contained in Article 6 or Article 8 of this Agreement (it being
understood that no Payment Event shall occur pursuant to this clause
(b)(i)(z) with respect to any breach of any covenant contained in Section
6.01(c), 6.01(e), 6.04, 6.05, 6.06 or 8.06 hereof));
53
(ii) $2,000,000 upon termination of this Agreement (x) by either
Parent or the Company pursuant to Section 10.01(b)(iii) if there has been
no Change of Recommendation, (y) by the Company pursuant to Section
10.01(f)(ii) or (z) by Parent pursuant to Section 10.01(e)(i) with respect
to a breach of the covenant contained in Section 6.01(c);
(iii) in the case of any termination described in Section
11.01(b)(ii)(x) or (y), if the Company consummates a Qualifying
Transaction within eighteen (18) months of the termination, concurrently
with consummation of such Qualifying Transaction, an additional
$2,500,000, for an aggregate payment under this Section 11.04(b) of
$4,500,000; provided, however, that if such Qualifying Transaction
involves the participation of a Third Party (or any of such Third Party's
Affiliates) who made (directly or indirectly through its Affiliates or
representatives) an Acquisition Proposal that was publicly announced and
made known to the Company's stockholders prior to the Company Stockholder
Meeting (whether or not conditional and whether or not such Acquisition
Proposal shall have been rejected or shall have been withdrawn prior to
the Company Stockholder Meeting), then the Company shall pay Parent an
additional $4,000,000 for an aggregate payment under this Section 11.04(b)
of $6,000,000.
For purposes of this Section 11.04, a "Qualifying Transaction" means a
transaction whereby, (A) the Company merges with or into, or is acquired,
directly or indirectly, by merger or otherwise by, a Third Party (other than
the Company); (B) a Third Party (other than the Company), directly or
indirectly, acquires more than 50% of the total assets of the Company and its
Subsidiaries, taken as a whole (other than a liquidation, dissolution or
winding up initiated by the Company or any of its officers and directors in
their capacities as such and not including any other Third Party prior to the
time of adoption or implementation of such liquidation, dissolution or winding
up); (C) a Third Party (other than the Company), directly or indirectly,
acquires more than 50% of the outstanding shares of Company Stock; or (D) the
Company adopts or implements a plan of liquidation, recapitalization or share
repurchase at the initiation of, or (prior to the time the Company so adopts or
implements such plan) involving, a Third Party (it being understood that a
liquidation initiated by the Company or any of its officers and directors in
their capacity as such and not involving any other Third Party prior to the
time of adoption or implementation of such liquidation shall not constitute a
Qualifying Transaction) relating to more than 50% of the outstanding Shares or
an extraordinary dividend relating to more than 50% of the outstanding Shares
of 50% of the assets of the Company and its Subsidiaries, taken as a whole.
(c) If a Payment Event occurs, the Company shall pay to Parent in
immediately available funds, within four Business Days after submission of
reasonable documentation therefor, an amount equal to all out-of-pocket
expenses and fees actually incurred by Parent arising out of, or in connection
with or related to, the transactions contemplated by this Agreement, including,
without limitation, all fees and expenses of agents, counsel, commercial banks,
investment banking firms, accountants, experts and consultants to Parent and
its affiliates if this Agreement is terminated in any of the circumstances set
forth in clauses (i) or (ii) of paragraph (b) above.
54
(d) The Company acknowledges that the agreements contained in this Section
11.04 are an integral part of the transactions contemplated by this Agreement
and that, without these agreements, Parent and Merger Sub would not enter into
this Agreement. Accordingly, if the Company fails promptly to pay any amount
due to Parent pursuant to this Section 11.04, it shall also pay any costs and
expenses incurred by Parent in connection with any legal actions brought to
enforce this Agreement (including attorney's fee and expenses), together with
interest on the amount of the fees to be paid pursuant to Section 11.04(b) from
the date such payment was required to be made until the date of payment at the
prime rate of Canadian Imperial Bank of Commerce in effect on the date such
payment was required to be made.
Section 11.05 Right of First Negotiation and First Refusal. If (x) this
Agreement is terminated in accordance with Section 10.01 and (y) the Board of
Directors of the Company approves a plan to liquidate, dissolve or wind up the
Company that, prior to the time of such approval, does not involve a Third
Party (other than the Company or its officers or directors in their capacity as
such), then upon the public announcement of such plan the Parent shall have (a)
a right of first negotiation and (b) a right of first refusal with the Company
with respect to the purchase of the Technology from the Company, in each case
for a period ending at 5:00 p.m. San Francisco time on the 45th day following
such announcement (the "Expiration Date"). During such period, the Company
shall be free to negotiate with any prospective transferee to obtain an offer
to purchase the Technology; provided that, such offer must be a bona fide cash
offer from an independent Third Party and must contain customary
representations and warranties, and must not contain any special provisions
which could not be fulfilled by the independent Third Party. If the Company
receives from a prospective transferee such an offer on terms that the Company
is willing to accept, the Company shall provide written notice thereof to
Parent, setting forth the cash price and the other principal terms and
conditions of the proposed transfer. Upon the receipt of such notice, Parent
shall have the right to purchase, at the offered price, the Technology. After
the Expiration Date, Parent shall have no further rights under this Section
11.05 and the Company shall have the ability to sell or transfer the Technology
to any Third Party at any price on any terms or conditions.
Section 11.06 Binding Effect; Benefit; Assignment. (a) The provisions of
this Agreement shall be binding upon and, except as provided in Section 7.03,
shall inure to the benefit of the parties hereto and their respective
successors and assigns. Except as provided in Section 7.03, no provision of
this Agreement is intended to confer any rights, benefits, remedies,
obligations or liabilities hereunder upon any Person other than the parties
hereto and their respective successors and assigns.
(b) No party may assign, delegate or otherwise transfer any of its rights
or obligations under this Agreement without the consent of each other party
hereto, except that Parent may transfer or assign, in whole or from time to
time in part, to one or more of its Affiliates, the right to enter into the
transactions contemplated by this Agreement, but any such transfer or
assignment shall not relieve Parent of its obligations hereunder.
Section 11.07 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, regardless of
the laws that might otherwise govern under applicable conflict of law
principles.
55
Section 11.08 Jurisdiction. Any suit, action or proceeding seeking to
enforce any provision of, or based on any matter arising out of or in
connection with, this Agreement or the transactions contemplated hereby shall
be brought in any federal court located in the State of Delaware or any
Delaware state court, and each of the parties hereto hereby consents to the
exclusive jurisdiction of such courts (and of the appropriate appellate courts
therefrom) in any such suit, action or proceeding and irrevocably waives, to
the fullest extent permitted by law, any objection that it may now or hereafter
have to the laying of the venue of any such suit, action or proceeding in any
such court or that any such suit, action or proceeding brought in any such
court has been brought in an inconvenient form. Process in any such suit,
action or proceeding may be served on any party anywhere in the world, whether
within or without the jurisdiction of any such court. Without limiting the
foregoing, each party hereto agrees that service of process on such party as
provided in Section 11.01 shall be deemed effective service of process on such
party.
Section 11.09 WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
Section 11.10 Counterparts; Effectiveness. This Agreement may be signed in
any number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
This Agreement shall become effective when each party hereto shall have
received counterparts hereof signed by all of the other parties hereto.
Section 11.11 Entire Agreement. This Agreement (including the disclosure
schedules and the other documents and instruments referred to herein) and the
Confidentiality Agreement constitute the entire agreement among the parties
with respect to the subject matter of this Agreement and supersede all prior
agreements and understandings, both oral and written, among the parties with
respect to the subject matter of this Agreement.
Section 11.12 Captions. The captions herein are included for convenience
of reference only and shall be ignored in the construction or interpretation
hereof.
Section 11.13 Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated
so long as the economic or legal substance of the transactions contemplated
hereby is not affected in any manner materially adverse to any party. Upon such
a determination, the parties shall negotiate in good faith to modify this
Agreement so as to effect the original intent of the parties hereto as closely
as possible in an acceptable manner so that the transactions contemplated
hereby be consummated as originally contemplated to the fullest extent
possible.
Section 11.14 Specific Performance. The parties hereto agree that
irreparable damage would occur if any provision of this Agreement were not
performed in accordance with the terms hereof and that the parties shall be
entitled to an injunction or injunctions to prevent breaches of
56
this Agreement or to enforce specifically the performance of the terms and
provisions hereof in any federal court located in the State of Delaware or any
Delaware state court, in addition to any other remedy to which they are
entitled at law or in equity.
57
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
NETRO CORPORATION
By: /s/ Sanjay Khare
------------------------------------
Name: Sanjay Khare
Title: Vice President and Chief
Financial Officer
SR TELECOM INC.
By: /s/ Pierre St. Arnaud
------------------------------------
Name: Pierre St. Arnaud
Title: President and Chief
Executive Officer
By: /s/ David Adams
------------------------------------
Name: David Adams
Title: Vice President and
Chief Financial Officer
NORWAY ACQUISITION CORPORATION
By: /s/ Pierre St. Arnaud
------------------------------------
Name: Pierre St. Arnaud
Title: President and Chief
Executive Officer
By: /s/ David Adams
------------------------------------
Name: David Adams
Title: Vice President and
Chief Financial Officer
EXHIBIT F
List of Directors and Officers
Gideon Ben-Efraim
Sanjay Khare
Shlomo Yariv
Peter Carson
Sanford Robertson
Richard Moley
Irwin Federman
Shirley Young
Thomas Baruch
59