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Agreement and Plan of Merger

 

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Title:

Agreement and Plan of Merger

Entities:

Banc of America Securities LLC; Credit Suisse First Boston LLC; Wells Fargo Bank Minnesota, NA; Pillsbury Winthrop LLP; Nice Acquisition, Inc.; Nishan Systems, Inc.; mcdata corp

Date:

2003

Size:

Preview shows 60KB of 210KB total

Price:

$86

ID:

#171219

 

 

► Plans ► Agreements ► Agreements & Plans of Merger
► Financial
► Services ► Legal

 

 

Start of Preview

AGREEMENT AND PLAN OF MERGER

BY AND AMONG

McDATA CORPORATION,

NICE ACQUISITION, INC.,

AND

NISHAN SYSTEMS, INC.

DATED AS OF AUGUST 25, 2003


TABLE OF CONTENTS

 
    
    
   Page
ARTICLE I   THE MERGER   2
    1.1   The Merger   2
    1.2   Closing; Effective Time   2
    1.3   Actions at Closing   2
    1.4   Effect of the Merger   2
    1.5   Certificate of Incorporation; Bylaws.   2
    1.6   Merger Consideration.   3
    1.7   Dissenting Shares.   5
    1.8   Surrender of Certificates.   6
    1.9   Lost, Stolen or Destroyed Certificates   7
    1.10   Closing of Company's Transfer Books   7
    1.11   Tax Consequences   7
    1.12   No Liability   7
    1.13   Taking of Necessary Action; Further Action   7

ARTICLE II
 
REPRESENTATIONS AND WARRANTIES OF COMPANY
 
7
    2.1   Organization, Standing and Power   7
    2.2   Capital Structure   8
    2.3   Authority   10
    2.4   No Conflicts; Required Filings and Consents.   10
    2.5   Permits; Compliance with Laws   11
    2.6   Financial Statements   11
    2.7   Absence of Certain Changes   11
    2.8   Absence of Undisclosed Liabilities   12
    2.9   Litigation   12
    2.10   Restrictions on Business Activities   13
    2.11   Title to Property   13
    2.12   Intellectual Property.   13
    2.13   Taxes   18
    2.14   Employee Benefit Plans.   20
    2.15   Employees; Employee Matters.   21
    2.16   Interested Party Transactions   22
    2.17   Bank Accounts   22
    2.18   Material Contracts   22
    2.19   No Breach of Material Contracts.   23
    2.20   Brokers   24
    2.21   No Business Activity Restriction   24
    2.22   Environmental Matters.   24
    2.23   Company Shareholders' Approval   25
    2.24   No Excess Parachute Payments   26
    2.25   Completeness of Company Information   26
    2.26   Insurance   26
    2.27   Guaranties   26
    2.28   Anti-Takeover Matters   26
    2.29   Warranty   27
    2.30   Product Liability   27
    2.31   Inventory   27
             

i

    2.32   Working Capital   27
    2.33   Accounts Receivable   27
    2.34   Relationship with Suppliers, Customers, Manufacturers, Resellers and Distributors   27
    2.35   Fairness Opinion   27
    2.36   Representations Complete   27

ARTICLE III
 
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
 
28
    3.1   Organization and Standing   28
    3.2   Authority   28
    3.3   No Conflict; Required Filings and Consents.   28
    3.4   Brokers   29

ARTICLE IV
 
CONDUCT PRIOR TO THE EFFECTIVE TIME
 
29
    4.1   Conduct of Business of Company   29
    4.2   Exclusivity.   31
    4.3   Notices of Certain Events   32

ARTICLE V
 
ADDITIONAL AGREEMENTS
 
32
    5.1   Access to Information.   32
    5.2   Confidentiality.   33
    5.3   Public Disclosure   34
    5.4   Reasonable Efforts and Further Assurances.   34
    5.5   Notification of Certain Matters   35
    5.6   Company Disclosure Schedule   35
    5.7   Litigation Support   35
    5.8   Transition   35
    5.9   Shareholders Meeting   36
    5.10   Information Statement   36
    5.11   Employees   37
    5.12   Indemnification   37
    5.13   Financing   38
    5.14   Amendment to Company's Amended and Restated Articles of Incorporation   38
    5.15   Resignation of Directors and Officers   38
    5.16   Bridge Payments; McGraw Payment; Excess Transaction Fees   38
    5.17   Loan Agreements   38

ARTICLE VI
 
CONDITIONS TO THE MERGER
 
38
    6.1   Conditions to Obligations of Each Party to Consummate the Merger   38
    6.2   Additional Conditions to Obligations of Company   39
    6.3   Additional Conditions to Obligations of Parent and Merger Sub   40

ARTICLE VII
 
TERMINATION AND AMENDMENT
 
41
    7.1   Termination   41
    7.2   Effect of Termination.   43

ARTICLE VIII
 
REMEDIES, ESCROW AND INDEMNIFICATION
 
43
    8.1   Survival of Representations and Warranties   43
    8.2   Escrow Fund   43
             

ii

    8.3   Limitations on Indemnification.   43
    8.4   Indemnification by Company Shareholders   44
    8.5   Indemnification by Parent and Surviving Corporation   44
    8.6   Third Party Claims   44

ARTICLE IX
 
GENERAL PROVISIONS
 
45
    9.1   Expenses   45
    9.2   Notices   45
    9.3   Certain Definitions; Interpretation   47
    9.4   Counterparts   47
    9.5   Entire Agreement; Parties in Interest; Nonassignability   47
    9.6   Severability   48
    9.7   Governing Law   48
    9.8   Rules of Construction   48
    9.9   Extension; Waiver   48
    9.10   No Third-Party Beneficiary   48
    9.11   Amendment   48
    9.12   Specific Performance   48
    9.13   Submission to Jurisdiction   48

iii

EXHIBITS

Exhibit A     Executing Shareholders and Forms of Voting Agreements
Exhibit B     Form of Agreement of Merger
Exhibit C     Shareholder Participation in Escrow Fund
Exhibit D     Employee Consideration
Exhibit E     Form of Escrow Agreement
Exhibit F     Form of Legal Opinion of Counsel to Company
Exhibit G     Form of Offer Letter
Exhibit H     Merger Consideration Reductions

SCHEDULES

Company Disclosure Schedule
Parent Disclosure Schedule

iv


AGREEMENT AND PLAN OF MERGER

        THIS AGREEMENT AND PLAN OF MERGER (the "Agreement") is made and entered into as of August 25, 2003, by and among McDATA Corporation, a Delaware corporation ("Parent"); Nice Acquisition, Inc., a California corporation and wholly-owned subsidiary of Parent ("Merger Sub"); and Nishan Systems, Inc., a California corporation ("Company").

RECITALS

        A.    The Boards of Directors of Company, Merger Sub and Parent believe it is in the best interests of their respective corporations and the shareholders of their respective corporations to enter into a business combination by means of a statutory merger of Merger Sub with and into Company (the "Merger") and, in furtherance thereof, have approved this Agreement and the Merger.

        B.    Pursuant to the Merger, among other things, the outstanding shares of Series A Convertible Preferred Stock, no par value, of Company ("Series A Preferred"), the outstanding shares of Series A-1 Convertible Preferred Stock, no par value, of Company ("Series A-1 Preferred"), the outstanding shares of Series B Convertible Preferred Stock, no par value, of Company ("Series B Preferred"), the outstanding shares of Series B-1 Convertible Preferred Stock, no par value, of Company ("Series B-1 Preferred") and the outstanding shares of Series C Convertible Preferred Stock, no par value, of Company ("Series C Preferred" and, together with the Series A Preferred, the Series A-1 Preferred, the Series B Preferred, the Series B-1 Preferred, the "Preferred Stock") shall be converted into the right to receive cash from Parent on the terms and subject to the conditions set forth herein. The outstanding shares of common stock, no par value, including outstanding shares of restricted stock, of Company (the "Common Stock") will be converted into the right to receive cash from Parent on the terms and subject to the conditions set forth herein. No unvested shares of Common Stock outstanding ("Restricted Shares") will be accelerated in connection with the Merger other than pursuant to vesting acceleration provisions contained in the purchase agreements under which such Restricted Shares were issued. Each Restricted Share not repurchased at cost by Company will be treated in all respects as any other share of Common Stock and shall be converted into the right to receive cash from Parent on the terms and subject to the conditions set forth herein. Options for shares of capital stock of Company (the "Options") issued pursuant to Company's 1999 Stock Option Plan, as amended (the "Company Plan"), will not be assumed by Parent and will terminate by the operation of board action causing them to become exercisable for zero shares of capital stock in accordance with the Company Plan. If not exercised in accordance with their terms, the outstanding Options will not receive any consideration and will terminate by the operation of board action causing them to become exercisable for zero shares of capital stock in connection with the Merger. Outstanding warrants of Company to acquire shares of Preferred Stock (the "Warrants") will not be assumed by Parent and, if not exercised the outstanding warrants will not receive any consideration and will terminate at the closing of the Merger.

        C.    Parent shall have the option to make an election under Section 338(g) of the Internal Revenue Code of 1986, as amended (the "Code"), with respect to its acquisition of all the outstanding stock of Company pursuant to the Agreement.

        D.    Concurrently with the execution of this Agreement, each of the security holders of Company set forth on Exhibit A attached hereto, which are holders of a sufficient number of shares of capital stock of Company to approve and adopt this Agreement and the Merger and to amend the Amended and Restated Articles of Incorporation, as amended, as set forth in Section 5.13, all as set forth in Section 2.23, is executing and delivering to Parent one of the Voting Agreements substantially in the forms set forth in Exhibit A attached hereto (the "Voting Agreements").

1


        NOW, THEREFORE, in consideration of the representations, warranties, covenants, agreements and mutual promises set forth herein, and for other good and valuable consideration, the receipt of which is hereby acknowledged, the parties agree as follows:


ARTICLE I

THE MERGER

        1.1    The Merger.    At the Effective Time (as defined in Section 1.2) and subject to and upon the terms and conditions set forth in this Agreement and the applicable provisions of the California Corporations Code ("California Law"), Merger Sub shall be merged with and into Company, the separate corporate existence of Merger Sub shall cease and Company shall continue as the surviving corporation and as a wholly-owned subsidiary of Parent. Company, as the surviving corporation after the Merger, is hereinafter sometimes referred to as the "Surviving Corporation."

        1.2    Closing; Effective Time.    The closing of the Merger (the "Closing") shall take place as soon as practicable after the satisfaction or waiver of each of the conditions set forth in Article VI or at such other time as the parties hereto agree (the "Closing Date"); provided, however, that, at the option of Parent, the Closing Date shall be no earlier than September 15, 2003. The Closing shall take place at the offices of McDATA Corporation, 380 Interlocken Crescent, Suite 600, Broomfield, Colorado 80021, or at such other location as the parties hereto agree. At the Closing and simultaneously therewith, the parties hereto shall cause the Merger to be consummated by filing an Agreement of Merger including the required officer's certificates, substantially in the form attached hereto as Exhibit B (the "Agreement of Merger") with the Secretary of State of the State of California in accordance with the relevant provisions of California Law (the time of filing of the Agreement of Merger being the "Effective Time").

        1.3    Actions at Closing.    At the Closing, (i) Company will deliver to Parent and Merger Sub the various certificates, instruments and documents referred to in Section 6.2 below, (ii) Parent and Merger Sub will deliver to Company the various certificates, instruments and documents referred to in Section 6.3 below, (iii) Company and Merger Sub will file with the California Secretary of State the California Agreement of Merger, and (iv) Parent will deliver the Merger Consideration in the manner provided in Section 1.8 below.

        1.4    Effect of the Merger.    At the Effective Time, the effect of the Merger shall be as provided in this Agreement, the Agreement of Merger and the applicable provisions of California Law. Without limiting the generality of the foregoing, and subject thereto, at the Effective Time, all the assets, property, rights, privileges, powers and franchises of Company and Merger Sub shall vest in the Surviving Corporation, and all debts, liabilities and duties of Company and Merger Sub shall become the debts, liabilities and duties of the Surviving Corporation, and the Surviving Corporation shall be a wholly-owned subsidiary of Parent.

        1.5    Certificate of Incorporation; Bylaws.