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EXHIBIT 2.1
AMENDED AND RESTATED
MERGER AGREEMENT AND
PLAN OF REORGANIZATION
BY AND AMONG
BROADCOM CORPORATION,
AC ACQUISITION CORP.,
AND
ALTIMA COMMUNICATIONS, INC.
Dated as of July 28, 2000
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TABLE OF CONTENTS
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ARTICLE 1 THE MERGER..............................................................3
1.1 The Merger..............................................................3
1.2 Effective Time..........................................................3
1.3 Effect of the Merger on Constituent Corporations........................4
1.4 Articles of Incorporation and By-Laws of Surviving Corporation..........4
1.5 Directors and Officers of Surviving Corporation.........................4
1.6 Maximum Number of Shares of Parent Common Stock to be Issued; Effect on
Outstanding Securities of the Company...................................4
(a) Conversion of Company Capital Stock..............................5
(b) Cancellation of Parent-Owned and Company-Owned Stock.............5
(c) Company Options and Company Stock Option Plan....................5
(d) Adjustments to Exchange Ratios...................................6
(e) Fractional Shares................................................6
(f) Capital Stock of Merger Sub......................................6
1.7 Dissenting Shares.......................................................7
1.8 Exchange Procedures.....................................................7
(a) Parent Common Stock..............................................7
(b) Exchange Procedures..............................................7
(c) Distributions With Respect to Unexchanged Shares of Company
Capital Stock....................................................8
(d) Transfers of Ownership...........................................8
1.9 No Further Ownership Rights in Company Capital Stock....................9
1.10 Lost, Stolen or Destroyed Certificates..................................9
1.11 Exemption From Registration; California Permit..........................9
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1.12 Taking of Necessary Action; Further Action..............................9
ARTICLE 2 REPRESENTATIONS AND WARRANTIES OF THE COMPANY..........................10
2.1 Organization and Qualification.........................................10
2.2 Authority Relative to this Agreement...................................10
2.3 Capital Stock..........................................................11
2.4 No Subsidiaries........................................................12
2.5 Directors and Officers.................................................12
2.6 No Conflicts...........................................................12
2.7 Books and Records; Organizational Documents............................13
2.8 Company Financial Statements...........................................13
2.9 Absence of Changes.....................................................14
2.10 No Undisclosed Liabilities.............................................18
2.11 Taxes..................................................................18
2.12 Legal Proceedings......................................................20
2.13 Compliance with Laws and Orders........................................21
2.14 Plans; ERISA...........................................................21
(a) Existence of Plans..............................................21
(b) Present Value of Benefits.......................................22
(c) Penalties; Reportable Events....................................22
(d) Deficiencies; Qualification.....................................22
(e) Parachute Payments..............................................23
(f) COBRA...........................................................24
(g) Litigation......................................................24
2.15 Real Property..........................................................24
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2.16 Tangible Personal Property.............................................25
2.17 Intellectual Property..................................................25
2.18 Contracts..............................................................29
2.19 Insurance..............................................................30
2.20 Affiliate Transactions.................................................30
2.21 Employees; Labor Relations.............................................31
2.22 Environmental Matters..................................................32
2.23 Substantial Customers and Suppliers....................................33
2.24 Accounts Receivable....................................................34
2.25 Inventory..............................................................34
2.26 Other Negotiations; Brokers; Third Party Expenses......................34
2.27 Banks and Brokerage Accounts...........................................34
2.28 Warranty Obligations...................................................35
2.29 Foreign Corrupt Practices Act..........................................35
2.30 Tax-Free Reorganization................................................35
2.31 Financial Projections; Operating Plan..................................35
2.32 Approvals..............................................................36
2.33 Compliance.............................................................37
2.34 Takeover Statutes......................................................37
2.35 Permit Application; Information Statement..............................37
2.36 Disclosure.............................................................37
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB................37
3.1 Organization and Qualification.........................................38
3.2 Authority Relative to this Agreement...................................38
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3.3 Capital Stock..........................................................38
3.4 Issuance of Parent Common Stock........................................39
3.5 SEC Documents; Parent Financial Statements.............................39
3.6 No Conflicts...........................................................39
3.7 Information to be Supplied by Parent...................................40
3.8 Ownership of Merger Sub; No Prior Activities...........................40
3.9 Investment Advisors....................................................41
3.10 Tax-Free Reorganization................................................41
3.11 Approvals..............................................................41
ARTICLE 4 CONDUCT PRIOR TO THE EFFECTIVE TIME....................................41
4.1 Conduct of Business of the Company.....................................41
4.2 No Solicitation........................................................42
ARTICLE 5 ADDITIONAL AGREEMENTS..................................................43
5.1 Information Statement; Permit Application..............................43
5.2 Shareholder Approval...................................................44
5.3 Access to Information..................................................45
5.4 Confidentiality........................................................45
5.5 Expenses...............................................................46
5.6 Public Disclosure......................................................46
5.7 Approvals..............................................................46
5.8 FIRPTA Compliance......................................................47
5.9 Notification of Certain Matters........................................47
5.10 [Intentionally Omitted]................................................47
5.11 [Intentionally Omitted]................................................47
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5.12 [Intentionally Omitted]................................................47
5.13 Additional Documents and Further Assurances............................47
5.14 Indemnification........................................................47
5.15 Form S-8...............................................................48
5.16 NNM Listing of Additional Shares. Parent ..............................48
5.17 Company's Auditors.....................................................48
5.18 Termination of 401(k) Plans............................................48
5.19 Takeover Statutes......................................................49
5.20 [Intentionally Omitted]................................................49
5.21 Treatment as Reorganization............................................49
5.22 Company Repurchases....................................................49
5.23 Information Technology Access..........................................49
5.24 Change of Merger Form..................................................50
5.25 Due Diligence..........................................................50
5.26 Intellectual Property..................................................50
5.27 Company Disclosure Schedule............................................51
5.28 Inclusion in Parent Plans..............................................51
5.29 Certain Agreements.....................................................51
5.30 Adjustment of Aggregate Share Number...................................52
5.31 Acceleration of Vesting; Designated Employee...........................52
ARTICLE 6 CONDITIONS TO THE MERGER...............................................52
6.1 Conditions to Obligations of Each Party to Effect the Merger...........52
(a) Governmental and Regulatory Approvals...........................52
(b) No Injunctions or Regulatory Restraints; Illegality.............53
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(c) Tax Opinions....................................................53
(d) Shareholder Approval............................................53
(e) NNM Listing. ..................................................53
(f) Legal Proceedings...............................................53
(g) Fairness Hearing and California Permit; Private Placement
Alternative.....................................................53
6.2 Additional Conditions to Obligations of the Company....................53
(a) Representations and Warranties..................................53
(b) Performance.....................................................54
(c) Officers' Certificates..........................................54
(d) Legal Opinion...................................................54
6.3 Additional Conditions to the Obligations of Parent and Merger Sub......54
(a) Representations and Warranties..................................54
(b) Performance.....................................................54
(c) Officers' Certificates..........................................55
(d) Third Party Consents............................................55
(e) Legal Opinion...................................................55
(f) Non-Competition Agreements......................................55
(g) Limitation on Dissent...........................................55
(h) No Bankruptcy...................................................55
(i) FIRPTA Compliance...............................................55
(j) No Material Adverse Change......................................55
(k) Company Intellectual Property...................................55
(l) Termination of Pension Plan.....................................56
(m) Employees.......................................................56
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(n) Assignment of Intellectual Property.............................56
(o) Repurchase Agreement............................................56
(p) Intentional Material Misrepresentation:.........................56
ARTICLE 7 SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS;
ESCROW PROVISIONS......................................................56
7.1 Survival of Representations, Warranties, Covenants and Agreements......56
7.2 Escrow Provisions......................................................57
(a) Establishment of the Escrow Fund................................57
(b) Recourse to the Escrow Fund.....................................57
(i) Basic Amount Recoverable.................................57
(c) Escrow Period; Distribution of Escrow Fund upon Termination of
Escrow Period...................................................58
(d) Protection of Escrow Fund.......................................59
(e) Claims Upon Escrow Fund.........................................60
(f) Objections to Claims............................................60
(g) Resolution of Conflicts; Arbitration............................61
(h) Shareholder Agent of the Shareholders; Power of Attorney........62
(i) Actions of the Shareholder Agent................................62
(j) Third-Party Claims..............................................63
(k) Indemnification for Shareholder Agent...........................63
(l) Depositary Agent's Duties.......................................63
(i) Limitation on Duties of Depositary Agent.................63
(ii) Compliance with Orders...................................63
(iii) Limitations on Liability of Depositary Agent.............64
(iv) Good Faith of Depositary Agent...........................64
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(v) Non-responsibility of Depositary Agent...................64
(vi) Indemnification of Depositary Agent......................64
(vii) Resignation of Depositary Agent..........................64
(m) Fees............................................................65
ARTICLE 8 TERMINATION, AMENDMENT AND WAIVER......................................65
8.1 Termination............................................................65
8.2 Effect of Termination..................................................67
8.3 Amendment..............................................................67
8.4 Extension; Waiver......................................................67
8.5 Termination Fee; Limited Remedy........................................68
ARTICLE 9 MISCELLANEOUS PROVISIONS...............................................68
9.1 Notices................................................................68
9.2 Entire Agreement.......................................................70
9.3 Further Assurances; Post-Closing Cooperation...........................70
9.4 Waiver.................................................................70
9.5 Third Party Beneficiaries..............................................70
9.6 No Assignment; Binding Effect..........................................70
9.7 Headings...............................................................70
9.8 Invalid Provisions.....................................................70
9.9 Governing Law..........................................................71
9.10 WAIVER OF TRIAL BY JURY................................................71
9.11 Construction...........................................................71
9.12 Counterparts...........................................................71
9.13 Specific Performance...................................................71
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ARTICLE 10 DEFINITIONS............................................................72
10.1 Definitions............................................................72
[SIGNATURE PAGE FOLLOWS]...............................................85
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ALL SECTIONS MARKED WITH ONE ASTERISK (*) REFLECT PORTIONS WHICH HAVE BEEN
REDACTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION BY
BROADCOM CORPORATION AS PART OF A REQUEST FOR CONFIDENTIAL TREATMENT.
AMENDED AND RESTATED
MERGER AGREEMENT AND
PLAN OF REORGANIZATION
This AMENDED AND RESTATED MERGER AGREEMENT AND PLAN OF REORGANIZATION is
made and entered into as of July 28, 2000 (the "Amendment Date"), by and among
Broadcom Corporation, a California corporation ("Parent"), AC Acquisition Corp.,
a California corporation and wholly-owned subsidiary of Parent ("Merger Sub"),
and Altima Communications, Inc., a California corporation (the "Company"), and
with respect to Section 7.2 only, ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, as Shareholder Agent, and
U.S. Stock Transfer Corporation, as Depositary Agent. Capitalized terms used and
not otherwise defined herein have the meanings set forth in Article 10.
RECITALS
A. Parent, Merger Sub and the Company and, with respect to Section 7.2
thereof only, ▇▇▇▇▇▇▇ ▇▇, as Shareholder Agent, and U.S. Stock Transfer
Corporation, as Depositary Agent, have previously entered into that certain
Merger Agreement and Plan of Reorganization (the "Original Agreement") dated as
of May 3, 2000 which provides, among other things, for Parent to acquire the
Company pursuant to the merger of Merger Sub with and into the Company.
B. Parent, Merger Sub and the Company and, with respect to Section 7.2
thereof only, ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, as Shareholder Agent, and U.S. Stock Transfer
Corporation, as Depositary Agent, desire to amend and restate the Original
Agreement.
C. The Boards of Directors of each of Parent, Merger Sub and the Company
believe it is in the best interests of Parent, Merger Sub and the Company (as
applicable) and their respective shareholders that Parent acquire the Company
through the merger of Merger Sub with and into the Company (the "Merger") and,
in furtherance thereof, have approved the Merger, this Agreement and the
transactions contemplated hereby.
D. Pursuant to the Merger, among other things, and subject to the terms
and conditions of this Agreement, (i) all of the shares of capital stock of the
Company which are issued and outstanding immediately prior to the Effective Time
of the Merger shall be converted into the right to receive shares of Class A
common stock, par value $.0001 per share, of Parent ("Parent Common Stock") and
(ii) all Company Options, Company Warrants and Company Stock Purchase Rights
then outstanding (whether vested or unvested) will become exercisable for Parent
Common Stock, on the terms and subject to the conditions set forth herein.
E. As an inducement to Parent and Merger Sub to enter into this
Agreement, certain shareholders of the Company have concurrently herewith
entered into Support Agreements with Parent in substantially the form attached
hereto as Exhibit A ("Support
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Agreements") pursuant to which, among other things, such shareholders have
agreed to vote the shares of Company Capital Stock owned by them in favor of the
Merger.
F. As a further inducement to Parent and Merger Sub to enter into this
Agreement, certain employees of the Company have concurrently with the execution
and delivery of the Original Agreement entered into Non-Competition Agreements
substantially in the form attached hereto as Exhibit C (the "Non-Competition
Agreements"), each of which shall become effective at the Effective Time.
G. Parent, Merger Sub and the Company intend that the Merger shall
constitute a reorganization within the meaning of Section 368(a) of the Code,
and in furtherance thereof intend that this Agreement shall be a "Plan of
Reorganization" within the meaning of Sections 354(a) and 361(a) of the Code.
H. The Company, Parent and Merger Sub desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger.
I. A portion of the shares of Parent Common Stock otherwise issuable by
Parent in connection with the Merger shall be placed in escrow by Parent, the
release of which amount shall be contingent upon certain events and conditions,
all as set forth in Article 7 herein.
NOW, THEREFORE, in consideration of the covenants, promises,
representations and warranties set forth herein, and for other good and valuable
consideration (the receipt and sufficiency of which are hereby acknowledged by
the parties), intending to be legally bound hereby, the parties agree as
follows:
ARTICLE 1
THE MERGER
1.1 The Merger. At the Effective Time and subject to and upon the terms
and conditions of this Agreement and the applicable provisions of the California
Code, Merger Sub shall be merged with and into the Company, the separate
corporate existence of Merger Sub shall cease, and the Company shall continue as
the surviving corporation. The Company is sometimes referred to herein as the
"Surviving Corporation."
1.2 Effective Time. Unless this Agreement is earlier terminated pursuant
to Section 8.1, the closing of the Merger (the "Closing") will take place as
soon as reasonably practicable following satisfaction or waiver of the
conditions set forth in Article 6 at the offices of Irell & ▇▇▇▇▇▇▇ LLP, ▇▇▇▇
▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, unless another place or
time is agreed to by Parent and the Company; and the parties shall use their
best efforts to have the Closing take place by August 31, 2000. The date upon
which the Closing actually occurs is herein referred to as the "Closing Date."
On the Closing Date, the parties hereto shall cause the Merger to be consummated
by filing a California Agreement of Merger (or like instrument), in
substantially the form attached hereto as Exhibit D (the "California Agreement
of Merger"), with the Secretary of State of the State of California, in
accordance with the relevant provisions of applicable law (the time of
acceptance by the Secretary of State of the State of California of such filing
or such
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later time as may be agreed to by the parties and set forth in the Agreement of
Merger being referred to herein as the "Effective Time").
1.3 Effect of the Merger on Constituent Corporations. At the Effective
Time, the effect of the Merger shall be as provided in the applicable provisions
of the California Code. Without limiting the generality of the foregoing, and
subject thereto, at the Effective Time, all the property, rights, privileges,
powers and franchises of Merger Sub and the Company shall vest in the Surviving
Corporation, and all debts, liabilities, obligations, restrictions, disabilities
and duties of Merger Sub and the Company shall become the debts, liabilities,
obligations, restrictions, disabilities and duties of the Surviving Corporation.
1.4 Articles of Incorporation and By-Laws of Surviving Corporation.
(a) At the Effective Time, the articles of incorporation of the
Company, as in effect immediately prior to the Effective Time, shall be amended
and restated in their entirety in the form set forth as Annex 1 to Exhibit D to
this Agreement, and, as so amended and restated, shall be the articles of
incorporation of the Surviving Corporation from and after the Effective Time
until thereafter amended as provided by law and such articles of incorporation
and by-laws of the Surviving Corporation.
(b) The by-laws of Merger Sub, as in effect immediately prior to
the Effective Time, shall be the by-laws of the Surviving Corporation until
thereafter amended as provided by such by-laws, the articles of incorporation
and applicable law.
1.5 Directors and Officers of Surviving Corporation. The directors of
Merger Sub immediately prior to the Effective Time shall be the directors of the
Surviving Corporation, each to hold office in accordance with the articles of
incorporation and by-laws of the Surviving Corporation. The officers of Merger
Sub immediately prior to the Effective Time shall be the officers of the
Surviving Corporation, each to hold office in accordance with the by-laws of the
Surviving Corporation.
1.6 Maximum Number of Shares of Parent Common Stock to be Issued; Effect
on Outstanding Securities of the Company. The maximum number of shares of Parent
Common Stock to be issued (including Parent Common Stock to be reserved for
issuance upon exercise of any of the Company Options, Company Warrants or
Company Stock Purchase Rights to be assumed by Parent as provided herein) in
exchange for the acquisition by Parent of all shares of Company Capital Stock
which are issued and outstanding immediately prior to the Effective Time and all
vested and unvested Company Options, Company Warrants and Company Stock Purchase
Rights which are then outstanding shall be the Aggregate Share Number. No
adjustment shall be made in the number of shares of Parent Common Stock issued
in the Merger as a result of any consideration (in any form whatsoever) received
by the Company from the date hereof to the Effective Time as a result of any
exercise, conversion or exchange of Company Options, Company Warrants or Company
Stock Purchase Rights. On the terms and subject to the conditions of this
Agreement, at the Effective Time, by virtue of the Merger and without any action
on the part of Parent, Merger Sub, the Company or the holder of any shares of
the Company Capital Stock or Company Options, Company Warrants or Company Stock
Purchase Rights, the following shall occur:
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(a) Conversion of Company Capital Stock. Each share of Company
Capital Stock issued and outstanding immediately prior to the Effective Time
(other than any shares of Company Capital Stock to be canceled pursuant to
Section 1.6(b) and any Dissenting Shares (as provided in Section 1.7)) will be
cancelled and extinguished and each share of Company Series A Preferred Stock,
Company Series B Preferred Stock and Company Common Stock which is issued and
outstanding immediately prior to the Effective Time shall be converted
automatically into the right to receive, following the expiration or early
termination of any waiting period under the HSR Act which is applicable to the
holder of such share (due to the making of a filing by such holder under the HSR
Act), that number of shares of Parent Common Stock equal to the Series A
Exchange Ratio, the Series B Exchange Ratio or the Common Stock Exchange Ratio,
as applicable (subject to Section 1.6(e).
(b) Cancellation of Parent-Owned and Company-Owned Stock. Each
share of Company Capital Stock owned by Parent or the Company or any Subsidiary
of Parent or the Company immediately prior to the Effective Time shall be
automatically canceled and extinguished without any conversion thereof and
without any further action on the part of Parent or the Company.
(c) Company Options and Company Stock Option Plan. All unexpired
and unexercised Company Options, Company Warrants and Company Stock Purchase
Rights, then outstanding, whether vested or unvested, together with the Company
Stock Option Plan, shall be assumed by Parent in accordance with provisions
described below.
(i) At the Effective Time, each unexpired and
unexercised Company Option, Company Warrant and Company Stock Purchase Right
then outstanding, whether vested or unvested, shall be, in connection with the
Merger, assumed by Parent, together with the Company Stock Option Plan. Each
Company Option, Company Warrant and Company Stock Purchase Right so assumed by
Parent under this Agreement shall continue to have, and be subject to, the same
terms and conditions as were applicable to such Company Option, Company Warrant
or Company Stock Purchase Right immediately prior to the Effective Time
(including, but not limited to, any repurchase rights or vesting provisions),
provided that (I) such Company Option, Company Warrant or Company Stock Purchase
Right, as the case may be, shall be exercisable for that number of whole shares
of Parent Common Stock equal to the product of the number of shares of Company
Capital Stock that were issuable upon exercise of such Company Option, Company
Warrant or Company Stock Purchase Right immediately prior to the Effective Time
multiplied by the Exchange Ratio applicable to the series of Company Capital
Stock subject to such Company Option, Company Warrant or Company Stock Purchase
Right (rounded down to the nearest whole number of shares of Parent Common
Stock) and (II) the per share exercise price for the shares of Parent Common
Stock issuable upon exercise of such assumed Company Option, Company Warrant or
Company Stock Purchase Right, as the case may be, shall be equal to the quotient
determined by dividing the exercise price per share of Company Capital Stock at
which such Company Option, Company Warrant or Company Stock Purchase Right was
exercisable immediately prior to the Effective Time by the Exchange Ratio
applicable to the series of Company Capital Stock subject to such Company
Option, Company Warrant or Company Stock Purchase Right (rounded to the nearest
whole cent).
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(ii) It is the intention of the parties that the Company
Options assumed by Parent shall qualify following the Effective Time as
incentive stock options as defined in Section 422 of the Code to the same extent
the Company Options qualified as incentive stock options immediately prior to
the Effective Time and the provisions of this Section 1.6(c) shall be applied
consistent with this intent.
(iii) Promptly following the Effective Time, Parent will
issue to each holder of an unexpired and unexercised Company Option, Company
Warrant or Company Stock Purchase Right an instrument evidencing the foregoing
assumption of such Company Option, Company Warrant or Company Stock Purchase
Right by Parent.
(iv) At the Effective Time, Parent shall assume the
Company's obligations, and shall be assigned the Company's repurchase rights and
purchase options, under any Restricted Stock Purchase Agreements listed on
Schedule 1.6(c)(iv), true and correct copies of which have been made available
by the Company to Parent. Any and all restrictions on the Company Restricted
Stock issued pursuant to such agreements which do not lapse in accordance with
their terms (as in effect on January 1, 2000) shall continue in full force and
effect until such restrictions lapse pursuant to the terms of such agreements,
and any repurchase rights or repurchase options which the Company has with
respect to the Company Restricted Stock shall also continue in full force and
effect.
(v) Parent will reserve sufficient shares of Parent
Common Stock for issuance pursuant to this Section 1.6(c).
(d) Adjustments to Exchange Ratios. The Exchange Ratios shall be
equitably adjusted to reflect fully the effect of any stock split, reverse
split, stock combination, stock dividend (including any dividend or distribution
of securities convertible into Parent Common Stock or Company Capital Stock),
reorganization, reclassification, recapitalization or other like change with
respect to Parent Common Stock or Company Capital Stock the effective date of
which occurs after the date hereof and prior to the Effective Time.
(e) Fractional Shares. No fraction of a share of Parent Common
Stock will be issued in the Merger, but in lieu thereof, each holder of shares
of Company Capital Stock who would otherwise be entitled to a fraction of a
share of Parent Common Stock (after aggregating all fractional shares of Parent
Common Stock to be received by such holder) shall be entitled to receive from
Parent an amount of cash (rounded to the nearest whole cent) equal to the
product of (a) such fraction, multiplied by (b) the Closing Price.
(f) Capital Stock of Merger Sub. Each share of common stock of
Merger Sub issued and outstanding immediately prior to the Effective Time shall
be converted into and exchanged for one validly issued, fully paid and
nonassessable share of common stock of the Surviving Corporation. From and after
the Effective Time, each share certificate of Merger Sub theretofore evidencing
ownership of any such shares shall evidence ownership of such shares of capital
stock of the Surviving Corporation.
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1.7 Dissenting Shares.
(a) Notwithstanding any provision of this Agreement to the
contrary, any shares of Company Capital Stock held by a holder who has demanded
and perfected appraisal rights for such shares in accordance with the California
Code and who, as of the Effective Time, has not effectively withdrawn or lost
such appraisal rights ("Dissenting Shares") shall not be converted into or
represent a right to receive Parent Common Stock pursuant to Section 1.6, but
the holder thereof shall only be entitled to such rights as are granted by the
California Code.
(b) Notwithstanding the provisions of Section 1.7(a) above, if
any holder of shares of Company Capital Stock who demands appraisal of such
shares under the California Code shall effectively withdraw or lose (through
failure to perfect or otherwise) the right to appraisal, then, as of the later
of (i) the Effective Time or (ii) the occurrence of such event, such holder's
shares shall automatically be converted into and represent only the right to
receive Parent Common Stock as provided in Section 1.6, without interest
thereon, upon surrender to the Company of the certificate representing such
shares in accordance with Section 1.8 of this Agreement.
(c) The Company shall give Parent (i) prompt notice of its
receipt of any written demands for appraisal of any shares of Company Capital
Stock, withdrawals of such demands, and any other instruments relating to the
Merger served pursuant to the California Code and received by the Company and
(ii) the opportunity to participate in all negotiations and proceedings with
respect to demands for appraisal under the California Code. The Company shall
not, except with the prior written consent of Parent or as may be required under
applicable law, voluntarily make any payment with respect to any demands for
appraisal of Company Capital Stock or offer to settle or settle any such
demands.
1.8 Exchange Procedures.
(a) Parent Common Stock. On the Closing Date, Parent shall
deposit with the Exchange Agent for exchange in accordance with this Article 1,
the aggregate number of shares of Parent Common Stock issuable in exchange for
outstanding shares of Company Capital Stock; provided, however, that, on behalf
of the holders of Company Capital Stock, Parent shall deposit into an escrow
account a number of shares of Parent Common Stock equal to the Escrow Amount.
The portion of the Escrow Amount contributed on behalf of each holder of Company
Capital Stock shall be in proportion to the aggregate number of shares of Parent
Common Stock which such holder would otherwise be entitled to receive by virtue
of ownership of outstanding shares of Company Capital Stock.
(b) Exchange Procedures. As soon as practicable after the
Effective Time, the Surviving Corporation shall cause to be mailed to each
holder of record of a certificate or certificates which immediately prior to the
Effective Time represented outstanding shares of Company Capital Stock (the
"Certificates") and which shares were converted into the right to receive shares
of Parent Common Stock pursuant to Section 1.6, (i) a letter of transmittal in
customary form (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Exchange Agent and shall be in such form and have such other
provisions
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as Parent may reasonably specify) and (ii) instructions for use in effecting the
surrender of the Certificates in exchange for certificates representing shares
of Parent Common Stock and cash in lieu of fractional shares. Upon surrender of
a Certificate for cancellation to the Exchange Agent or to such other agent or
agents as may be appointed by Parent, together with such letter of transmittal,
duly completed and validly executed in accordance with the instructions thereto,
the holder of such Certificate shall be entitled to receive in exchange therefor
a certificate representing the number of whole shares of Parent Common Stock
(less the number of shares of Parent Common Stock to be deposited in the Escrow
Fund on such holder's behalf pursuant to Article 7 hereof), to which such holder
is entitled pursuant to Section 1.6 and cash in lieu of fractional shares to
which such holder is entitled pursuant to Section 1.6(e), and the Certificate so
surrendered shall be canceled. As soon as practicable after the Effective Time,
and subject to and in accordance with the provisions of Article 7 hereof, Parent
shall cause to be distributed to the Depositary Agent a certificate or
certificates (in such denominations as may be requested by the Depositary Agent)
representing that number of shares of Parent Common Stock equal to the Escrow
Amount, which certificate shall be registered in the name of the Depositary
Agent. Such shares shall be beneficially owned by the holders on whose behalf
such shares were deposited in the Escrow Fund and shall be available to
compensate Parent as provided in Article 7. Until surrendered, each outstanding
Certificate that, prior to the Effective Time, represented shares of Company
Capital Stock will be deemed from and after the Effective Time, for all
corporate purposes, other than the payment of dividends, to evidence the
ownership of the number of full shares of Parent Common Stock into which such
shares of Company Capital Stock shall have been so converted (subject only to,
if applicable, the expiration or early termination of any waiting period under
the HSR Act which is applicable to the holder of such shares due to the making
of a filing by such holder under the HSR Act) and cash in lieu of fractional
shares.
(c) Distributions With Respect to Unexchanged Shares of Company
Capital Stock. No dividends or other distributions with respect to Parent Common
Stock declared or made after the Effective Time and with a record date after the
Effective Time will be paid to the holder of any unsurrendered Certificate with
respect to the shares of Parent Common Stock represented thereby until the
holder of record of such Certificate shall surrender such Certificate. Subject
to applicable law, following surrender of any such Certificate, there shall be
paid to the record holder of the certificates representing whole shares of
Parent Common Stock issued in exchange therefor, without interest, at the time
of such surrender, the amount of dividends or other distributions with a record
date after the Effective Time theretofore payable (but for the provisions of
this Section 1.8(c)) with respect to such whole shares of Parent Common Stock.
(d) Transfers of Ownership. If any certificate for shares of
Parent Common Stock is to be issued pursuant to the Merger in a name other than
that in which the Certificate surrendered in exchange therefor is registered, it
will be a condition of the issuance thereof that the Certificate so surrendered
will be properly endorsed and otherwise in proper form for transfer and that the
person requesting such exchange will have paid to Parent or any agent designated
by it any transfer or other taxes required by reason of the issuance of a
certificate for shares of Parent Common Stock in any name other than that of
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the registered holder of the Certificate surrendered, or established to the
satisfaction of Parent or any agent designated by it that such tax has been paid
or is not payable.
1.9 No Further Ownership Rights in Company Capital Stock. All shares of
Parent Common Stock issued upon the surrender for exchange of shares of Company
Capital Stock in accordance with the terms hereof (including any cash in lieu of
fractional shares) shall be deemed to have been issued in full satisfaction of
all rights pertaining to such shares of Company Capital Stock, and there shall
be no further registration of transfers on the records of the Company of shares
of Company Capital Stock which were outstanding immediately prior to the
Effective Time. If, after the Effective Time, Certificates are presented to the
Surviving Corporation for any reason, they shall be canceled and exchanged as
provided in this Article 1.
1.10 Lost, Stolen or Destroyed Certificates. In the event any
certificates evidencing shares of Company Capital Stock shall have been lost,
stolen or destroyed, the Exchange Agent shall issue certificates representing
such shares of Parent Common Stock and cash in lieu of fractional shares in
exchange for such lost, stolen or destroyed Certificates, upon the making of an
affidavit of that fact by the holder thereof; provided, however, that Parent or
the Exchange Agent may, in its discretion and as a condition precedent to the
issuance thereof, require the owner of such lost, stolen or destroyed
Certificates to provide an indemnity or deliver a bond in such sum as it may
reasonably direct as indemnity against any claim that may be made against Parent
or the Exchange Agent with respect to the Certificates alleged to have been
lost, stolen or destroyed.
1.11 Exemption From Registration; California Permit. Parent and the
Company intend that the shares of Parent Common Stock to be issued pursuant to
Section 1.6 in connection with the Merger will be issued in a transaction exempt
from registration under the Securities Act of 1933, as amended (including the
rules and regulations promulgated thereunder, the "Securities Act"), by reason
of Section 3(a)(10) thereof or pursuant to Section 5.1(c). by reason of Section
4(2) of the Securities Act and SEC rules and regulations promulgated thereunder.
Subject to the provisions of Section 5.1(c), Parent and the Company intend that
the shares of Parent Common Stock to be issued pursuant to Section 1.6 in
connection with the Merger will be qualified under the California Code, pursuant
to Section 25121 thereof, after a fairness hearing has been held by the
Commissioner of Corporations of the State of California pursuant to the
authority granted by Section 25142 of such law (the "Fairness Hearing"), and (if
deemed necessary by Parent in its good faith judgment) the Fairness Hearing
shall also address the assumption by Parent of all Company Options, Company
Warrants and Company Stock Purchase Rights pursuant to Section 1.6 hereof. Each
of Parent and the Company shall use all requisite commercially reasonable
efforts (i) to file promptly following the execution and delivery of this
Agreement, an application for issuance of a permit pursuant to Section 25121 of
the California Code to issue such securities and (if deemed necessary by Parent
in its good faith judgment) to assume such Company Options, Company Warrants and
Company Stock Purchase Rights (the "California Permit") and (ii) to obtain the
California Permit as promptly as practicable thereafter.
1.12 Taking of Necessary Action; Further Action. If, at any time after
the Effective Time, any such further action is necessary or desirable to carry
out the purposes of
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this Agreement and to vest the Surviving Corporation with full right, title and
possession to all assets, property, rights, privileges, powers and franchises of
the Company, the officers and directors of the Surviving Corporation are fully
authorized to take, and will take, all such lawful and necessary action.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent and Merger Sub,
subject to such exceptions as are specifically disclosed with respect to
specific numbered and lettered sections and subsections of this Article 2 in the
disclosure schedule and schedule of exceptions delivered to Parent concurrently
with the execution and delivery of this Agreement (the "Company Disclosure
Schedule") (a draft of which was delivered to Parent concurrently with the
execution and delivery of the Original Agreement), and numbered with
corresponding numbered and lettered sections and subsections, as follows (it
being agreed that for purposes of the representations and warranties set forth
in this Article 2, the term the "Company" shall be deemed to refer to the
Company and its Subsidiary on a consolidated basis, except where the context
reasonably indicates otherwise):
2.1 Organization and Qualification. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the state of
its incorporation, and has full corporate power to conduct its business as now
conducted and as currently proposed to be conducted and to own, use, license and
lease its Assets and Properties. The Company is duly qualified, licensed or
admitted to do business and is in good standing as a foreign corporation in each
jurisdiction in which the ownership, use, licensing or leasing of its Assets and
Properties, or the conduct or nature of its business, makes such qualification,
licensing or admission necessary, except for such failures to be so duly
qualified, licensed or admitted and in good standing that could not reasonably
be expected to have a material adverse effect on the Business or Condition of
the Company. Section 2.1 of the Company Disclosure Schedule sets forth each
jurisdiction where the Company is so qualified, licensed or admitted to do
business and separately lists each other jurisdiction in which the Company owns,
uses, licenses or leases its Assets and Properties, or conducts business or has
employees or engages independent contractors.
2.2 Authority Relative to this Agreement. Subject only to the requisite
approval of the Merger and this Agreement by the shareholders of the Company,
the Company has full corporate power to execute and deliver this Agreement, to
perform its obligations hereunder and to consummate the transactions
contemplated hereby. The Company's Board of Directors has approved this
Agreement and declared its advisability. The execution and delivery by the
Company of this Agreement and the other agreements attached hereto as exhibits
(the "Ancillary Agreements") to which the Company is a party and the
consummation by the Company of the transactions contemplated hereby and thereby,
and the performance by the Company of its obligations hereunder and thereunder,
have been duly and validly authorized by all necessary action by the Board of
Directors of the Company, and no other action on the part of the Board of
Directors of the Company is required to authorize the execution, delivery and
performance of this Agreement and the Ancillary Agreements to which the Company
is a party and the consummation by the Company of the transactions contemplated
hereby and thereby. This Agreement and the
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Ancillary Agreements to which the Company is a party have been or will be, as
applicable, duly and validly executed and delivered by the Company and, assuming
the due authorization, execution and delivery hereof by Parent and Merger Sub,
each constitutes or will constitute, as applicable, a legal, valid and binding
obligation of the Company enforceable against the Company in accordance with its
respective terms, except as the enforceability thereof may be limited by
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or
other similar Laws relating to the enforcement of creditors' rights generally
and by general principles of equity.
2.3 Capital Stock. The authorized capital stock of the Company consists
only of 30,000,000 shares of Common Stock, no par value per share (the "Company
Common Stock"), of which 9,634,250 shares of Common Stock are issued and
outstanding as of the Amendment Date, and 11,000,000 shares of Preferred Stock,
no par value per share (the "Company Preferred Stock"). The Company is in the
process of increasing the authorized number of shares of Company Common Stock
from 30,000,000 to 100,000,000; and Parent hereby consents to such increase. The
designation and status of the Company Preferred Stock is as follows: (i)
2,000,000 shares are designated as Series A Preferred Stock (the "Series A
Preferred Stock"), 1,776,333 of which are issued and outstanding as of the date
hereof, and (ii) 2,457,250 shares are designated as Series B Preferred Stock
(the "Series B Preferred Stock"), 1,695,503 of which are issued and outstanding
as of the date hereof. All of the issued and outstanding shares of Company
Common Stock and Company Preferred Stock are validly issued, fully paid and
nonassessable, and have been issued in compliance with all applicable federal,
state and foreign securities Laws. Except as set forth in Section 2.3 of the
Company Disclosure Schedule, no shares of Company Common Stock or Company
Preferred Stock are held in treasury or are authorized or reserved for issuance
and no Options are outstanding. Section 2.3 of the Company Disclosure Schedule
lists the name and state of residence of each holder of Company Common Stock and
Company Preferred Stock provided to the Company by such holder. With respect to
any Company Common Stock or Company Preferred Stock that has been issued subject
to a repurchase option on the part of the Company, Section 2.3 of the Company
Disclosure Schedule sets forth the holder thereof, the number and type of
securities covered thereby, and the vesting schedule thereof (including a
description of the circumstances under which such vesting schedule can or will
be accelerated). Except as set forth in Section 2.3 of the Company Disclosure
Schedule, there are no outstanding Company Options, Company Warrants or Company
Stock Purchase Rights or agreements, arrangements or understandings to which the
Company is a party (written or oral) to issue any Options with respect to the
Company and there are no preemptive rights or agreements, arrangements or
understandings to issue preemptive rights with respect to the issuance or sale
of Company Capital Stock created by statute, the articles of incorporation or
by-laws of the Company, or any agreement or other arrangement to which the
Company is a party or to which it is bound and there are no agreements,
arrangements or understandings to which the Company is a party (written or oral)
pursuant to which the Company has the right to elect to satisfy any Liability by
issuing Company Common Stock or Equity Equivalents. With respect to each Company
Option, Company Warrant and Company Stock Purchase Right, Section 2.3 of the
Company Disclosure Schedule sets forth the holder thereof, the number and type
of securities issuable thereunder, and, if applicable, the exercise price
therefor, the exercise period and vesting schedule thereof (including a
description of the circumstances under which such vesting schedule can
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or will be accelerated). All of the Company Options, Company Warrants and
Company Stock Purchase Rights were issued in compliance with all applicable
federal, state and foreign securities Laws. The terms of the Company Stock
Option Plan and the applicable stock option agreements related to the
outstanding Company Options permit the assumption or substitution of options to
purchase Parent Common Stock as provided in this Agreement, without the consent
or approval of the holders of such securities, Company Shareholders' Action or
otherwise and without any acceleration of the exercise schedule or vesting
provisions in effect for those options. True and complete copies of all
agreements and instruments relating to or issued under the Company Stock Option
Plan have been provided to Parent and such agreements and instruments have not
been amended, modified or supplemented, and there are no agreements to amend,
modify or supplement such agreements or instruments in any case from the form
provided to Parent. Except for the Support Agreements, the Company is not a
party or subject to any agreement or understanding, and, to the Company's
knowledge, there is no agreement, arrangement or understanding between or among
any Persons which affects, restricts or relates to voting, giving of written
consents, dividend rights or transferability of shares with respect to the
Company Capital Stock, including without limitation any voting trust agreement
or proxy. Except as set forth in Section 2.3 of the Company Disclosure Schedule,
no debt securities of the Company are issued and outstanding. The fair market
value of the aggregate Merger consideration exceeds the amount set forth in
Section 6.2 of the Company's Restated Articles of Incorporation that would
otherwise permit the holders of shares of the Series B Preferred Stock to
receive the special consideration set forth in such Section 6.2 and,
accordingly, Section 6.2 of the Company's Restated Articles of Incorporation is
inapplicable to the Merger.
2.4 No Subsidiaries. Except as set forth in Section 2.4 of the Company
Disclosure Schedule, the Company has no (and prior to the Closing will have no)
Subsidiaries and does not (and prior to the Closing will not) otherwise hold any
equity, membership, partnership, joint venture or other ownership interest in
any Person.
2.5 Directors and Officers. The name of each director and officer of the
Company on the date hereof, and his or her position with the Company, are listed
in Section 2.5 of the Company Disclosure Schedule.
2.6 No Conflicts. The execution and delivery by the Company of this
Agreement does not, the performance by the Company of its obligations under this
Agreement and the consummation of the transactions contemplated hereby do not
and will not:
(a) conflict with or result in a violation or breach of any of
the terms, conditions or provisions of the articles of incorporation or by-laws
of the Company;
(b) subject to obtaining the consents, approvals and actions,
making the filings and giving the notices disclosed in Section 2.6 of the
Company Disclosure Schedule, if any, conflict with or result in a violation or
breach of any Law or Order applicable to the Company or any of its Assets and
Properties; or
(c) except as disclosed in Section 2.6 of the Company Disclosure
Schedule and except as would not have a material adverse effect on the Business
or
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Condition of the Company (provided that this second exception shall not apply
with respect to any of the following which affects or relates to any Company
Intellectual Property), (i) conflict with or result in a violation or breach of,
(ii) constitute a default (or an event that, with or without notice or lapse of
time or both, would constitute a default) under, (iii) require the Company to
obtain any consent, approval or action of, make any filing with or give any
notice to any Person as a result or under the terms of (except for (I) the
filing of the Agreement of Merger, together with the required officer's
certificates; (II) such consents approvals, orders, authorizations,
registrations, declarations and filings as may be required under applicable
state or federal securities laws; and (III) such filings as may be required
under the HSR Act), (iv) result in or give to any Person any right of
termination, cancellation, acceleration or modification in or with respect to,
(v) result in or give to any Person any additional rights or entitlement to
increased, additional, accelerated or guaranteed payments or performance under,
(vi) result in the creation or imposition of (or the obligation to create or
impose) any Lien upon the Company or any of its Assets and Properties under or
(vii) result in the loss of a material benefit under, any of the terms,
conditions or provisions of any Contract or License to which the Company is a
party or by which any of the Company's Assets and Properties is bound.
2.7 Books and Records; Organizational Documents. The minute books and
stock record books and other similar records of the Company have been provided
or made available to Parent or its counsel prior to the execution of this
Agreement, are complete and correct in all respects and have been maintained in
accordance with sound business practices. Such minute books contain a true and
complete record of all actions taken at all meetings and by all written consents
in lieu of meetings of the directors, shareholders and committees of the Board
of Directors of the Company from the date of the Company's incorporation through
the date hereof. The Company has prior to the execution of this Agreement
delivered to Parent true and complete copies of its articles of incorporation
and by-laws, both as amended through the date hereof. The Company is not in
violation of any provisions of its articles of incorporation or bylaws.
2.8 Company Financial Statements. Section 2.8 of the Company Disclosure
Schedule sets forth the Company Financials. The Company Financials delivered to
Parent are correct and complete in all material respects and have been prepared
in accordance with GAAP applied on a basis consistent throughout the periods
indicated and consistent with each other (except as may be indicated in the
notes thereto as delivered to Parent prior to the date hereof, and, in the case
of the Interim Financial Statements, subject to normal year-end adjustments,
which adjustments will not be material in amount or significance). The Company
Financials present fairly and accurately the financial condition and operating
results of the Company as of the dates and during the periods indicated therein,
subject, in the case of the Interim Financial Statements, to normal year-end
adjustments, which adjustments will not be material in amount or significance
and except that the Interim Financial Statements may not contain footnotes.
Except as set forth in Section 2.8 to the Company Disclosure Schedule, since
January 1, 1997, there has been no change in any accounting policies,
principles, methods or practices, including any change with respect to reserves
(whether for bad debts, contingent liabilities or otherwise), of the Company.
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2.9 Absence of Changes. Since March 31, 2000, except as set forth in
Section 2.9 of the Company Disclosure Schedule, there has not been any material
adverse change in the Business or Condition of the Company or any occurrence or
event which, individually or in the aggregate could be reasonably expected to
have any material adverse change in the Business or Condition of the Company.
Since the beginning of its 2000 fiscal year, the Company has operated its
business in accordance with its 2000 operating plan (a copy of which has been
provided to and approved by Parent). In addition, without limiting the
generality of the foregoing, except as expressly contemplated by this Agreement
and except as disclosed in Section 2.9 of the Company Disclosure Schedule, since
March 31, 2000:
(a) the Company has not entered into any Contract, commitment or
transaction or incurred any Liabilities outside of the ordinary course of
business, consistent with past practice;
(b) the Company has not entered into any Contract in connection
with any transaction involving a Business Combination;
(c) the Company has not altered or entered into any Contract or
other commitment to alter, its interest in any corporation, association, joint
venture, partnership or business entity in which the Company directly or
indirectly holds any interest on the date hereof;
(d) the Company has not entered into any strategic alliance,
joint development or joint marketing Contract;
(e) there has not been any material amendment or other
modification (or agreement to do so) or violation of the terms of, any of the
Contracts set forth or described in the Company Disclosure Schedule;
(f) the Company has not entered into any transaction with any
officer, director, shareholder, Affiliate or Associate of the Company, other
than pursuant to any Contract in effect on the Audited Financial Statement Date
and disclosed to Parent pursuant to (and so identified in) Section 2.9(f),
Section 2.18(a) or Section 2.20 of the Company Disclosure Schedule or other than
pursuant to any contract of employment and listed pursuant to Section 2.18(a) of
the Company Disclosure Schedule;
(g) the Company has not entered into or amended in any material
respect any Contract pursuant to which any other Person is granted
manufacturing, marketing, distribution, licensing or similar rights of any type
or scope with respect to any products of the Company or Company Intellectual
Property other than as contemplated by the Company's Contracts or Licenses
disclosed in the Company Disclosure Schedule;
(h) no Action or Proceeding has been commenced or, to the
knowledge of the Company, threatened by or against the Company;
(i) the Company has not declared or set aside or paid any
dividends on or made any other distributions (whether in cash, stock or
property) in respect of any Company
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Capital Stock or Equity Equivalents, or effected or approved any split,
combination or reclassification of any Company Capital Stock or Equity
Equivalents or issued or authorized the issuance of any other securities in
respect of, in lieu of or in substitution for shares of Company Capital Stock or
Equity Equivalents, or repurchased, redeemed or otherwise acquired, directly or
indirectly, any shares of Company Capital Stock or Equity Equivalents, except
repurchases of Company Capital Stock pursuant to agreements with Company
employees, officers, directors and consultants relating to repurchases at cost
upon termination of service with the Company;
(j) except for (i) the issuance of shares of Company Capital
Stock upon exercise or conversion of then-outstanding Company Options, Company
Warrants, Company Stock Purchase Rights or Company Preferred Stock listed in
Section 2.3 of the Company Disclosure Schedule, or (ii) the issuance of options
available for grant under the Company's existing Company Stock Option Plan in
the ordinary course of business to (x) employees hired after the Audited
Financial Statement Date on terms and in amounts consistent with past practice
or (y) existing employees on terms and in amounts consistent, and otherwise in
accordance, with past practice, (A) the Company has not issued, granted,
delivered, sold or authorized or proposed to issue, grant, deliver or sell, or
purchased or proposed to purchase, any shares of Company Capital Stock, Equity
Equivalents, (B) the Company has not modified or amended the rights of any
holder of any outstanding shares of Company Capital Stock or Equity Equivalents
(including to reduce or alter the consideration to be paid to the Company upon
the exercise of any outstanding Company Options, Company Warrants, Company Stock
Purchase Rights or other Equity Equivalents), (C) there have not been any
agreements, arrangements, plans or understandings with respect to any such
modification or amendment; and (D) the Company has not granted any Options with
an exercise price of less than the fair market value of Company Common Stock on
the date the Option was granted (as determined in good faith by the Company's
board of directors;
(k) there has not been any amendment to the Company's articles
of incorporation or by-laws;
(l) there has not been any transfer (by way of a License or
otherwise) to any Person of rights to any Company Intellectual Property;
(m) the Company has not made or agreed to make any disposition
or sale of, waiver of rights to, license or lease of, or incurrence of any Lien
on, any Assets and Properties of the Company, other than dispositions of
inventory, or nonexclusive licenses of products to Persons to whom the Company
had granted licenses of its products at the Audited Financial Statement Date, in
the ordinary course of business of the Company consistent with past practice;
(n) the Company has not made or agreed to make any purchase of
any Assets and Properties of any Person other than (i) acquisitions of
inventory, or licenses of products, in the ordinary course of business of the
Company consistent with past practice and (ii) other acquisitions in an amount
not exceeding fifty thousand dollars ($50,000) in the case of any individual
item or one hundred fifty thousand dollars ($150,000) in the aggregate;
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(o) the Company has not made or agreed to make any capital
expenditures or commitments for additions to property, plant or equipment of the
Company constituting capital assets individually or in the aggregate in an
amount exceeding $50,000;
(p) the Company has not made or agreed to make any write-off or
write-down any determination to write off or write-down, or revalue, any of the
Assets and Properties of the Company, or change any reserves or liabilities
associated therewith, individually or in the aggregate in an amount exceeding
$50,000;
(q) the Company has not made or agreed to make payment,
discharge or satisfaction, in an amount in excess of $25,000, in any one case,
or $50,000 in the aggregate, of any claim, Liability or obligation (whether
absolute, accrued, asserted or unasserted, contingent or otherwise), other than
the payment, discharge or satisfaction in the ordinary course of business of
Liabilities reflected or reserved against in the Company Financial Statements;
(r) the Company has not failed to pay or otherwise satisfy any
Liabilities of the Company presently due and payable, except such Liabilities of
the Company which are being contested in good faith by appropriate means or
procedures and which, individually or in the aggregate, are immaterial in
amount;
(s) the Company has not incurred any Indebtedness or guaranteed
any Indebtedness in an aggregate amount exceeding $50,000 or issued or sold any
debt securities of the Company or guaranteed any debt securities of others;
(t) the Company has not granted any severance or termination pay
to any director, officer employee or consultant, except payments made pursuant
to written Contracts outstanding on the date hereof, copies of which have been
delivered to Parent and the terms of which are disclosed in Section 2.9(t) of
the Company Disclosure Schedule;
(u) except pursuant to a Contract disclosed to Parent pursuant
to Section 2.9(f) or 2.18 of the Company Disclosure Schedule, the Company has
not granted or approved any increase of greater than five percent (5%) in
salary, rate of commissions, rate of consulting fees or any other compensation
of any current or former officer, director, shareholder, employee, independent
contractor or consultant of the Company;
(v) the Company has not paid or approved the payment of any
consideration of any nature whatsoever (other than salary, commissions or
consulting fees and customary benefits paid to any current or former officer,
director, shareholder, employee or consultant of the Company) to any current or
former officer, director, shareholder, employee, independent contractor or
consultant of the Company;
(w) the Company has not established or modified any (i) targets,
goals, pools or similar provisions under any Plan, employment Contract or other
employee compensation arrangement or independent contractor Contract or other
compensation arrangement or (ii) salary ranges, increased guidelines or similar
provisions in respect of any Plan, employment Contract or other employee
compensation arrangement or independent contractor Contract or other
compensation arrangement;
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(x) the Company has not adopted, entered into, amended, modified
or terminated (partially or completely) any Plan;
(y) the Company has not paid any discretionary or stay bonus;
(z) the Company has not taken or approved any action, including
the acceleration of vesting of any Company Options or Company Warrants, or other
rights to acquire shares of capital stock of the Company, which could jeopardize
the status of the Merger as a tax-free reorganization;
(aa) the Company has not made or changed any material election
in respect of Taxes, adopted or changed any accounting method in respect of
Taxes, entered into any tax allocation agreement, tax sharing agreement, tax
indemnity agreement or closing agreement, settled or compromised any claim or
assessment in respect of Taxes, or consented to any extension or waiver of the
limitation period applicable to any claim or assessment in respect of Taxes with
any Taxing Authority or otherwise;
(bb) the Company has not made any change in accounting policies,
principles, methods, practices or procedures (including without limitation for
bad debts, contingent liabilities or otherwise, respecting capitalization or
expense of research and development expenditures, depreciation or amortization
rates or timing of recognition of income and expense);
(cc) other than in the ordinary course of business, the Company
has not made any representation or proposal to, or engaged in substantive
discussions with, any of the holders (or their representatives) of any
Indebtedness, or to or with any party which has issued a letter of credit which
benefits the Company;
(dd) the Company has not commenced or terminated, or made any
change in, any line of business;
(ee) the Company has not failed to renew any insurance policy;
no insurance policy of the Company has been cancelled or materially amended; and
the Company has given all notices and presented all claims (if any) under all
such policies in a timely fashion;
(ff) there has been no material amendment or non-renewal of any
of the Company's Approvals, and the Company has used commercially reasonable
efforts to maintain such Approvals and has observed in all material respects all
Laws and Orders applicable to the conduct of the Company's business or the
Company's Assets and Properties;
(gg) the Company has taken all action required to procure,
maintain, renew, extend or enforce any Company Intellectual Property, including,
but not limited to, submission of required documents or fees during the
prosecution of patent, trademark or other applications for Registered
Intellectual Property rights;
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(hh) there has been no physical damage, destruction or other
casualty loss (whether or not covered by insurance) affecting any of the real or
personal property or equipment of the Company individually or in the aggregate
in an amount exceeding $50,000.
(ii) the Company has not repurchased, cancelled or modified the
terms of any Company Capital Stock, Equity Equivalents, Company Options, Company
Warrants, Company Stock Purchase Rights or other financial instrument that
derives value from its convertibility into Company Capital Stock or Equity
Equivalents, other than transactions entered into in the ordinary course of
business and pursuant to either (i) contractual provisions or (ii) the Company
Stock Option Plan, in each case as in effect at the time of execution and
delivery of this Agreement;
(jj) the Company has not entered into or approved any contract,
arrangement or understanding or acquiesced in respect of any arrangement or
understanding, to do, engage in or cause or having the effect of any of the
foregoing, including with respect to any Business Combination not otherwise
restricted by the foregoing paragraphs.
2.10 No Undisclosed Liabilities. Except as reflected or reserved against
in the Company Financials (including the notes thereto) or as disclosed in
Section 2.10 of the Company Disclosure Schedule, there are no Liabilities of,
relating to or affecting the Company or any of its Assets and Properties, other
than Liabilities incurred in the ordinary course of business consistent with
past practice since the Financial Statement Date and in accordance with the
provisions of this Agreement which, individually and in the aggregate, are not
material to the Business or Condition of the Company, and are not for tort or
for breach of contract.
2.11 Taxes. Except as disclosed in Section 2.11 of the Company
Disclosure Schedule:
(a) All Tax Returns required to have been filed by or with
respect to the Company or any affiliated, consolidated, combined, unitary or
similar group of which the Company is or was a member (a "Relevant Group") have
been duly and timely filed (including any extensions), and each such Tax Return
correctly and completely reflects Tax liability and all other information
required to be reported thereon. All Taxes due and payable by the Company or any
member of a Relevant Group, whether or not shown on any Tax Return, or claimed
to be due by any Tax Authority, have been paid or accrued on the balance sheet
included in the Company Financials or have otherwise been provided for as
described in Section 2.11(b). All such Tax Returns are true, complete and
correct in all material respects.
(b) The Company has not incurred any material liability for
Taxes other than as reflected on the balance sheet included in the Interim
Financial Statements through the date thereof. The unpaid Taxes of the Company
(i) did not, as of the most recent fiscal month end, exceed by any material
amount the reserve for liability for Income Tax (other than the reserve for
deferred taxes established to reflect timing differences between book and tax
income) or Other Tax set forth on the face of the Company's balance sheet
included in the Interim Financial Statements and (ii) will not exceed by any
material amount such
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reserve as adjusted for operations and transactions in the ordinary course of
business through the Closing Date, with reserves computed for this purpose in
the same manner as any such reserves were computed at the Company's year end in
its most recent Audited Financial Statements.
(c) The Company is not a party to any agreement extending the
time within which to file any Tax Return. No claim has ever been made in writing
by a Taxing Authority of any jurisdiction in which the Company or any member of
any Relevant Group does not file Tax Returns that the Company or such member is
or may be subject to taxation by that jurisdiction.
(d) The Company and each member of any Relevant Group has
withheld and paid all Taxes required to have been withheld and paid in
connection with amounts paid or owing to any employee, creditor or independent
contractor.
(e) The Company does not have knowledge of any actions by any
Taxing Authority in connection with assessing additional Taxes against or in
respect of it or any Relevant Group for any past period. There is no dispute or
claim concerning any Tax liability of the Company either (i) threatened, claimed
or raised in writing by any Taxing Authority or (ii) of which the Company is
otherwise aware. There are no Liens for Taxes upon the Assets and Properties of
the Company other than Liens for Taxes not yet due. Section 2.11 of the Company
Disclosure Schedule indicates those Tax Returns, if any, of the Company and each
member of any Relevant Group that have been audited or examined by Taxing
Authorities, and indicates those Tax Returns of the Company and each member of
any Relevant Group that currently are the subject of audit or examination.
Solely with respect to Income Taxes, the Company has delivered to Parent
complete and correct copies of all federal, state, local and foreign income Tax
Returns filed by, and all Tax examination reports and statements of deficiencies
assessed against or agreed to by, the Company and each member of any Relevant
Group.
(f) There are no outstanding agreements or waivers extending the
statutory period of limitation applicable to any Tax Returns required to be
filed by, or which include or are treated as including, the Company or with
respect to any Tax assessment or deficiency affecting the Company or any
Relevant Group.
(g) The Company has not received any written ruling related to
Taxes or entered into any agreement with a Taxing Authority relating to Taxes.
(h) The Company has no liability for the Taxes of any Person
other than the Company (i) under Section 1.1502-6 of the Treasury regulations
(or any similar provision of state, local or foreign Law), (ii) as a transferee
or successor, (iii) by Contract or (iv) otherwise.
(i) The Company (i) has neither agreed to make nor is required
to make any adjustment under Section 481 of the Code by reason of a change in
accounting method and (ii) is not a "consenting corporation" within the meaning
of Section 341(f)(1) of the Code.
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(j) The Company is not a party to or bound by any obligations
under any tax sharing, tax allocation, tax indemnity or similar agreement or
arrangement.
(k) The Company is not involved in, subject to, or a party to
any joint venture, partnership, Contract or other arrangement that is treated as
a partnership for federal, state, local or foreign Income Tax purposes.
(l) The Company was not included and is not includible in the
Tax Return of any Relevant Group with any corporation other than such a return
of which the Company is the common parent corporation.
(m) The Company has not made any payments, is not obligated to
make any payments, nor is a party to any Contract that under certain
circumstances could require it to make or give rise to any payments that are not
deductible as a result of the provisions set forth in Section 280G of the Code
or the Treasury regulations thereunder or would result in an excise tax to the
recipient of any such payment under Section 4999 of the Code.
(n) There is currently no limitation on the utilization of the
net operating losses, built-in losses, capital losses, Tax credits or other
similar items of the Company under (i) Section 382 of the Code, (ii) Section 383
of the Code, (iii) Section 384 of the Code, and (iv) Section 1502 of the Code
and Treasury regulations promulgated thereunder.
(o) All material elections with respect to income Taxes
affecting the Company are set forth in Section 2.11 of the Company Disclosure
Schedule.
(p) The Company is not nor has it ever been a United States real
property holding corporation within the meaning of Section 897(c)(1)(A)(ii) of
the Code.
2.12 Legal Proceedings.
(a) Except as set forth in Section 2.12 of the Company
Disclosure Schedule:
(i) there are no Actions or Proceedings pending or, to
the knowledge of the Company, threatened against, relating to or affecting the
Company or its Assets and Properties;
(ii) there are no facts or circumstances known to the
Company that the Company expects to give rise to any Action or Proceeding
against, relating to or, to the knowledge of the Company, directly affecting the
Company; and
(iii) the Company has not received notice, and does not
otherwise have knowledge of any Orders outstanding against the Company.
(b) Prior to the execution of this Agreement, the Company has
delivered to Parent all responses of counsel for the Company to auditor's
requests for information for the preceding three years (together with any
updates provided by such counsel) regarding Actions or Proceedings pending or
threatened against, relating to or affecting the Company. Section 2.12(b) of the
Company Disclosure Schedule sets forth all Actions or Proceedings
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relating to or affecting, or, to the knowledge of the Company, threatened
against, the Company or any of its Assets and Properties during the three-year
period prior to the date hereof.
2.13 Compliance with Laws and Orders. Except as disclosed in Section
2.13 of the Company Disclosure Schedule, the Company has not violated in any
material respect, and is not currently in material default under, any Law or
Order applicable to the Company or any of its Assets and Properties.
2.14 Plans; ERISA.
(a) Existence of Plans. Except as disclosed on Section 2.14 of
the Company Disclosure Schedule, (i) neither the Company, any Subsidiary nor any
of their respective ERISA Affiliates maintains or sponsors (or ever maintained
or sponsored), or makes or is required to make contributions to, any Plans, (ii)
none of the Plans is or was a "multi-employer plan", as defined in Section 3(37)
of ERISA, (iii) none of the Plans is or was a "defined benefit pension plan"
within the meaning of Section 3(35) of ERISA, (iv) none of the Plans provides or
provided post-retirement medical or health benefits, (v) none of the Plans is or
was a "welfare benefit fund," as defined in Section 419(e) of the Code, or an
organization described in Sections 501(c)(9) or 501(c)(20) of the Code, (vi)
neither the Company, any Subsidiary nor any of their respective ERISA Affiliates
is or was a party to any collective bargaining agreement, and (vii) neither the
Company, any Subsidiary nor any of their respective ERISA Affiliate has
announced or otherwise made any commitment to create or amend any Plan, except
as may be required by changes in Law. Notwithstanding any statement or
indication in this Agreement to the contrary, other than its obligation to
provide required COBRA continuation coverage with respect to the Company's
medical plan, there are no Plans (a) as to which Parent will be required to make
any contributions or with respect to which Parent shall have any obligation or
liability whatsoever, whether on behalf of any of the current employees of the
Company or any Subsidiary or on behalf of any other person, after the Closing,
or (b) which Parent, the Surviving Corporation or any Subsidiary will not be
able to terminate immediately after the Closing in accordance with their terms
and ERISA. With respect to each of such Plans, at the Closing there will be no
unrecorded liabilities with respect to the establishment, implementation,
operation, administration or termination of any such Plan, or the termination of
the participation in any such Plan by the Company, any Subsidiary or any of
their respective ERISA Affiliates. The Company has delivered to Parent true and
complete copies of: (i) each of the Plans and any related funding agreements
thereto (including insurance contracts) including all amendments, all of which
are legally valid and binding and in full force and effect and there are no
defaults thereunder, (ii) the currently effective Summary Plan Description
pertaining to each of the Plans, (iii) all annual reports for each of the Plans
(including all related schedules), (iv) the most recently filed PBGC Form 1 (if
applicable), (v) the most recent Internal Revenue Service determination letter,
opinion, notification or advisory letter (as the case may be) for each Plan
which is intended to constitute a qualified plan under Section 401 of the Code
and each amendment to each of the foregoing documents, and (vi) for each
unfunded Plan, financial statements consisting of (A) the consolidated statement
of assets and liabilities of such Plan as of its most recent valuation date, and
(B) the statement of changes in fund balance and in financial position or
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the statement of changes in net assets available for benefits under such Plan
for the most recently-ended plan year, which such financial statements shall
fairly present the financial condition and the results of operations of such
Plan in accordance with GAAP, consistently applied, as of such dates.
(b) Present Value of Benefits. The present value of all accrued
benefits under any Plan subject to Title IV of ERISA shall not, as of the
Closing Date, exceed the value of the assets of such Plans allocated to such
accrued benefits, based upon the applicable provisions of the Code and ERISA,
and each such Plan shall be capable of being terminated as of the Closing Date
in a "standard termination" under Section 4041(b) of ERISA. With respect to each
Plan that is subject to Title IV of ERISA, (i) no amount is due or owing from
the Company, any Subsidiary or any of their respective ERISA Affiliates to the
PGBC or to any "multi-employer Plan" as defined in Section 3(37) of ERISA on
account of any withdrawal therefrom and (ii) no such Plan has been terminated
other than in accordance with ERISA or at a time when the Plan was not
sufficiently funded. The transactions contemplated hereunder, including without
limitation the termination of any Plan at or prior to the Closing, shall not
result in any such withdrawal or other liability under any applicable Laws.
(c) Penalties; Reportable Events. Neither the Company, any
Subsidiary nor any of their respective ERISA Affiliates is subject to any
material liability, tax or penalty whatsoever to any person or agency whomsoever
as a result of engaging in a prohibited transaction under ERISA or the Code, and
neither the Company, any Subsidiary nor any of their respective ERISA Affiliates
has any knowledge of any circumstances which reasonably might result in any
material liability, tax or penalty, including but not limited to, a penalty
under Section 502 of ERISA, as a result of a breach of any duty under ERISA or
under other Laws. Each Plan which is required to comply with the provisions of
Sections 4980B and 4980C of the Code, or with the requirements referred to in
Section 4980D of the Code, has complied in all material respects. No event has
occurred which could subject any Plan to tax under Section 511 of the Code. None
of the Plans subject to Title IV of ERISA has, since September 2, 1974, been
completely or partially terminated nor has there been any "reportable event", as
such term is defined in Section 4043(b) of ERISA, with respect to any of the
Plans since the effective date of ERISA nor has any notice of intent to
terminate been filed or given with respect to any such Plan. There has been no
(i) withdrawal by the Company, any Subsidiary or any of their respective ERISA
Affiliates that is a substantial employer from a single-employer plan which is a
Plan and which has two or more contributing sponsors at least two of whom are
not under common control, as referred to in Section 4063(b) of ERISA, or (ii)
cessation by the Company, any Subsidiary or any of their respective ERISA
Affiliates of operations at a facility causing more than 20% of Plan
participants to be separated from employment, as referred to in Section 4062(f)
of ERISA. Neither the Company, any Subsidiary nor any of their respective ERISA
Affiliates, nor any other organization of which any of them are a successor or
Parent corporation as defined in Section 4069(b) of ERISA, have engaged in any
transaction described in Section 4069(a) of ERISA.
(d) Deficiencies; Qualification. None of the Plans nor any trust
created thereunder has incurred any "accumulated funding deficiency" as such
term is defined in
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Section 412 of the Code, whether or not waived, since the effective date of said
Section 412, and no condition has occurred or exists which by the passage of
time could be expected to result in an accumulated funding deficiency as of the
last day of the current plan year of any such Plan. Furthermore, neither the
Company, ant Subsidiary nor any of their respective ERISA Affiliates has any
unfunded liability under ERISA in respect of any of the Plans. Each of the Plans
which is intended to be a qualified plan under Section 401(a) of the Code has
received a favorable determination letter, opinion, notification or advisory
letter from the Internal Revenue Service, and has in all material respects been
operated in accordance with its terms and with the provisions of the Code. All
of the Plans have been administered and maintained in substantial compliance
with ERISA, the Code and all other applicable Laws. Notwithstanding the
foregoing, no representation is made by the Company concerning the impact of the
termination of the Company's 401(k) plan on such plan's continued qualification
under Section 401(a) of the Code. All contributions required to be made to each
of the Plans under the terms of that Plan, ERISA, the Code or any other
applicable Laws have been timely made. Each Plan intended to meet the
requirements for tax-favored treatment under Subchapter B of Chapter 1 of the
Code is in compliance with such requirements. There are no Liens against the
property of the Company, any Subsidiary or any of their respective ERISA
Affiliates under Section 412(n) of the Code or Sections 302(f) or 4068 of ERISA.
The Interim Financial Statements properly reflect all amounts required to be
accrued as liabilities to date under each of the Plans.
(e) Parachute Payments. There is no contract, agreement or
benefit arrangement covering any current or former employee or consultant of the
Company or any Subsidiary which, individually or collectively, could give rise
to the payment of any amount which would constitute an "excess parachute
payment" (as defined in Section 280G) of the Code). Neither the execution of
this Agreement nor the consummation of any of the transactions contemplated
hereby (whether alone or upon the occurrence of any additional or further acts
or events) will (i) result in any obligation or liability (with respect to
accrued benefits or otherwise) on the part of the Company, Parent, the Surviving
Corporation, or any of their respective Subsidiaries to the PBGC, to any Plan,
or to any present or former employee, director, officer, shareholder, contractor
or consultant of Parent, the Surviving Corporation, or any their respective
Subsidiaries or any of their dependents, (ii) be a trigger event under any Plan
that will result in any payment (whether of severance pay or otherwise) becoming
due to any such present or former employee, officer, director, shareholder,
contractor, or consultant, or any of their dependents, or (iii) accelerate the
time of payment or vesting, or increase the amount, of any compensation
theretofore or thereafter due or granted to any employee, officer, director,
shareholder, contractor, or consultant of the Company or any Subsidiary or any
of their dependents. With respect to any insurance policy which provides, or has
provided, funding for benefits under any Plan, (I) there is and will be no
liability of the Company, Parent or any of their respective Subsidiaries in the
nature of a retroactive or retrospective rate adjustment, loss sharing
arrangement, or actual or contingent liability as of the Closing Date, nor would
there be any such liability if such insurance policy were terminated as of the
Closing Date, and (II) no insurance company issuing any such policy is in
receivership, conservatorship, bankruptcy, liquidation, or similar proceeding,
and, to the knowledge of the Company, no such proceedings with respect to any
insurer are imminent.
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(f) COBRA. With respect to each Plan which provides health care
coverage, the Company and each ERISA Affiliate have complied in all material
respects with (i) the applicable health care continuation and notice provisions
of the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended
("COBRA"), and the applicable COBRA regulations and (ii) the applicable
requirements of the Health Insurance Portability and Accountability Act of 1996
and the regulations thereunder, and neither the Company nor any ERISA Affiliate
has incurred any liability under Section 4980B of the Internal Revenue Code.
(g) Litigation. Other than routine claims for benefits under the
Plans, there are no pending, or, to the best knowledge of the Company,
threatened, Actions or Proceedings involving the Plans, or the fiduciaries,
administrators, or trustees of any of the Plans or the Company, any Subsidiary
or any of their respective ERISA Affiliates as the employer or sponsor under any
Plan, with any of the IRS, the Department of Labor, the PBGC, any participant in
or beneficiary of any Plan or any other person whomsoever. The Company knows of
no reasonable basis for any such claim, lawsuit, dispute, action or controversy.
2.15 Real Property.
(a) Section 2.15(a) of the Company Disclosure Schedule contains
a true and correct list of (i) each parcel of real property leased, utilized
and/or operated by the Company (as lessor or lessee or otherwise) (the "Leased
Real Property") and (ii) all Liens relating to or affecting any parcel of real
property referred to in clause (i) to which the Company is a party. The Company
owns no real property other than Company owned leasehold improvements, if any,
on the Leased Real Property.
(b) Subject to the terms of its respective leases, the Company
has a valid and subsisting leasehold estate in and the right to quiet enjoyment
of the Leased Real Properties for the full term (or the renewal period, if the
lease has been renewed) of the leases relating thereto. Each lease referred to
in clause (i) of paragraph (a) above is a legal, valid and binding agreement,
enforceable in accordance with its terms, of the Company and of each other
Person that is a party thereto, and except as set forth in Section 2.15(b) of
the Company Disclosure Schedule, there is no, and the Company has not received
notice of any, default (or any condition or event which, after notice or lapse
of time or both, would constitute a default) thereunder. The Company does not
owe brokerage commissions or finders fees with respect to any such Leased Real
Property, except to the extent that the Company may renew the term of any such
lease, in which case, any such commissions and fees would be in amounts that are
reasonable and customary for the spaces so leased, given their intended use and
terms.
(c) Except as disclosed in Section 2.15(c) of the Company
Disclosure Schedule, all improvements on the Leased Real Property (i) comply
with and are operated in accordance with applicable laws (including, without
limitation, Environmental Laws) and all applicable Liens, Approvals, Contracts,
covenants and restrictions and (ii) are in all material respects in good
operating condition and in a state of good maintenance and repair, ordinary wear
and tear excepted, and such improvements are in all material respects adequate
and suitable for the purposes for which they are presently being used and, to
the knowledge of
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the Company, there are no condemnation or appropriation proceedings pending or
threatened against any of such real property or the improvements thereon.
(d) True and correct copies of the documents under which the
Leased Real Property is leased, subleased (to or by the Company or otherwise),
utilized, and/or operated (the "Lease Documents") have been delivered to Parent.
The Lease Documents are unmodified and in full force and effect, and there are
no other Contracts between the Company and any third parties, or by and among
any third parties, claiming an interest in the interest of the Company in the
Leased Real Property or otherwise relating to the use and occupancy of the
Leased Real Property.
2.16 Tangible Personal Property. The Company is in possession of and has
good and marketable title to, or has valid leasehold interests in or valid
rights under Contract to use, all tangible personal property used in the conduct
of its business, including all tangible personal property reflected on the
Company Financials and tangible personal property acquired since the Audited
Financial Statement Date, other than property disposed of since such date in the
ordinary course of business consistent with past practice. Except as disclosed
in Section 2.16 of the Company Disclosure Schedule, all such tangible personal
property is free and clear of all Liens and is adequate and suitable in all
material respects for the conduct by the Company of its business as presently
conducted, and is in good working order and condition in all material respects,
ordinary wear and tear excepted, and its use complies in all material respects
with all applicable Laws.
2.17 Intellectual Property.
(a) Section 2.17(a) of the Company Disclosure Schedule lists all
Company Registered Intellectual Property (including all trademarks and service
marks that the Company has used with the intent of creating or benefiting from
any common law rights relating to such marks) and lists any proceedings or
actions pending as of the date hereof before any court or tribunal (including
the PTO or equivalent authority anywhere in the world) related to any of the
Company Registered Intellectual Property.
(b) The Company has all requisite right, title and interest in
or valid and enforceable rights under Contracts or Licenses to use all Company
Intellectual Property necessary to the conduct of its business as presently
conducted. Each item of Company Intellectual Property, including all Company
Registered Intellectual Property listed in Section 2.17(a) of the Company
Disclosure Schedule, is owned exclusively by the Company (excluding Intellectual
Property licensed to the Company under any License and is free and clear of any
Liens. The Company (i) owns exclusively all trademarks, service marks and trade
names used by the Company in connection with the operation or conduct of the
business of the Company, including the sale of any products or technology or the
provision of any services by the Company; provided, however, that the Company
may use trademarks, service marks and trade names of third parties which are
licensed to the Company or are in the public domain, and (ii) owns exclusively,
and has good title to, all copyrighted works that are Company products or other
works of authorship that the Company otherwise purports to own; provided,
however, that such works may incorporate copyrighted works or works of
authorship, trademarks or trade names of third parties which are licensed to the
Company or are in the public domain.
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(c) To the extent that any Company Intellectual Property has
been developed or created by any Person other than the Company, the Company has
a written agreement with such Person with respect thereto and the Company has
either (i) obtained ownership of, and is the exclusive owner of, all such
Intellectual Property by operation of law or by valid assignment of any such
rights or (ii) has obtained a License under or to such Intellectual Property.
(d) Except pursuant to agreements described in Section 2.17(d)
of the Company Disclosure Schedule, the Company has not transferred ownership of
or granted any License of or other right to use or authorized the retention of
any rights to use any Intellectual Property that is or was Company Intellectual
Property, to any other Person.
(e) The Company Intellectual Property constitutes all the
Intellectual Property used in and/or necessary to the conduct of the Company's
business as it currently is conducted or as reasonably contemplated to be
conducted, including, without limitation, the design, development, distribution,
marketing, manufacture, use, import, license, and sale of the products,
technology and services of the Company (including products, technology, or
services currently under development).
(f) Section 2.17(f) of the Company Disclosure Schedule lists all
Contracts and Licenses (including all inbound Licenses) to which the Company is
a party with respect to any Intellectual Property. No Person other than the
Company has ownership rights to improvements made by the Company in Intellectual
Property which has been licensed to the Company.
(g) Section 2.17(g) of the Company Disclosure Schedule lists all
Contracts, Licenses and agreements between the Company and any other Person
wherein or whereby the Company has agreed to, or assumed, any obligation or duty
to warrant, indemnify, reimburse, hold harmless, guaranty or otherwise assume or
incur any obligation or Liability or provide a right of rescission with respect
to the infringement or misappropriation by the Company or such other Person of
the Intellectual Property of any Person other than the Company.
(h) The operation of the business of the Company as currently
conducted or as presently proposed to be conducted, including the Company's
design, development, use, import, manufacture and sale of the products,
technology or services (including products, technology or services currently
under development) of the Company does not infringe or misappropriate the
Intellectual Property of any Person, violate the rights of any Person (including
rights to privacy or publicity), or constitute unfair competition or an unfair
trade practice under any Law, and the Company has not received notice from any
Person claiming that such operation or any act, product, technology or service
(including products, technology or services currently under development) of the
Company infringes or misappropriates the Intellectual Property of any Person or
constitutes unfair competition or trade practices under any Law, including
notice of third party patent or other Intellectual Property rights from a
potential licensor of such rights.
(i) Each item of Company Registered Intellectual Property is
valid and subsisting, and all necessary registration, maintenance, renewal fees,
annuity fees and taxes
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in connection with such Registered Intellectual Property have been paid and all
necessary documents and certificates in connection with such Company Registered
Intellectual Property have been filed with the relevant patent, copyright,
trademark or other authorities in the United States or foreign jurisdictions, as
the case may be, for the purposes of maintaining such Registered Intellectual
Property. Section 2.17(i) of the Company Disclosure Schedule lists all actions
that must be taken by the Company within one hundred eighty (180) days from the
date hereof, including the payment of any registration, maintenance, renewal
fees, annuity fees and taxes or the filing of any documents, applications or
certificates for the purposes of maintaining, perfecting or preserving or
renewing any Company Registered Intellectual Property. Except as set forth in
Section 2.17(i) of the Company Disclosure Schedule, the Company has registered
the copyright with the U.S. Copyright Office for the latest version of each
product or technology of the Company that constitutes or includes a
copyrightable work. In each case in which the Company has acquired ownership of
any Intellectual Property rights from any Person, the Company has obtained a
valid and enforceable assignment sufficient to irrevocably transfer all rights
in such Intellectual Property (including the right to seek past and future
damages with respect to such Intellectual Property) to the Company and, to the
maximum extent provided for by and required to protect the Company's ownership
rights in and to such Intellectual Property in accordance with applicable Laws,
the Company has recorded each such assignment of Registered Intellectual
Property with the relevant Governmental or Regulatory Authority, including the
PTO, the U.S. Copyright Office, or their respective equivalents in any relevant
foreign jurisdiction, as the case may be.
(j) There are no Contracts or Licenses between the Company and
any other Person with respect to Company Intellectual Property under which there
is any dispute (or, to the Company's knowledge, facts that may reasonably lead
to a dispute) known to the Company regarding the scope of such Contract or
License, or performance under such Contract or License, including with respect
to any payments to be made or received by the Company thereunder.
(k) To the knowledge of the Company, no Person is infringing or
misappropriating any Company Intellectual Property.
(l) The Company has taken all commercially reasonable steps to
protect the Company's rights in confidential information and trade secrets of
the Company or provided by any other Person to the Company subject to a duty of
confidentiality. Without limiting the generality of the foregoing, the Company
has, and enforces, a policy requiring each employee, consultant and independent
contractor to execute proprietary information, confidentiality and invention and
copyright assignment agreements substantially in the form set forth in Section
2.17(l) of the Company Disclosure Schedule, and all current and former
employees, consultants and independent contractors of the Company have executed
such an agreement. Copies of all such agreements have been provided to Parent or
made available to Parent for review.
(m) No Company Intellectual Property or product, technology or
service of the Company is subject to any Order or Action or Proceeding that
restricts, or that is reasonably expected to restrict in any manner, the use,
transfer or licensing of any Company
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Intellectual Property by the Company or that may affect the validity, use or
enforceability of such Company Intellectual Property.
(n) No (i) product, technology, service or publication of the
Company, (ii) material published or distributed by the Company or (iii) conduct
or statement of Company constitutes obscene material, a defamatory statement or
material, false advertising or otherwise violates any Law.
(o) The Company has taken all actions necessary and appropriate
to assure that there shall be no material adverse change to its business or
electronic systems or material interruptions in the delivery of the Company's
products and services by reason of the advent of the year 2000, including,
without limitation, that all of its products (including products currently under
development) will, without interruption or manual intervention, continue to
consistently, predictably and accurately record, store, process, calculate and
present calendar dates falling on and after (and if applicable, spans of time
including) January 1, 2000, and will consistently, predictably and accurately
calculate any information dependent on or relating to such dates in the same
manner, and with the same functionality, data integrity and performance, as such
products record, store, process, calculate and present calendar dates on or
before December 31, 1999, or calculate any information dependent on or relating
to such dates. Without limiting the generality of the foregoing, (i) the Company
has taken all actions necessary and appropriate to ensure that the IT systems
and non-IT systems used by the Company in its internal operations will function
properly beyond 1999 (and the Company has no knowledge of any material issues
that have arisen in connection therewith) and (ii) the Company has made
inquiries of its key third-party vendors and suppliers as to the status of their
Year 2000 efforts and as a result thereof has not uncovered any problems that
could materially disrupt or harm the day-to-day functioning of business and
operations of the Company.
(p) Neither this Agreement nor any transactions contemplated by
this Agreement will result in Parent's granting any rights or licenses with
respect to the Intellectual Property of Parent to any Person pursuant to any
Contract to which the Company is a party or by which any of its Assets and
Properties are bound.
(q) Section 2.17(q) of the Company Disclosure Schedule sets
forth a list of (x) all software which the Company has licensed from any third
party which is used by the Company in its products or otherwise in its business
(other than standard off-the-shelf software) and (y) a list of all "freeware"
and "shareware" incorporated into any product now or heretofore shipped by the
Company. The Company has all rights necessary to the use of such software,
"freeware" and "shareware".
(r) The Company's products comply in all material respects with
all applicable IEEE standards and with the feature specifications and
performance standards set forth in the Company's product data sheets. There are
no outstanding claims (or facts that may reasonably lead to a claim) for breach
of warranties by the Company in connection with the foregoing. All product
performance comparisons heretofore furnished by the Company to customers or
Parent are accurate in all material respects as of the dates so furnished
(except that, in the case of product performance comparisons made as of a
specified earlier date, such comparisons shall be accurate as of such specified
earlier date, and, in the case of
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product performance comparisons superseded by a subsequent product performance
comparison furnished to the customer before the customer's acquisition of a
license on the product covered by the superseded comparison, the superseding
comparison shall be accurate in all material respects and the superseded
comparison shall be disregarded).
(s) The Company has taken all reasonably necessary and
appropriate steps to protect and preserve ownership of Company Intellectual
Property. The Company has secured valid written assignments from all consultants
and employees who contributed to the creation or development of the Company
Intellectual Property. In the event that the consultant is concurrently employed
by the Company and a third party, the Company has taken additional steps to
ensure that any Company Intellectual Property developed by such a consultant
does not belong to the third party or conflict with the third party's employment
agreement (such steps include, but are not limited to, ensuring that all
research and development work performed by such a consultant are performed only
on the Company's facilities and only using the Company's resources), except as
set forth in Section 2.16(s) of the Company Disclosure Schedule.
2.18 Contracts.
(a) Section 2.18(a)(1) of the Company Disclosure Schedule
contains a true and complete list of each of the Contracts (true and complete
copies or, if none, reasonably complete and accurate written descriptions of
which, together with all amendments and supplements thereto and all waivers of
any terms thereof, have been made available to Parent prior to the execution of
this Agreement), to which the Company is a party or by which any of its Assets
and Properties is bound. Section 2.18(a)(2) of the Company Disclosure Schedule
contains a true and complete list of each Contract of the Company (i) not
terminable by the Company upon 30 days (or less) notice by the Company without
penalty or obligation to make payments based on such termination or (ii) which
provides for continuing design or other services by the Surviving Corporation
after the Closing Date.
(b) Each Contract required to be disclosed in Section 2.18(a) of
the Company Disclosure Schedule is in full force and effect and constitutes a
legal, valid and binding agreement of the Company, enforceable in accordance
with its terms, and to the knowledge of the Company, of each other party
thereto; and except as disclosed in Section 2.18(b) of the Company Disclosure
Schedule, to the knowledge of the Company, no other party to such Contract is,
nor has received notice that it is, in violation or breach of or default under
any such Contract (or with notice or lapse of time or both, would be in
violation or breach of or default under any such Contract).
(c) Except as disclosed in Section 2.18(c) of the Company
Disclosure Schedule, the Company is not a party to or bound by any Contract that
has been or could reasonably be expected to be, individually or in the aggregate
with any other similar Contracts, materially adverse to the Business or
Condition of the Company or that has been or could reasonably be expected to
result, individually or in the aggregate with any such other Contracts in Losses
to the Company or be materially adverse to the Business or Condition of the
Company.
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(d) Except as disclosed in Section 2.18(d) of the Company
Disclosure Schedule, the Company is not a party to or bound by any Contract that
(i) automatically terminates or allows termination by the other party thereto
upon consummation of the transactions contemplated by this Agreement or (ii)
contains any covenant or other provision which limits the Company's ability to
compete with any Person in any line of business or in any area or territory.
2.19 Insurance. Section 2.19 of the Company Disclosure Schedule contains
a true and complete list (including the names and addresses of the insurers, the
expiration dates thereof, the annual premiums and payment terms thereof, the
period of time covered thereby and a brief description of the interests insured
thereby) of all liability, property, workers' compensation, directors' and
officers' liability and other insurance policies currently in effect that insure
the business, operations or employees of the Company or affect or relate to the
ownership, use or operation of any of the Assets and Properties of the Company
and that (a) have been issued to the Company or (b) to the knowledge of the
Company, have been issued to any Person (other than the Company) for the benefit
of the Company. The insurance coverage provided by the policies described in
clause (a) above will not terminate or lapse by reason of any of the
transactions contemplated by this Agreement. Each policy listed in Section 2.19
of the Company Disclosure Schedule is valid and binding and in full force and
effect, all premiums due thereunder have been paid when due and neither the
Company or the Person to whom such policy has been issued has received any
notice of cancellation or termination in respect of any such policy or is in
default thereunder, and the Company has no knowledge of any reason or state of
facts that could reasonably be expected to lead to the cancellation of such
policies or a material premium increase. The insurance policies listed in
Section 2.19 of the Company Disclosure Schedule, (i) in light of the business,
operations and Assets and Properties of the Company are in amounts and have
coverages that are reasonable and customary for Persons engaged in similar
businesses and operations and having similar Assets and Properties and (ii) are
in amounts and have coverages as required by any Contract to which the Company
is a party or by which any of its Assets and Properties is bound. Section 2.19
of the Company Disclosure Schedule contains a list of all claims made under any
insurance policies covering the Company in the last two years. The Company has
not received notice that any insurer under any policy referred to in this
Section is denying liability with respect to a claim thereunder or defending
under a reservation of rights clause. The Company has, in the reasonable
judgment of the Company, in light of its business, location, operations and
Assets and Properties, maintained, at all times, without interruption,
appropriate insurance, both in scope and amount of coverages.
2.20 Affiliate Transactions.
(a) Except as disclosed in Section 2.9(f) or Section 2.20(a) of
the Company Disclosure Schedule, (i) there are no Contracts or Liabilities
between the Company, on the one hand, and (I) any current or former officer,
director, shareholder, or to the Company's knowledge, any Affiliate or Associate
of the Company or (II) any Person who, to the Company's knowledge, is an
Associate of any such officer, director, shareholder or Affiliate, on the other
hand, (ii) the Company does not provide or cause to be provided any assets,
services or facilities to any such current or former officer, director,
shareholder,
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Affiliate or Associate, (iii) neither the Company nor any such current or former
officer, director, shareholder, Affiliate or Associate provides or causes to be
provided any assets, services or facilities to the Company and (iv) the Company
does not beneficially own, directly or indirectly, any Investment Assets of any
such current or former officer, director, shareholder, Affiliate or Associate.
(b) Except as disclosed in Section 2.20(b) of the Company
Disclosure Schedule, each of the Contracts and Liabilities listed in Section
2.20(a) of the Company Disclosure Schedule were entered into or incurred, as the
case may be, on terms no less favorable to the Company (in the reasonable
judgment of the Company) than if such Contract or Liability was entered into or
incurred on an arm's- length basis on competitive terms. Any Contract to which
the Company is a party and in which any director of the Company has a financial
interest in such Contract was approved by a majority of the disinterested
members of the Board of Directors of the Company and/or shareholders of the
Company, as the case may be, in accordance with Section 144 of Delaware Law.
2.21 Employees; Labor Relations.
(a) Except as set forth in Section 2.21(a) of the Company
Disclosure Schedule, the Company is not a party to any collective bargaining
agreement and there is no unfair labor practice or labor arbitration proceedings
pending with respect to the Company, or, to the knowledge of the Company,
threatened, and there are no facts or circumstances known to the Company that
could reasonably be expected to give rise to such complaint or claim. To the
knowledge of the Company, there are no organizational efforts presently underway
or threatened involving any employees of the Company or any of the employees
performing work for the Company but provided by an outside employment agency, if
any. There has been no work stoppage, strike or other concerted action by
employees of the Company.
(b) All employees of the Company are employed at will, except as
set forth in Section 2.21(b) of the Company Disclosure Schedule, and those
employees (if any) represented by a union. Section 2.21(b) of the Company
Disclosure Schedule sets forth, individually and by category, the name of each
officer, employee and consultant, together with such person's position or
function, annual base salary or wage and any incentive, severance or bonus
arrangements with respect to such person. Except as described in Section 2.21(b)
of the Company Disclosure Schedule, the completion of the transactions
contemplated by this Agreement will not result in any payment or increased
payment becoming due from the Company to any current or former officer,
director, or employee of, or consultant to, the Company, and to the knowledge of
the Company no employee of the Company has made any threat, or otherwise
revealed an intent, to terminate such employee's relationship with the Company,
for any reason, including because of the consummation of the transactions
contemplated by this Agreement. The Company is not a party to any agreement for
the provision of labor from any outside agency except as set forth in Section
2.21(b) of the Company Disclosure Schedule. To the knowledge of the Company,
since December 31, 1997, there have been no claims by employees of such outside
agencies, if any, with regard to employees assigned to work for the Company, and
no claims by any governmental agency with regard to such employees except as set
forth in Section 2.21(b) of the Company Disclosure Schedule.
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(c) Since December 31, 1997, there have been no federal or state
claims based on sex, sexual or other harassment, age, disability, race or other
discrimination or common law claims, including claims of wrongful termination,
by any employees of the Company or by any of the employees performing work for
the Company but provided by an outside employment agency, and there are no facts
or circumstances known to the Company that could reasonably be expected to give
rise to such complaint or claim. The Company has complied with all laws related
to the employment of employees and, except as set forth in Section 2.21(c) of
the Company Disclosure Schedule, since December 31, 1997, the Company has not
received any notice of any claim that it has not complied in any material
respect with any Laws relating to the employment of employees, including without
limitation, any provisions thereof relating to wages, hours, collective
bargaining, the payment of Social Security and similar taxes, equal employment
opportunity, employment discrimination, the WARN Act, employee safety, or that
it is liable for any arrearages of wages or any taxes or penalties for failure
to comply with any of the foregoing.
(d) The Company has no written policies and/or employee
handbooks or manuals except as described in Section 2.21(d) of the Company
Disclosure Schedule.
(e) To the knowledge of the Company, no officer, employee or
consultant of the Company is obligated under any Contract or other agreement or
subject to any Order or Law that would interfere with the Company's business as
currently conducted. Neither the execution nor delivery of this Agreement, nor
the carrying on of the Company's business as presently conducted nor any
activity of such officers, employees or consultants in connection with the
carrying on of the Company's business as presently conducted, will conflict with
or result in a breach of the terms, conditions or provisions of, constitute a
default under, or trigger a condition precedent to any rights under any Contract
or other agreement under which any of such officer's, employees or consultants
is now bound.
2.22 Environmental Matters.
(a) The Company possesses any and all Environmental Permits
necessary to or required for the operation of its business. The Company will
obtain, prior to the Closing, any Environmental Permits that must be obtained as
of or immediately after the Closing in order for the Surviving Corporation
and/or the Company to conduct the business of the Company as it was conducted
prior to the Closing.
(b) The Company is in compliance with (i) all terms, conditions
and provisions of its Environmental Permits; and (ii) all Environmental Laws.
(c) Neither the Company nor any predecessor of the Company nor
any entity previously owned by the Company has received any notice of alleged,
actual or potential responsibility for, or any inquiry regarding, (i) any
Release or threatened or suspected Release of any Hazardous Material, or (ii)
any violation of Environmental Law.
(d) Neither the Company nor any predecessor of the Company nor
any entity previously owned by the Company has any obligation or liability with
respect to any Hazardous Material, including any Release or threatened or
suspected Release of any
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Hazardous Material, and there have been no events, facts or circumstances which
could form the basis of any such obligation or liability.
(e) No Releases of Hazardous Material(s) have occurred at, from,
in, to, on, or under any Site and no Hazardous Material is present in, on, about
or migrating to or from any Site.
(f) Neither the Company, nor any predecessor of the Company, nor
any entity previously owned by the Company, has transported or arranged for the
treatment, storage, handling, disposal or transportation of any Hazardous
Material at or to any location.
(g) No Site is a current or proposed Environmental Clean-up
Site.
(h) There are no Liens under or pursuant to any Environmental
Law on any Site.
(i) There is no (i) underground storage tank, active or
abandoned, (ii) polychlorinated biphenyl containing equipment, (iii)
asbestos-containing material, (iv) radon, (v) lead-based paint or (vi) urea
formaldehyde at any Site. Any underground storage tank meets all 1998 upgrade
requirements.
(j) There have been no environmental investigations, studies,
audits, tests, reviews or other analyses conducted with respect to any Site
which have not been delivered to Parent prior to execution of this Agreement.
(k) The Company is not a party, whether as a direct signatory or
as successor, assign, third party beneficiary, guarantor or otherwise, to, and
is not otherwise bound by, any lease or other contract under which the Company
is obligated or may be obligated by any representation, warranty, covenant,
restriction, indemnification or other undertaking respecting Hazardous Materials
or under which any other person is or has been released respecting Hazardous
Materials.
(l) The Company and any predecessors of the Company and any
entity previously owned by the Company have provided all notifications and
warnings, made all reports, and kept and maintained all records required
pursuant to Environmental Laws.
2.23 Substantial Customers and Suppliers. Section 2.23(a) of the Company
Disclosure Schedule lists the 15 largest customers of the Company, collectively,
on the basis of revenues collected or accrued for the most recent complete
fiscal year. Section 2.23(b) of the Company Disclosure Schedule lists the 15
largest suppliers of the Company on the basis of cost of goods or services
purchased for the most recent fiscal year. Except as disclosed in Section
2.23(c) of the Company Disclosure Schedule, no such customer or supplier has
ceased or materially reduced its purchases from or sales or provision of
services to the Company since June 30, 1999 or, to the knowledge of the Company,
has threatened to cease or materially reduce such purchases or sales or
provision of services after the date hereof. Except as disclosed in Section
2.23(d) of the Company Disclosure Schedule, to the knowledge of the Company, no
such customer or supplier is threatened with bankruptcy or insolvency.
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2.24 Accounts Receivable. Except as set forth in Section 2.24 of the
Company Disclosure Schedule, the accounts and notes receivable of the Company
reflected on the Company Financials, and all accounts and notes receivable
arising subsequent to the Financial Statement Date, (a) arose from bona fide
sales transactions in the ordinary course of business, consistent with past
practice, and are payable on ordinary trade terms, (b) are legal, valid and
binding obligations of the respective debtors enforceable in accordance with
their respective terms, (c) are not subject to any valid set-off or counterclaim
and (d) do not represent obligations for goods sold on consignment, on approval
or on a sale-or-return basis or subject to any other repurchase or return
arrangement.
2.25 Inventory. All inventory of the Company reflected on the balance
sheet included in the Company Financials consisted, and all such inventory
acquired since the Audited Financial Statement Date consists, of a quality and
quantity usable and salable in the ordinary course of business. Except as
disclosed in the notes to the Financial Statements or in Section 2.25 of the
Company Disclosure Schedule, all items included in the inventory of the Company
are the property of the Company free and clear of any Lien, have not been
pledged as collateral, are not held by the Company on consignment from others
and conform in all material respects to all standards applicable to such
inventory or its use or sale imposed by Governmental or Regulatory Authorities.
2.26 Other Negotiations; Brokers; Third Party Expenses. Neither the
Company nor, to the knowledge of the Company, any of its Affiliates (nor any
investment banker, financial advisor, attorney, accountant or other Person
retained by or acting for or on behalf of the Company or any such Affiliate) (a)
has entered into any Contract that conflicts with any of the transactions
contemplated by this Agreement or (b) has entered into any Contract or had any
discussions with any Person regarding any transaction involving the Company
which could result in Parent, the Company or any general partner, limited
partner, manager, officer, director, employee, agent or Affiliate of any of them
being subject to any claim for liability to said Person as a result of entering
into this Agreement or consummating the transactions contemplated hereby. No
broker, investment banker, financial advisor or other Person is entitled to any
broker's, finder's, financial advisor's or similar fee or commission in
connection with this Agreement and the transactions contemplated hereby based on
arrangements made by or on behalf of the Company. Section 2.26 of the Company
Disclosure Schedule sets forth the principal terms and conditions of any
Contract with respect to, and a reasonable estimate of, all Third Party Expenses
expected to be incurred by the Company in connection with the negotiation and
effectuation of the terms and conditions of this Agreement and the transactions
contemplated hereby.
2.27 Banks and Brokerage Accounts. Section 2.27 of the Company
Disclosure Schedule sets forth (a) a true and complete list of the names and
locations of all banks, trust companies, securities brokers and other financial
institutions at which the Company has an account or safe deposit box or
maintains a banking, custodial, trading or other similar relationship, (b) a
true and complete list and description of each such account, box and
relationship, indicating in each case the account number and the names of the
respective officers, employees, agents or other similar representatives of the
Company having signatory power with respect thereto and (c) a list of each
Investment Asset, the name of the record and beneficial owner thereof, the
location of the certificates, if any, therefor, the maturity
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date, if any, and any stock or bond powers or other authority for transfer
granted with respect thereto.
2.28 Warranty Obligations. Section 2.28 of the Company Disclosure
Schedule sets forth (a) a list of all forms of written warranties, guarantees
and written warranty policies of the Company in respect of any of the Company's
products and services, which are currently in effect (the "Warranty
Obligations"), and the duration of each such Warranty Obligation, (b) each of
the Warranty Obligations which is subject to any dispute or, to the knowledge of
the Company, threatened dispute and (c) the experience of the Company with
respect to warranties, guarantees and warranty policies of or relating to the
Company's products and services. True and correct copies of the Warranty
Obligations have been delivered to Parent prior to the execution of this
Agreement. Except as disclosed in Section 2.28 of the Company Disclosure
Schedule, (i) there have not been any material deviations from the Warranty
Obligations, and salespersons, employees and agents of the Company are not
authorized to undertake obligations to any customer or other Person in excess of
such Warranty Obligations and (ii) the balance sheet included in the Interim
Financial Statements reflects adequate reserves for Warranty Obligations. All
products manufactured, designed, licensed, leased, rented or sold by the Company
(I) are and were free from material defects in construction and design and (II)
satisfy any and all Contract or other specifications related thereto to the
extent stated in writing in such Contracts or specifications, in each case, in
all material respects.
2.29 Foreign Corrupt Practices Act. Neither the Company, nor to the
knowledge of the Company, any agent, employee or other Person associated with or
acting on behalf of the Company has, directly or indirectly, used any corporate
funds for unlawful contributions, gifts, entertainment or other unlawful
expenses relating to political activity, made any unlawful payment to foreign or
domestic government officials or employees or to foreign or domestic political
parties or campaigns from corporate funds, violated any provision of the Foreign
Corrupt Practices Act of 1977, as amended, or made any bribe, rebate, payoff,
influence payment, kickback or other similar unlawful payment.
2.30 Tax-Free Reorganization. Neither the Company nor any of its
directors, officers or shareholders has taken any action which, to the Company's
knowledge, could reasonably be expected to jeopardize the status of the Merger
as a "reorganization" within the meaning of Section 368(a) of the Code.
2.31 Financial Projections; Operating Plan.
(a) The Company has made available to Parent certain financial
projections with respect to the Company's business which projections were
prepared for internal use only. The Company makes no representation or warranty
regarding the accuracy of such projections or as to whether such projections
will be achieved, except that the Company represents and warrants that such
projections were prepared in good faith and are based on assumptions believed by
it to be reasonable as of the date of this Agreement.
(b) The Company has made available to Parent its 2000 Operating
Plan. The Company makes no representation or warranty regarding its ability to
successfully execute its 2000 Operating Plan, except that the Company represents
and warrants that the
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2000 Operating Plan was prepared in good faith and is based on assumptions
believed by it to be reasonable as of the date of this Agreement as of the date
of this Agreement.
2.32 Approvals.
(a) Section 2.32(a) of the Company Disclosure Schedule contains
a list of all material Approvals of Governmental or Regulatory Authorities
relating to the business conducted by the Company which are required to be given
to or obtained by the Company from any and all Governmental or Regulatory
Authorities in connection with the consummation of the transactions contemplated
by this Agreement (other than the filing of the Agreement of Merger, together
with the required officers' certificates, and such consents, approvals, orders,
authorizations, registrations, declarations and filings as may be required under
state or federal securities laws).
(b) Section 2.32(b) of the Company Disclosure Schedule contains
a list of all material Approvals which are required to be given to or obtained
by the Company from any and all third parties other than Governmental or
Regulatory Authorities in connection with the consummation of the transactions
contemplated by this Agreement.
(c) Except as set forth in Section 2.32(c)(1) of the Company
Disclosure Schedule, the Company has obtained all material Approvals from
Governmental or Regulatory Authorities necessary to conduct the business
conducted by the Company in the manner as it is currently being conducted and
since January 1, 1997, there has been no written notice received by the Company
of any material violation or material non-compliance with any such Approvals.
All material Approvals from Governmental or Regulatory Authorities necessary to
conduct the business conducted by the Company as it is currently being conducted
are set forth in Section 2.32(c)(2) of the Company Disclosure Schedule.
(d) The affirmative vote or consent of the holders of (i) a
majority of the shares of Company Common Stock outstanding as of the applicable
record date, voting as a separate class, (ii) a majority of the shares of
Company Preferred Stock outstanding as of the applicable record date, voting
together as a single class and (iii) a majority of the shares of Company Common
Stock and Company Preferred Stock (with each share of Company Preferred Stock
entitled to vote a number of shares equal to a whole number of shares of Company
Common Stock into which such shares of Company Preferred Stock would be
converted on the applicable record date), voting together as a single class, are
the only votes of the holders of any of the Company Capital Stock necessary to
approve this Agreement and the Merger and the transactions contemplated hereby.
(e) The shares owned by shareholders of the Company who have
concurrently herewith entered into Support Agreements constitute (x) a majority
of the outstanding shares of Company Common Stock, (y) a majority of the
aggregate outstanding shares of Company Preferred Stock and (z) a majority of
the outstanding shares of Company Common Stock and Company Preferred Stock (with
each share of Company Preferred Stock entitled to vote a number of shares equal
to a whole number of shares of Company Common Stock into which such shares of
Company Preferred Stock would be converted on the applicable record date)
combined.
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2.33 Compliance. Except as set forth in Section 2.33 of the Company
Disclosure Schedule, since December 31, 1997, the Company and its Affiliates,
officers, directors, agents and employees have been and are in compliance with
all applicable Laws and Orders of any Governmental or Regulatory Authorities
applicable to the business conducted by the Company, and neither the Company nor
any of its Affiliates, is aware of any claim of violation, or of any actual
violation, of any such Laws and Orders by the Company.
2.34 Takeover Statutes. No Takeover Statute applicable to the Company is
applicable to the Merger or the transactions contemplated hereby.
2.35 Permit Application; Information Statement. The information supplied
by the Company for inclusion in the application for issuance of a California
Permit pursuant to which the shares of Parent Common Stock to be issued in the
Merger and (if deemed necessary by Parent in its good faith judgment) the
Company Options to be assumed in the Merger will be qualified under the
California Code (the "Permit Application") shall not at the time the Fairness
Hearing is held pursuant to Section 25142 of the California Code or the time the
qualification of such securities is effective under Section 25122 of the
California Code 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, in light of the circumstances under which they were
made, not misleading. The information supplied by the Company for inclusion in
the information statement to be sent to the shareholders of the Company in
connection with the Company shareholders' consideration of the Merger (the
"Company Shareholder Action") (such information statement as amended or
supplemented is referred to herein as the "Information Statement") shall not, on
the date the Information Statement is first mailed to the Company's
shareholders, at the time of the Company Shareholder Action and at the Effective
Time, contain any statement which, at such time, is false or misleading with
respect to any material fact, or omit to state any material fact necessary in
order to make the statements made therein, in light of the circumstances under
which they are made, not false or misleading; or omit to state any material fact
necessary to correct any statement in any earlier communication with respect to
the solicitation of proxies or written consents for the Company Shareholder
Action which has become false or misleading. Notwithstanding the foregoing, the
Company makes no representation, warranty or covenant with respect to any
information supplied by Parent or Merger Sub which is contained in the Permit
Application or the Information Statement.
2.36 Disclosure. No representation or warranty contained in this
Agreement, and no statement contained in the Company Disclosure Schedule or in
any certificate, list or other writing furnished to Parent pursuant to any
provision of this Agreement (including the Company Financials and the notes
thereto) contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements herein or therein, in
the light of the circumstances under which they were made, not misleading.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub hereby represents and warrants to the Company,
subject to such exceptions as are specifically disclosed with respect to
specific numbered and lettered sections and subsections of this Article 3 in the
disclosure schedule and schedule of
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exceptions (the "Parent Disclosure Schedule") delivered herewith and dated as of
the date hereof, and numbered with corresponding numbered and lettered sections
and subsections, as follows:
3.1 Organization and Qualification. Each of Parent and Merger Sub is a
corporation duly organized, validly existing and in good standing under the Laws
of the State of California. Each of Parent and Merger Sub has all requisite
corporate power to conduct its business as now conducted and as currently
proposed to be conducted and to own, use and lease its Assets and Properties.
Each of Parent and Merger Sub is duly qualified, licensed or admitted to do
business and is in good standing in each jurisdiction in which the ownership,
use, licensing or leasing of its Assets and Properties, or the conduct or nature
of its business, makes such qualification, licensing or admission necessary,
except for such failures to be so duly qualified, licensed or admitted and in
good standing that could not reasonably be expected to have a Material Adverse
Effect on Parent.
3.2 Authority Relative to this Agreement. Each of Parent and Merger Sub
has full corporate power to execute and deliver this Agreement and the Ancillary
Agreements to which it is a party, to perform its respective obligations
hereunder and thereunder and to consummate the transactions contemplated hereby
and thereby. The execution and delivery by Parent and Merger Sub of this
Agreement and the Ancillary Agreements to which it is a party and the
consummation by Parent and Merger Sub of the transactions contemplated hereby
and thereby have been duly and validly authorized by all necessary corporate and
shareholder action by Parent and Merger Sub, and no other corporate action on
the part of Parent or Merger Sub is required to authorize the execution,
delivery and performance of this Agreement and the Ancillary Agreements to which
it is a party and the consummation by Parent and Merger Sub of the transactions
contemplated hereby and thereby. This Agreement and the Ancillary Agreements to
which Parent or Merger Sub is a party have been or will be, as applicable, duly
and validly executed and delivered by Parent to Merger Sub, as applicable, and,
assuming the due authorization, execution and delivery hereof by the Company
and/or the other parties thereto, constitutes or will constitute, as applicable,
a legal, valid and binding obligation of Parent or Merger Sub, as applicable,
enforceable against Parent or Merger Sub, as applicable, in accordance with its
respective terms, except as the enforceability thereof may be limited by
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or
other similar Laws relating to the enforcement of creditors' rights generally
and by general principles of equity.
3.3 Capital Stock.
(a) The authorized capital stock of Parent consists of
1,200,000,000 shares of common stock, $0.0001 par value per share, of which
800,000,000 shares have been designated Class A Common Stock (the "Parent Class
A Common Stock") and 400,000,000 have been designated Class B Common Stock (the
"Parent Class B Common Stock"), and 10,000,000 shares of preferred stock,
$0.0001 par value per share (the "Parent Preferred Stock"). As of June 30, 2000,
there were issued and outstanding 125,893,529 shares of Parent Class A Common
Stock, 92,229,543 shares of Parent Class B Common Stock and no shares of Parent
Preferred Stock. All of the issued and outstanding shares of Parent Class A
Common Stock and Parent Common Stock are validly issued, fully paid and
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nonassessable, and have been issued in compliance with all applicable federal,
state and foreign securities Laws.
(b) The authorized capital stock of Acquisition Sub consists of
1,000 shares of common stock, without par value per share, 100 of which are
issued and outstanding.
3.4 Issuance of Parent Common Stock. The shares of Parent Common Stock
to be issued pursuant to the Merger, when issued, will be duly authorized,
validly issued, fully paid, non-assessable and not subject to any preemptive
rights and issued in compliance with applicable federal and state securities
laws subject to the truth and accuracy of the representations made by the
Company in Section 2.3.
3.5 SEC Documents; Parent Financial Statements. Parent has furnished or
made available to the Company true and complete copies of all SEC Documents
filed by it with the SEC since January 1, 1999, all in the form so filed. As of
their respective filing dates, such SEC Documents filed by Parent and all SEC
Documents filed after the date hereof but before the Closing complied or, if
filed after the date hereof, will comply in all material respects with the
requirements of the Securities Act and the Exchange Act and the rules and
regulations of the SEC thereunder, as the case may be, and none of the SEC
Documents contained or will contain any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements made therein, in light of the circumstances in which they
were made, not misleading, except to the extent such SEC Documents have been
corrected, updated or superseded by a document subsequently filed with the SEC.
The financial statements of Parent, including the notes thereto, included in the
SEC Documents (the "Parent Financial Statements") comply as to form in all
material respects with the published rules and regulations of the SEC with
respect thereto, have been prepared in accordance with GAAP consistently applied
(except as may be indicated in the notes thereto or, in the case of unaudited
statements, as permitted by Form 10-Q under the Exchange Act) and present fairly
the consolidated financial position of Parent at the dates thereof and the
consolidated results of its operations and cash flows for the periods then ended
(subject, in the case of unaudited financial statements, to normal year-end
adjustments), it being understood that such financial statements may be required
to be restated from time to time as may be required under applicable pooling
rules in connection with past, present or future acquisitions. There has been no
change in Parent's accounting policies except as described in the notes to the
Parent Financial Statements. Except as reflected or reserved against in the
Parent Financial Statements, Parent has no material Liabilities, except for
Liabilities and obligations (i) incurred in the ordinary course of business
since the date of the most recent Parent Financial Statements or (ii) that would
not be required to be reflected or reserved against in the balance sheet of
Parent prepared in accordance with GAAP.
3.6 No Conflicts. The execution and delivery by Parent and Merger Sub of
this Agreement does not, and the performance by Parent and Merger Sub of their
respective obligations under this Agreement and the consummation of the
transactions contemplated hereby do not and will not:
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(a) conflict with or result in a violation or breach of any of
the terms, conditions or provisions of the articles of incorporation or by-laws
of Parent or Merger Sub;
(b) conflict with or result in a violation or breach of any Law
or Order applicable to Parent, Merger Sub or their respective Assets or
Properties; or
(c) except as would not have a material adverse effect on the
Business or Condition of Parent, (i) conflict with or result in a violation or
breach of, (ii) constitute a default (or an event that, with or without notice
or lapse of time or both, would constitute a default) under, (iii) require
Parent to obtain any consent, approval or action of, make any filing with or
give any notice to any Person as a result of the terms of (except for (I) the
filing of the Agreement of Merger, together with the required officer's
certificates; (II) such consents approvals, orders, authorizations,
registrations, declarations and filings as may be required under applicable
state or federal securities laws; and (III) such filings as may be required
under the HSR Act), (iv) result in or give to any Person any right of
termination, cancellation, acceleration or modification in or with respect to,
(v) result in or give to any person any additional rights or entitlement to
increased, additional, accelerated or guaranteed payments or performance under,
(vi) result in the creation or imposition of (or the obligation to create or
impose) any Lien upon Parent or Merger Sub or any of their respective Assets or
Properties, or (vii) result in the loss of a material benefit under, any of the
terms, conditions or provisions of any Contract or License to which Parent or
Merger Sub is a party or by which any of their respective Assets and Properties
are bound.
3.7 Information to be Supplied by Parent. The information supplied by
Parent or Merger Sub for inclusion in the Permit Application shall not, at the
time the Fairness Hearing is held pursuant to Section 25142 of the California
Code or the time the qualification of such securities is effective under Section
25122 of the California Code, 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, in light of the circumstances under which
they were made, not misleading. The information supplied by Parent or Merger Sub
for inclusion in the Information Statement shall not, on the date the
Information Statement is first mailed to the Company's shareholders, at the time
of the Company Shareholder Action and at the Effective Time, contain any
statement which, at such time, is false or misleading with respect to any
material fact, or omit to state any material fact necessary in order to make the
statements therein, in light of the circumstances under which it is made, not
false or misleading; or omit to state any material fact necessary to correct any
statement in any earlier communication with respect to the solicitation of
proxies or written consents for the Company Shareholder Action which has become
false or misleading. Notwithstanding the foregoing, Parent and Merger Sub make
no representation, warranty or covenant with respect to any information supplied
by the Company which is contained in any of the foregoing documents.
3.8 Ownership of Merger Sub; No Prior Activities. As of the date hereof
and the Effective Time, except for obligations or Liabilities incurred in
connection with its incorporation or organization and the transactions
contemplated by this Agreement and except for this Agreement and any other
agreements or arrangements contemplated by this Agreement, Merger Sub has not
and will not have incurred, directly or indirectly, through any subsidiary or
affiliate, any obligations or liabilities or engaged in any business activities
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of any type or kind whatsoever or entered into any agreements or arrangements
with any Person.
3.9 Investment Advisors. No broker, investment banker, financial advisor
or other Person, is entitled to any broker's, finder's, financial advisor's or
similar fee or commission in connection with this Agreement and the transactions
contemplated hereby based on arrangements made by or on behalf of Parent.
3.10 Tax-Free Reorganization. Neither Parent nor any of its directors,
officers or shareholders has taken any action which, to Parent's knowledge after
consultation with its independent accountants, could reasonably be expected to
jeopardize the status of the Merger as a "reorganization" within the meaning of
Section 368(a) of the Internal Revenue Code.
3.11 Approvals. Section 3.11 of the Parent Disclosure Schedule contains
a list of all material Approvals of Governmental or Regulatory Authorities which
are required to be given to or obtained by the Parent from any and all
Governmental or Regulatory Authorities in connection with the consummation of
the transactions contemplated by this Agreement (other than the filing of the
Agreement of Merger, together with the required officers' certificates, and such
consents, approvals, orders, authorizations, registrations, declarations and
filings as may be required under state or federal securities laws).
ARTICLE 4
CONDUCT PRIOR TO THE EFFECTIVE TIME
4.1 Conduct of Business of the Company. During the period from April 21,
2000 and continuing until the earlier of the termination of this Agreement and
the Effective Time, the Company agrees (unless Parent shall give its prior
consent in writing which consent shall not be unreasonably withheld) to carry on
its business in the usual, regular and ordinary course consistent in all
respects with the Company's 2000 operating plan provided to Parent prior to the
date of this Agreement, to pay its Liabilities and Taxes consistent with the
Company's past practices (and in any event when due), to pay or perform other
obligations when due consistent with the Company's past practices (other than
Liabilities, Taxes and other obligations, if any, contested in good faith
through appropriate proceedings), and, to the extent consistent with such
business, to use reasonable efforts and institute all policies to preserve
intact its present business organization, keep available the services of its
present officers and key employees and preserve its relationships with
customers, suppliers, distributors, licensors, licensees, independent
contractors and other Persons having business dealings with it, all with the
express purpose and intent of preserving unimpaired its goodwill and ongoing
businesses at the Effective Time. Except as expressly contemplated by this
Agreement, the Company shall not, without the prior written consent of Parent,
which consent shall not be unreasonably withheld, take, or agree in writing or
otherwise to take, any of the actions described in Section 2.9 of this
Agreement, or any other action that would make any of its representations or
warranties contained in this Agreement untrue or incorrect in any material
respect or prevent the Company from performing or cause the Company not to
perform its agreements and covenants hereunder. Without limiting the generality
of the foregoing, with respect to Section 2.9(j), any Options granted must have
an exercise price of at least the fair market value of the Company Common Stock
on the date
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the Option was granted (as determined in good faith by the Company's board of
directors following consultation with, and consistent with the advice provided
by, each of the Company's and Parent's independent public accountants).
4.2 No Solicitation. Until the earlier of the Effective Time and the
date of termination of this Agreement pursuant to the provisions of Section 8.1
hereof, the Company will not take (and since April 23, 2000 inclusive has not
taken), nor will the Company (and since April 23, 2000 inclusive has not
permitted) permit any of the Company's officers, directors, employees,
shareholders, attorneys, investment advisors, agents, representatives,
Affiliates or Associates (collectively, "Representatives") to (directly or
indirectly), take any of the following actions with any Person other than Parent
and its designees: (a) solicit, encourage, initiate, entertain, accept receipt
of, substantively review or encourage any proposals or offers from, or
participate in or conduct discussions with or engage in negotiations with, any
Person relating to any offer or proposal, oral, written or otherwise, formal or
informal (a "Competing Proposed Transaction"), with respect to any possible
Business Combination with the Company or any of its Subsidiaries (whether such
Subsidiaries are in existence on the date hereof or are hereafter organized),
(b) provide information with respect to the Company to any Person, other than
Parent, relating to (or which the Company believes would be used for the purpose
of formulating an offer or proposal with respect to), or otherwise assist,
cooperate with, facilitate or encourage any effort or attempt by any such Person
with regard to, any possible Business Combination with the Company or any
Subsidiary of the Company (whether such Subsidiaries are in existence on the
date hereof or are hereafter organized), (c) agree to, enter into a Contract
with any Person, other than Parent, providing for, or approve a Business
Combination with the Company or any Subsidiary (whether such Subsidiaries are in
existence on the date hereof or are hereafter organized), (d) make or authorize
any statement, recommendation, solicitation or endorsement in support of any
possible Business Combination with the Company or any Subsidiary (whether such
Subsidiary is in existence on the date hereof or are hereafter organized) other
than by Parent, or (e) authorize or permit any of the Company's Representatives
to take any such action. The Company shall immediately cease and cause to be
terminated any such contacts or negotiations with any Person relating to any
such transaction or Business Combination. In addition to the foregoing, if the
Company receives prior to the Effective Time or the termination of this
Agreement any offer or proposal (formal or informal, oral, written or otherwise)
relating to, or any inquiry or contact from any Person with respect to, a
Competing Proposed Transaction, the Company shall immediately notify Parent
thereof and provide Parent with the details thereof, including the identity of
the Person or Persons making such offer or proposal, and will keep Parent fully
informed on a current basis of the status and details of any such offer or
proposal and of any modifications to the terms thereof; provided, however, that
this provision shall not in any way be deemed to limit the obligations of the
Company and its Representatives set forth in the previous sentence. Each of the
Company and Parent acknowledge that this Section 4.2 was a significant
inducement for Parent to enter into this Agreement and the absence of such
provision would have resulted in either (i) a material reduction in the merger
consideration to be paid to the shareholders of the Company or (ii) a failure to
induce Parent to enter into this Agreement. This Section 4.2 shall not preclude
any shareholder of the Company from making decisions with respect to voting of
shares of Company Capital Stock.
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ARTICLE 5
ADDITIONAL AGREEMENTS
5.1 Information Statement; Permit Application.
(a) As soon as practicable after the execution of this
Agreement, the Company shall prepare, with the cooperation of Parent, the
Information Statement for the shareholders of the Company to approve this
Agreement, the Agreement of Merger and the transactions contemplated hereby.
Parent and the Company shall each use reasonable commercial efforts to cause the
Information Statement to comply with applicable federal and state securities
laws requirements. Each of Parent and the Company agrees to 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 Information Statement, 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
Information Statement. The Company will promptly advise Parent, and Parent will
promptly advise the Company, in writing if at any time prior to the Effective
Time either the Company or Parent, as applicable, shall obtain knowledge of any
facts that might make it necessary or appropriate to amend or supplement the
Information Statement in order to make the statements contained or incorporated
by reference therein not misleading or to comply with applicable law. The
Information Statement shall contain the recommendation of the Board of Directors
of the Company that the Company's shareholders approve the Merger and this
Agreement and the conclusion of the Board of Directors that the terms and
conditions of the Merger are advisable and fair and reasonable to, and in the
best interests of, the shareholders of the Company. Anything to the contrary
contained herein notwithstanding, the Company shall not include in the
Information Statement any information with respect to Parent or its affiliates
or associates, the form and content of which information shall not have been
approved by Parent prior to such inclusion.
(b) As soon as practicable after the execution of this
Agreement, Parent shall prepare, with the cooperation of the Company, and file
the Permit Application. Parent and the Company shall each use commercially
reasonable efforts to cause the Permit Application to comply with the
requirements of applicable federal and state laws. Each of Parent and the
Company agrees to 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 Permit Application, 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 Permit Application. The Company will promptly
advise Parent, and Parent will promptly advise the Company, in writing if at any
time prior to the Effective Time either the Company or Parent, as applicable,
shall obtain knowledge of any facts that might make it necessary or appropriate
to amend or supplement the Permit Application in order to make the statements
contained or incorporated by reference therein not misleading or to comply with
applicable law. Anything to the contrary contained herein notwithstanding,
Parent shall not include in the Permit Application any information with respect
to the Company or its affiliates or associates, the form and content of which
information shall not have been approved by the Company prior to such inclusion.
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(c) In the event that the California Permit cannot be obtained
in time to permit the Closing to occur on or before August 31, 2000, then, at
the Company's election, unless Parent shall certify to the Company that Parent
believes in good faith that the California Permit can be obtained within thirty
(30) days after such date and within such thirty day period the California
Permit is thereafter obtained, Parent and the Company shall use commercially
reasonable efforts to effect the issuance of the shares of Parent Common Stock
to be issued pursuant to Section 1.6 in a private placement pursuant to Section
4(2) of the Securities Act on terms and conditions that are reasonably
satisfactory to Parent and the Company. The parties hereto acknowledge and agree
that in such event: (i) as a condition to effecting such issuance as a private
placement pursuant to Section 4(2) of the Securities Act, Parent shall be
entitled to obtain from each shareholder of the Company a Shareholder
Certificate in the form attached hereto as Exhibit F (or such other form as
shall be reasonably satisfactory to Parent and the Company) (the "Shareholder
Certificate") and that Parent will be relying upon the representations made by
each shareholder of the Company in the applicable Shareholder Certificate in
connection with the issuance of Parent Common Stock to such shareholder, (ii) at
the Closing, Parent shall execute and deliver a backup registration rights
agreement (the "Backup Registration Rights Agreement") granting Form S-3
registration rights with respect to the shares subject to terms, condition,
limitations, blackout periods and postponement rights (as reasonably desired by
Parent to accommodate other potential acquisitions and significant corporate
developments) reasonably acceptable to the parties; (iii) the shares of Parent
Common Stock so issued pursuant to Section 1.6 will not be registered under the
Securities Act and will constitute "restricted securities" within the meaning of
the Securities Act; and (iv) the certificates representing the shares of Parent
Common Stock shall bear appropriate legends to identify such privately placed
shares as being restricted under the Securities Act, to comply with applicable
state securities laws and, if applicable, to notice the restrictions on transfer
of such shares; and (v) notwithstanding anything else herein to the contrary,
the Backup Registration Rights Agreement shall contain terms and conditions
which are at least as favorable to the Company's shareholders as the terms and
conditions contained in and otherwise applicable to the Backup Rights
Registration Agreement entered into between Parent and the shareholders of
HotHaus Technologies Inc., a British Columbia corporation.
5.2 Shareholder Approval. As soon as practicable following the execution
and delivery of this Agreement and the issuance of the California Permit, the
Company shall give written notice of this Agreement and the proposed Merger to
all Company shareholders and shall use commercially reasonable efforts to take
all other action necessary in accordance with the California Code and its
articles of incorporation and bylaws to convene a meeting of its shareholders or
secure the written consent of its shareholders with respect to the Company
Shareholder Action before August 30, 2000. The Company shall submit this
Agreement to its shareholders for adoption whether or not the Company's Board of
Directors determines at any time subsequent to declaring its advisability that
this Agreement is no longer advisable and recommends that the shareholders
reject it. The Company shall consult with Parent regarding the date of any
shareholder meeting with respect to the Company Shareholder Action and shall not
postpone or adjourn (other than for the absence of a quorum) any such meeting,
which consent shall not be unreasonably withheld. The Company shall use all
commercially reasonable efforts required to solicit and obtain from shareholders
of the Company proxies or written consents in favor of the Merger and this
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Agreement and shall take all other action necessary or advisable to secure the
vote or consent of shareholders of the Company required with respect to the
Merger. The materials submitted to the shareholders of the Company in respect of
the Merger shall have been subject to prior review and comment by Parent and
shall include (a) information regarding the Company, the terms of the Merger and
this Agreement, (b) the recommendation of the Board of Directors of the Company
that the Company's shareholders approve the Merger and this Agreement and the
transactions contemplated hereby and approve and execute such other documents as
may be required to satisfy the applicable requirements of the Securities Act in
connection with the issuance and sale of Parent Common Stock in the Merger, (c)
and the conclusion of the Board of Directors of the Company that the terms and
conditions of the Merger are advisable, fair and reasonable to, and in the best
interests of, the shareholders of the Company and (d) such other documents as
may be required to satisfy the applicable requirements of the Securities Act in
connection with the issuance and sale of Parent Common Stock in the Merger.
5.3 Access to Information. Between the date of this Agreement and the
earlier of the Effective Time or the termination of this Agreement, upon
reasonable notice the Company shall (i) give Parent and its officers, employees,
accountants, counsel, financing sources and other agents and representatives
reasonable access to all buildings, offices, and other facilities and to all
Books and Records of the Company, whether located on the premises of the Company
or at another location; (ii) permit Parent to make such inspections as they may
reasonably require; (iii) cause its officers to furnish Parent such financial,
operating, technical and product data and other information with respect to the
business and Assets and Properties of the Company as Parent from time to time
may reasonably request, including without limitation financial statements and
schedules; (iv) allow Parent the opportunity to interview such employees and
other personnel and Affiliates of the Company with the Company's prior written
consent, which consent shall not be unreasonably withheld or delayed; and (v)
assist and cooperate with Parent in the development of integration plans for
implementation by Parent and the Surviving Corporation following the Effective
Time; provided, however, that no investigation pursuant to this Section 5.3
shall affect or be deemed to modify any representation or warranty made by the
Company herein. Materials furnished to Parent pursuant to this Section 5.3 may
be used by Parent for strategic and integration planning purposes relating to
accomplishing the transactions contemplated hereby.
5.4 Confidentiality. Each of the parties hereto hereby agrees to keep
the existence and terms of this Agreement (except to the extent contemplated
hereby) and such information or knowledge obtained in any investigation pursuant
to Section 5.3, or pursuant to the negotiation and execution of this Agreement
or the effectuation of the transactions contemplated hereby, confidential;
provided, however, that the foregoing shall not apply to information or
knowledge which (a) a party can demonstrate was already lawfully in its
possession prior to the disclosure thereof by the other party, (b) is generally
known to the public and did not become so known through any violation of Law, or
a confidentiality agreement or other contractual, legal or fiduciary obligation
of confidentiality of the disclosing party or any other party with respect to
such information, (c) became known to the public through no fault of such party,
(d) is later lawfully acquired by such party without confidentiality
restrictions from other sources not bound by applicable confidentiality
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restrictions, (e) is required to be disclosed by order of court or Governmental
or Regulatory Authority with subpoena powers (provided that such party shall
have provided the other party with prior notice of such order and an opportunity
to object or seek a protective order and take any other available action) or (f)
which is disclosed without obligation of confidentiality in the course of any
Action or Proceeding between any of the parties hereto. The parties acknowledge
that Parent and the Company have previously executed a confidentiality agreement
dated March 15, 1999 (as amended, the "Confidentiality Agreement"), which
Confidentiality Agreement shall continue in full force and effect in accordance
with its terms. Without limiting the foregoing, all information furnished to
Parent and its officers, employees, accountants and counsel by the Company, and
all information furnished to the Company by Parent and its officers, employees,
accountants and counsel, shall be covered by the Confidentiality Agreement, and
Parent and the Company shall be fully liable and responsible under the
Confidentiality Agreement for any breach of the terms and conditions thereof by
their respective subsidiaries, officers, employees, accountants and counsel.
5.5 Expenses. Whether or not the Merger is consummated, all fees and
expenses incurred in connection with the Merger including 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. Parent shall have the right to approve
Third Party Expenses to be incurred by the Company between the date hereof and
the Closing, including necessary fees and expenses of legal counsel, auditors
and tax advisors, which such approvals will not be unreasonably withheld (it
being understood that Third Party Expenses incurred by the Company in connection
with the transactions contemplated by this Agreement (whether before or after
the date hereof) which do not exceed $400,000 for legal expenses (including
agreed premiums) and $200,000 for non-legal expenses (exclusive of premiums)
shall be deemed to have been approved by Parent).
5.6 Public Disclosure. Except as provided below and unless otherwise
required by Law (including federal and state securities laws) or, as to Parent,
by the rules and regulations of the NASD, prior to the Effective Time, no
disclosure (whether or not in response to any inquiry) of the existence of any
subject matter of, or the terms and conditions of, this Agreement shall be made
by any party hereto unless approved by Parent and the Company prior to release;
provided, however, that such approval shall not be unreasonably withheld or
delayed. Notwithstanding the foregoing: (i) each of Parent and the Company shall
be permitted to disclose the existence of this Agreement in confidence to its
customers, suppliers and sales representatives with whom it has non-disclosure
agreements that apply to such disclosure (or the other party otherwise agrees to
such disclosure) and for which there is a business reason for the disclosure;
and (ii) the parties shall issue a joint press release announcing this Agreement
before 3:00 p.m., California time, on the first business day after the
expiration of the due diligence period.
5.7 Approvals. The Company shall use commercially reasonable efforts to
obtain all Approvals from Governmental or Regulatory Authorities or under any of
the Contracts or other agreements as may be required in connection with the
Merger (all of such
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Approvals are set forth in the Company Disclosure Schedule or described in this
Agreement) so as to preserve all rights of and benefits to the Company
thereunder and Parent shall provide the Company with such assistance and
information as is reasonably required to obtain such Approvals. Parent shall use
commercially reasonable efforts to obtain all Approvals from Governmental or
Regulatory Authorities (all of such Approvals are set forth in the Parent
Disclosure Schedule or described in this Agreement) as may be required in
connection with the Merger and the Company shall provide Parent with such
assistance and information as is reasonably required to obtain such Approvals.
5.8 FIRPTA Compliance. Within thirty days prior to the Closing Date, the
Company shall deliver to Parent a properly executed statement in a form prepared
by Parent and reasonably acceptable to the Company for purposes of satisfying
Parent's obligations under Treasury Regulation Section 1.1445-2(c)(3).
5.9 Notification of Certain Matters. The Company shall give prompt
notice to Parent, and Parent 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, Parent
or Merger Sub, respectively, contained in this Agreement to be untrue or
inaccurate at or prior to the Closing Date and (ii) any failure of the Company,
Parent or Merger Sub, 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 5.9 shall not limit or otherwise affect any remedies available to the
party receiving such notice.
5.10 [Intentionally Omitted].
5.11 [Intentionally Omitted]
5.12 [Intentionally Omitted]
5.13 Additional Documents and Further Assurances. Each party hereto, at
the request of the other party hereto, shall execute and deliver such other
instruments and do and perform such other acts and things (including, but not
limited to, all action reasonably necessary to seek and obtain any and all
consents and approvals of any Government or Regulatory Authority or Person
required in connection with the Merger; provided, however, that Parent shall not
be obligated to consent to any divestitures or operational limitations or
activities in connection therewith and no party shall be obligated to make a
payment of money as a condition to obtaining any such condition or approval) as
may be reasonably necessary or desirable for effecting completely the
consummation of this Agreement and the transactions contemplated hereby.
5.14 Indemnification. Parent, the Company and the Surviving Corporation
agree that all rights to indemnification or exculpation now existing in favor of
the employees, agents, directors or officers of the Company (the "Company
Indemnified Parties") as provided in its articles of incorporation or bylaws or
indemnification agreements as in effect on the date of this Agreement shall
continue in full force and effect for a period of not less than six years from
the Closing Date, assuming the consummation of the Merger; provided, however,
that, in the event any claim or claims are asserted or made within such six-year
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period, all rights to indemnification in respect of any such claim or claims
shall continue to disposition of any and all such claims. Any determination
required to be made with respect to whether a Company Indemnified Party's
conduct complies with the standards set forth in the articles of incorporation
or bylaws or indemnification agreements of the Surviving Corporation or
otherwise shall be made by independent counsel selected by the Surviving
Corporation reasonably satisfactory to the Company Indemnified Party (whose fees
and expenses shall be paid by the Surviving Corporation), which such
determination shall be final and binding on the parties thereto. The Company
hereby represents and warrants to Parent that no claim for indemnification has
been made by any director or officer of the Company and, to the knowledge of the
Company, no basis exists for any such claim for indemnification. Parent
unconditionally guarantees the Surviving Company's payment and other obligations
provided for in this Section 5.14.
5.15 Form S-8. Parent shall file a registration statement on Form S-8
for the shares of Parent Common Stock issuable with respect to assumed Company
Options promptly (and in any event within twenty (20) Business Days) after the
Effective Time to the extent the shares of Parent Common Stock issuable upon
exercise of such Company Options qualify for registration on Form S-8 and Parent
shall use its commercially reasonable efforts to maintain the effectiveness of
such registration statement (and maintain the current status of the prospectus
relating thereto) for so long as such Company Options remain outstanding.
5.16 NNM Listing of Additional Shares. Parent shall, to the extent
required by the rules of the NNM, notify the NNM of the shares of Parent Common
Stock to be issued, and the shares of Parent Common Stock required to be
reserved for issuance, in connection with the Merger, it being understood that
under current NNM and SEC rules, no additional listing application needs to be
filed by Parent.
5.17 Company's Auditors. The Company will use commercially reasonable
efforts to cause its management and its independent auditors to facilitate on a
timely basis (i) the preparation of financial statements (including pro forma
financial statements if required) as required by Parent to comply with
applicable SEC regulations, (ii) the review of any Company audit or review work
papers, including the examination of selected interim financial statements and
data, (iii) the delivery of such representations from the Company's independent
accountants as may be reasonably requested by Parent or its accountants, and
(iv) the securing of a binding fee commitment (on terms similar to those in
place on the date of this Agreement) with respect to consents and comfort
letters requested by Parent after the Closing.
5.18 Termination of 401(k) Plans. Upon the request of Parent, the Board
of Directors of the Company, and of any Subsidiary, shall adopt resolutions
terminating, effective as of the day before the Closing Date, any Plan which is
intended to meet the requirements of Section 401(k) of the Code, and which is
sponsored, or contributed to, by the Company or any Subsidiary. At the Closing,
the Company shall provide Parent (i) executed resolutions of the Board of
Directors of the Company authorizing such termination and (ii) if required, an
executed amendment to the 401(k) Plan in the form requested by Parent sufficient
to assure compliance with all applicable requirements of the
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Code and regulations thereunder so that the tax-qualified status of the 401(k)
Plan will be maintained at the time of termination.
5.19 Takeover Statutes. If any Takeover Statute is or may become
applicable to the transactions contemplated hereby, the Board of Directors of
the Company will grant such approvals and take such actions as are necessary so
that the transactions contemplated hereby may be consummated as promptly as
practicable on the terms contemplated hereby and otherwise act to eliminate the
effects of any Takeover Statute on any of the transactions contemplated hereby.
5.20 [Intentionally Omitted]
5.21 Treatment as Reorganization. Neither Parent nor the Company shall
knowingly take any action prior to or following the Closing that would cause the
merger to fail to qualify as a "reorganization" within the meaning of Section
368(a) of the Internal Revenue Code, including, but not limited to, any change
in the form of the Merger pursuant to Section 5.24 or any post-Closing merger or
liquidation of the Company that would cause the Merger to so fail to qualify.
5.22 Company Repurchases. The Company will exercise any rights that
mature between the date hereof and the Effective Time to repurchase any
outstanding shares of Company Capital Stock at the price at which such shares
were issued.
5.23 Information Technology Access. In furtherance of the Company's
agreement in Section 5.3 and to facilitate prompt integration following the
Closing of the Company's information technology ("IT") inventory (e.g., voice
and data network services and software and hardware, licenses,
financial/accounting software, IT budgets, etc.) with Parent's, the Company will
provide Parent and its Representatives with access to the Company's IT
inventory, as well as the Company's personnel responsible for such IT inventory.
Because of the substantial lead time that may be required to order and install
new software and hardware to integrate the Company's IT systems with Parent's,
and the importance of a smooth integration of such IT systems promptly after the
Closing, the Company agrees that Parent may order, either in Parent's name or
the Company's name, any new IT services, hardware and software that Parent
believes will be needed at the Company's facilities in order to integrate
Parent's and the Company's respective operations following the Closing. The
Company will cooperate with Parent in the installation of such IT systems,
hardware and software prior to and in anticipation of the Closing, including,
but not limited to, providing Parent with reasonable access to and use of the
Company's appropriate personnel. If necessary, at Parent's request, the Company
will place IT systems, hardware and software orders in the Company's name. For
clarity, it is the parties' intent not to connect any of the ordered services or
systems prior to the Closing. Parent and the Company agree to cooperate with
each other to minimize any potential disruption to the Company's business from
the IT integration efforts; provided, however, that Parent will not have any
liability to the Company for any such disruption or as may otherwise result from
the IT integration efforts, except as may be directly caused by Parent's gross
negligence or willful misconduct; and provided further that in no event will
Parent have any liability to the Company for any indirect, incidental,
consequential, special or speculative damages, including, but not limited to,
damages for loss of profits or use, business interruption or loss of goodwill,
irrespective
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of whether such damages arise under contract, tort, statute or otherwise and
whether or not the Company has given Parent advance notice of the possibility of
such damages. If the Closing does not occur, other than because of the Company's
breach of the Merger Agreement, Parent will reimburse the Company for its
reasonable and documented out-of-pocket costs incurred by it in connection with
the ordering and installation of IT services, hardware and software. If Parent
is so required to reimburse the Company, Parent will own any such hardware and
software and will pay for its removal from Company premises. Parent and the
Company will cooperate in the removal of any such hardware or software so as to
minimize any disruption to the Company's business. In addition, if the Closing
does not occur, the Company will cooperate with Parent in canceling any orders
for IT services, hardware or software and will otherwise act to minimize the
costs which might be incurred in connection with the IT integration efforts.
5.24 Change of Merger Form. The Company agrees that in the event Parent
requests at least five (5) Business Days prior to the Closing that the
transactions contemplated hereby be effected through a different form of merger
(limited to a forward merger qualifying under Code Section 368(a)(1)(A)) than
the form presently contemplated herein, and provided that the alternative form
of merger is in any event intended to qualify as a tax-free reorganization in
the opinion of counsel to Parent and the Company, the Company shall cooperate
with Parent in effecting the alternative form of merger and will take all
reasonably necessary action towards such end, including, but not limited to the
execution of any amendments to this Agreement (provided such amendments relate
only to the alternative form of merger and any related matters and do not
include any other substantive changes not otherwise agreed between the parties).
The Company shall not be responsible for any Other Tax imposed on the Company,
including, but not limited to, any sales or use or other transfer Tax, resulting
from Parent's determination to change the form of the Merger.
5.25 Due Diligence. The Company acknowledges that, as of the date of
this Agreement, Parent has not yet received all of the due diligence materials
it has requested with respect to the Company and its operations, nor has Parent
had sufficient opportunity to complete its review of the due diligence materials
provided to date by the Company. The Company agrees that it will continue to
promptly provide requested due diligence materials to Parent and (as
contemplated by Section 5.3) provide Parent with reasonable access to its
facilities, Books and Records and personnel for the purpose of permitting Parent
to complete its due diligence review. Parent agrees that it will use
commercially reasonable efforts to complete its due diligence review of the
Company as promptly as practicable, and in no event later than the earlier of:
(i) fourteen days after receipt of all material due diligence materials
requested by Parent from the Company (including any supplementary materials
requested by Parent as a result of its review of any of the due diligence
materials provided by the Company); and (ii) 11:59 p.m. California time, on July
30, 2000.
5.26 Intellectual Property. The Company shall give Parent prompt notice
that any Person shall have (i) commenced, or shall have notified the Company
that it intends to commence, an Action or Proceeding or (ii) provided the
Company with notice, in either case which allege(s) that any of the Intellectual
Property, including the Company Intellectual Property, presently embodied, or
proposed to be embodied, in the Company's products or
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utilized in Company-designed or modified development tools (including standard
cells) or design environments infringes or otherwise violates the intellectual
property rights of such Person, is available for licensing from a potential
licensor providing the notice or otherwise alleges that the Company does not
otherwise own or have the right to exploit such Intellectual Property, including
the Company Intellectual Property. The Company shall cooperate with Parent in
making arrangements, prior to the Closing Date, satisfactory to Parent in its
sole discretion to effect the assignment to the Company of all Intellectual
Property created by the Company's founders, employees and consultants, including
certain Intellectual Property created by the Company's founders prior to the
Company's incorporation, and to obtain the cooperation of such Persons to
complete all appropriate patent filings related thereto. The Company shall take
commercially reasonable actions to maintain, perfect, preserve or renew the
Company Registered Intellectual Property, including, without limitation, the
payment of any registration, maintenance, renewal fees, annuity fees and taxes
or the filing of any documents, applications or certificates related thereto,
and to promptly respond and prepare to respond to all requests, related to the
Company Registered Intellectual Property, received from Governmental or
Regulatory Authorities. At the Closing, the Company will notify Parent of all
material actions which must be taken within the 180 days following the Closing
Date and which are necessary to maintain, perfect, preserve or renew the Company
Registered Intellectual Property, including the payment of any registration,
maintenance, renewal fees, annuity fees and taxes or the filing of any
documents, applications or certificates related thereto.
5.27 Company Disclosure Schedule. Parent and Merger Sub acknowledge that
the Company Disclosure Schedule delivered by the Company in connection with the
execution and delivery of the Original Agreement was in draft form. The
definitive Company Disclosure Schedule delivered by the Company concurrently
herewith supercedes the draft Company Disclosure Schedule delivered as of the
date of the Original Agreement and constitutes the "Company Disclosure Schedule"
for all purposes of this Agreement.
5.28 Inclusion in Parent Plans. Parent shall, to the extent permitted by
Parent's various benefit plans, promptly following the Closing include all of
the Company's employees in Parent's employee benefit plans, including its
medical, equity, stock option, profit sharing, retirement, 401(k), dental, or
other similar welfare or retirement plans. Each such Company employee shall
receive full credit for prior service rendered to the Company for purposes of
eligibility and vesting in employee benefits plans maintained by Parent and for
purposes of vacation, sick leave and other benefits in which the amount of an
employee's benefits is dependent upon length of service and with full credit for
deductibles, co-payments and out-of-pocket expenses for the current year
(subject in all cases to any limitations contained in any applicable plan) and
with full credit; provided, however, that no such prior service credit shall
apply with respect to the vesting schedule of options or other similar incentive
awards granted by Parent to such Company employees.
5.29 Certain Agreements. Schedule 5.29 sets forth those individuals and
entities who have not, as of the date hereof, executed a Support Agreement
Reaffirmation. The Company agrees to use commercially reasonable efforts to
obtain executed copies of such an agreement from individuals and entities
sufficient to satisfy the voting requirement set forth in Section 2.32(d) as
soon as practicable and in any event no later than August 4, 2000.
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Parent acknowledges that it has received all executed agreements required under
Section 8.1(k).
5.30 Adjustment of Aggregate Share Number. The parties acknowledge that
the Company intends to issue Company Options to new employees of the Company in
the ordinary course of business between the Amendment Date and the Closing Date.
Parent and the Company acknowledge that the Aggregate Share Number will be
increased in accordance with Schedule 5.30 as necessary to directly offset the
dilutive effect of grants of Company Options to Company employees newly hired
between the Amendment Date and the Closing and certain other matters. The
Company agrees that it will seek Parent's prior written approval of any grant of
Company Options to any new employee, which consent shall not be unreasonably
withheld or delayed, subject to Schedule 5.30. Notwithstanding anything in this
Section 5.30 to the contrary, no adjustment to the Aggregate Share Number shall
be made for any grant of Company Options by the Company which Parent has not
approved in writing. In no event will the Closing be delayed, postponed or
affected if there is a dispute between the Company and Parent as to whether the
Aggregate Share Number is required to be increased pursuant to this section. If
any such dispute cannot be resolved before the Closing, such dispute will be
resolved post-Closing by Parent and the Shareholder Agent pursuant to the
dispute resolution provisions of this Agreement.
5.31 Acceleration of Vesting; Designated Employee. The parties shall
provide for a mechanism that provides for the following upon consummation of the
Merger with respect to each employee of the Company designated by the Company
prior to the Closing Date (the "Designated Employees") and each Company Option
issued to such Designated Employees prior to the Closing Date (the "Designated
Stock Options"): In the event that a Designated Employee is terminated by the
Company or Parent without Cause within one year after the Closing Date, then the
vesting of the shares of Parent Common Stock covered by the Designated Stock
Options of such Designated Employee shall accelerate by one year effective as of
the date of such termination. Prior to the Closing, the Company and each
Designated Employee will enter into an appropriate amendment (which shall be
subject to the reasonable approval of Parent) to the applicable Designated Stock
Options in accordance with this Section.
ARTICLE 6
CONDITIONS TO THE MERGER
6.1 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 Closing of the following
conditions:
(a) Governmental and Regulatory Approvals. Approvals from any
Governmental or Regulatory Authority (if any) necessary for consummation of the
transactions contemplated hereby shall have been timely obtained; and any
waiting period applicable to the consummation of the Merger under the HSR Act
(other than with respect to the receipt of Parent Common Stock by a shareholder
of the Company) shall have expired or been terminated.
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(b) No Injunctions or Regulatory Restraints; Illegality. No
temporary restraining order, preliminary or permanent injunction or other Order
issued by any court of competent jurisdiction or Governmental or Regulatory
Authority or other legal or regulatory restraint or prohibition preventing the
consummation of the Merger shall be in effect; nor shall there be any action
taken, or any Law or Order enacted, entered, enforced or deemed applicable to
the Merger or the other transactions contemplated by the terms of this Agreement
that would prohibit the consummation of the Merger or which would permit
consummation of the Merger only if certain divestitures were made or if Parent
were to agree to limitations on its business activities or operations.
(c) Tax Opinions. Parent and the Company shall each have
received written opinions from their counsel, in form and substance reasonably
satisfactory to each of them, to the effect that the Merger will constitute a
reorganization within the meaning of Section 368(a) of the Code. The parties to
this Agreement agree to make such reasonable written representations as
requested by such counsel for the purpose of rendering such opinions.
(d) Shareholder Approval. The Merger shall have been approved by
the requisite votes of the Company's shareholders in accordance with the
California Code.
(e) NNM Listing. The shares of Parent Common Stock to be issued,
and the shares of Parent Common Stock required to be reserved for issuance, in
connection with the Merger shall be authorized for listing on the NNM.
(f) Legal Proceedings. No Governmental or Regulatory Authority
shall have notified either party to this Agreement that such Governmental or
Regulatory Authority intends to commence proceedings to restrain or prohibit the
transactions contemplated hereby or force rescission, unless such Governmental
or Regulatory Authority shall have withdrawn such notice and abandoned any such
proceedings prior to the time which otherwise would have been the Closing Date.
(g) Fairness Hearing and California Permit; Private Placement
Alternative. The fairness hearing shall have been held by the Commissioner of
Corporations of the State of California and the California Permit shall have
been issued by the State of California. In the alternative in accordance with
and as permitted by Section 5.1(c), Parent shall have executed and delivered to
the Company the Backup Registration Rights Agreement (and such Backup
Registration Rights Agreement shall be in full force and effect), and the
parties shall be reasonably satisfied that the shares of Parent Common Stock to
be issued in connection with the Merger pursuant to Section 1.6(a) are issuable
without registration pursuant to Section 4(2) of the Securities Act.
6.2 Additional Conditions to Obligations of the Company. The obligations
of the Company to consummate the Merger and the other transactions contemplated
by this Agreement shall be subject to the satisfaction at or prior to the
Closing of each of the following conditions, any of which may be waived, in
writing, exclusively by the Company:
(a) Representations and Warranties. The representations and
warranties of Parent and Merger Sub contained in this Agreement shall be
accurate in all respects as of
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the date of this Agreement and shall be true and correct in all respects as of
the Closing Date as if made on and as of the Closing Date (other than
representations and warranties which by their express terms are made solely as
of a specified earlier date, which shall be true and correct as of such
specified earlier date), except that any inaccuracies in such representations
and warranties will be disregarded if the circumstances giving rise to all such
inaccuracies (considered collectively) do not constitute, and would not
reasonably be expected to have, a material adverse change on the Business or
Condition of Parent; provided, however, that, for purposes of determining the
accuracy of such representations and warranties, all "material adverse change in
the Business or Condition of Parent" qualifications and other materiality
qualifications contained in such representations and warranties shall be
disregarded.
(b) Performance. Parent and Merger Sub shall have performed and
complied with in all material respects each agreement, covenant and obligation
required by this Agreement to be so performed or complied with by the Parent or
Merger Sub at or before the Closing.
(c) Officers' Certificates. Paren and Merger Sub shall have
delivered to the Company certificates, dated the Closing Date and executed by
their respective President and Chief Executive Officer, substantially in the
form set forth in Exhibit G-1 hereto, and certificates, dated the Closing Date
and executed by the Secretary of Parent and Merger Sub, substantially in the
form set forth in Exhibit G-2 hereto.
(d) Legal Opinion. The Company shall have received a legal
opinion from Irell & ▇▇▇▇▇▇▇ LLP, counsel to Parent, as to the matters set forth
in Exhibit H.
6.3 Additional Conditions to the Obligations of Parent and Merger Sub.
The obligations of Parent and Merger Sub to consummate the Merger and the other
transactions contemplated by this Agreement shall be subject to the satisfaction
at or prior to the Closing of each of the following conditions, any of which may
be waived, in writing, exclusively by Parent:
(a) Representations and Warranties. The representations and
warranties of the Company contained in this Agreement shall be accurate in all
respects as of the date of this Agreement and shall be accurate in all respects
as of the Closing Date as if made on and as of the Closing Date (other than
representations and warranties which by their express terms are made solely as
of a specified earlier date, which shall be true and correct as of such
specified earlier date), except that any inaccuracies in such representations
and warranties will be disregarded if the circumstances giving rise to all such
inaccuracies (considered collectively) do not constitute, and would not
reasonably be expected to have, a material adverse change on the Business or
Condition of the Company; provided, however, that, for purposes of determining
the accuracy of such representations and warranties, all "material adverse
change in the Business or Condition of the Company" qualifications and other
materiality qualifications contained in such representations and warranties
shall be disregarded.
(b) Performance. The Company shall have performed and complied
with in all material respects each agreement, covenant and obligation required
by this Agreement to be so performed or complied with by the Company on or
before the Closing Date.
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(c) Officers' Certificates. The Company shall have delivered to
Parent a certificate, dated the Closing Date and executed by the President and
Chief Executive Officer of the Company, substantially in the form set forth in
Exhibit I-1 hereto, and a certificate, dated the Closing Date and executed by
the Secretary of the Company, substantially in the form set forth in Exhibit I-2
hereto.
(d) Third Party Consents. Parent shall have been furnished with
evidence satisfactory to it that the Company has obtained the consents,
approvals and waivers listed in Section 2.6 of the Disclosure Schedule (except
for such consents, approvals and waivers the failure of which to receive could
not reasonably be expected to have a material adverse effect on the Company).
(e) Legal Opinion. Parent shall have received a legal opinion
from ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP, legal counsel to the Company, as to the
matters set forth in Exhibit J.
(f) Non-Competition Agreements. Each of the persons listed on
Schedule 6.3(f) shall have executed and delivered to Parent a Non-Competition
Agreement and all of the Non-Competition Agreements shall be in full force and
effect.
(g) Limitation on Dissent. Holders of no more than three percent
(3.0%) of the outstanding shares of Company Capital Stock shall have exercised,
nor shall they have any continued right to exercise, appraisal, dissenters' or
similar rights under applicable law with respect to their shares by virtue of
the Merger.
(h) No Bankruptcy. There shall not have been a Bankruptcy Event.
(i) FIRPTA Compliance. The executed statement described in
Section 5.8 for purposes of satisfying Parent's obligations under Treasury
Regulation Section 1.1445-2(c)(3) previously delivered by the Company to Parent
shall continue to be in full force and effect.
(j) No Material Adverse Change. There shall have occurred no
material adverse change in the Business or Condition of the Company since April
21, 2000.
(k) Company Intellectual Property. Other than as disclosed in
the Company Disclosure Schedule, no Person (other than Level One Communications
or its Affiliates) shall have (i) commenced, or shall have notified either party
to this Agreement that it intends to commence, an Action or Proceeding or (ii)
provided the Company with notice, in either case which allege(s) that any of the
Intellectual Property, including the Company Intellectual Property, presently
embodied, or proposed to be embodied, in the Company's products or utilized in
Company-designed or modified development tools (including standard cells) or
design environments infringes or otherwise violates the intellectual property
rights of such Person, is available for licensing from a potential licensor
providing the notice or otherwise alleges that the Company does not otherwise
own or have the right to exploit such Intellectual Property, including the
Company Intellectual Property, unless such Person shall have withdrawn such
notice and abandoned any such Action or Proceeding prior to the time which
otherwise would have been the Closing Date.
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(l) Termination of Pension Plan. If requested by Parent in
writing at least ten (10) business days prior to Closing, the Company shall,
immediately prior to the Closing Date, have terminated the Company 401(k) Plan
and no further contributions shall have been made to the 401(k) Plan. The
Company shall have provided to Parent (i) executed resolutions of the Board of
Directors of the Company authorizing the termination and (ii) an executed
amendment to the 401(k) Plan sufficient to assure compliance with all applicable
requirements of the Internal Revenue Code and regulations thereunder so that the
tax-qualified status of the 401(k) Plan will be maintained at the time of
termination.
(m) Employees. The employees of the Company set forth on
Schedule 6.3(m) shall continue to be employed by the Company at the Closing (and
shall not have given any notice or other indication that they are not willing to
be employed by Parent or a Subsidiary of Parent (as Parent shall designate),
following the Merger. At least ninety percent (90%) of the other engineering and
research and development employees of the Company employed as of the date of
this Agreement shall continue to be employed by the Company at the Closing and
shall not have given any notice or other indication, that they are not willing
to be employed by Parent or a Subsidiary of Parent (as Parent shall designate)
following the Merger. Any one (but not more than one) Company employee who
ceases to be employed by the Company as a result of death or bona fide permanent
disability will be excluded from the numerator and the denominator in
calculating such percentage.
(n) Assignment of Intellectual Property. Arrangements
satisfactory to Parent in its sole discretion shall have been made to effect the
assignment to the Company of all Intellectual Property created by the Company's
founders, employees and consultants, including certain Intellectual Property
created by the Company's founders prior to the Company's incorporation, and to
obtain the cooperation of such Persons to complete all appropriate U.S. and
foreign patent filings related thereto.
(o) Repurchase Agreement. ▇▇▇▇▇▇▇ ▇▇ shall have executed and
delivered to Parent a Stock Repurchase Agreement in substantially the form
attached hereto as Exhibit L (or Parent and ▇▇▇▇▇▇▇ ▇▇ shall have executed a
similar agreement with such changes thereto as have been agreed upon by both
parties in each party's sole and absolute discretion), and such Stock Repurchase
Agreement shall be in full force and effect.
(p) Intentional Material Misrepresentation: The Company shall
not have committed any material fraud in connection with this Agreement, made
any intentional material misrepresentation to Parent constituting fraud, or
committed any other intentional material breach of this Agreement.
ARTICLE 7
SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND
AGREEMENTS; ESCROW PROVISIONS
7.1 Survival of Representations, Warranties, Covenants and Agreements.
Notwithstanding any right of Parent, Merger Sub or the Company (whether or not
exercised) to investigate the affairs of Parent, Merger Sub or the Company
(whether pursuant to Section 5.3 or otherwise) or a waiver by Parent or the
Company of any condition to Closing
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set forth in Article 6, each party shall have the right to rely fully upon the
representations, warranties, covenants and agreements of the other party
contained in this Agreement or in any instrument delivered pursuant to this
Agreement. Except for (i) the covenant contained in Section 5.14 (which shall
survive for the period set forth therein) and (ii) Article 7 (which shall
survive until termination of the escrow created thereby and the satisfaction of
any other obligations described therein), (x) all of the representations and
warranties of the Company in this Agreement relating to the IP Claims shall
survive until the IP Expiration Date and (y) all of the other representations,
warranties, covenants and agreements of the Company and Parent and Merger Sub
contained in this Agreement or in any instrument delivered pursuant to this
Agreement shall survive the Merger and continue until the first anniversary of
the Closing Date (the "General Expiration Date").
7.2 Escrow Provisions.
(a) Establishment of the Escrow Fund. As soon as practicable
after the Effective Time, the Escrow Amount, without any act of any shareholder,
will be deposited with the Depositary Agent (plus a proportionate share of any
additional shares of Parent Common Stock as may be issued upon any stock splits,
stock dividends or recapitalizations effected by Parent following the Effective
Time), such deposit to constitute the "Escrow Fund" to be governed by the terms
set forth herein. The portion of the Escrow Amount contributed on behalf of each
shareholder of the Company shall be in proportion to the aggregate number of
shares of Parent Common Stock which such holder would otherwise be entitled
under Section 1.6(a). Notwithstanding the references in this Agreement to the
"escrow" and the Escrow Fund, the parties acknowledge and agree that the
Depositary Agent is acting as a depository and not as an escrow agent pursuant
to this Article 7.
(b) Recourse to the Escrow Fund. Subject to the terms and
conditions hereof, the IP Escrow Amount shall be available to compensate Parent
and its officers, directors, employees, agents, Affiliates and Associates (the
"Parent Indemnitees") for any and all payments and disbursements made by any of
the Parent Indemnitees (including attorneys' fees and other expenses of
litigation, and amounts paid in settlement), directly or indirectly, as a result
of IP Claims ("IP Losses"). The term "IP Losses" shall not include any expenses
of litigation which relate to any of the IP Claims and which are incurred prior
to the Closing Date and, notwithstanding anything to the contrary contained in
this Agreement, no Officer's Certificate may be submitted to the Depository
Agent for any expenses of litigation which relate to any of the IP Claims and
which are incurred prior to the Closing Date. Subject to the terms and
conditions hereof, the General Escrow Amount shall be available to compensate
the Parent Indemnitees for any and all Losses (whether or not involving a Third
Party Claim), including IP Losses, incurred or sustained by any of the Parent
Indemnitees, directly or indirectly, either as a result of (i) any inaccuracy or
breach of any representation, warranty, covenant or agreement of the Company
contained herein or in any instrument delivered pursuant to this Agreement or
(ii) any IP Claim. Notwithstanding the foregoing, Parent may not make any claims
against the Escrow Fund unless the aggregate Losses incurred or sustained exceed
$300,000 (at which such time claims may be made for all Losses incurred or
sustained).
(i) Basic Amount Recoverable: The amount of payments and
disbursements recoverable from the Escrow Fund with respect to any IP Losses
shall be
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determined on the following basis: (x) in the case of litigation expenses
incurred after the Closing Date with respect to the IP Claims (including
expenses in connection with threatened litigation), the actual amount of such
litigation expenses which are paid; (y) in the case of any payments made to
third parties in settlement of any IP Claims (including, but not limited to, any
lump-sum payment, prepaid license, technology acquisition costs or periodic
royalties), the actual amount of such payments which are made; and (z) in the
case of any judgments with respect to the IP Claims, the actual amount of such
judgments which are paid to third parties. It is agreed that any Losses that
Parent or the other Parent Indemnities may incur with respect to the IP Claims
will be offset by: (1) any payments that Parent or the Company receives from
Accton Technology Corporation ("Accton") that are specifically identified by
Accton as being made toward the legal fees or damages incurred by Parent or the
Company in connection with the IP Claims; or (2) the amount of any royalties
otherwise due from the Company to Accton that are withheld from payment to
Accton (with Accton's concurrence) in lieu of a payment from Accton towards such
legal fees or damages.
(ii) Treatment of Bundled Claims: In the event of
payments and disbursements relating both to the IP Claims and to other claims,
then only that portion of the payments and disbursements which is reasonably
allocable to the IP Claim shall be recoverable from the Escrow Fund as IP
Losses, and the remainder of such payments and disbursements shall not be
recoverable from the Escrow Fund unless an independent basis for recovery of
such amounts from the Escrow Fund exists (that is, unless such payments and
disbursements would otherwise constitute Losses for which Parent would be
entitled to indemnification pursuant to this Article 7).
(iii) Treatment of Bundled Products: In the event that
any payments and disbursements relate to products of Parent incorporating
Company Intellectual Property, then no such payments and disbursements shall be
recoverable from the Escrow Fund.
Parent, Merger Sub and the Company each acknowledge that such Losses, if any,
would relate to unresolved contingencies existing at the Effective Time, which
if resolved at the Effective Time would have led to a reduction in the aggregate
Merger consideration to be paid to the shareholders of the Company. The
shareholders of the Company shall not have any liability under this Agreement of
any sort whatsoever in excess of the Escrow Fund, except in the event of fraud
or willful misconduct (i.e., an intentional breach of a representation,
warranty, covenant or agreement, but excluding a negligent or reckless breach)
by the Company of any of its representations, warranties, agreements or
covenants contained herein or in any other instrument or document required to be
delivered pursuant to this Agreement in connection herewith. In the event of
such a fraudulent breach, Parent shall have all remedies available at law or in
equity (including for tort) with respect to such breach; provided, however,
that, notwithstanding anything to the contrary contained in this Agreement, in
no event shall any shareholder of the Company have any liability in excess of
the Merger consideration received by such shareholder in connection with the
Merger or the proceeds, if any, received by such shareholder in connection with
the disposition of such Merger consideration.
(c) Escrow Period; Distribution of Escrow Fund upon Termination
of Escrow Period. Subject to the following requirements, the Escrow Fund shall
be in
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existence immediately following the Effective Time and shall terminate at 5:00
p.m., Pacific Time, on the General Expiration Date (with respect to the General
Escrow Amount) and on the IP Expiration Date (with respect to the IP Escrow
Amount) (the period of time from the Effective Time through and including the
applicable expiration date is referred to herein as the "Escrow Period"); and
all shares of Parent Common Stock remaining in the Escrow Fund shall be
distributed as set forth below in this Section 7.2(c); provided, however, that
the applicable Escrow Period shall not terminate with respect to such amount (or
some portion thereof) that is necessary in the reasonable judgment of Parent,
subject to the objection of the Shareholder Agent and the subsequent arbitration
of the matter in the manner as provided in Section 7.2(g) hereof, to satisfy any
unsatisfied claims under this Section 7.2 concerning facts and circumstances
existing prior to the termination of such applicable Escrow Period which claims
are specified in any Officer's Certificate delivered to the Depositary Agent
prior to termination of such applicable Escrow Period. As soon as all such
claims, if any, have been resolved, the Depositary Agent shall deliver to the
shareholders of the Company the remaining portion of the Escrow Fund not
required to satisfy such claims. Deliveries of shares of Parent Common Stock
remaining in the Escrow Fund to the shareholders of the Company pursuant to this
Section 7.2(c) shall be made ratably in proportion to their respective
contributions to the Escrow Fund. Each shareholder of the Company who would
otherwise be entitled to a fraction of a share of Parent Common Stock (after
aggregating all fractional shares of Parent Common Stock to be received by such
holder) shall be entitled to receive from Parent an amount of cash (rounded to
the nearest whole cent) equal to the product of (a) such fraction, multiplied by
(b) the Closing Price. Parent shall use its commercially reasonable efforts to
have such shares delivered as promptly as practicable after such resolution.
Parent may at any time prior to the first release of any portion of the General
Escrow Amount to the Company shareholders determine whether a claim which it may
make against either the General Escrow Amount or the IP Escrow Amount shall be
settled from the General Escrow Amount or the IP Escrow Amount and, if
previously settled from one of the escrow amounts, may prior to such release
cause a reallocation between the escrow amounts to reflect such determination.
For purpose of clarity, at the expiration of the Escrow Period relating to the
General Escrow Amount, only such remaining portion of the Escrow Fund which
relates to the General Escrow Amount shall be available for distribution to the
Company's shareholders, while the portion of the Escrow Fund which relates to
the IP Escrow Amount shall remain in the escrow.
(d) Protection of Escrow Fund.
(i) The Depositary Agent shall hold and safeguard the
Escrow Fund during the Escrow Period, shall treat such fund as a trust fund in
accordance with the terms of this Agreement and not as the property of Parent
and shall hold and dispose of the Escrow Fund only in accordance with the terms
hereof.
(ii) Any shares of Parent Common Stock or other Equity
Equivalents securities issued or distributed by Parent ("New Shares") in respect
of Parent Common Stock in the Escrow Fund which have not been released from the
Escrow Fund shall be added to the Escrow Fund. New Shares issued in respect of
shares of Parent Common Stock which have been released from the Escrow Fund
shall not be added to the Escrow Fund but shall be distributed to the record
holders thereof. Cash dividends on
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Parent Common Stock shall not be added to the Escrow Fund but shall be
distributed to the record holders of the Parent Common Stock on the record date
set for any such dividend.
(iii) Each shareholder shall have voting rights with
respect to the shares of Parent Common Stock contributed to the Escrow Fund by
such shareholder (and on any voting securities added to the Escrow Fund in
respect of such shares of Parent Common Stock).
(e) Claims Upon Escrow Fund.
(i) Upon receipt by the Depositary Agent at any time on
or before the last day of the Escrow Period of a certificate signed by any
officer of Parent (an "Officer's Certificate"): (A) stating that Parent (or
another Parent Indemnitee) has paid or properly accrued or reasonably
anticipates that it will have to pay or accrue Losses, directly or indirectly,
as a result of any inaccuracy or breach of any representation, warranty,
covenant or agreement of the Company contained herein or in any instrument
delivered pursuant to this Agreement, (B) specifying in reasonable detail the
individual items of Losses included in the amount so stated, the date each such
item was paid or properly accrued, or the basis for such anticipated liability,
and the nature of the misrepresentation, breach of warranty, agreement or
covenant to which such item is related, the Depositary Agent shall, subject to
the provisions of Section 7.2(f) hereof, deliver to Parent out of the Escrow
Fund, as promptly as practicable, shares of Parent Common Stock held in the
Escrow Fund in an amount equal to such Losses, and (C) subject to Parent's
rights under Section 7.2(c), specifying whether such Losses should be settled
against the General Escrow Amount or the IP Escrow Amount. Where the basis for a
claim upon the Escrow Fund by Parent is that Parent reasonably anticipates that
it will pay or accrue a Loss, no payment will be made from the Escrow Fund for
such Loss unless and until such Loss is actually paid or accrued.
(ii) For the purposes of determining the number of
shares of Parent Common Stock to be delivered to Parent out of the Escrow Fund
pursuant to Section 7.2(e)(i), the shares of Parent Common Stock shall be valued
at the Closing Price.
(f) Objections to Claims. At the time of delivery of any
Officer's Certificate to the Depositary Agent, a duplicate copy of such
certificate shall be delivered to the Shareholder Agent and for a period of
thirty (30) days after such delivery, the Depositary Agent shall make no
delivery to Parent of any Escrow Amounts pursuant to Section 7.2(e) hereof
unless the Depositary Agent shall have received written authorization from the
Shareholder Agent to make such delivery. After the expiration of such 30 day
period, the Depositary Agent shall make delivery of shares of Parent Common
Stock from the Escrow Fund in accordance with Section 7.2(e) hereof, provided
that no such payment or delivery may be made if the Shareholder Agent shall
object in a written statement to the claim made in the Officer's Certificate,
and such statement shall have been delivered to the Depositary Agent prior to
the expiration of such 30 day period.
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(g) Resolution of Conflicts; Arbitration.
(i) In case the Shareholder Agent shall object in
writing to any claim or claims made in any Officer's Certificate, the
Shareholder Agent and Parent shall attempt in good faith to agree upon the
rights of the respective parties with respect to each of such claims. If the
Shareholder Agent and Parent should so agree, a memorandum setting forth such
agreement shall be prepared and signed by both parties and shall be furnished to
the Depositary Agent. The Depositary Agent shall be entitled to rely on any such
memorandum and distribute shares of Parent Common Stock from the Escrow Fund in
accordance with the terms thereof.
(ii) If no such agreement can be reached after good
faith negotiation, either Parent or the Shareholder Agent may demand arbitration
of the dispute unless the amount of the damage or loss is at issue in a pending
Action or Proceeding involving a Third Party Claim, in which event arbitration
shall not be commenced until such amount is ascertained or both parties agree to
arbitration; and in either event the matter shall be settled by arbitration
conducted by three (3) arbitrators, one (1) selected by Parent and one (1)
selected by the Shareholder Agent, and the two (2) arbitrators selected by
Parent and the Shareholder Agent shall select a third arbitrator. The
arbitrators shall set a limited time period and establish procedures designed to
reduce the cost and time for discovery of information relating to any dispute
while allowing the parties an opportunity, adequate as determined in the sole
judgment of the arbitrators, to discover relevant information from the opposing
parties about the subject matter of the dispute. The arbitrators shall rule upon
motions to compel, limit or allow discovery as they shall deem appropriate given
the nature and extent of the disputed claim. The arbitrators shall also have the
authority to impose sanctions, including attorneys' fees and other costs
incurred by the parties, to the same extent as a court of law or equity, should
the arbitrators determine that discovery was sought without substantial
justification or that discovery was refused or objected to by a party without
substantial justification. The decision of a majority of the three (3)
arbitrators as to the validity and amount of any claim in such Officer's
Certificate shall be binding and conclusive upon the parties to this Agreement,
and notwithstanding anything in Section 7.2(f) hereof, the Depositary Agent
shall be entitled to act in accordance with such decision and make or withhold
payments out of the Escrow Fund in accordance therewith. Such decision shall be
written and shall be supported by written findings of fact and conclusions
regarding the dispute which shall set forth the award, judgment, decree or order
awarded by the arbitrators.
(iii) Judgment upon any award rendered by the
arbitrators may be entered in any court having competent jurisdiction. Any such
arbitration shall be held in the city and county of Los Angeles, California
under the commercial rules of arbitration then in effect of the American
Arbitration Association. For purposes of this Section 7.2(g), in any arbitration
hereunder in which any claim or the amount thereof stated in the Officer's
Certificate is at issue, Parent shall be deemed to be the Non-Prevailing Party
in the event that the arbitrators award Parent less than the sum of one-half
(1/2) of the disputed amount of any Losses plus any amounts not in dispute;
otherwise, the shareholders of the Company as represented by the Shareholder
Agent shall be deemed to be the Non-Prevailing Party. The Non-Prevailing Party
to an arbitration shall pay its own expenses, the fees of each
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arbitrator, the administrative costs of the arbitration and the expenses,
including without limitation, reasonable attorneys' fees and costs, incurred by
the other party to the arbitration.
(h) Shareholder Agent of the Shareholders; Power of Attorney.
(i) In the event that the Merger is approved by the
shareholders of the Company, effective upon such vote, and without further act
of any shareholder, ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ shall be appointed as agent and
attorney-in-fact (the "Shareholder Agent") for each shareholder of the Company
(except such shareholders, if any, as shall have perfected their appraisal or
dissenters' rights under the California Code), for and on behalf of shareholders
of the Company, to give and receive notices and communications, to authorize
delivery to Parent of shares of Parent Common Stock from the Escrow Fund in
satisfaction of claims by Parent, to object to such deliveries, to agree to,
negotiate, enter into settlements and compromises of, and demand arbitration and
comply with orders of courts and awards of arbitrators with respect to such
claims, and to take all actions necessary or appropriate in the judgment of the
Shareholder Agent for the accomplishment of the foregoing. Such agency may be
changed by the shareholders of the Company from time to time upon not less than
thirty (30) days prior written notice to Parent; provided, however, that the
Shareholder Agent may not be removed unless holders of a two-thirds interest in
the Escrow Fund agree to such removal and to the identity of the substituted
Shareholder Agent. Any vacancy in the position of Shareholder Agent may be
filled by approval of the holders of a majority in interest of the Escrow Fund.
No bond shall be required of the Shareholder Agent, and the Shareholder Agent
shall not receive compensation for his services. Notices or communications to or
from the Shareholder Agent shall constitute notice to or from each of the
shareholders of the Company.
(ii) The Shareholder Agent shall not be liable for any
act done or omitted hereunder as Shareholder Agent while acting in good faith
and in the exercise of reasonable judgment.
(iii) The Shareholder Agent shall have reasonable access
to information about the Company and the reasonable assistance of the Company's
officers and employees for purposes of performing its duties and exercising its
rights hereunder, provided that the Shareholder Agent shall treat confidentially
and not disclose any nonpublic information from or about the Company to anyone
(except on a need to know basis to individuals who agree in writing to treat
such information confidentially).
(i) Actions of the Shareholder Agent. A decision, act, consent
or instruction of the Shareholder Agent shall constitute a decision of all the
shareholders for whom a portion of the Escrow Amount otherwise issuable to them
are deposited in the Escrow Fund and shall be final, binding and conclusive upon
each of such shareholders, and the Depositary Agent and Parent may rely upon any
such decision, act, consent or instruction of the Shareholder Agent as being the
decision, act, consent or instruction of every such shareholder of the Company.
The Depositary Agent and Parent are hereby relieved from any liability to any
person for any acts done by them in accordance with such decision, act, consent
or instruction of the Shareholder Agent.
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(j) Third-Party Claims. In the event Parent becomes aware of a
third-party claim (a "Third Party Claim") which Parent reasonably expects may
result in a demand against the Escrow Fund, Parent shall notify the Shareholder
Agent of such claim, and the Shareholder Agent, as representative for the
shareholders of the Company, shall be entitled, at their expense, to participate
in any defense of such claim. Parent shall have the right in its sole discretion
to settle any Third Party Claim; provided, however, that if Parent settles any
Third Party Claim without the Shareholder Agent's consent (which consent shall
not be unreasonably withheld or delayed), Parent may not make a claim against
the Escrow Fund with respect to the amount of Losses incurred by Parent in such
settlement. In the event that the Shareholder Agent has consented to any such
settlement, the Shareholder Agent shall have no power or authority to object
under any provision of this Article 7 to the amount of any claim by Parent
against the Escrow Fund with respect to the amount of Losses incurred by Parent
in such settlement (but such consent, by itself, shall not constitute agreement
that Parent is entitled to indemnification hereunder for such Losses).
(k) Indemnification for Shareholder Agent. The Company's
shareholders shall, severally and not jointly, on a pro rata basis based on
their proportionate ownership interests in the Company, indemnify, defend and
hold the Shareholder Agent harmless from and against any loss, damage, tax,
liability and expense that may be incurred by the Shareholder Agent arising out
of or in connection with the acceptance or administration of the Shareholder
Agent's duties, except as caused by the Shareholder Agent's gross negligence or
willful misconduct, including the legal costs and expenses of defending such
Shareholder Agent against any claim or liability in connection with the
performance of the Shareholder Agent's duties. The Shareholder Agent shall be
entitled, but not limited, to such indemnification from the Escrow Fund prior to
any distribution thereof to the Company's shareholders, but after any
distributions therefrom to Parent.
(l) Depositary Agent's Duties.
(i) Limitation on Duties of Depositary Agent. The
Depositary Agent shall be obligated only for the performance of such duties as
are specifically set forth herein, and as set forth in any additional written
escrow instructions which the Depositary Agent may receive after the date of
this Agreement which are signed by an officer of Parent and the Shareholder
Agent, and may rely and shall be protected in relying or refraining from acting
on any instrument reasonably believed to be genuine and to have been signed or
presented by the proper party or parties. The Depositary Agent shall not be
liable for any act done or omitted hereunder as Depositary Agent while acting in
good faith and in the exercise of reasonable judgment, and any act done or
omitted pursuant to the advice of counsel shall be conclusive evidence of such
good faith.
(ii) Compliance with Orders. The Depositary Agent is
hereby expressly authorized to comply with and obey Orders of any court of law
or Governmental or Regulatory Authority, notwithstanding any notices, warnings
or other communications from any party or any other person to the contrary. In
case the Depositary Agent obeys or complies with any such Order, the Depositary
Agent shall not be liable to any of the parties hereto or to any other person by
reason of such compliance, notwithstanding any such Order being subsequently
reversed, modified, annulled, set aside, vacated or found to have been entered
without jurisdiction or proper authority.
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(iii) Limitations on Liability of Depositary Agent. The
Depositary Agent shall not be liable in any respect on account of (a) the
identity, authority or rights of the parties executing or delivering or
purporting to execute or deliver this Agreement or any documents or papers
deposited or called for hereunder; or (b) the expiration of any rights under any
statute of limitations with respect to this Agreement or any documents deposited
with the Depositary Agent.
(iv) Good Faith of Depositary Agent. In performing any
duties under the Agreement, the Depositary Agent shall not be liable to any
party for damages, losses, or expenses, except for gross negligence or willful
misconduct on the part of the Depositary Agent. The Depositary Agent shall not
incur any such liability for (a) any act or failure to act made or omitted in
good faith, or (b) any action taken or omitted in reliance upon any instrument,
including any written statement or affidavit provided for in this Agreement that
the Depositary Agent shall in good faith believe to be genuine, nor will the
Depositary Agent be liable or responsible for forgeries, fraud, impersonations
or determining the scope of any representative authority. In addition, the
Depositary Agent may consult with legal counsel in connection with the
Depositary Agent's duties under this Agreement and shall be fully protected in
any act taken, suffered, or permitted by him/her in good faith in accordance
with the advice of counsel. The Depositary Agent is not responsible for
determining and verifying the authority of any person acting or purporting to
act on behalf of any party to this Agreement.
(v) Non-responsibility of Depositary Agent. If any
controversy arises between the parties to this Agreement, or with any other
party, concerning the subject matter of this Agreement, its terms or conditions,
the Depositary Agent will not be required to determine the controversy or to
take any action regarding it. The Depositary Agent may hold all documents and
shares of Parent Common Stock and may wait for settlement of any such
controversy by final appropriate legal proceedings or other means as, in the
Depositary Agent's discretion, the Depositary Agent may be required, despite
what may be set forth elsewhere in this Agreement. In such event, the Depositary
Agent will not be liable for any damages. Furthermore, the Depositary Agent may
at its option, file an action of interpleader requiring the parties to answer
and litigate any claims and rights among themselves. The Depositary Agent is
authorized to deposit with the clerk of the court all documents and shares of
Parent Common Stock held in escrow, except all costs, expenses, charges and
reasonable attorney fees incurred by the Depositary Agent due to the
interpleader action and which the parties jointly and severally agree to pay.
Upon initiating such action, the Depositary Agent shall be fully released and
discharged of and from all obligations and liability imposed by the terms of
this Agreement.
(vi) Indemnification of Depositary Agent. Parent and its
successors and assigns agrees to indemnify and hold the Depositary Agent
harmless against any and all Losses incurred by the Depositary Agent in
connection with the performance of the Depositary Agent's duties under this
Agreement, including but not limited to any litigation arising from this
Agreement or involving its subject matter.
(vii) Resignation of Depositary Agent. The Depositary
Agent may resign at any time upon giving at least 30 days written notice to the
parties; provided, however, that no such resignation shall become effective
until the appointment of a
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successor depositary agent which shall be accomplished as follows: the parties
shall use their best efforts to mutually agree on a successor depositary agent
within thirty (30) days after receiving such notice. If the parties fail to
agree upon a successor depositary agent within such time, the Depositary Agent
shall have the right to appoint a successor depositary agent authorized to do
business in the State of California. The successor depositary agent shall
execute and deliver an instrument accepting such appointment and it shall,
without further acts, be vested with all the estates, properties, rights,
powers, and duties of the predecessor depositary agent as if originally named as
Depositary Agent. The Depositary Agent shall be discharged from any further
duties and liability under this Agreement.
(m) Fees. All fees of the Depositary Agent for performance of
its duties hereunder shall be paid by Parent in accordance with the fee schedule
that will be attached to this Agreement prior to the Closing as Exhibit K. In
the event that the conditions of this Agreement are not promptly fulfilled, or
if the Depositary Agent renders any service not provided for in this Agreement,
or if the parties request a substantial modification of its terms, or if any
controversy arises, or if the Depositary Agent is made a party to, or intervenes
in, any Action or Proceeding pertaining to this escrow or its subject matter,
the Depositary Agent shall be reasonably compensated for such extraordinary
services and reimbursed for all costs, attorney's fees, and expenses occasioned
by such default, delay, controversy or Action or Proceeding. Parent agrees to
pay these sums upon demand.
ARTICLE 8
TERMINATION, AMENDMENT AND WAIVER
8.1 Termination. Except as provided in Section 8.2 below, this Agreement
may be terminated and the Merger abandoned at any time prior to the Effective
Time:
(a) by mutual agreement of the Company, Parent and Merger Sub;
(b) by Parent, Merger Sub or the Company if: (i) the Effective
Time has not occurred before 5:00 p.m., California time, on August 31, 2000 (the
"Outside Date"); provided, however, that the right to terminate this Agreement
under this Section 8.1(b)(i) shall not be available to any party whose willful
failure to fulfill any obligation hereunder has been the cause of, or resulted
in, the failure of the Effective Time to occur on or before such date; provided,
further, that the Outside Date may be extended by either party by written notice
to the other delivered on or before the previously scheduled Outside Date to (y)
September 30, 2000, unless both the conditions set forth in Section 6.1(g) of
this Agreement have been satisfied by 11:59 p.m., California time, on August 25,
2000, and the Company has obtained the approval of the Merger from the holders
of at least 90% of the outstanding shares of Company Capital Stock (such
percentage being calculated on an as-converted basis) by August 30, 2000,
provided that (if so extended) the Outside Date shall automatically be amended
to be the later of (1) such date that is five (5) business days after the
satisfaction of the conditions set forth in Section 6.1(g) of this Agreement if
such satisfaction occurs at any time between 12:00 a.m., California time, on
August 26, 2000 and 11:59 p.m., California time, on September 24, 2000, and (2)
the date one business day following the first day on which the Company has
obtained the approval of the Merger from the holders of 90% of the outstanding
shares of Company Capital Stock (such percentage being calculated on an
as-converted basis), or (z) December 31, 2000 if the condition set
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forth in Section 6.1(a) of this Agreement requiring the expiration or
termination of any waiting period applicable to the consummation of the Merger
under the HSR Act (other than with respect to the receipt of Parent Common Stock
by a shareholder of the Company) (the "HSR Condition") has not been satisfied by
11:59 p.m., California time, on August 25, 2000, provided that (if so extended)
the Outside Date shall automatically be amended to be such date that is five (5)
days after the satisfaction of the HSR Condition if such satisfaction occurs at
any time between 12:00 a.m., California time, on August 26, 2000 and 11:59 p.m.,
California time, on December 25, 2000; (ii) there shall be a final nonappealable
order of a federal or state court in effect preventing consummation of the
Merger; or (iii) there shall be any statute, rule, regulation or order enacted,
promulgated or issued or deemed applicable to the Merger by any Governmental or
Regulatory Authority that would make consummation of the Merger illegal.
(c) by Parent and Merger Sub if there shall be any action taken,
or any Law or Order enacted, promulgated or issued or deemed applicable to the
Merger, by any Governmental or Regulatory Authority, which would: (i) prohibit
Parent's or Merger Sub's ownership or operation of all or any portion of the
business of the Company or (ii) compel Parent or Merger Sub to dispose of or
hold separate all or any portion of the Assets and Properties of the Company as
a result of the Merger;
(d) by Parent if it is not in material breach of its
representations, warranties, covenants and agreements under this Agreement and
there has been a breach of any representation, warranty, covenant or agreement
contained in this Agreement on the part of the Company and (i) the Company is
not using its reasonable efforts to cure such breach, or has not cured such
breach within thirty (30) days, after notice of such breach to the Company
(provided, however, that, no cure period shall be required for a breach which by
its nature cannot be cured) and (ii) as a result of such breach any of the
conditions set forth in Section 6.1 or Section 6.3, as the case may be, would
not then be satisfied;
(e) by the Company if it is not in material breach of its
representations, warranties, covenants and agreements under this Agreement and
there has been a breach of any representation, warranty, covenant or agreement
contained in this Agreement on the part of Parent or Merger Sub and (i) Parent
is not using its reasonable efforts to cure such breach, or has not cured such
breach within thirty (30) days, after notice of such breach to Parent (provided,
however, that no cure period shall be required for a breach which by its nature
cannot be cured), and (ii) as a result of such breach any of the conditions set
forth in Section 6.1 or Section 6.2, as the case may be, would not then be
satisfied;
(f) by Parent if, if at any time after five (5) days following
the Company Shareholder Action, holders of more than 3.0% of the outstanding
shares of Company Capital Stock shall have exercised, or have any continued
right to exercise, appraisal, dissenters' or similar rights under applicable law
with respect to their shares by virtue of the Merger;
(g) by Parent, if the Merger shall not have been approved by the
requisite votes of the Company's shareholders in accordance with the California
Code;
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(h) By Parent, if the individuals listed on Schedule 6.3(m)
cease to be employed by the Company, provided, however, that Parent may exercise
this termination right with respect to a particular individual named in Schedule
6.3(m) only if Parent gives the Company written notice of termination of the
Agreement within thirty days after receipt of written notice from the Company
that such individual has ceased to be employed by the Company;
(i) By Parent, if, at any time, less than ninety percent (90%)
of the Company's engineering and research and development employees of the
Company (exclusive of those listed on Schedule 6.3(m)) employed as of April 21,
2000 shall cease to be employed by the Company at the Closing or if ten percent
(10%) or more of such employees shall have given any notice or other indication
that they are not willing to be employed by Parent or a Subsidiary of Parent (as
Parent shall designate) following the Merger (other than as expressly permitted
by the terms of Section 6.3(m));
(j) By Parent, if Parent is not satisfied in its sole discretion
with the results of its due diligence investigation of the Company; provided,
however, that Parent may exercise this termination right only by delivery to the
Company of written notice thereof before 11:59 p.m., California time, on July
30, 2000; or
(k) By Parent, if any of the individuals and entities set forth
on Schedule 5.29 have not executed and delivered to Parent a Support Agreement,
Company Affiliate Agreement and/or Noncompetition Agreement, as applicable, by
May 19, 2000.
(l) By Parent, unless individuals and entities who previously
delivered a Support Agreement to Parent and who represent sufficient shares to
satisfy the voting requirement set forth on Section 2.32(d) have executed and
delivered to Parent by August 4, 2000 a Support Agreement Reaffirmation in the
form attached hereto as Exhibit B.
8.2 Effect of Termination. In the event of a valid termination of this
Agreement as provided in Section 8.1, this Agreement shall forthwith become void
and there shall be no liability or obligation on the part of Parent or the
Company, or their respective officers, directors or shareholders or Affiliates
or Associates; provided, however, that each party shall remain liable for any
breaches of this Agreement prior to its termination; and provided further that,
the provisions of Sections 5.4, 5.5, 9.1, 9.2, 9.4, 9.5, 9.6, 9.7, 9.8, 9.9,
9.10, 9.11, 9.12 and 9.13, Article 8 and the applicable definitions set forth in
Article 10 of this Agreement shall remain in full force and effect and survive
any termination of this Agreement.
8.3 Amendment. Except as is otherwise required by applicable law after
the shareholders of the Company approve the Merger and 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.
8.4 Extension; Waiver. At any time prior to the Effective Time, Parent,
Merger Sub and the Company 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
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document delivered 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.
8.5 Termination Fee; Limited Remedy.
(a) If Parent terminates this Agreement pursuant to Section
8.1(j) hereof, then Parent shall promptly reimburse the Company for the business
and out-of-pocket expenses incurred by the Company in connection with this
Agreement and the transactions contemplated thereby, which the parties estimate
in good faith to be approximately $1,000,000.00.
(b) *
(c) *
(d) *
ARTICLE 9
MISCELLANEOUS PROVISIONS
9.1 Notices. All notices, requests and other communications hereunder
must be in writing and will be deemed to have been duly given only if delivered
personally against written receipt or by facsimile transmission against
facsimile confirmation or mailed by prepaid first class certified mail, return
receipt requested, or mailed by overnight courier prepaid, to the parties at the
following addresses or facsimile numbers:
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If to Parent or to Merger Sub to:
Broadcom Corporation
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: President and Chief Executive Officer and
Attn: General Counsel
with a copy to:
Irell & ▇▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
If to the Company to:
Altima Communications, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: President and Chief Executive Officer
with a copy to:
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
All such notices, requests and other communications will (i) if delivered
personally to the address as provided in this Section 9.1, be deemed given upon
delivery, (ii) if delivered by facsimile transmission to the facsimile number as
provided for in this Section 9.1, be deemed given upon facsimile confirmation,
(iii) if delivered by mail in the manner described above to the address as
provided for in this Section 9.1, be deemed given on the earlier of the third
Business Day following mailing or upon receipt and (iv) if delivered by
overnight courier to the address as provided in this Section 9.1, be deemed
given on the earlier of the first Business Day following the date sent by such
overnight courier or upon receipt (in each case regardless of whether such
notice, request or other communication is received by any other Person to whom a
copy of such notice is to be delivered pursuant to this Section 9.1). Any party
from time to time may change its address, facsimile number or other information
for the purpose of notices to that party by giving notice specifying such change
to the other party hereto.
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9.2 Entire Agreement. This Agreement and the Exhibits and Schedules
hereto, including the Company Disclosure Schedule and the Parent Disclosure
Schedule, 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 , except for the Confidentiality Agreement, which shall continue in full
force and effect and shall survive any termination of this Agreement or the
Closing in accordance with its terms.
9.3 Further Assurances; Post-Closing Cooperation. At any time or from
time to time after the Closing, the parties shall execute and deliver to the
other party such other documents and instruments, provide such materials and
information and take such other actions as the other party may reasonably
request to consummate the transactions contemplated by this Agreement and
otherwise to cause the other party to fulfill its obligations under this
Agreement and the transactions contemplated hereby. Each party agrees to use
commercially reasonable efforts to cause the conditions to its obligations to
consummate the Merger to be satisfied. As used in this Agreement, it is
understood that the term "commercially reasonable efforts" shall not obligate
any party to pay to any third party any sums that such third party would not
otherwise be entitled to receive (unless the other party hereto agrees to be
such responsible for such payment).
9.4 Waiver. Any term or condition of this Agreement may be waived at any
time by the party that is entitled to the benefit thereof, but no such waiver
shall be effective unless set forth in a written instrument duly executed by or
on behalf of the party waiving such term or condition. No waiver by any party of
any term or condition of this Agreement, in any one or more instances, shall be
deemed to be or construed as a waiver of the same or any other term or condition
of this Agreement on any future occasion. All remedies, either under this
Agreement or by Law or otherwise afforded, will be cumulative and not
alternative.
9.5 Third Party Beneficiaries. The terms and provisions of this
Agreement are intended solely for the benefit of each party hereto and their
respective successors or permitted assigns, and it is not the intention of the
parties to confer third-party beneficiary rights, and this Agreement does not
confer any such rights, upon any other Person other than any Person entitled to
indemnity under Section 5.14 or Article 7.
9.6 No Assignment; Binding Effect. Neither this Agreement nor any right,
interest or obligation hereunder may be assigned (by operation of law or
otherwise) by any party without the prior written consent of the other party and
any attempt to do so will be void. Subject to the preceding sentence, this
Agreement is binding upon, inures to the benefit of and is enforceable by the
parties hereto and their respective successors and assigns.
9.7 Headings. The headings and table of contents used in this Agreement
have been inserted for convenience of reference only and do not define or limit
the provisions hereof.
9.8 Invalid Provisions. If any provision of this Agreement is held to be
illegal, invalid or unenforceable under any present or future Law, and if the
rights or obligations of
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any party hereto under this Agreement will not be materially and adversely
affected thereby, (a) such provision will be fully severable, (b) this Agreement
will be construed and enforced as if such illegal, invalid or unenforceable
provision had never comprised a part hereof, (c) the remaining provisions of
this Agreement will remain in full force and effect and will not be affected by
the illegal, invalid or unenforceable provision or by its severance herefrom and
(d) in lieu of such illegal, invalid or unenforceable provision, there will be
added automatically as a part of this Agreement a legal, valid and enforceable
provision as similar in terms to such illegal, invalid or unenforceable
provision as may be possible.
9.9 Governing Law. This Agreement shall be governed by and construed in
accordance with the domestic laws of the State of California, without giving
effect to any choice of law or conflict of law provision or rule (whether of the
State of California or any other jurisdiction) that would cause the application
of the laws of any jurisdiction other than the State of California.
9.10 WAIVER OF TRIAL BY JURY. IN ANY ACTION OR PROCEEDING ARISING
HEREFROM, THE PARTIES HERETO CONSENT TO TRIAL WITHOUT A JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM BROUGHT BY ANY PARTY HERETO AGAINST THE OTHER OR
THEIR SUCCESSORS IN RESPECT OF ANY MATTER ARISING OUT OF OR IN CONNECTION WITH
THIS AGREEMENT, REGARDLESS OF THE FORM OF ACTION OR PROCEEDING.
9.11 Construction. The parties hereto agree that this Agreement is the
product of negotiation between sophisticated parties and individuals, all of
whom were represented by counsel, and each of whom had an opportunity to
participate in and did participate in, the drafting of each provision hereof.
Accordingly, ambiguities in this Agreement, if any, shall not be construed
strictly or in favor of or against any party hereto but rather shall be given a
fair and reasonable construction without regard to the rule of contra
preferentum.
9.12 Counterparts. This Agreement may be executed in any number of
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
9.13 Specific Performance. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. Except where this Agreement specifically provides for arbitration, it
is agreed that the parties shall be entitled to an injunction or injunctions to
prevent breaches of this Agreement and to enforce specifically the terms and
provisions hereof in any court of the United States or any state having
jurisdiction, this being in addition to any other remedy to which they are
entitled at law or in equity.
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ARTICLE 10
DEFINITIONS
10.1 Definitions.
(a) As used in this Agreement, the following defined terms shall
have the meanings indicated below:
"Actions or Proceedings" means any action, suit, complaint,
petition, investigation, proceeding, arbitration, litigation or Governmental or
Regulatory Authority investigation, audit or other proceeding, whether civil or
criminal, in law or in equity, or before any arbitrator or Governmental
Regulatory Authority.
"Affiliate" means, as applied to any Person, (a) any other
Person directly or indirectly controlling, controlled by or under common control
with, that Person, (b) any other Person that owns or controls (i) ten percent
(10%) or more of any class of equity securities of that Person or any of its
Affiliates or (ii) ten percent (10%) or more of any class of equity securities
(including any equity securities issuable upon the exercise of any option or
convertible security) of that Person or any of its Affiliates, or (c) any
director, partner, officer, manager, agent, employee or relative of such Person.
For the purposes of this definition, "control" (including with correlative
meanings, the terms "controlling", "controlled by", and "under common control
with") as applied to any Person, means the possession, directly or indirectly,
of the power to direct or cause the direction of the management and policies of
that Person, whether through ownership of voting securities or by contract or
otherwise.
"Aggregate Common Number" means the aggregate number of shares
of Company Common Stock outstanding immediately prior to the Effective Time
(including all shares of Company Common Stock issued or issuable upon conversion
of all shares of Company Preferred Stock which participate with the Company
Common Stock in the Merger and upon exercise, conversion or exchange of all
unvested and vested Company Options, Company Warrants and Company Stock Purchase
Rights which are not exercised, converted, exchanged or expired as of the
Effective Time).
"Aggregate Share Number" means 5,415,192 shares of Parent Common
Stock, as (i) appropriately adjusted to reflect the effect of any stock split,
stock dividend, stock combination, reorganization, reclassification or similar
change occurring after the date of this Agreement and prior to the Effective
Time and (ii) adjusted pursuant to Section 5.30.
"Agreement" means this Merger Agreement and Plan of
Reorganization, including (unless the context otherwise requires) the Exhibits
and the Disclosure Schedules and the certificates and instruments delivered in
connection herewith, or incorporated by reference, as the same may be amended or
supplemented from time to time in accordance with the terms hereof.
"Agreement of Merger" has the meaning ascribed to it in Section
1.2.
"Ancillary Agreements" has the meaning ascribed to it in Section
2.2.
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"Approval" means any approval, authorization, consent, permit,
qualification or registration, or any waiver of any of the foregoing, required
to be obtained from or made with, or any notice, statement or other
communication required to be filed with or delivered to, any Governmental or
Regulatory Authority or any other Person.
"Assets and Properties" of any Person means all assets and
properties of every kind, nature, character and description (whether real,
personal or mixed, whether tangible or intangible, whether absolute, accrued,
contingent, fixed or otherwise and wherever situated), including the goodwill
related thereto, operated, owned, licensed or leased by such Person, including
cash, cash equivalents, Investment Assets, accounts and notes receivable,
chattel paper, documents, instruments, general intangibles, real estate,
equipment, inventory, goods and Intellectual Property.
"Associate" means, with respect to any Person, any corporation
or other business organization of which such Person is an officer or partner or
is the beneficial owner, directly or indirectly, of ten percent (10%) or more of
any class of equity securities, any trust or estate in which such Person has a
substantial beneficial interest or as to which such Person serves as a trustee
or in a similar capacity and any relative or spouse of such Person, or any
relative of such spouse, who has the same home as such Person.
"Audited Financial Statement Date" means June 30, 1999.
"Audited Financial Statements" means the audited consolidated
balance sheets of the Company as of each of the fiscal years ended December 31,
1997 through December 31, 1999, respectively, and the related audited
consolidated statements of operations, shareholders' equity and cash flows for
each of the fiscal years then ended, in each case, including the notes thereto.
"Backup Registration Rights Agreement" has the meaning ascribed
to it in Section 5.1(c).
"Bankruptcy Event" means that the Company shall have, pursuant
to or within the meaning of any Bankruptcy Law, (i) commenced a voluntary case,
(ii) had an involuntary case instituted against it which has not been dismissed
within sixty (60) days, (iii) consented to the appointment of a custodian of or
for all or substantially all of its assets, (iv) made a general assignment for
the benefit of creditors, or (v) admitted in writing its inability to pay its
debts generally as they become due.
"Bankruptcy Law" means Title 11, U.S. Code or any similar
foreign or U.S. federal or state law for the relief of creditors.
"Books and Records" means all files, documents, instruments,
papers, books and records relating to the Business or Condition of the Company,
including financial statements, internal reports, Tax Returns and related work
papers and letters from accountants, budgets, pricing guidelines, ledgers,
journals, deeds, title policies, minute books, stock certificates and books,
stock transfer ledgers, Contracts, Licenses, customer lists, computer files and
programs (including data processing files and records), retrieval programs,
operating data and plans and environmental studies and plans.
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"Business Combination" means, with respect to any Person, (i)
any merger, consolidation or other business combination to which such Person is
a party, (ii) any sale, dividend, split or other disposition of any capital
stock or other equity interests of such Person (except for issuances of common
stock upon conversion of preferred stock outstanding on the date hereof or the
exercise of options or warrants outstanding on the date hereof or issued in
accordance with the covenants of this Agreement), (iii) any tender offer
(including a self tender), exchange offer, recapitalization, restructuring,
liquidation, dissolution or similar or extraordinary transaction, (iv) any sale,
dividend or other disposition of all or a material or significant portion of the
Assets and Properties of such Person (including by way of exclusive license or
joint venture formation) or (v) the entering into of any agreement or
understanding, the granting of any rights or options, or the acquiescence of
such Person, with respect to any of the foregoing.
"Business Day" means a day other than Saturday, Sunday or any
day on which banks located in the State of California are authorized or
obligated to close.
"Business or Condition of Parent" means the business, condition
(financial or otherwise), results of operations, prospects or Assets and
Properties of the Parent and its Subsidiaries, in the aggregate.
"Business or Condition of the Company" means the business,
condition (financial or otherwise), results of operations, prospects or Assets
and Properties of the Company.
"California Code" means the California Corporations Code and all
amendments and additions thereto.
"California Permit" has the meaning ascribed to it in Section
1.11.
"Cause" shall mean (i) dishonesty, fraud, misrepresentation,
embezzlement or other act of dishonesty with respect to the Surviving
Corporation or Parent, (ii) any unlawful or criminal activity of a serious
nature (including any such activity involving moral turpitude), (iii) any
material breach of duty or neglect of duty (after written notice thereof and, if
curable, a reasonable opportunity to remedy such failure), or (iv) any material
breach of any employment, service, confidentiality or non-compete agreement or
policy of the Surviving Corporation or Parent (after written notice thereof and,
if curable, a reasonable opportunity to remedy such failure).
"Certificates" has the meaning ascribed to it in Section 1.8(b).
"Closing" means the closing of the transactions contemplated by
Section 1.2.
"Closing Date" has the meaning ascribed to it in Section 1.2.
"Closing Price" means the average closing sales price of Parent
Common Stock as traded on the NNM and reported by the Wall Street Journal, for
the thirty (30) consecutive market trading days commencing on the thirty second
market trading day prior
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to the Closing Date and ending on (inclusive) the third market trading day prior
to the Closing Date.
"COBRA" has the meaning ascribed to it in Section 2.14(f).
"Code" means the Internal Revenue Code of 1986, as amended, and
the rules and regulations promulgated thereunder.
"Common Stock Exchange Ratio" means the quotient obtained by
dividing (x) the Aggregate Share Number by (y) the Aggregate Common Number.
"Company" has the meaning ascribed to it in the forepart of this
Agreement.
"Company Capital Stock" means the Company Common Stock and the
Company Preferred Stock.
"Company Common Stock" has the meaning ascribed to it in Section
2.3.
"Company Disclosure Schedule" means the schedules delivered to
Parent by or on behalf of the Company, containing all lists, descriptions,
exceptions and other information and materials as are required to be included
therein in connection with the representations and warranties made by the
Company in Article 2 of this Agreement or otherwise.
"Company Financials" means the Audited Financial Statements and
the Interim Financial Statements.
"Company Indemnified Party" has the meaning ascribed to it in
Section 5.14.
"Company Intellectual Property" shall mean any Intellectual
Property that (a) is owned by; (b) is licensed to; (c) was developed or created
by or for the Company or (d) is used in or necessary for the conduct of the
business of the Company as presently or heretofore conducted or as proposed to
be conducted in the Company's 2000 Operating Plan, including any Intellectual
Property created by any of the Company's founders, employees or consultants and
including any Intellectual Property created by any of the Company's founders
prior to the creation of the Company.
"Company Option(s)" means any Option to purchase Company Capital
Stock, excluding the Company Preferred Stock and the Company Warrants.
"Company Preferred Stock" has the meaning ascribed to it in
Section 2.3.
"Company Registered Intellectual Property" means all Registered
Intellectual Property owned by, filed in the name of, assigned to or applied for
by, the Company.
"Company Restricted Stock" means shares of Company Capital Stock
purchased pursuant to an exercise of a Company Stock Purchase Right which are
subject to a repurchase option by the Company.
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"Company Series A Preferred Stock" has the meaning set forth in
2.3.
"Company Series B Preferred Stock" has the meaning set forth in
2.3.
"Company Stock Option Plan" means the Company's 1997 Stock
Option Plan.
"Company Stock Purchase Right" means a right to purchase Company
Restricted Stock granted by the Company.
"Company Shareholders Action" has the meaning ascribed to it in
Section 2.35.
"Company Warrants" means all of the warrants to purchase Company
Capital Stock listed on Section 2.3 of the Disclosure Schedule.
"Competing Proposed Transaction" has the meaning ascribed to it
in Section 4.2.
"Confidentiality Agreement" has the meaning ascribed to it in
Section 5.4
"Contract" means any material contract, agreement or other
business arrangement (whether oral or written) including:
(A) any distributor, sales, advertising, agency or
manufacturer's representative contract;
(B) any continuing contract for the purchase of
materials, supplies, equipment or services involving in the case of any
such contact more than fifty thousand dollars ($50,000) over the life of
the contract;
(C) any material contract that expires or may be renewed
at the option of any person other than the Company so as to expire more
than one year after the date of this Agreement;
(D) any trust indenture, mortgage, promissory note, loan
agreement or other contract for the borrowing of money, any currency
exchange, commodities or other hedging arrangement or any leasing
transaction of the type required to be capitalized in accordance with
generally accepted accounting principles;
(E) any contract for capital expenditures in excess of
fifty thousand dollars ($50,000) in the aggregate;
(F) any contract limiting the freedom of the Company to
engage in any line of business or to compete with any other Person or
any confidentiality, secrecy or non-disclosure contract;
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(G) any contract pursuant to which the Company is a
lessor of any machinery, equipment, motor vehicles, office furniture,
fixtures or other personal property;
(H) any contract for more than $50,000 (either
individually or in the aggregate) with any person with whom the Company
does not deal at arm's length;
(I) any material contract that is not terminable by the
Company upon 30 days (or less) notice by the Company without penalty or
obligation to make payments based on such termination; or
(J) any agreement of guarantee, support,
indemnification, assumption or endorsement of, or any similar commitment
with respect to, the obligations, liabilities (whether accrued,
absolute, contingent or otherwise) or indebtedness of any other Person.
"Depositary Agent" means U.S. Stock Transfer Corporation (or
other institution acceptable to Parent and the Shareholder Agent).
"Disclosure Schedules" means the Company Disclosure Schedule and
the Parent Disclosure Schedule.
"Dissenting Shares" has the meaning ascribed to it in Section
1.7(a).
"Effective Time" has the meaning ascribed to it in Section 1.2.
"Environment" means air, surface water, ground water, or land,
including land surface or subsurface, and any receptors such as persons,
wildlife, fish, biota or other natural resources.
"Environmental Clean-up Site" means any location which is listed
or proposed for listing on the National Priorities List, the Comprehensive
Environmental Response, Compensation and Liability Information System, or on any
similar state list of sites relating to investigation or cleanup, or which is
the subject of any pending or threatened action, suit, proceeding, or
investigation related to or arising from any location at which there has been a
Release or threatened or suspected Release of a Hazardous Material.
"Environmental Law" means any federal, state, local or foreign
environmental, health and safety or other Law relating to of Hazardous
Materials, including without limitation the Comprehensive, Environmental
Response Compensation and Liability Act, the Clean Air Act, the Federal Water
Pollution Control Act, the Solid Waste Disposal Act, the Federal Insecticide,
Fungicide and Rodenticide Act, and the California Safe Drinking Water and Toxic
Enforcement Act.
"Environmental Permit" means any permit, license, approval,
consent or authorization required under or in connection with any Environmental
Law and includes without limitation any and all orders, consent orders or
binding agreements issued by or entered into with a Governmental or Regulatory
Authority.
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"Equity Equivalents" means securities (including Options to
purchase any shares of Company Capital Stock) which, by their terms, are or may
be exercisable, convertible or exchangeable for or into common stock, preferred
stock or other securities at the election of the holder thereof.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and the rules and regulations promulgated thereunder.
"ERISA Affiliate" has the meaning ascribed to in the definition
of Plan in this Section 10.
"Escrow Amount" means (i) the General Escrow Amount plus (ii)
the IP Escrow Amount. The shares deposited with the Depositary Agent shall, to
the extent possible, be shares that are not subject to any repurchase rights.
"Escrow Fund" has the meaning ascribed to it in Section 7.2(a).
"Escrow Period" has the meaning ascribed to it in Section
7.2(c).
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the SEC thereunder.
"Exchange Agent" means U.S. Stock Transfer Corporation.
"Expiration Date" has the meaning ascribed to it in Section 7.1.
"Financial Statement Date" means March 31, 2000.
"GAAP" means generally accepted accounting principles in the
United States, as in effect from time to time.
"General Escrow Amount" means the number of shares of Parent
Common Stock obtained by multiplying (x) the aggregate number of shares of
Parent Common Stock issuable by Parent at the Effective Time to holders of
Company Capital Stock in accordance with Section 1.6(a) by (y) 0.10.
"General Expiration Date" has the meaning ascribed to it in
Section 7.1.
"Governmental or Regulatory Authority" means any court,
tribunal, arbitrator, authority, agency, bureau, board, commission, department,
official or other instrumentality of the United States, any foreign country or
any domestic or foreign state, county, city or other political subdivision, and
shall include any stock exchange, quotation service and the National Association
of Securities Dealers.
"Hazardous Material" means (a) any chemical, material, substance
or waste including, containing or constituting petroleum or petroleum products,
solvents (including chlorinated solvents), nuclear or radioactive materials,
asbestos in any form that is or could become friable, radon, lead-based paint,
urea formaldehyde foam insulation or polychlorinated biphenyls, (b) any
chemicals, materials, substances or wastes which are now
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defined as or included in the definition of "hazardous substances," "hazardous
wastes," "hazardous materials," "extremely hazardous wastes," "restricted
hazardous wastes," "toxic substances," "toxic pollutants" or words of similar
import under any Environmental Law; or (c) any other chemical, material,
substance or waste which is regulated by any Governmental or Regulatory
Authority or which could constitute a nuisance.
"HSR Act" means the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act
of 1976, as amended.
"Income Tax" means (i) any income, alternative or add-on minimum
tax, gross income, gross receipts, franchise, profits, including estimated taxes
relating to any of the foregoing, or other similar tax or other like assessment
or charge of similar kind whatsoever, excluding any Other Tax, together with any
interest and any penalty, addition to tax or additional amount imposed by any
Taxing Authority responsible for the imposition of any such Tax (domestic or
foreign); or (ii) any liability of a Person for the payment of any taxes,
interest, penalty, addition to tax or like additional amount resulting from the
application of Treas. Reg. Section 1.1502-6 or comparable provisions of any
Taxing Authority in respect of a Tax Return of a Relevant Group or any Contract.
"Indebtedness" of any Person means all obligations of such
Person (a) for borrowed money, (b) evidenced by notes, bonds, debentures or
similar instruments, (c) for the deferred purchase price of goods or services
(other than trade payables or accruals incurred in the ordinary course of
business), (d) under capital leases and (e) in the nature of guarantees of the
obligations described in clauses (a) through (d) above of any other Person.
"Information Statement" has the meaning ascribed to it in
Section 2.36.
"Intellectual Property" means all trademarks and trademark
rights, trade names and trade name rights, service marks and service ▇▇▇▇
rights, service names and service name rights, patents and patent rights,
utility models and utility model rights, copyrights, mask work rights, brand
names, trade dress, product designs, product packaging, business and product
names, logos, slogans, rights of publicity, trade secrets, inventions (whether
patentable or not), invention disclosures, improvements, processes, formulae,
industrial models, processes, designs, specifications, technology,
methodologies, computer software (including all source code and object code),
firmware, development tools, flow charts, annotations, all Web addresses, sites
and domain names, all data bases and data collections and all rights therein,
any other confidential and proprietary right or information, whether or not
subject to statutory registration, and all related technical information,
manufacturing, engineering and technical drawings, know-how and all pending
applications for and registrations of patents, utility models, trademarks,
service marks and copyrights, and the right to ▇▇▇ for past infringement, if
any, in connection with any of the foregoing, and all documents, disks, records,
files and other media on which any of the foregoing is stored.
"Interim Financial Statements" means the unaudited balance sheet
of the Company as of March 31, 2000, and the related unaudited statement of
operations and statement of cash flows for the nine-month period ended on such
date.
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"Investment Assets" means all debentures, notes and other
evidences of Indebtedness, stocks, securities (including rights to purchase and
securities convertible into or exchangeable for other securities), interests in
joint ventures and general and limited partnerships, mortgage loans and other
investment or portfolio assets owned of record or beneficially by the Company.
"IP Claims" means all demands, requests for payment and claims
raised in or by (i) Level One Communications, Inc. vs. Altima Communications,
Inc., U.S. District Court - Eastern District of California - Case No. CIV
S-99-2488 GEB GGH (and any related Actions or Proceedings that may be filed),
(ii) In re Certain Integrated Repeaters & Products Containing Same, ITC
Investigation No. 337-TA-430 (and any related Actions or Proceedings that may be
filed), (iii) that certain "cease and desist" letter dated November 15, 1999
from Level One Communications, Inc., (iv) any other similar or derivative
letters and claims required to be but which are not disclosed in the Company
Disclosure Schedule, and (v) Level One Communications, Inc. or any of its
Affiliates with respect to any Company Intellectual Property or relating to U.S.
Patent Nos. 5,894,410, 5,608,341, or 5,726,860. The term "IP Claims" shall
include claims and demands whether raised by the original parties to the
foregoing litigation and letters or any of their respective successors and
assigns, and shall include claims in whatever manner raised, whether by claim,
cross-claim, amended claim or cross-claim or otherwise. Notwithstanding anything
else to the contrary, the term "IP Claims" only includes demands, requests for
payment, and claims to the extent that such demands, request for payment, and
claims relate to: (1) activities of or products sold by the Company prior to the
Closing Date; or (2) the incorporation of Company Intellectual Property in the
products of the Company sold after the Closing Date as planned by the Company
prior to beginning merger discussions with Parent.
"IP Escrow Amount" means (i) the number of shares of Parent
Common Stock obtained by multiplying (x) the aggregate number of shares of
Parent Common Stock issuable by Parent at the Effective Time to holders of
Company Capital Stock in accordance with Section 1.6(a) by (y) 0.05.
"IP Expiration Date" means the second anniversary of the Closing
Date.
"IP Losses" has the meaning ascribed to it in Section 7.2(b).
"IRS" means the United States Internal Revenue Service or any
successor entity.
"IT" has the meaning ascribed to it in Section 5.23.
"Law" or "Laws" means any law, statute, order, decree, consent
decree, judgment, rule, regulation, ordinance or other pronouncement having the
effect of law whether in the United States, any foreign country, or any domestic
or foreign state, county, city or other political subdivision or of any
Governmental or Regulatory Authority.
"Leased Real Property(ies)" has the meaning ascribed to it in
Section 2.15(a).
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"Liabilities" means all Indebtedness, obligations and other
liabilities of a Person, whether absolute, accrued, contingent (or based upon
any contingency), known or unknown, fixed or otherwise, or whether due or to
become due.
"License" means any Contract that grants a Person the right to
use or otherwise enjoy the benefits of any Intellectual Property (including
without limitation any covenants not to ▇▇▇ with respect to any Intellectual
Property).
"Liens" means any mortgage, pledge, assessment, security
interest, lease, lien, easement, license, covenant, condition, restriction,
adverse claim, levy, charge, option, equity, adverse claim or restriction or
other encumbrance of any kind, or any conditional sale Contract, title retention
Contract or other Contract to give any of the foregoing, except for any
restrictions on transfer generally arising under any applicable federal or state
securities law.
"Liquidation Share Number" means the quotient obtained by
dividing (i) the Aggregate Liquidation Preference by (ii) the Closing Price.
"Loss(es)" means any and all damages, fines, fees, Taxes,
penalties, deficiencies, losses (including lost profits or diminution in value)
and expenses, including interest, reasonable expenses of investigation, court
costs, reasonable fees and expenses of attorneys, accountants and other experts
or other expenses of litigation or other proceedings or of any claim, default or
assessment (such fees and expenses to include all fees and expenses, including
fees and expenses of attorneys, incurred in connection with (i) the
investigation or defense of any Third Party Claims or (ii) asserting or
disputing any rights under this Agreement against any party hereto or
otherwise), net of any insurance proceeds actually received (without any adverse
effect on the premiums paid for such insurance) or proceeds received by virtue
of third party indemnification. The term "Losses" shall not include any expenses
of litigation which relate to any of the IP Claims and which are incurred prior
to the Closing Date.
"Merger" has the meaning ascribed to it in Recital A to this
Agreement.
"NASD" means the National Association of Securities Dealers,
Inc.
"New Shares" has the meaning ascribed to it in Section
7.2(d)(ii).
"NNM" means the distinct tier of The Nasdaq Stock Market
referred to as the Nasdaq National Market.
"Non-Competition Agreement" has the meaning ascribed to it in
Recital E
"Officer's Certificate" has the meaning ascribed to it in
Section 7.2(e)(i).
"Option" with respect to any Person means any security, right,
subscription, warrant, option, "phantom" stock right or other Contract (other
than the Company Series A Preferred Stock and the Company Series B Preferred
Stock) that gives the right to (i) purchase or otherwise receive or be issued
any shares of capital stock or other equity interests of such Person or any
security of any kind convertible into or exchangeable or
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exercisable for any shares of capital stock or other equity interests of such
Person or (ii) receive any benefits or rights similar to any rights enjoyed by
or accruing to the holder of shares of capital stock or other equity interests
of such Person, including any rights to participate in the equity, income or
election of directors or officers of such Person.
"Order" means any writ, judgment, decree, injunction or similar
order of any Governmental or Regulatory Authority (in each such case whether
preliminary or final).
"Other Tax" means any sales, use, ad valorem, business license,
withholding, payroll, employment, excise, stamp, transfer, recording,
occupation, premium, property, value added, custom duty, severance, windfall
profit or license tax, governmental fee or other similar assessment or charge,
together with any interest and any penalty, addition to tax or additional amount
imposed by any Taxing Authority responsible for the imposition of any such tax
(domestic or foreign).
"Parent" has the meaning ascribed to it in the forepart of this
Agreement.
"Parent Common Equity" means the Parent Common Stock and the
Class B Common Stock of Parent.
"Parent Common Stock" has the meaning ascribed to it in Recital
B to this Agreement.
"Parent Disclosure Schedule" has the meaning ascribed to it in
the forepart of Article 3.
"Parent Financial Statements" has the meaning ascribed to it in
Section 3.4.
"Parent Indemnitees" has the meaning ascribed to it in Section
7.2(b).
"PBGC" means the Pension Benefit Guaranty Corporation
established under ERISA.
"Permit" means any license, permit, franchise or authorization.
"Permit Application" has the meaning ascribed to it in Section
2.35.
"Person" means any natural person, corporation, general
partnership, limited partnership, limited liability company or partnership,
proprietorship, other business organization, trust, union, association or
Governmental or Regulatory Authority.
"Plan" mean (i) each of the "employee benefit plans" (as such
term is defined in Section 3(3) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"), of which any of the Company, any Subsidiary, or
any member of the same controlled group of businesses as the Company or any
Subsidiary within the meaning of Section 4001(a)(14) of ERISA (an "ERISA
Affiliate") is or ever was a sponsor or participating employer or as to which
the Company or any Subsidiary or any of their ERISA Affiliates makes
contributions or is required to make contributions, and (ii) any similar
employment, severance or other arrangement or policy of any of the Company any
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Subsidiary or any of their ERISA Affiliates (whether written or oral) providing
for health, life, vision or dental insurance coverage (including self-insured
arrangements), workers' compensation, disability benefits, supplemental
unemployment benefits, vacation benefits or retirement benefits, fringe
benefits, or for profit sharing, deferred compensation, bonuses, stock options,
stock appreciation or other forms of incentive compensation or post-retirement
insurance, compensation or benefits.
"PTO" means the United States Patent and Trademark Office.
"Registered Intellectual Property" shall mean all United States,
international and foreign: (i) patents and patent applications (including
provisional applications); (ii) registered trademarks and servicemarks,
applications to register trademarks and servicemarks, intent-to-use
applications, other registrations or applications to trademarks or servicemarks,
or trademarks or servicemarks in which common law rights are owned or otherwise
controlled; (iii) registered copyrights and applications for copyright
registration; (iv) any mask work registrations and applications to register mask
works; and (v) any other Intellectual Property that is the subject of an
application, certificate, filing, registration or other document issued by,
filed with, or recorded by, any state, government or other public legal
authority.
"Release" means any spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching, dumping or
disposing of a Hazardous Material into the Environment.
"Relevant Group" has the meaning ascribed to it in Section
2.11(a).
"Representatives" has the meaning ascribed to it in Section 4.2.
"Restricted Stock Purchase Agreement" means a Restricted Stock
Purchase Agreement as may been entered into by the Company prior to the date of
this Agreement pursuant to which the Company has sold Company Restricted Stock
or issued Company Stock Purchase Rights.
"SEC" means the Securities and Exchange Commission or any
successor entity.
"SEC Documents" means, with respect to any Person, each report,
schedule, form, statement or other document filed or required to be filed with
the SEC by such Person pursuant to Section 13(a) of the Exchange Act.
"Securities Act" has the meaning ascribed to it in Section 1.11.
"Series A Exchange Ratio" means the product obtained by
multiplying (i) the Common Stock Exchange Ratio by (ii) the number of shares of
Company Common Stock into which the Series A Preferred Stock is convertible at
the time of determination (six, as of May 3, 2000).
"Series B Exchange Ratio" means the product obtained by
multiplying (i) the Common Stock Exchange Ratio by (ii) the number of shares of
Company Common Stock
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into which the Series B Preferred Stock is convertible at the time of
determination (two, as of May 3, 2000).
"Site" means any of the real properties currently or previously
owned, leased, occupied, used or operated by the Company, any predecessors of
the Company, or any entities previously owned by the Company, including all
soil, subsoil, surface waters and groundwater.
"Shareholder Agent" has the meaning ascribed to it in Section
7.2(h)(i).
"Shareholder Certificate" has the meaning ascribed to it in
Section 5.1(c)
*
"Subsidiary" means any Person in which the Company or Parent, as
the context requires, directly or indirectly through Subsidiaries or otherwise,
beneficially owns at least 50% of either the equity interest in, or the voting
control of, such Person, whether or not existing on the date hereof.
"Support Agreement" has the meaning ascribed to it in Recital D
to this Agreement.
"Surviving Corporation" has the meaning ascribed to it in
Section 1.1.
"Takeover Statute" means a "fair price," "moratorium," "control
share acquisition" or other similar antitakeover statute or regulation enacted
under state or federal laws in the United States, including without limitation
Section 203 of the Delaware Law.
"Tax" or "Taxes" means Income Taxes and/or Other Taxes, as the
context requires.
"Tax Laws" means the Code, federal, state, county, local or
foreign laws relating to Taxes and any regulations or official administrative
pronouncements released thereunder.
"Tax Returns" means any return, report, information return,
schedule, certificate, statement or other document (including any related or
supporting information) filed or required to be filed with, or, where none is
required to be filed with a Taxing Authority, the statement or other document
issued by, a Taxing Authority in connection with any Tax.
"Taxing Authority" means any governmental agency, board, bureau,
body, department or authority of any United States federal, state or local
jurisdiction or any foreign jurisdiction, having or purporting to exercise
jurisdiction with respect to any Tax.
*
"Third Party Claim" has the meaning ascribed to it in Section
7.2(j).
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"Third Party Expenses" has the meaning ascribed to it in Section
5.5.
"Warranty Obligations" has the meaning ascribed to it in Section
2.28.
(b) Unless the context of this Agreement otherwise requires, (i)
words of any gender include each other gender, (ii) words using the singular or
plural number also include the plural or singular number, respectively, (iii)
the terms "hereof," "herein," "hereby" and derivative or similar words refer to
this entire Agreement as a whole and not to any particular Article, Section or
other subdivision, (iv) the terms "Article" or "Section" or other subdivision
refer to the specified Article, Section or other subdivision of the body of this
Agreement, (v) the phrases "ordinary course of business" and "ordinary course of
business consistent with past practice" refer to the business and practice of
the Company, (vi) the words "include," "includes" and "including" shall be
deemed to be followed by the phrase "without limitation," and (vii) when a
reference is made in this Agreement to Exhibits, such reference shall be to an
Exhibit to this Agreement unless otherwise indicated. All accounting terms used
herein and not expressly defined herein shall have the meanings given to them
under GAAP. The term "party" or "parties" when used herein refer to Parent, on
the one hand, and the Company, on the other.
(c) When used herein, the phrase "to the knowledge of" any
Person, "to the best knowledge of" any Person, "known to" any Person or any
similar phrase, means (i) with respect to any Person who is an individual, the
actual knowledge of such Person, (ii) with respect to any other Person, the
actual knowledge of the directors and officers of such Person and other
individuals that have a similar position or have similar powers and duties as
the officers and directors of such Person, and (iii) in the case of each of (i)
and (ii), the knowledge of facts that such individuals should have after due
inquiry. For this purpose, "due inquiry" means inquiry of and consultation with
(x) the directors and officers of such Person and other individuals that have a
similar position or have similar powers and duties as the officers and directors
of such Person, and the advisors, including legal counsel and outside auditors,
who in each case are the principal persons responsible for such matters as of
the date hereof and (y) the shareholders owning more than 10% of the equity
interests, by vote or value, of such Person.
(d) All references herein to the "date hereof" and the "date of
this Agreement" (or any similar phrase) shall mean May 3, 2000, the date of the
Original Agreement.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, Parent, Merger Sub and the Company, and with respect
to Section 7.2 only, the Shareholder Agent and the Depositary Agent, have caused
this Agreement to be signed by their duly authorized representatives, all as of
the date first written above.
ALTIMA COMMUNICATIONS, INC. BROADCOM CORPORATION
By: /s/ ▇▇▇▇▇▇▇ ▇▇ By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ III
--------------------------------- ---------------------------------
▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ III, Ph.D.
President and Chief Executive Officer President and Chief Executive
Officer
AC ACQUISITION CORP. SHAREHOLDER AGENT
By:/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ III /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------- ---------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ III, Ph.D. ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
President and Chief Executive Officer
U.S. STOCK TRANSFER CORPORATION,
AS DEPOSITARY AGENT
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇
--------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇
Vice President
▇▇▇▇▇▇▇ ▇▇ hereby consents to be replaced as Shareholder Agent hereunder
by ▇▇▇▇ ▇. ▇▇▇▇▇▇▇.
/s/ ▇▇▇▇▇▇▇ ▇▇
-----------------------------------
▇▇▇▇▇▇▇ ▇▇
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AMENDED AND RESTATED
MERGER AGREEMENT AND
PLAN OF REORGANIZATION
BY AND AMONG
BROADCOM CORPORATION,
AC ACQUISITION CORP.,
AND
ALTIMA COMMUNICATIONS, INC.
Dated as of July 28, 2000
Exhibit A: Support Agreement
Exhibit B: Intentionally Omitted
Exhibit C: Non-Competition Agreement
Exhibit D: Agreement of Merger
Exhibit E: Intentionally Omitted
Exhibit F: Shareholder Certificate
Exhibit G-1: Parent and Merger Sub Officer's Certificates
Exhibit G-2: Parent and Merger Sub Secretary's Certificates
Exhibit H: Parent and Merger Sub Counsel Legal Opinion
Exhibit I-1: Company Officer's Certificate
Exhibit I-2: Company Secretary's Certificate
Exhibit J: Opinion of Company Counsel
Exhibit K: Depositary Agent Fee Schedule
Exhibit L: Stock Repurchase Agreement
Broadcom Corporation agrees to furnish supplementally a copy of any of the
foregoing exhibits to the SEC upon request.
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