AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
UTSTARCOM, INC.,
AND
WACOS, INC.
Dated as of December 14, 1999
TABLE OF CONTENTS
PAGE
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ARTICLE I THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 The Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 Actions at the Closing . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.4 Effect of Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.5 Procedure for Issuance of Buyer Shares . . . . . . . . . . . . . . . . . . 3
1.6 Closing of Transfer Records. . . . . . . . . . . . . . . . . . . . . . . . 4
1.7 No Further Ownership Rights in Company Shares. . . . . . . . . . . . . . . 4
1.8 Lost, Stolen or Destroyed Certificates . . . . . . . . . . . . . . . . . . 4
1.9 Tax and Accounting Treatment . . . . . . . . . . . . . . . . . . . . . . . 4
1.10 Taking of Necessary Action; Further Action . . . . . . . . . . . . . . . . 4
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE
STOCKHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.1 Organization of the Company. . . . . . . . . . . . . . . . . . . . . . . . 5
2.2 Company Capital Structure. . . . . . . . . . . . . . . . . . . . . . . . . 5
2.3 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.4 Authority. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.5 Company Financial Statements . . . . . . . . . . . . . . . . . . . . . . . 6
2.6 Restrictions on Business Activities. . . . . . . . . . . . . . . . . . . . 7
2.7 Title of Properties; Absence of Liens and Encumbrances;
Condition of Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.8 Intellectual Property. . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.9 Interested Party Transactions. . . . . . . . . . . . . . . . . . . . . . . 8
2.10 Governmental Authorization . . . . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE III REPRESENTATIONS AND WARRANTIES OF BUYER. . . . . . . . . . . . . . . . . 8
3.1 Organization of the Buyer. . . . . . . . . . . . . . . . . . . . . . . . . 9
3.2 Buyer Capital Structure. . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.3 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
3.4 Authority. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
3.5 Buyer Financial Statements . . . . . . . . . . . . . . . . . . . . . . . .10
3.6 Compliance with Other Instruments. . . . . . . . . . . . . . . . . . . . .10
ARTICLE IV ADDITIONAL AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . .11
4.1 Company Stockholder Approval . . . . . . . . . . . . . . . . . . . . . . .11
4.2 Access to Information. . . . . . . . . . . . . . . . . . . . . . . . . . .11
4.3 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
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4.4 Public Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
4.5 Board of Directors of the Company. . . . . . . . . . . . . . . . . . . . .11
4.6 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
4.7 FIRPTA Compliance. . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
4.8 Best Efforts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
4.9 Notification of Certain Matters. . . . . . . . . . . . . . . . . . . . . .12
4.10 Additional Documents and Further Assurances. . . . . . . . . . . . . . . .12
4.11 Conversion of Company Series A Preferred Stock . . . . . . . . . . . . . .12
ARTICLE V CONDITIONS TO THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . .13
5.1 Conditions to Obligations of Each Party to Effect the Merger13
5.2 Additional Conditions to Obligations of the Company and the
Stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
5.3 Additional Conditions to Obligations of Buyer. . . . . . . . . . . . . . .13
ARTICLE VI SURVIVAL OF REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . .14
6.1 Survival of Representations and Warranties . . . . . . . . . . . . . . . .14
ARTICLE VII TERMINATION, AMENDMENT AND WAIVER. . . . . . . . . . . . . . . . . . . .14
7.1 Amendment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
7.2 Extension; Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
ARTICLE VIII GENERAL PROVISIONS. . . . . . . . . . . . . . . . . . . . . . . . . . .15
8.1 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
8.2 Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
8.3 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
8.4 Entire Agreement; Assignment . . . . . . . . . . . . . . . . . . . . . . .16
8.5 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
8.6 Other Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
8.7 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
8.8 Rules of Construction. . . . . . . . . . . . . . . . . . . . . . . . . . .17
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INDEX OF EXHIBITS
EXHIBIT DESCRIPTION
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Exhibit A Company Disclosure Schedule
Exhibit B Buyer Disclosure Schedule
Exhibit C Third Amended and Restated Registration Rights Agreement
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AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (the 'AGREEMENT') is made and entered
into as of December 14, 1999 by and between UTStarcom, Inc., a Delaware
corporation ('BUYER') and WACOS, Inc., a Delaware corporation ('COMPANY').
RECITALS
A. This Agreement contemplates a tax-free merger of the Company with
and into Buyer in a reorganization pursuant to Section 368(a)(1)(A) of the
Internal Revenue Code of 1986, as amended (the 'MERGER').
B. The Boards of Directors of each of Buyer and Company believe it is
in the best interests of each company and their respective stockholders that the
Merger be consummated and, in furtherance thereof, have approved the Merger.
NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein, and for other good and valuable consideration,
the parties agree as follows:
ARTICLE I
THE MERGER
1.1 THE MERGER. On and subject to the terms and conditions of this
Agreement, the Company will merge with and into the Buyer (the 'MERGER') at the
Effective Time (as defined in Section 1.4(a) below). The Buyer shall be the
corporation surviving the Merger.
1.2 THE CLOSING. The closing of the transactions contemplated by this
Agreement (the 'CLOSING') shall take place at the offices of Wilson Sonsini
Goodrich & Rosati, Professional Corporation, in Palo Alto, California,
commencing at 10:00 a.m. local time on the second business day following the
satisfaction or waiver of all conditions to the obligations of the parties to
consummate the transactions contemplated hereby (other than conditions with
respect to actions the respective parties will take at the Closing itself) or
such other date and time as the parties may mutually determine (the 'CLOSING
DATE').
1.3 ACTIONS AT THE CLOSING. At the Closing: (i) the Company will
deliver to the Buyer the various certificates, instruments, and documents as
required by Section 5.3 below; (ii) the Buyer will deliver to the Company the
various certificates, instruments, and documents as required by Section 5.2
below; (iii) the Buyer and the Company will file an agreement of merger with the
Secretary of State of the State of California and the Secretary of State of the
State of Delaware; and (iv) the Buyer will deliver to the stockholders of the
Company (the 'STOCKHOLDERS') in the manner provided in
Section 1.5 below, the certificates evidencing the Buyer Shares (as defined
below) to be issued in the Merger.
1.4 EFFECT OF MERGER
(a) GENERAL. The Merger shall become effective at the time
(the 'EFFECTIVE TIME') the Buyer and the Company file the agreement of merger
with the Secretary of State of the State of California and the Secretary of
State of the State of Delaware. The Merger shall have the effect set forth in
the Delaware General Corporation Law and the applicable laws of the State of
California. Without limiting the generality of the foregoing, and subject
thereto, at the Effective Time, all the property, rights, privileges, powers and
franchises of the Company shall vest in Buyer, and all debts, liabilities and
duties of the Company shall become the debts, liabilities and duties of Buyer.
The Buyer may, at any time after the Effective Time, take any action (including
executing and delivering any document) in the name and on behalf of the Company
in order to carry out and effectuate the transactions contemplated by this
Agreement.
(b) CERTIFICATE OF INCORPORATION. The Certificate of
Incorporation of the Buyer in effect at and as of the Effective Time will remain
the Certificate of Incorporation of the Buyer without any modification or
amendment resulting from the Merger.
(c) BYLAWS. The Bylaws of the Buyer in effect at and as of the
Effective Time will remain the Bylaws of the Buyer without any modification or
amendment resulting from the Merger.
(d) DIRECTORS AND OFFICERS. The directors and officers of the
Buyer in office at and as of the Effective Time will remain the directors and
officers of the Buyer (retaining their respective positions and terms of
office).
(e) CONVERSION OF COMPANY SHARES. At and as of the Effective
Time:
(i) Each outstanding share of Common Stock of the
Company ('COMPANY COMMON STOCKS') shall be cancelled and extinguished and be
converted automatically into the right to receive 0.4498070 shares of Series G
Preferred Stock, $0.0025 per value, of Buyer ('BUYER SHARES') (the ratio of
0.4498070 Buyer Shares to one (1) Company Common Stock is referred to herein as
the 'COMMON STOCK CONVERSION RATIO').
(ii) Each outstanding share of Series B Preferred Stock
of the Company ('COMPANY SERIES B SHARES') shall be cancelled and extinguished
and be converted automatically into the right to receive 0.9335977 Buyer Shares
(the ratio of 0.9335977 Buyer Shares to one (1) Company Series B Share is
referred to herein as the 'SERIES B CONVERSION RATIO')
The Common Stock Conversion Ratio and the Series B Conversion Ratio shall
be subject to equitable adjustment in the event of any stock split, stock
dividend, reverse stock split, or other change in the capital stock of the Buyer
prior to the Effective Time. The number of Buyer Shares
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which shall be delivered to each Stockholder at the Closing is as set forth on
SCHEDULE 2.2(a) attached hereto. The aggregate number of Buyer Shares issuable
to the holders of Company Common Stock and Company Series B Shares
(collectively, the 'COMPANY SHARES') pursuant to this Section 1.4(e) is
hereinafter referred to as the 'MERGER CONSIDERATION'. No Company Share shall
be deemed to be outstanding or to have any rights other than those set forth
above in this Section 1.4(e) after the Effective Time.
(f) NO FRACTIONAL SHARES. No fractional of a share of Buyer
Shares will be issued, but in lieu thereof, each holder of shares of Company
Capital Stock who would otherwise be entitled to a fraction of a share of Buyer
Shares (after aggregating all fractional shares of Buyer Common Stock to be
received by such holder) shall be entitled to receive from Buyer an amount of
cash (rounded to the nearest whole cent) equal to the product of (i) such
fraction, multiplied by (ii) $16.2605.
(g) COMPANY STOCK OPTIONS. At the Effective Time, all options
to purchase Company Common Stock then outstanding under the Company's 1997 Stock
Plan (the 'OPTION PLAN') or otherwise shall be assumed by Buyer in accordance
with provisions described below:
(i) At the Effective Time, each outstanding option to
purchase shares of Company Common Stock (each a 'COMPANY OPTION') under the
Option Plan or otherwise, whether vested or unvested, shall be, in connection
with the Merger, assumed by Buyer. Each Company Option so assumed by Buyer
under this Agreement shall continue to have, and be subject to, the same terms
and conditions set forth in the Option Plan and/or as provided in the respective
option agreements governing such Company Option immediately prior to the
Effective Time, except that such Company Option shall be exercisable for that
number of whole shares of the Buyer's Common Stock equal to the product of the
number of shares of Company Common Stock that were issuable upon exercise of
such Company Option immediately prior to the Effective Time multiplied by
0.4498070, rounded down (in the case of Company Options granted under the Option
Plan) to the nearest whole number of shares of the Buyer's Common Stock.
(ii) It is the intention of the parties that the Company
Options assumed by Buyer qualify following the Effective Time as incentive
stock options as defined in Section 422 of the Code to the extent the Company
Options qualified as incentive stock options immediately prior to the Effective
Time.
(h) BUYER SHARES. Each Buyer Share issued and outstanding at
and as of the Effective Time will remain issued and outstanding.
1.5 PROCEDURE FOR ISSUANCE OF BUYER SHARES.
(a) Promptly after the Effective Time, Buyer shall make
available to the Stockholders of the Company the Buyer Shares issuable to such
Stockholders pursuant to Section 1.4(e) in exchange for all of the outstanding
capital stock of the Company.
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(b) The Buyer will not pay any dividend or make any
distribution on Buyer Shares (with a record date at or after the Effective
Time) to any Stockholder until such Stockholder surrenders for exchange his
certificates which formerly represented Company Shares. The Buyer instead will
hold such dividend in trust for the benefit of such Stockholder pending
surrender and exchange. In no event, however, will any Stockholder be entitled
to any interest or earnings on the dividend or distribution pending receipt.
(c) The Buyer shall pay all charges and expenses of issuing
the Buyer Shares.
1.6 CLOSING OF TRANSFER RECORDS. After the close of business on the
Closing Date, transfers of Company Shares outstanding prior to the Effective
Time shall not be made on the stock transfer books of the Company.
1.7 NO FURTHER OWNERSHIP RIGHTS IN COMPANY SHARES. All amounts paid
upon the surrender for exchange of the Company Shares in accordance with the
terms hereof shall be deemed to have been issued in full satisfaction of all
rights pertaining to such Company Shares, and there shall be no further
registration of transfers on the records of the Company of Company Shares which
were outstanding immediately prior to the Effective Time. If, after the
Effective Time, certificates are presented to the Buyer for any reason, they
shall be canceled and the Buyer Shares shall be delivered to the person
entitled thereto.
1.8 LOST, STOLEN OR DESTROYED CERTIFICATES. In the event any
certificates evidencing Company Shares shall have been lost, stolen or
destroyed, Buyer shall make payment in exchange for such lost, stolen or
destroyed certificates, upon the making of an affidavit of that fact by the
holder thereof, such amount, if any, as may be required pursuant to Section
1.5; PROVIDED, HOWEVER, that Buyer may, in its sole discretion and as a
condition precedent to the issuance thereof, require the owner of such lost,
stolen or destroyed certificates to deliver an agreement (in form and substance
satisfactory to it) to indemnify Buyer against any claim that may be made
against Buyer with respect to the certificates alleged to have been lost,
stolen or destroyed.
1.9 TAX AND ACCOUNTING TREATMENT. The Merger shall constitute a
tax-free transaction pursuant to Section 368(a)(1)(A) of the Internal Revenue
Code of 1986, as amended (the 'Code'), and will be treated as a 'purchase' for
financial accounting purposes.
1.10 TAKING OF NECESSARY ACTION; FURTHER ACTION. If, at any time
after the Effective Time, any further action is necessary or desirable to carry
out the purposes of this Agreement and to vest the Buyer with full right, title
and possession to all assets, property, rights, privileges, powers and
franchises of the Company, the officers and directors of the Company and Buyer
are fully authorized in the name of their respective corporations or otherwise
to take, and will take, all such lawful and necessary and/or desirable action.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Buyer, subject to such exceptions
as are specifically disclosed in the Disclosure Schedule attached hereto as
EXHIBIT A, as follows:
2.1 ORGANIZATION OF THE COMPANY. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. The Company has the corporate power to own its properties and to
carry on its business as now being conducted. The Company is duly qualified to
do business and in good standing as a foreign corporation in each jurisdiction
in which the failure to be so qualified would have a material adverse effect on
the business, assets (including intangible assets), financial condition,
prospects or results of operations of the Company (hereinafter referred to in
this Article II to as a 'Material Adverse Effect'). The Company has delivered
a true and correct copy of its Certificate of Incorporation and Bylaws, each as
amended to date, to Buyer or its counsel.
2.2 COMPANY CAPITAL STRUCTURE.
(a) The authorized capital of the Company consists of
24,525,000 shares. 18,000,000 of the shares are designated as Common Stock,
$0.0001 par value, 10,120,665 shares of which are issued and outstanding
(assuming conversion of each share of Series A Preferred Stock of Buyer as of
November 30, 1999 into one share of Common Stock). 5,000,000 of the shares are
designated as Series A Preferred Stock, $0.001 par value, no shares of which
are issued and outstanding (assuming conversion of each share of Series A
Preferred Stock of Buyer as of November 30, 1999 into one share of Common
Stock). 1,525,000 of the shares are designated as Series B Preferred Stock,
$0.0001 par value, 868,825 shares of which are issued and outstanding. All of
the capital stock of the Company is held by the persons and in the amounts set
forth on SCHEDULE 2.2(a). All outstanding shares of the Company Common Stock
are duly authorized, validly issued, fully paid and non-assessable and not
subject to preemptive rights created by statute, the Certificate of
Incorporation or Bylaws of the Company or any agreement to which the Company is
a party or by which it is bound. Any rights of first refusal and rights of
repurchase in favor of the Company, if any, shall be waived in full by the
Company as provided in Section 5.3 as a condition of Buyer's obligation to
consummate the transactions contemplated by this Agreement.
(b) The Company has reserved 1,315,500 shares of Common Stock
for issuance to employees and consultants pursuant to the Option Plan, of which
1,315,500 shares are subject to outstanding, unexercised options and no shares
remain available for future grant. SCHEDULE 2.2(b) sets forth for each
outstanding option ('COMPANY OPTIONS'), the name of the holder of such option,
the number of shares of Common Stock subject to such option, the exercise price
of such option and the vesting schedule for such option. Except for the
Company Options described in Schedule 2.2(b), there are no options, warrants,
calls, rights, commitments or agreements of any character, written or
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oral, to which the Company is a party or by which it is bound obligating the
Company to issue, deliver, sell, repurchase or redeem, or cause to be issued,
delivered, sold, repurchased or redeemed, any shares of the capital stock of
the Company or obligating the Company to grant, extend, accelerate the vesting
of, change the price of, otherwise amend or enter into any such option,
warrant, call, right, commitment or agreement.
2.3 SUBSIDIARIES. The Company does not have any subsidiaries or
affiliated companies and does not otherwise own any shares of capital stock or
any ownership interest in, or control, directly or indirectly, of any other
corporation, partnership, association, joint venture or other business entity.
2.4 AUTHORITY. Subject only to the requisite approval of the Merger
and this Agreement by the Company's Stockholders, the Company has all requisite
corporate power and authority to enter into this Agreement and to consummate
the transactions contemplated hereby. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby have
been duly authorized by all necessary corporate action on the part of the
Company, subject only to the approval of the Merger by the Company's
Stockholders. The Company's Board of Directors and the Stockholders have
approved the Merger and this Agreement as required by applicable law. This
Agreement has been duly executed and delivered by the Company and constitutes
the valid and binding obligation of the Company, enforceable in accordance with
its terms except as such enforceability may be limited by principles of public
policy and subject to the laws of general application relating to bankruptcy,
insolvency and the relief of debtors and rules of law governing specific
performance, injunctive relief or other equitable remedies. Except as set
forth on SCHEDULE 2.4, subject only to the approval of the Merger and this
Agreement by the Company's Stockholders, the execution and delivery of this
Agreement by the Company does not, and, as of the Effective Time, the
consummation of the transactions contemplated hereby will not, conflict with,
or result in any violation of, or default under (with or without notice or
lapse of time, or both), or give rise to a right of termination, cancellation
or acceleration of any obligation or loss of any benefit that would have a
Material Adverse Effect under (any such event, a 'Conflict') (i) any provision
of the Certificate of Incorporation or Bylaws of the Company or (ii) any
mortgage, indenture, lease, contract or other agreement or instrument, permit,
concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to the Company or its properties or
assets. No consent, waiver, approval, order or authorization of, or
registration, declaration or filing with, any court, administrative agency or
commission or other federal, state, county, local or foreign governmental
authority, instrumentality, agency or Commission ('Governmental Entity') or any
third party (so as not to trigger any Conflict), is required by or with respect
to the Company in connection with the execution and delivery of this Agreement
or the consummation of the transactions contemplated hereby, except for the
filing of an agreement of merger with the California Secretary of State and the
Delaware Secretary of State and such other consents, waivers, authorizations,
filings, approvals and registrations which are set forth on SCHEDULE 2.4.
2.5 COMPANY FINANCIAL STATEMENTS. The Company has provided Buyer
with the Company's unaudited balance sheet as of September 30, 1999 and the
related unaudited profit and
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loss statement for the twelve-month period then ended (collectively, the
'COMPANY FINANCIALS'). The Company Financials are true and correct in all
material respects and are consistent throughout the periods indicated and
consistent with each other. The Company Financials present fairly the
financial condition and operating results of the Company as of the dates and
during the periods indicated therein, subject to normal year-end adjustments,
which will not be material in amount or significance in the aggregate.
2.6 RESTRICTIONS ON BUSINESS ACTIVITIES. Other than the restrictions
contained in the agreements listed in the Disclosure Schedule, there is no
agreement (noncompete or otherwise), commitment, judgment, injunction, order or
decree to which the Company or any of the Stockholders are a party or otherwise
binding upon the Company or any of the Stockholders which has or reasonably
could be expected to have the effect of materially prohibiting or impairing any
business practice of the Company, any acquisition of property (tangible or
intangible) by the Company, the conduct of business by the Company or the
operation of the business of the Company by Buyer following the Effective Time.
2.7 TITLE OF PROPERTIES; ABSENCE OF LIENS AND ENCUMBRANCES; CONDITION
OF EQUIPMENT.
(a) The Company has good and valid title to, or, in the case
of leased properties and assets, valid leasehold interests in, all of its
tangible properties and assets, real, personal and mixed, used or held for use
in its business, free and clear of any Liens (as defined in Section 2.8(vii)),
except as reflected in the Company Financials or in the Disclosure Schedule and
except for liens for Taxes not yet due and payable and such imperfections of
title and encumbrances, if any, which are not material in character, amount or
extent, and which do not materially detract from the value, or materially
interfere with the present use, of the property subject thereto or affected
thereby.
(b) Except as described in the Disclosure Schedule, the
equipment (the 'EQUIPMENT') owned or leased by the Company is, taken as a
whole, (i) adequate for the conduct of the business of the Company as currently
conducted and (ii) in good operating condition, regularly and properly
maintained, subject to normal wear and tear.
2.8 INTELLECTUAL PROPERTY. The Company has sufficient title and
ownership of patents, copyrights, trademarks, trade secrets, and all other
proprietary rights needed to conduct its business as proposed to be conducted.
There are no pending infringement claims regarding any third
party's patents, copyrights, trademarks, trade secrets or proprietary rights
and processes against the Company nor, to the best of the Company's knowledge,
is there any threat thereof or basis therefor. To the best of the Company's
knowledge, the Company is not infringing upon or otherwise acting adversely to,
and will not, by conducting its business as presently conducted, infringe upon
or otherwise act adversely to, the right or claimed right of any other person
with respect to any of the foregoing. The Company is not aware of any
violation by a third party of any of its patents, copyrights, trademarks, trade
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secrets or other proprietary rights. The Company has taken reasonable security
measures to protect the secrecy, confidentiality and value of its proprietary
information.
The Company is not aware that any of its employees is obligated
under any contract (including licenses, covenants or commitments of any nature)
or other agreement, or subject to any judgment, decree or order of any court or
administrative agency, that would interfere with the use of the employee's best
efforts to promote the interests of the Company or that would conflict with the
Company's business as proposed to be conducted. Neither the execution nor
delivery of this Agreement, nor the carrying on of the Company's business by
the employees of the Company, will, to the Company's knowledge, conflict with
or result in a breach of the terms, conditions or provisions of, or constitute
a default under, any contract, covenant or instrument under which any of such
employees is now obligated. The Company does not believe it is or will be
necessary to utilize any inventions of any of its employees (or people it
currently intends to hire) made prior to their employment by the Company.
2.9 INTERESTED PARTY TRANSACTIONS. Except as set forth on SCHEDULE
2.9, no officer, director or Stockholder of the Company (nor any ancestor,
sibling, descendant or spouse of any of such persons, or any trust, partnership
or corporation in which any of such persons has an interest), has, directly or
indirectly, (i) an interest in any entity which furnished or sold, or furnishes
or sells, services or products that the Company furnishes or sells, or proposes
to furnish or sell, or (ii) an interest in any entity that purchases from or
sells or furnishes to, the Company, any goods or services or (iii) a beneficial
interest in any contract or agreement set forth in SCHEDULE 2.9; provided, that
ownership of no more than one percent (1%) of the outstanding voting stock of a
publicly traded corporation shall not be deemed an 'interest in any entity' for
purposes of this SECTION 2.9.
2.10 GOVERNMENTAL AUTHORIZATION. SCHEDULE 2.10 accurately lists each
material consent, license, permit, grant or other authorization issued to the
Company by a Governmental Entity (i) pursuant to which the Company currently
operates or holds any interest in any of its properties or (ii) which is
required for the operation of its business or the holding of any such interest
(herein collectively called 'COMPANY AUTHORIZATIONS'), which Company
Authorizations are in full force and effect and constitute all Company
Authorizations required to permit the Company to operate or conduct its
business substantially as it is currently and has been conducted or hold any
interest in its properties or assets.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYER
The Buyer represents and warrants to the Company and each of the
Stockholders, subject to such exceptions as are specifically disclosed in the
disclosure schedule attached hereto as EXHIBIT B, as follows:
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3.1 ORGANIZATION OF THE BUYER. The Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. The Buyer has the corporate power to own its properties and to carry
on its business as it is now being conducted. The Buyer is duly qualified to do
business and in good standing as a foreign corporation in each jurisdiction in
which the failure to be so qualified would have a material adverse effect on the
business, assets (including intangible assets), financial condition, prospects
or results of operations of the Buyer (hereinafter referred to in this Article
III as a 'Material Adverse Effect'). The Buyer has delivered a true and correct
copy of its Certificate of Incorporation and Bylaws, each as amended to date, to
the Company or its counsel.
3.2 BUYER CAPITAL STRUCTURE.
(a) The authorized capital of the Company consists of
121,000,000 shares. 71,400,000 of the shares are designated as Common Stock,
$0.0025 par value, of which 4,410,394 shares are issued and outstanding.
49,600,000 of the shares are designated as Preferred Stock, $0.0025 par value,
2,000,000 of the shares are designated as Series A Preferred Stock, of which
1,425,000 shares are issued and outstanding, 8,000,000 of the shares are
designated as Series B Preferred Stock, of which 7,246,376 shares are issued and
outstanding, 7,000,000 of the shares are designated as Series C Preferred Stock,
of which 6,794,528 shares are issued and outstanding, 4,100,000 of the shares
are designated as Series D Preferred Stock, of which 4,016,064 shares are issued
and outstanding, 19,000,000 of the shares are designated as Series E Preferred
Stock, of which 10,061,185 shares of which are issued and outstanding, 4,000,000
of the shares are designated as Series F Preferred Stock, of which 3,076,053 are
issued and outstanding (assuming the sale and issuance of 922,816 shares between
December 1, 1999 and the Effective Time) and 5,500,000 of the shares are
designated as Series G Preferred Stock, of which no shares are issued and
outstanding. All outstanding shares of Buyer are duly authorized, validly
issued, fully paid and non-assessable and are not subject to preemptive rights
created by statute, the Certificate of Incorporation or Bylaws of the Buyer or
any agreement to which the Buyer is a party or by which it is bound. The Buyer
Shares, when issued in compliance with the provisions of this Agreement, will be
validly issued, fully paid and nonassessable and will have the rights,
preferences and privileges described in the Certificate of Incorporation of
Buyer. The Buyer Shares will be free of any liens or encumbrances, other than
any liens or encumbrances created by or imposed upon the holders thereof through
no action of the Buyer; provided, however, that the Buyer Shares will be subject
to restrictions on transfer under state and/or federal securities laws. The
Buyer Shares are not subject to any preemptive rights, rights of first refusal,
Stockholder agreement or voting agreement.
The Buyer has reserved 810,164 shares of Common Stock for issuance to
employees and consultants pursuant to its 1992 Omnibus Equity Incentive Plan
('1992 PLAN'), of which 21,344 shares are subject to outstanding , unexercised
options, and none of which remain available for grant. The Buyer also has
reserved 3,355,032 shares of Common Stock for issuance to employees and
consultants pursuant to its 1995 Stock Plan ('1995 PLAN'), of which 3,098,488
shares are subject to outstanding , unexercised options, and none of which
remain available for grant. The Buyer also has reserved 3,657,509 shares of
Common Stock for issuance to employees and consultants pursuant to
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its 1997 Stock Plan ('1997 PLAN'), of which 2,531,610 shares are subject to
outstanding, unexercised options (not including options to be granted by
Buyer in connection with this Agreement and the transactions contemplated
hereby), and 1,114,727 of which remain available for grant. The Buyer has
reserved 266,000 shares of Common Stock for issuance upon the exercise of
outstanding warrants.
(b) Except for the warrants and options outstanding under the
1992 Plan, the 1995 Plan, the 1997 Plan and the options to be issued by Buyer in
connection with this Agreement and the transactions contemplated hereby, there
are no options, warrants, calls, rights, commitments or agreements of any
character, written or oral, to which the Buyer is a party or by which it is
bound obligating the Buyer to issue, deliver, sell, repurchase or redeem, or
cause to be issued, delivered, sold, repurchased or redeemed, any shares of the
capital stock of the Buyer or obligating the Buyer to grant, extend, accelerate
the vesting of, change the price of, otherwise amend or enter into any such
option, warrant, call, right, commitment or agreement.
3.3 SUBSIDIARIES. The Buyer has provided the Company with a list of
its subsidiaries and affiliated companies.
3.4 AUTHORITY. Buyer has all requisite corporate power and authority
to enter in this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of the Buyer. The Buyer's Board of Directors has
unanimously approved the Merger and this Agreement. This Agreement has been
duly executed and delivered by the Buyer and constitutes the valid and binding
obligation of the Buyer, enforceable in accordance with its terms except as such
enforceability may be limited by principles of public policy and subject to the
laws of general application relating to bankruptcy, insolvency and the relief of
debtors and rules of law governing specific performance, injunctive relief or
other equitable remedies.
3.5 BUYER FINANCIAL STATEMENTS. Buyer has provided the Company with
the Buyer's unaudited balance sheet as of September 30, 1999 and the related
unaudited statements of operations for the twelve-month period then ended
(collectively, the 'BUYER FINANCIALS'). The Buyer Financials are true and
correct in all material respects and are consistent throughout the periods
indicated and consistent with each other. The Buyer Financials present fairly
the financial condition and operating results of the Buyer as of the dates and
during the periods indicated therein, subject to normal year-end adjustments,
which will not be material in amount or significance in the aggregate.
3.6 COMPLIANCE WITH OTHER INSTRUMENTS. The execution, delivery and
performance of, and compliance with, this Agreement, and the issuance of the
Buyer Shares will not result in any material violation of, or conflict with, or
constitute a material default under, the Buyer's Certificate of Incorporation or
Bylaws.
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ARTICLE IV
ADDITIONAL AGREEMENTS
4.1 COMPANY STOCKHOLDER APPROVAL. The Company has submitted this
Agreement and the transactions contemplated hereby to its stockholders for
approval and adoption as provided by the applicable laws of the State of
California and the State of Delaware. The Company has obtained the approval of
holders of at least 90% of the outstanding equity securities of the Company in
favor of the Merger and this Agreement and to enable the Closing to occur as
promptly as practicable. The materials submitted to the Company's Stockholders
shall include information regarding the Company, the terms of the Merger and
this Agreement and the unanimous recommendation of the Board of Directors of the
Company in favor of the Merger and this Agreement.
4.2 ACCESS TO INFORMATION. The Company shall afford Buyer and its
accountants, counsel and other representatives, reasonable access during normal
business hours during the period prior to the Effective Time to (a) all of the
Company's properties, books, contracts, commitments and records, and (b) all
other information concerning the business, properties and personnel of the
Company as Buyer may reasonably request. The Company agrees to provide to Buyer
and its accountants, counsel and other representatives copies of internal
financial statements promptly upon request. No information or knowledge
obtained in any investigation pursuant to this Section 4.2 shall affect or be
deemed to modify any representation or warranty contained herein or the
conditions to the obligations of the parties to consummate the Merger.
4.3 EXPENSES. Whether or not the Merger is consummated, all fees and
expenses incurred in connection with the Merger including, without limitation,
all legal, accounting, financial advisory, consulting and all other fees and
expenses of third parties ('THIRD PARTY EXPENSES') incurred by a party in
connection with the negotiation and effectuation of the terms and conditions of
this Agreement and the transactions contemplated hereby, shall be the obligation
of the respective party incurring such fees and expenses.
4.4 PUBLIC DISCLOSURE. Unless otherwise required by law, prior to the
Effective Time, no disclosure (whether or not in response to an inquiry) of the
subject matter of this Agreement shall be made by any party hereto unless
approved by Buyer and the Company prior to release, provided that such approval
shall not be unreasonably withheld.
4.5 BOARD OF DIRECTORS OF THE COMPANY. Effective as of the Closing
Date, the members of the Company's Board of Directors shall tender their
resignations from the Board.
4.6 CONSENTS. The Company shall use its best efforts to obtain the
consents, waivers and approvals under any of the Contracts as may be required in
connection with the Merger (all of such consents and approvals are set forth in
SCHEDULE 2.4) so as to preserve all rights of, and benefits to, the Company
thereunder.
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4.7 FIRPTA COMPLIANCE. On the Closing Date, the Company shall deliver
to Buyer a properly executed statement in a form reasonably acceptable to Buyer
for purposes of satisfying Buyer's obligations under Treasury Regulation
Section 1.1445-2(c)(3).
4.8 BEST EFFORTS. Subject to the terms and conditions provided in
this Agreement, each of the parties hereto shall use its best efforts to take
promptly, or cause to be taken, all actions, and to do promptly, or cause to be
done, all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions contemplated
hereby, to obtain all necessary waivers, consents and approvals and to effect
all necessary registrations and filings and to remove any injunctions or other
impediments or delays, legal or otherwise, in order to consummate and make
effective the transactions contemplated by this Agreement for the purpose of
securing to the parties hereto the benefits contemplated by this Agreement;
provided that Buyer shall not be required to agree to any divestiture by Buyer
or the Company or any of Buyer's subsidiaries or affiliates of shares of capital
stock or of any business, assets or property of Buyer or its subsidiaries or
affiliates or the Company or its affiliates, or the imposition of any material
limitation on the ability of any of them to conduct their businesses or to own
or exercise control of such assets, properties and stock.
4.9 NOTIFICATION OF CERTAIN MATTERS. The Company shall give prompt
notice to Buyer, and Buyer shall give prompt notice to the Company, of (i) the
occurrence or non-occurrence of any event, the occurrence or non-occurrence of
which is likely to cause any representation or warranty of the Company and
Buyer, respectively, contained in this Agreement to be untrue or inaccurate at
or prior to the Effective Time and (ii) any failure of the Company or Buyer, as
the case may be, to comply with or satisfy any covenant, condition or agreement
to be complied with or satisfied by it hereunder; PROVIDED, HOWEVER, that the
delivery of any notice pursuant to this Section 4.9 shall not limit or otherwise
affect any remedies available to the party receiving such notice.
4.10 ADDITIONAL DOCUMENTS AND FURTHER ASSURANCES. Each party hereto,
at the request of another party hereto, shall execute and deliver such other
instruments and do and perform such other acts and things as may be necessary or
desirable for effecting completely the consummation of this Agreement and the
transactions contemplated hereby.
4.11 CONVERSION OF COMPANY SERIES A PREFERRED STOCK. Prior to the
Effective Date, each then outstanding share of Series A Preferred Stock of the
Company ('COMPANY SERIES A STOCK') shall be canceled and extinguished and
converted into one (1) share of Company Common Stock (the 'PRELIMINARY
CONVERSION'). No Series A Preferred Stock of the Company shall be deemed
outstanding after the Preliminary Conversion.
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ARTICLE V
CONDITIONS TO THE MERGER
5.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY TO EFFECT THE MERGER. The
respective obligations of each party to this Agreement to effect the Merger
shall be subject to the satisfaction at or prior to the Effective Time of the
following condition: No temporary restraining order, preliminary or permanent
injunction or other order issued by any court of competent jurisdiction or other
legal restraint or prohibition preventing the consummation of the Merger shall
be in effect, nor shall any proceeding brought by an administrative agency or
commission or other governmental authority or instrumentality, domestic or
foreign, seeking any of the foregoing be pending; nor shall there be any action
taken, or any statute, rule, regulation or order enacted, entered, enforced or
deemed applicable to the Merger, which makes the consummation of the Merger
illegal.
5.2 ADDITIONAL CONDITIONS TO OBLIGATIONS OF THE COMPANY. The
obligations of the Company to consummate and effect this Agreement and the
transactions contemplated hereby shall be subject to the satisfaction at or
prior to the Effective Time of the following conditions, any of which may be
waived, in writing, exclusively by the Company: The representations and
warranties of Buyer in this Agreement shall be true and correct in all material
respects on and as of the Effective Time as though such representations and
warranties were made on and as of such time and each of Buyer shall have
performed and complied with all covenants, obligations and conditions of this
Agreement required to be performed and complied with by it as of the Effective
Time.
5.3 ADDITIONAL CONDITIONS TO OBLIGATIONS OF BUYER. The obligations of
Buyer to consummate and effect this Agreement and the transactions contemplated
hereby shall be subject to the satisfaction at or prior to the Effective Time of
each of the following conditions, any of which may be waived, in writing,
exclusively by Buyer:
(a) REPRESENTATIONS, WARRANTIES AND COVENANTS. The
representations and warranties of the Company in this Agreement shall be true
and correct in all material respects on and as of the Effective Time as though
such representations and warranties were made on and as of such time and the
Company shall have performed and complied with all covenants, obligations and
conditions of this Agreement required to be performed and complied with by it as
of the Effective Time.
(b) NO INJUNCTIONS OR RESTRAINTS ON CONDUCT OF BUSINESS. No
temporary restraining order, preliminary or permanent injunction or other order
issued by any court of competent jurisdiction or other legal or regulatory
restraint or provision challenging Buyer's proposed acquisition of the Company,
or limiting or restricting Buyer's conduct or operation of the business of the
Company (or its own business) following the Merger shall be in effect, nor shall
any proceeding brought by an administrative agency or commission or other
governmental authority or instrumentality, domestic or foreign, seeking any of
the foregoing be pending.
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(c) NO MATERIAL ADVERSE CHANGES. There shall not have occurred
any material adverse change in the business, assets (including intangible
assets), results of operations, liabilities (contingent or accrued) or financial
condition of the Company.
(d) COMPANY STOCKHOLDER APPROVAL. This Agreement and the
Merger shall have been approved and adopted by the Company's Stockholders
holding at least 90% of the equity securities of the Company.
(e) LITIGATION. There shall be no action, suit, claim or
proceeding of any nature pending, or overtly threatened, against the Buyer or
the Company, their respective properties or any of their officers or directors,
arising out of, or in any way connected with, the Merger or the other
transactions contemplated by the terms of this Agreement.
(f) SURRENDER OF COMPANY STOCK CERTIFICATES. Each of the
Company Stockholders shall have surrendered for exchange his certificates which
formerly represented Company Shares (unless the Stockholder makes an affidavit
pursuant to Section 1.8).
(g) REGISTRATION RIGHT AGREEMENT. Each of the Company
Stockholders receiving Buyer Shares shall have executed the Third Amended and
Restated Rights Agreement in the form attached as EXHIBIT C hereto.
ARTICLE VI
SURVIVAL OF REPRESENTATIONS AND WARRANTIES
6.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations
and warranties made by the Company and Buyer in this Agreement or in any
instrument delivered pursuant to this Agreement shall survive the Merger and
continue until 12 months following the Effective Time (the 'Survival Period').
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
7.1 AMENDMENT. Except as is otherwise required by applicable law
after the stockholders of the Company approve this Agreement, this Agreement may
be amended by the parties hereto at any time by execution of an instrument in
writing signed on behalf of each of the parties hereto.
7.2 EXTENSION; WAIVER. At any time prior to the Effective Time,
Buyer, on the one hand, and the Company, on the other, may, to the extent
legally allowed, (i) extend the time for the performance of any of the
obligations of the other party hereto, (ii) waive any inaccuracies in the
representations and warranties made to such party contained herein or in any
document delivered
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pursuant hereto, and (iii) waive compliance with any of the agreements,
covenants or conditions for the benefit of such party contained herein. Any
agreement on the part of a party hereto to any such extension or waiver shall
be valid only if set forth in an instrument in writing signed on behalf of
such party.
ARTICLE VIII
GENERAL PROVISIONS
8.1 NOTICES. All notices and other communications hereunder shall be
in writing and shall be deemed given if delivered personally or by commercial
delivery service, or mailed by registered or certified mail (return receipt
requested) or sent via facsimile (with acknowledgment of complete transmission)
to the parties at the following addresses (or at such other address for a party
as shall be specified by like notice):
(a) if to Buyer, to:
UTStarcom, Inc.
1275 Harbor Bay Parkway
Suite 100
Alameda, California 94502
Attention: Hong Lu
Facsimile No.: (510) 864-8802
with a copy to:
Wilson Sonsini Goodrich & Rosati, Professional Corporation
650 Page Mill Road
Palo Alto, California 94304-1050
Attention: Carmen Chang, Esq.
Facsimile No.: (650) 493-6811
(b) if to the Company or Company stockholders, to:
WACOS, Inc.
1275 Harbor Bay Parkway
Suite 100
Alameda, California 94502
Attention: Hong Lu
Facsimile No.: (510) 864-8802
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with a copy to:
McCutchen, Doyle, Brown & Enersen, LLP
3150 Porter Drive
Palo Alto, California 94304
Attention: Edward S. Merrill, Esq.
Facsimile No.: (650) 849-4800
8.2 INTERPRETATION. The words 'include,' 'includes' and 'including'
when used herein shall be deemed in each case to be followed by the words
'without limitation.' The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
8.3 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.
8.4 ENTIRE AGREEMENT; ASSIGNMENT. This Agreement, the schedules and
exhibits hereto, and the documents and instruments and other agreements among
the parties hereto referenced herein: (a) constitute the entire agreement among
the parties with respect to the subject matter hereof and supersede all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof; (b) are not intended to confer upon any
other person any rights or remedies hereunder; and (c) shall not be assigned by
operation of law or otherwise except as otherwise specifically provided, except
that Buyer may assign its respective rights and delegate its respective
obligations hereunder to their respective affiliates and any successors.
8.5 SEVERABILITY. In the event that any provision of this Agreement
or the application thereof, becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable, the remainder of this
Agreement will continue in full force and effect and the application of such
provision to other persons or circumstances will be interpreted so as reasonably
to effect the intent of the parties hereto. The parties further agree to
replace such void or unenforceable provision of this Agreement with a valid and
enforceable provision that will achieve, to the extent possible, the economic,
business and other purposes of such void or unenforceable provision.
8.6 OTHER REMEDIES. Except as otherwise provided herein, any and all
remedies herein expressly conferred upon a party will be deemed cumulative with
and not exclusive of any other remedy conferred hereby, or by law or equity upon
such party, and the exercise by a party of any one remedy will not preclude the
exercise of any other remedy.
8.7 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of California, regardless of the laws
that might otherwise govern under applicable principles of conflicts of laws
thereof.
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8.8 RULES OF CONSTRUCTION. The parties hereto agree that they have
been represented by counsel during the negotiation and execution of this
Agreement and, therefore, waive the application of any law, regulation, holding
or rule of construction providing that ambiguities in an agreement or other
document will be construed against the party drafting such agreement or
document.
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IN WITNESS WHEREOF, Buyer and the Company have caused this Agreement to
be signed by their duly authorized respective officers, all as of the date first
written above.
UTSTARCOM, INC. WACOS, INC.
/s/ Hong Lu /s/ Hong Lu
--------------------------------- ------------------------------------
Hong Lu Hong Lu
President President
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EXHIBIT A
[Omitted]
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EXHIBIT B
Not applicable.
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EXHIBIT C
[Omitted]
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Agreement and Plan of Merger - UTStarcom Inc. and WACOS Inc.
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