EXHIBIT 2.1
________________________________________________________________________________
Agreement and Plan of Merger
Dated as of January 23, 2000
among
Virata Corporation,
D2 Technologies, Inc.,
VC Acquisition, Inc.
and
▇▇▇▇▇ ▇. ▇▇▇▇, as Securityholder Agent
________________________________________________________________________________
TABLE OF CONTENTS
Page
ARTICLE I THE MERGER....................................................................... 1
Section 1.1. The Merger.............................................................. 1
Section 1.2. Effective Time.......................................................... 2
Section 1.3. Closing of the Merger................................................... 2
Section 1.4. Effects of the Merger................................................... 2
Section 1.5. Articles of Incorporation and Bylaws.................................... 2
Section 1.6. Directors............................................................... 2
Section 1.7. Officers................................................................ 3
Section 1.8. Conversion of Shares.................................................... 3
Section 1.9. Dissent and Appraisal Rights............................................ 4
Section 1.10. Exchange of Certificates................................................ 4
Section 1.11. Stock Options........................................................... 7
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY.................................... 8
Section 2.1. Organization and Qualification; Subsidiaries; Investments............... 8
Section 2.2. Capitalization of the Company and its Subsidiaries...................... 9
Section 2.3. Authority Relative to this Agreement; Recommendation.................... 10
Section 2.4. Financial Statements.................................................... 10
Section 2.5. Information Supplied.................................................... 11
Section 2.6. Consents and Approvals; No Violations................................... 12
Section 2.7. No Default.............................................................. 12
Section 2.8. No Undisclosed Liabilities; Absence of Changes.......................... 12
Section 2.9. Indebtedness; Bank Accounts; Receivables; Customers..................... 13
Section 2.10. Litigation.............................................................. 15
Section 2.11. Compliance with Applicable Law.......................................... 15
Section 2.12. Title to Properties; Absence of Liens and Encumbrances.................. 15
Section 2.13. Employee Benefit Plans; Labor Matters................................... 15
Section 2.14. Agreements, Scheduled Contracts and Commitments......................... 17
Section 2.15. Interested Party Transactions........................................... 20
Section 2.16. Environmental Laws and Regulations...................................... 20
Section 2.17. Taxes ............................................................... 21
Section 2.18. Intellectual Property................................................... 22
Section 2.19. Insurance............................................................... 28
Section 2.20. Certain Business Practices.............................................. 28
Section 2.21. Restrictions on Business Activities..................................... 28
Section 2.22. Product and Service Warranties.......................................... 28
Section 2.23. Suppliers............................................................... 29
Section 2.24. Vote Required........................................................... 29
Section 2.25. Affiliates.............................................................. 29
Section 2.26. Brokers................................................................. 29
Section 2.27. Minute Books............................................................ 29
i
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT AND ACQUISITION........................ 30
Section 3.1. Organization............................................................ 30
Section 3.2. Capitalization of Parent and its Subsidiaries........................... 30
Section 3.3. Authority Relative to this Agreement.................................... 31
Section 3.4. SEC Reports; Financial Statements....................................... 32
Section 3.5. Information Supplied.................................................... 32
Section 3.6. Consents and Approvals; No Violations................................... 33
Section 3.7. Opinion of Financial Adviser............................................ 33
Section 3.8. Brokers................................................................. 33
Section 3.9. No Prior Activities of Acquisition...................................... 33
ARTICLE IV COVENANTS....................................................................... 33
Section 4.1. Conduct of Business of the Company...................................... 33
Section 4.2. Preparation of Information Statement.................................... 37
Section 4.3. No Solicitation or Negotiation.......................................... 37
Section 4.4. Comfort Letters......................................................... 38
Section 4.5. Approval of Shareholders................................................ 38
Section 4.6. Access to Information................................................... 39
Section 4.7. Certain Filings; Reasonable Efforts..................................... 39
Section 4.8. Public Announcements.................................................... 40
Section 4.9. Conduct of Business of Parent........................................... 40
Section 4.10. Indemnification and Directors' and Officers' Insurance.................. 40
Section 4.11. Notification of Certain Matters......................................... 41
Section 4.12. Affiliates; Tax-Free Reorganization..................................... 41
Section 4.13. Additions to and Modification of Company Disclosure Schedule............ 42
Section 4.14. Employee Matters........................................................ 42
Section 4.15. Registration Rights Agreement........................................... 43
Section 4.16. Nasdaq Listing.......................................................... 43
ARTICLE V CONDITIONS TO CONSUMMATION OF THE MERGER........................................ 43
Section 5.1. Conditions to Each Party's Obligations to Effect the Merger............. 43
Section 5.2. Conditions to the Obligations of the Company............................ 44
Section 5.3. Conditions to the Obligations of Parent and Acquisition................. 45
ARTICLE VI TERMINATION; AMENDMENT; WAIVER.................................................. 47
Section 6.1. Termination............................................................. 47
Section 6.2. Effect of Termination................................................... 48
Section 6.3. Fees and Expenses....................................................... 48
Section 6.4. Amendment............................................................... 50
Section 6.5. Extension; Waiver....................................................... 50
ARTICLE VII INDEMNIFICATION....... ........................................................ 50
Section 7.1. General Survival........................................................ 50
Section 7.2. Indemnification Provisions in General................................... 50
Section 7.3. Manner of Indemnification............................................... 51
Section 7.4. Securityholder Agent.................................................... 52
Section 7.5. Third-Party Claims...................................................... 53
ii
Section 7.6. Exclusive Remedy........................................................ 53
ARTICLE VIII MISCELLANEOUS.................................................................. 53
Section 8.1. Entire Agreement; Assignment............................................ 53
Section 8.2. Validity................................................................ 53
Section 8.3. Notices................................................................. 54
Section 8.4. Governing Law; Venue; Specific Performance; Waiver of Jury Trial........ 55
Section 8.5. Descriptive Headings and Section References............................. 56
Section 8.6. Parties in Interest..................................................... 56
Section 8.7. Certain Definitions..................................................... 56
Section 8.8. Personal Liability...................................................... 57
Section 8.9. Counterparts............................................................ 58
TABLE OF EXHIBITS
Exhibit A-1........ Form of Letter Agreement with Company Affiliates
Exhibit A-2........ Form of Letter Agreement with Parent Affiliates
Exhibit B-1........ Form of Representations related to Tax Matters of the Company
Exhibit B-2........ Form of Representations Related to Tax Matters of Parent and Acquisition
Exhibit C.......... Matters to be Covered by Opinion of Legal Counsel to the Company
Exhibit D.......... Matters to be Covered by Opinion of Legal Counsel to Parent and Acquisition
Exhibit E.......... Form of Escrow Agreement
Exhibit F.......... Form of Registration Rights Agreement
Exhibit G.......... Final Audited Financial Statements of the Company
TABLE OF CONTENTS
TO
COMPANY DISCLOSURE SCHEDULE
Section 2.1(a)..... Subsidiaries
Section 2.1(b)..... Organization and Qualification
Section 2.1(c)..... Equity Investments
Section 2.2........ Capitalization of the Company and its Subsidiaries
Section 2.3........ Authority Relative to this Agreement; Recommendation
Section 2.4(a)..... Financial Statements
Section 2.6........ Consents and Approvals
Section 2.7........ No Defaults
Section 2.8........ No Undisclosed Liabilities; Absence of Changes
Section 2.9(a)..... Indebtedness
Section 2.9(b)..... Bank Accounts
Section 2.9(c)..... Receivables
iii
Section 2.9(d)....... Revenues
Section 2.9(e)....... Set-offs
Section 2.10......... Litigation
Section 2.11......... Compliance with Applicable Law
Section 2.12(a)...... Leases of Real Property
Section 2.12(b)...... Real Property Liens and Encumbrances
Section 2.13(a)...... Employee Benefit Plans
Section 2.13(b)...... Liability Under Employment Plans
Section 2.13(c)...... Employment and Related Agreements
Section 2.13(d)...... Employee Benefits Affected by this Transaction
Section 2.13(f)...... Employee Matters
Section 2.14(a)...... Contracts
Section 2.14(b)...... Loss Contracts
Section 2.14(d)...... No Contract Breaches
Section 2.14(e)...... Intellectual Property under Consulting Agreements
Section 2.15......... Interested Party Transactions
Section 2.18(a)...... Intellectual Property
Section 2.18(b)...... Trademarks
Section 2.18(c)...... Patents
Section 2.18(d)...... Trade Secrets
Section 2.18(e)(i)... Inbound License Agreements
Section 2.18(e)(ii).. Outbound License Agreements
Section 2.18(f)...... Licenses
Section 2.18(g)...... Protection of Intellectual Property
Section 2.18(l)...... Owned Software
Section 2.18(m)...... Existing and Currently Manufactured Software
Section 2.18(o)...... Y2K
Section 2.18(p)...... Employee Confidentiality Agreements
Section 2.18(r)...... Intellectual Property Safeguards
Section 2.21......... Restrictions of Business Activities
Section 2.22......... Product Warranties
Section 2.26......... Affiliates
Section 4.1.......... Conduct of Business
Section 4.1(h)....... Termination Agreements
Section 4.1(o)....... Capital Budget
Section 4.1(v)....... Licensing Agreements
Section 5.3(i)....... Consents
Section 8.7(e)....... Persons with Knowledge
TABLE OF CONTENTS
TO
OTHER SCHEDULES
Section 1.8(b)....... Amounts Paid by the Company or Parent to Procure Commitments
Section 5.3(k)(i).... Required Employees
Section 5.3(h)(ii)... Required Additional Employees
iv
TABLE OF DEFINED TERMS
Cross Reference
Term in Agreement Page
---- ------------ ----
Acquisition................................................. Preamble........................................ 1
affiliate .................................................. Section 8.7(a).................................. 58
Agreement .................................................. Preamble........................................ 1
Bid ........................................................ Section 2.14(c)(vi)............................. 20
business day ............................................... Section 8.7(b).................................. 58
Business System ............................................ Section 2.18(o)(i).............................. 27
capital stock .............................................. Section 8.7(c).................................. 58
Certificate of Merger ...................................... Section 1.2..................................... 2
Certificates ............................................... Section 1.10(b)................................. 5
CGCL ....................................................... Section 1.1..................................... 2
Closing Date ............................................... Section 1.3..................................... 2
Closing .................................................... Section 1.3..................................... 2
Code ....................................................... Preamble........................................ 1
Company Affiliates ......................................... Section 2.26.................................... 30
Company Balance Sheet Date ................................. Section 2.4(a).................................. 11
Company Balance Sheet ...................................... Section 2.4(a).................................. 11
Company Board .............................................. Section 2.3(a).................................. 11
Company Common Stock ....................................... Section 1.8(a).................................. 3
Company Disclosure Schedule ................................ Article II...................................... 8
Company Permits ............................................ Section 2.11.................................... 16
Company Plans .............................................. Section 1.11(a)................................. 7
Company .................................................... Preamble........................................ 1
Company Securities ......................................... Section 2.2(a).................................. 10
Company Stock Option or Options ............................ Section 1.11(a)................................. 7
Contaminant ................................................ Section 2.18(r)................................. 29
Contingent Obligation ...................................... Section 2.9(a).................................. 14
Continuing Employees ....................................... Section 4.14(a)................................. 44
Control .................................................... Exhibit B-1..................................... 1
Copyrights ................................................. Section 2.18(a)................................. 23
Disabling Code ............................................. Section 2.18(r)................................. 29
Dissenting Shares .......................................... Section 1.9..................................... 4
Dissenting Stockholder ..................................... Section 1.9..................................... 4
Effective Time ............................................. Section 1.2..................................... 2
Employee Non-Disclosure Agreement .......................... Section 4.14(a)................................. 44
Employee Plans ............................................. Section 2.13(a)................................. 17
Employment Agreements ...................................... Preamble........................................ 1
Environmental Claim ........................................ Section 2.16(a)................................. 21
Environmental Laws ......................................... Section 2.16(a)................................. 21
ERISA Affiliate ............................................ Section 2.13(a)................................. 17
ERISA ...................................................... Section 2.13(a)................................. 16
Escrow Agent ............................................... Section 1.10(i)................................. 7
v
Escrow Agreement ........................................... Section 1.10(i)................................. 7
Escrow Amount .............................................. Section 1.10(i)................................. 7
Exchange Act ............................................... Section 3.4(a).................................. 33
Exchange Agent ............................................. Section 1.10(a)................................. 5
Exchange Fund .............................................. Section 1.10(a)................................. 5
Exchange Ratio Determination Price ......................... Section 1.8(b).................................. 4
Exchange Ratio ............................................. Section 1.8(c).................................. 4
Final Audited Financial Statements ......................... Section 2.4(b).................................. 12
Final Date ................................................. Section 6.1(b).................................. 49
Financial Statements ....................................... Section 2.4(a).................................. 11
Floor ..................................................... Section 7.2(c).................................. 53
Government Contract ........................................ Section 2.14(c)(vii)............................ 20
Governmental Entity ........................................ Section 2.6..................................... 12
Hazardous Substance ........................................ Section 2.16(c)................................. 22
Inbound License Agreements ................................. Section 2.18(e)................................. 25
incentive stock options or ISOs ............................ Section 1.11(a)................................. 8
include or including ....................................... Section 8.7(d).................................. 59
Indebtedness ............................................... Section 2.9(a).................................. 14
Indemnified D&O Liabilities ................................ Section 4.10(a)................................. 42
Indemnified D&O Persons .................................... Section 4.10(a)................................. 42
Indemnitees ................................................ Section 7.2(a).................................. 52
Information Statement ...................................... Section 2.5..................................... 12
Insurance Policies ......................................... Section 2.19.................................... 29
Intellectual Property ...................................... Section 2.18(a)................................. 23
IRS ........................................................ Section 2.13(a)................................. 17
knowledge or known ......................................... Section 8.7(e).................................. 59
Lien ....................................................... Section 8.7(f).................................. 59
Losses ..................................................... Section 7.2(a).................................. 53
Major Company Shareholders ................................. Section 8.7(g).................................. 59
Material Adverse Effect on Parent .......................... Section 3.1(b).................................. 31
Material Adverse Effect on the Company ..................... Section 2.1(b).................................. 9
Maximum Merger Consideration ............................... Section 1.8(b).................................. 3
Merger ..................................................... Section 1.1..................................... 2
Non-Competition Agreements ................................. Preamble........................................ 1
Other Interests ............................................ Section 2.1(c).................................. 9
Outbound License Agreements ................................ Section 2.18(e)................................. 25
Owned Software ............................................. Section 2.18(l)................................. 26
Parent Common Stock ........................................ Section 1.8(a).................................. 3
Parent Financial Adviser ................................... Section 3.7..................................... 34
Parent Interim Financial Statements ....................... Section 3.4(b).................................. 33
Parent Plans ............................................... Section 4.14(d)................................. 44
Parent ..................................................... Preamble........................................ 1
Parent SEC Reports ......................................... Section 3.4(a).................................. 33
Parent Securities .......................................... Section 3.2(a).................................. 32
Patents .................................................... Section 2.18(a)................................. 23
Per Share Preference Amount ................................ Section 1.8(e).................................. 4
vi
person ..................................................... Section 8.7(h)................................ 59
Preference Amount .......................................... Section 1.8(d)................................ 4
Profit Sharing Plan ........................................ Section 4.14(c)............................... 44
Receivables ................................................ Section 2.9(c)................................ 15
Registration Rights Agreement .............................. Section 4.15.................................. 45
SARSEP Plan ................................................ Section 4.14(c)............................... 44
Scheduled Contract ......................................... Section 2.14(d)............................... 20
SEC ........................................................ Section 3.4(a)................................ 33
Securities Act ............................................. Section 3.4(a)................................ 33
Securityholder Agent ....................................... Preamble...................................... 1
Securityholder Agent ....................................... Section 7.4................................... 54
Series A Preferred Stock ................................... Section 1.8(a)................................ 3
Share ...................................................... Section 1.8(a)................................ 3
Shareholder Proceedings .................................... Section 4.5................................... 40, 41
Shares ..................................................... Section 1.8(a)................................ 3
Software Products .......................................... Section 2.18(m)............................... 27
Software ................................................... Section 2.18(l)............................... 26
subsidiary or subsidiaries ................................. Section 8.7(i)................................ 59
Survival Period Indemnification Claim....................... Section 7.2(b)................................ 53
Survival Period ............................................ Section 7.1................................... 52
Surviving Corporation ...................................... Section 1.1................................... 2
Systems .................................................... Section 2.18(r)............................... 29
Tax or Taxes ............................................... Section 2.17(a)(i)............................ 22
Tax Return ................................................. Section 2.17(a)(ii)........................... 22
Trade Secrets .............................................. Section 2.18(a)............................... 23
Trademarks ................................................. Section 2.18(a)............................... 23
Transaction Documents ...................................... Section 8.7(j)................................ 60
Voting Agreements .......................................... Preamble...................................... 1
Year 2000 Compliant ........................................ Section 2.18(o)(i)............................ 27
vii
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of January
23, 2000, is by and among D2 Technologies, Inc., a California corporation (the
"Company"), Virata Corporation, a Delaware corporation ("Parent"), VC
Acquisition, Inc., a California corporation and a wholly owned subsidiary of
Parent ("Acquisition"), and ▇▇▇▇▇ ▇. ▇▇▇▇, as agent for the shareholders of the
Company ("Securityholder Agent"), who is a party to this Agreement solely with
respect to the Sections hereof which relate specifically to the rights and
duties of the Securityholder Agent.
WHEREAS, the Boards of Directors of the Company, Parent and Acquisition
have each (i) determined that the Merger is advisable and fair and in the best
interests of their respective stockholders and (ii) approved the Merger upon the
terms and subject to the conditions set forth in this Agreement;
WHEREAS, the combination of the Company and Parent shall be effected by the
terms of this Agreement through a transaction in which Acquisition will merge
with and into the Company, the Company will be the surviving corporation and
become a wholly-owned subsidiary of Parent, and the shareholders of the Company
will become stockholders of Parent;
WHEREAS, for Federal income tax purposes it is intended that the Merger
qualify as a reorganization under the provisions of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code");
WHEREAS, certain officers and employees of the Company have entered into
employment agreements (the "Employment Agreements") and certain shareholders
of the Company have entered into non-competition agreements (the "Non-
Competition Agreements") with Parent and the Company, effective upon
consummation of the Merger, as an inducement to Parent to enter into this
Agreement; and
WHEREAS, certain shareholders of the Company have entered into irrevocable
proxy, voting and option agreements, pursuant to which such shareholders have
agreed to vote in favor of the Merger and the other transactions contemplated by
this Agreement and have granted to Parent an option on their shares of Company
stock (the "Voting Agreements"), as an inducement to Parent to enter into this
Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and the
representations, warranties, covenants and agreements herein contained, and
intending to be legally bound hereby, the Company, Parent, Acquisition and the
Securityholder Agent hereby agree as follows:
ARTICLE I
THE MERGER
Section 1.1. The Merger. At the Effective Time and upon the terms and
----------
subject to the conditions of this Agreement and in accordance with the
California Corporation Code (the
1
"CGCL"), Acquisition shall be merged with and into the Company (the "Merger").
Following the Merger, the Company shall continue as the surviving corporation
(the "Surviving Corporation") and the separate corporate existence of
Acquisition shall cease. By agreement of the parties, the Merger may be
structured so that the Company shall be merged with and into Acquisition with
the result that Acquisition shall become the "Surviving Corporation." The Merger
is intended to qualify as a tax-free reorganization under Section 368(a) of the
Code. Parent, as the sole shareholder of Acquisition, hereby approves the Merger
and this Agreement.
Section 1.2. Effective Time. Subject to the terms and conditions set
--------------
forth in this Agreement, on the Closing Date, (a) a copy of this Agreement (or a
condensed merger agreement that gives effect to the Merger on the terms
contained in this Article I), together with the certificates required by Section
1103 of the CGCL, (together, the "Certificate of Merger") shall be duly executed
and acknowledged by Acquisition and the Company and thereafter delivered to the
Secretary of State of the State of California for filing on the Closing Date, or
as soon thereafter as possible pursuant to Section 1103 of the CGCL and (b) the
parties shall make such other filings with the Secretary of State of the State
of California and/or any other authority as are necessary to effect the Merger.
The Merger shall become effective at such time as a properly executed copy of
the Certificate of Merger is duly filed with the Secretary of State of the State
of California in accordance with Section 1103 of the CGCL, or such later time as
Parent and the Company may agree upon and as may be set forth in the Certificate
of Merger (the time the Merger becomes effective being referred to herein as the
"Effective Time").
Section 1.3. Closing of the Merger. The closing of the Merger (the
---------------------
"Closing") will take place at a time and on a date (the "Closing Date") to be
specified by the parties, which shall be no later than the second business day
after satisfaction of the latest to occur of the conditions set forth in Article
V, at the offices of ▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, unless another time, date or place is agreed to in
writing by the parties hereto.
Section 1.4. Effects of the Merger. The Merger shall have the effects as
---------------------
provided in this Agreement and in the applicable provisions of the CGCL. Without
limiting the generality of the foregoing and subject thereto, at the Effective
Time, all the properties, rights, privileges, powers and franchises of the
Company and Acquisition shall vest in the Surviving Corporation and all debts,
liabilities and duties of the Company and Acquisition shall become the debts,
liabilities and duties of the Surviving Corporation.
Section 1.5. Articles of Incorporation and Bylaws. The Articles of
------------------------------------
Incorporation of the Surviving Corporation shall be amended and restated to be
the Articles of Incorporation of Acquisition in effect at the Effective Time
until amended in accordance with applicable law, except that Article I thereof
shall read: "The name of this corporation shall be D2 Technologies, Inc." The
bylaws of the Surviving Corporation shall be amended and restated to be the
bylaws of Acquisition in effect at the Effective Time until amended in
accordance with applicable law.
Section 1.6. Directors. The directors of Acquisition at the Effective
---------
Time shall be the initial directors of the Surviving Corporation, each to hold
office in accordance with the Articles of Incorporation and bylaws of the
Surviving Corporation until such director's successor is duly elected or
appointed and qualified.
2
Section 1.7. Officers. The officers of the Company shall be the initial
--------
officers of the Surviving Corporation, each to hold office in accordance with
the Articles of Incorporation and bylaws of the Surviving Corporation until such
officer's successor is duly elected or appointed and qualified.
Section 1.8. Conversion of Shares.
--------------------
(a) At the Effective Time, each share of Common Stock, no par
value, of the Company (the "Company Common Stock"), and each share of Series
A Preferred Stock, no par value, of the Company (the "Series A Preferred Stock "
and together with the Common Stock, individually a "Share" and collectively the
"Shares") issued and outstanding immediately prior to the Effective Time (other
than (i) Dissenting Shares, (ii) Shares held by any of the Company's
subsidiaries and (iii) Shares held by Parent, Acquisition or any other
subsidiary of Parent) shall, by virtue of the Merger and without any action on
the part of Parent, Acquisition, the Company or the holder thereof, be converted
into and shall become a number of fully paid and nonassessable shares of common
stock, par value $0.001 per share, of Parent ("Parent Common Stock") equal to
the Exchange Ratio; provided, however, that each share of Series A Preferred
Stock shall also receive the Per Share Preference Amount. Notwithstanding the
foregoing, if, between the date of this Agreement and the Effective Time, the
outstanding shares of Parent Common Stock or the outstanding Shares shall have
been changed into a different number of shares or a different class by reason of
any stock dividend, subdivision, reclassification, recapitalization, split,
combination or exchange of shares then the Exchange Ratio shall be
correspondingly adjusted to reflect such stock dividend, subdivision,
reclassification, recapitalization, split, combination or exchange of shares.
(b) The maximum aggregate consideration payable by Parent to
former shareholders of the Company and the holders of Company Stock Options in
connection with the Merger (the "Maximum Merger Consideration") shall be that
number of shares of Parent Common Stock equal to (i) the sum of (A) Ninety
Million Dollars ($90,000,000), plus (B) the aggregate of the exercise prices of
all Company Stock Options outstanding immediately prior to the Effective Time,
minus (C) the aggregate amount, if any, that either the Company or Parent agrees
to pay to any party to the Employment Agreements, Non-Competition Agreements or
Voting Agreements as consideration for such party's execution and delivery
therefor in procuring his or her commitment to remain an employee of the
Surviving Corporation to the extent set forth on Schedule 1.8(b), divided by
(ii) Thirty-Six Dollars ($36.00) (the "Exchange Ratio Determination Price").
(c) The "Exchange Ratio" shall be equal to the quotient of (i)
the difference between (x) the Maximum Merger Consideration, and (y) the
Preference Amount, divided by (ii) the sum of (A) the aggregate number of Shares
outstanding immediately prior to the Effective Time, plus (B) the aggregate
number of shares of Company Common Stock issuable upon the exercise of all
Company Stock Options outstanding immediately prior to the Effective Time.
(d) The "Preference Amount" shall be equal to the quotient of
(i) the product of (A) the aggregate number of Series A Preference Shares
outstanding immediately prior to the
3
Effective Time and (B) Two Dollars ($2.00), divided by (ii) the Exchange Ratio
Determination Price.
(e) The "Per Share Preference Amount" shall be equal to the
quotient of (i) the Preference Amount divided by (ii) the aggregate number of
shares of Series A Preferred Stock outstanding immediately prior to the
Effective Time.
(f) At the Effective Time, each outstanding share of the
common stock, no par value per share, of Acquisition shall be converted into one
fully paid and nonassessable share of common stock, no par value, of the
Surviving Corporation.
(g) At the Effective Time, each Share held by Parent,
Acquisition or any subsidiary of Parent, Acquisition or the Company immediately
prior to the Effective Time shall, by virtue of the Merger and without any
action on the part of Acquisition, the Company or the holder thereof, be
canceled, retired and cease to exist and no shares of Parent Common Stock shall
be delivered with respect thereto.
Section 1.9. Dissenters and Appraisal Rights. Shares that have not been
-------------------------------
voted for approval of this Agreement and with respect to which a demand for
payment and appraisal have been properly made in accordance with Chapter 13 of
the CGCL ("Dissenting Shares"), will not be converted into the right to receive
the shares of Parent Common Stock otherwise payable with respect to such Shares
at or after the Effective Time but will be converted into the right to receive
such consideration as may be determined to be due with respect to such
Dissenting Shares pursuant to the laws of the State of California. If a holder
of Dissenting Shares (a "Dissenting Stockholder") withdraws his or her demand
for such payment and appraisal or becomes ineligible for such payment and
appraisal, then, as of the Effective Time or the occurrence of such event of
withdrawal or ineligibility, whichever last occurs, such holder's Dissenting
Shares will cease to be Dissenting Shares and will be converted into the right
to receive, and will be exchangeable for, the shares of Parent Common Stock into
which such Dissenting Shares would have been converted pursuant to Section 1.8.
The Company will give Parent and Acquisition prompt notice of any demand
received by the Company from a holder of Dissenting Shares for appraisal of
Shares, and Parent shall have the right to participate in all negotiations and
proceedings with respect to such demand. The Company agrees that, except with
the prior written consent of Parent, or as required under the CGCL, it will not
voluntarily make any payment with respect to, or settle or offer or agree to
settle, any such demand for appraisal. Each Dissenting Stockholder who, pursuant
to the provisions of Chapter 13 of the CGCL, becomes entitled to payment of the
value of the Dissenting Shares will receive payment therefor but only after the
value therefor has been agreed upon or finally determined pursuant to such
provisions. Any portion of the Merger Consideration that would otherwise have
been payable with respect to Dissenting Shares will be retained by Parent.
Section 1.10. Exchange of Certificates.
------------------------
(a) Promptly after the Effective Time, Parent shall issue the
number of shares of Parent Common Stock that are issuable pursuant to Section
1.8 and, as required by this Section 1.10, Parent shall deliver to its transfer
agent, or a depository or trust institution of recognized standing selected by
Parent and Acquisition (the "Exchange Agent") for the benefit of
4
the holders of Shares for exchange in accordance with this Article I: (i)
certificates representing the appropriate number of shares of Parent Common
Stock issuable pursuant to Section 1.8 (after the application of Section
1.10(i)), and (ii) cash to be paid in lieu of fractional shares of Parent Common
Stock (such shares of Parent Common Stock and such cash are hereinafter referred
to as the "Exchange Fund"), in exchange for outstanding Shares.
(b) Parent shall cause the Exchange Agent, as soon as
reasonably practicable after the Effective Time, to mail to each holder of
record of a certificate or certificates that immediately prior to the Effective
Time represented outstanding Shares (the "Certificates") and whose shares were
converted into the right to receive shares of Parent Common Stock pursuant to
Section 1.8: (i) a letter of transmittal (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 as Parent and the Company 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, if applicable, cash to be paid for fractional shares of Parent Common
Stock. Upon surrender of a Certificate for cancellation to the Exchange Agent
together with such letter of transmittal duly executed, the holder of such
Certificate shall be entitled to receive in exchange therefor a certificate
representing that number of whole shares of Parent Common Stock and, if
applicable, a check representing the cash consideration to which such holder may
be entitled on account of a fractional share of Parent Common Stock that such
holder has the right to receive pursuant to the provisions of this Article I,
and the Certificate so surrendered shall forthwith be canceled. Parent shall
cause the Exchange Agent to deliver such certificates and cash, if any, to such
holder as soon as reasonably practicable after receipt by the Exchange Agent of
the holder's properly completed letter of transmittal and Certificate evidencing
his, her or its Shares. In the event of a transfer of ownership of Shares that
is not registered in the transfer records of the Company, a certificate
representing the proper number of shares of Parent Common Stock and, if
applicable, a check representing the amount of consideration payable in lieu of
fractional shares of Parent Common Stock may be issued to a transferee if the
Certificate representing such Shares is presented to the Exchange Agent
accompanied by all documents required to evidence and effect such transfer and
by evidence that any applicable stock transfer taxes have been paid. Until
surrendered as contemplated by this Section 1.10, each Certificate shall be
deemed at any time after the Effective Time to represent only the right to
receive upon such surrender the certificate representing shares of Parent Common
Stock and cash in lieu of any fractional shares of Parent Common Stock as
contemplated by this Section 1.10.
(c) No dividends or other distributions declared or made after
the Effective Time with respect to Parent Common Stock with a record date after
the Effective Time shall be paid to the holder of any unsurrendered Certificate
with respect to the shares of Parent Common Stock represented thereby, and no
cash payment in lieu of fractional shares shall be paid to any such holder
pursuant to Section 1.10(f), until the holder of record of such Certificate
shall surrender such Certificate. Subject to the effect of applicable laws,
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 (i) the amount of any cash payable
in lieu of a fractional share of Parent Common Stock to which such holder is
entitled pursuant to Section 1.10(f) and the amount of dividends or other
distributions with a record date after the Effective Time theretofore paid with
respect to such number of whole shares
5
of Parent Common Stock and (ii) at the appropriate payment date the amount of
dividends or other distributions with a record date after the Effective Time but
prior to surrender and a payment date subsequent to surrender payable with
respect to such whole shares of Parent Common Stock.
(d) In the event that any Certificate for Shares shall have
been lost, stolen or destroyed, the Exchange Agent shall issue in exchange
therefor, upon the making of an affidavit of that fact by the holder thereof in
a form acceptable to Parent, such shares of Parent Common Stock and cash in lieu
of fractional shares, if any, as may be required pursuant to this Agreement;
provided, however, that Parent or the Exchange Agent may, in its discretion,
require the delivery of a suitable bond or indemnity.
(e) All shares of Parent Common Stock issued upon the
surrender for exchange of Shares in accordance with the terms hereof (including
any cash paid pursuant to Section 1.10(c) or 1.10(f)) shall be deemed to have
been issued in full satisfaction of all rights pertaining to such Shares;
subject, however, to the Surviving Corporation's obligation to pay any dividends
or make any other distributions with a record date prior to the date hereof that
remain unpaid at the Effective Time, and there shall be no further registration
of transfers on the stock transfer books of the Surviving Corporation of the
Shares that 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 I.
(f) No fractions of a share of Parent Common Stock shall be
issued in the Merger, but in lieu thereof, each holder of Shares otherwise
entitled to a fraction of a share of Parent Common Stock shall upon surrender of
his or her Certificate or Certificates be entitled to receive an amount of cash
(without interest) determined by multiplying (i) the Exchange Ratio
Determination Price by (ii) the fractional share interest to which such holder
would otherwise be entitled. The parties acknowledge that payment of the cash
consideration in lieu of issuing fractional shares was not separately bargained
for consideration, but merely represents a mechanical rounding off for purposes
of simplifying the corporate and accounting complexities that would otherwise be
caused by the issuance of fractional shares.
(g) Any portion of the Exchange Fund that remains
undistributed to the shareholders of the Company upon the expiration of twelve
(12) months after the Effective Time shall be delivered to Parent upon demand
and any shareholders of the Company who have not theretofore complied with this
Article I shall thereafter look only to Parent as general creditors for payment
of their claim for Parent Common Stock and cash in lieu of fractional shares, as
the case may be, and any applicable dividends or distributions with respect to
Parent Common Stock.
(h) Neither Parent, Acquisition nor the Company shall be
liable to any holder of Shares or Parent Common Stock, as the case may be, for
such shares (or dividends or distributions with respect thereto) or cash from
the Exchange Fund delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law.
6
(i) Notwithstanding anything to the contrary contained in this
Agreement, promptly after the Effective Time, Parent shall deposit a number of
shares of Parent Common Stock representing an aggregate value of Nine Million
Dollars ($9,000,000) (the "Escrow Amount") of the aggregate Merger Consideration
(such number of shares to be determined based on the Exchange Ratio
Determination Price otherwise payable to the shareholders of the Company
pursuant to Section 1.8(b) with Greater Bay Bancorp or another third person
mutually satisfactory to Parent and the Securityholder Agent, as escrow agent
(the "Escrow Agent" to be administered and distributed pursuant to the
provisions of an escrow agreement in substantially the form of Exhibit E (the
---------
"Escrow Agreement").
Section 1.11. Stock Options.
-------------
(a) At the Effective Time, each option to purchase Shares (a
"Company Stock Option" or collectively "Company Stock Options") issued pursuant
to the Company's Tandem Stock Option Plan or other agreement or arrangement,
whether vested or unvested, and outstanding as of the Effective Time shall be
converted as of the Effective Time into options to purchase shares of Parent
Common Stock in accordance with the terms of this Section 1.11. All plans or
agreements described above pursuant to which any Company Stock Option has been
issued or may be issued are referred to collectively as the "Company Plans."
Each Company Stock Option shall be deemed to constitute an option to acquire a
number of shares of Parent Common Stock equal to the number of shares of Parent
Common Stock that the holder of such Company Stock Option would have been
entitled to receive pursuant to the Merger had such holder exercised such
Company Stock Option, whether or not vested, in full immediately prior to the
Effective Time (rounded to the nearest whole share) at a price per share
(rounded to the nearest whole cent) equal to (i) the aggregate exercise price
for the Shares otherwise purchasable pursuant to such Company Stock Option
divided by (ii) the product of (A) the number of Shares otherwise purchasable
pursuant to such Company Stock Option, multiplied by (B) the Exchange Ratio;
provided, however, that in the case of any option to which Section 421 of the
Code applies by reason of its qualification under Section 422 of the Code
("incentive stock options" or "ISOs") the option price, the number of shares
purchasable pursuant to such option and the terms and conditions of exercise of
such option shall be adjusted as necessary in order to comply with Section
424(a) of the Code.
(b) As soon as practicable after the date hereof, Parent shall
deliver to the holders of Company Stock Options appropriate notices setting
forth such holders' rights pursuant to the Company Plans and that the agreements
evidencing the grants of such options shall continue in effect on the same terms
and conditions (subject to the adjustments required by this Section 1.11 after
giving effect to the Merger). Parent shall comply with the terms of the Company
Plans and ensure, to the extent required by and subject to the provisions of
such Company Plans, that Company Stock Options that qualified as incentive stock
options prior to the Effective Time continue to qualify as incentive stock
options of Parent after the Effective Time.
(c) Parent shall cause a sufficient number of shares of Parent
Common Stock for delivery upon exercise of Company Stock Options assumed in
accordance with this Section 1.11 to be reserved for issuance for as long as
such options remain outstanding. Within six (6) months after the Effective Time,
Parent shall (i) if no registration statement is in effect
7
covering such shares of Parent Common Stock, file a registration statement on
Form S-8 (or any successor or other appropriate forms) with respect to the
shares of Parent Common Stock subject to any Company Stock Options held by
persons who are directors, officers or employees of the Company or its
subsidiaries and shall use reasonable commercial efforts to maintain the
effectiveness of such registration statement or registration statements (and
maintain the current status of the prospectus or prospectuses contained therein)
for so long as such options remain outstanding and (ii) cause such shares of
Parent Common Stock to be approved for listing on the Nasdaq National Market,
subject to official notice of issuance.
(d) After the Effective Time, all Company Stock Options
assumed by Parent pursuant hereto shall henceforth generally be subject to and
governed by Parent's stock option plan, subject to any irreconcilable conflict
set forth in any agreement between the Company and any holder of such Company
Stock Options relating thereto, and the Company Plans shall terminate
automatically at the Effective Time. At or before the Effective Time, the
Company shall cause to be effected, in a manner reasonably satisfactory to
Parent, such amendments, if any, to the Company Plans to give effect to the
foregoing provisions of this Section 1.11.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to each of Parent and
Acquisition, subject to the exceptions set forth in the Disclosure Schedule (the
"Company Disclosure Schedule") delivered by the Company to Parent in accordance
with Section 4.12 (which exceptions shall specifically identify a Section or
subsection hereof, as applicable, to which such exception relates) that:
Section 2.1. Organization and Qualification; Subsidiaries; Investments.
---------------------------------------------------------
(a) Section 2.1(a) of the Company Disclosure Schedule sets
forth, as of the date of this Agreement, a true and complete list of all the
Company's directly or indirectly owned subsidiaries, together with the
jurisdiction of incorporation of each subsidiary and the percentage of each
subsidiary's outstanding capital stock or other equity interests owned by the
Company or another subsidiary of the Company. Each of the Company and its
subsidiaries is duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation or organization and has all
requisite power and authority to own, lease and operate its properties and to
carry on its businesses as now being conducted. The Company has heretofore
delivered to Acquisition or Parent accurate and complete copies of the Articles
of Incorporation and bylaws (or similar governing documents), as currently in
full force and effect, of the Company and its subsidiaries. Section 2.1(a) of
the Company Disclosure Schedule identifies all the material subsidiaries of the
Company. The Company has no operating subsidiaries other than those incorporated
in a state of the United States.
(b) Except as set forth on Section 2.1(b) of the Company
Disclosure Schedule, each of the Company and its subsidiaries is duly qualified
or licensed and in good standing to do business in each jurisdiction in which
the property owned, leased or operated by it or the nature of the business
conducted by it makes such qualification or licensing necessary, except in such
8
jurisdictions where the failure to be so duly qualified or licensed and in good
standing would not, individually or in the aggregate, have a Material Adverse
Effect on the Company. The term "Material Adverse Effect on the Company" means
any circumstance, change in, or effect on the Company and its subsidiaries,
taken as a whole, (i) that is, or is reasonably likely in the future to be,
materially adverse to the operations, assets or liabilities (including
contingent liabilities), earnings or results of operations, the business
(financial or otherwise) or prospects of the Company and its subsidiaries, taken
as a whole or (ii) that would reasonably be expected to prevent or materially
delay or impair the ability of the Company to consummate the Merger; provided,
however, that such term shall not include any circumstance or change related to
general economic conditions or securities markets generally.
(c) Section 2.1(c) of the Company Disclosure Schedule sets
forth a true and complete list of each equity investment in an amount of Fifty
Thousand Dollars ($50,000) or more or that represents a five percent (5%) or
greater ownership interest in the subject of such investment made by the Company
or any of its subsidiaries in any other person other than the Company's
subsidiaries ("Other Interests"). The Other Interests are owned by the Company,
by one or more of the Company's subsidiaries or by the Company and one or more
of its subsidiaries, in each case free and clear of all Lien, except for Liens
that may be created by any partnership or joint venture agreements for Other
Interests.
Section 2.2. Capitalization of the Company and its Subsidiaries.
---------------------------------------------------
(a) The authorized capital stock of the Company consists of
Ten Million (10,000,000) shares of Company Common Stock, of which Five Million,
Sixty-Eight Thousand and Seventy-Five (5,068,750) were issued and outstanding as
of the date hereof, and Five Hundred Thousand (500,000) shares of Series A
Preferred Stock, of which all were issued and outstanding as of the date hereof.
All of the outstanding shares of Company Common Stock and Series A Preferred
Stock have been validly issued and are fully paid, nonassessable and free of
preemptive rights. After giving effect to the conversion of the Series A
Preferred Stock and, assuming no exercise of outstanding Company Stock Options,
there will be Five Million, Five Hundred and Sixty-Eight Thousand and Seventy-
Five (5,568,750) Shares issued and outstanding. As of the date hereof, 1,200,00
Shares were reserved for issuance and were issuable upon or otherwise
deliverable in connection with the exercise of outstanding Company Stock Options
issued pursuant to the Company Plans. As of the date hereof, there were
outstanding One Million, One Hundred Twenty-Eight Thousand (1,128,000) Company
Stock Options. The outstanding Shares and Company Stock Options are owned of
record by those persons, in the amounts, at the exercise price and on the
vesting schedule, all as set forth in Section 2.2 of the Company Disclosure
Schedule. Except as set forth above or in Section 2.2 of the Company Disclosure
Schedule, there are outstanding (i) no shares of capital stock or other voting
securities of the Company, (ii) no securities of the Company or any of its
subsidiaries convertible into or exchangeable or exercisable for shares of
capital stock or voting securities of the Company, (iii) no options or other
rights to acquire from the Company or any of its subsidiaries, and no
obligations of the Company or any of its subsidiaries to issue, any capital
stock, voting securities or securities convertible into or exchangeable or
exercisable for capital stock or voting securities of the Company and (iv) no
equity equivalent interests in the ownership or earnings of the Company or its
subsidiaries or other similar rights (collectively "Company Securities"). Except
as set forth in Section 2.2 of the Company Disclosure Schedule, as of the date
hereof, there are
9
no outstanding rights or obligations of the Company or any of its subsidiaries
to repurchase, redeem or otherwise acquire any Company Securities and there are
no shareholder agreements, voting trusts or other agreements or understandings
to which the Company is a party or by which it is bound relating to the voting
or registration of any shares of capital stock of the Company.
(b) All of the outstanding capital stock of the Company's
subsidiaries is owned by the Company, directly or indirectly, free and clear of
any Lien or any other limitation or restriction (including any restriction on
the right to vote or sell the same except as may be provided as a matter of
law). There are no options, warrants or other securities of the Company or any
of its subsidiaries convertible into or exchangeable or exercisable for, or
other rights to acquire from the Company or any of its subsidiaries, any capital
stock or other ownership interests in or any other securities of any subsidiary
of the Company, and there exists no other contract, understanding, arrangement
or obligation (whether or not contingent) providing for the issuance or sale,
directly or indirectly, of any such capital stock. There are no outstanding
contractual obligations of the Company or any of its subsidiaries to repurchase,
redeem or otherwise acquire any outstanding shares of capital stock or other
ownership interests in any subsidiary of the Company.
Section 2.3. Authority Relative to this Agreement; Recommendation.
----------------------------------------------------
(a) The Company has all necessary corporate power and
authority to execute and deliver this Agreement, to perform its obligations
under this Agreement and each of the other Transaction Documents to which it is
a party, and to consummate the transactions contemplated hereby and thereby. The
execution and delivery of this Agreement and each of the other Transaction
Documents to which the Company is a party, and the consummation of the
transactions contemplated hereby and thereby, have been duly and validly
authorized by the Board of Directors of the Company (the "Company Board"), and
no other corporate proceedings on the part of the Company are necessary to
authorize this Agreement or any of the other Transaction Documents to which it
is a party, or to consummate the transactions contemplated hereby and thereby,
except as set forth in Section 2.3 of the Company Disclosure Schedule. This
Agreement and each of the other Transaction Documents to which the Company is a
party, have been duly and validly executed and delivered by the Company and
constitutes, assuming the due authorization, execution and delivery hereof and,
to the extent they are parties, thereof by Parent and Acquisition, the valid,
legal and binding agreements of the Company, enforceable against the Company in
accordance with their respective terms, subject to any applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws now or hereafter in
effect relating to creditors' rights generally or to general principles of
equity.
(b) The Company Board has unanimously resolved to recommend
that the shareholders of the Company approve and adopt this Agreement.
Section 2.4. Financial Statements.
--------------------
(a) The Company has delivered to Parent copies of financial
statements (hereinafter collectively called the "Financial Statements"), as set
forth in Exhibit G, which have been prepared in all material respects in
accordance with United States generally accepted accounting principles
consistently applied and maintained throughout the periods indicated
10
fairly present the consolidated financial condition of the Company at their
respective dates and the results of its operations for the periods covered
thereby (subject to normal year-end adjustments and except that any unaudited
financial statements do not contain all required footnotes) as follows: (i)
preliminary balance sheet of the Company at December 31, 1999 and (ii) the
related statement of earnings/operations for the fiscal year ended December 31,
1999. The balance sheet of the Company at December 31, 1999 is referred to
herein as the "Company Balance Sheet" and the date thereof is referred to
herein as the "Company Balance Sheet Date." Except as set forth in the
Financial Statements or Section 2.4(a) of the Company Disclosure Schedule, such
statements of earnings/operations do not contain any items of special or
nonrecurring revenue or any other income not earned in the ordinary course of
business except as expressly specified therein, and such interim financial
statements include all adjustments, which consist only of normal recurring
accruals, necessary for a fair presentation. All inventories of raw materials,
work-in-process and finished goods set forth and reflected in the Company
Balance Sheet, as well as any inventory the Company has directed any of its
manufacturing subcontractors to procure and manufacture on the Company's behalf,
were acquired in the ordinary course of business consistent with past practice.
All such inventories consist of a quality and quantity usable and saleable (free
of any material defect or deficiency) in the ordinary course of business,
consistent with past practice, except for slow-moving, damaged or obsolete items
and materials of below standard quality, all of which have been written down to
net realizable value or in respect of which adequate reserves have been
provided, in each case as fully reflected in the Company Balance Sheet.
(b) The Company will have delivered to Parent as promptly as
practicable (but in all events not later than five (5) days after the date
hereof) final audited balance sheets of the Company at December 31, 1997, 1998
and 1999, and the related statements of earnings/operations for the years ended
December 31, 1997, 1998 and 1999, accompanied by the audit opinion thereon of
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP, the Company's independent public accountants, and the
balance sheet of the Company at December 31, 1999 and the related statement of
earnings/operations for the year then ended (the "Final Audited Financial
Statements"), and such Audited Financial Statements will have been prepared in
all material respects in accordance with United States generally accepted
accounting principles consistently applied and maintained throughout the periods
indicated and fairly present the consolidated financial condition of the Company
at their respective dates and the results of its operations for the periods
covered thereby.
Section 2.5. Information Supplied. None of the information supplied or to
--------------------
be supplied by the Company for inclusion in the Information Statement used or
delivered to Company shareholders in connection with the approval of the Merger
and the adoption of this Agreement and the other Transaction Documents (the
"Information Statement") will, at the date mailed to shareholders of the
Company and at the time used in connection with obtaining the approval of the
Merger and the adoption of this Agreement and the other Transaction Documents,
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 are made not misleading.
The foregoing representation shall not apply to information furnished in writing
to the Company by or on behalf of Parent or Acquisition for inclusion in the
Information Statement. The Information Statement insofar as it relates to the
meeting of the Company's shareholders to vote on, or a solicitation of written
consents from Company
11
Shareholders for approval of, the Merger will comply as to form in all material
respects with the provisions of the CGCL and the rules and regulations
thereunder.
Section 2.6. Consents and Approvals; No Violations. Except for filings,
-------------------------------------
permits, authorizations, consents and approvals as may be required under
applicable requirements of state securities or blue sky laws, and the filing and
recordation of the Certificate of Merger as required by the CGCL, no filing with
or notice to and no permit, authorization, consent or approval of any United
States or foreign court or tribunal, or administrative, governmental or
regulatory body, agency or authority (a "Governmental Entity") is necessary for
the execution and delivery by the Company of this Agreement or any of the other
Transaction Documents to which it is a party or the consummation by the Company
of the transactions contemplated hereby and thereby; provided, however, that the
foregoing representation and warranty assumes that Parent is not a "$100 million
person" as defined in the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act of 1976, as amended (the "HSR
Act"). Neither the execution, delivery and performance of this Agreement or any
of the other Transaction Documents to which it is a party by the Company nor the
consummation by the Company of the transactions contemplated hereby and thereby
will (i) conflict with or result in any breach of any provision of the
respective Articles of Incorporation or bylaws (or similar governing documents)
of the Company or any of its subsidiaries, (ii) except as set forth in Section
2.6 of the Company Disclosure Schedule, result in a violation or breach of or
constitute (with or without due notice or lapse of time or both) a default (or
give rise to any right of termination, amendment, cancellation or acceleration
or Lien) under any note, bond, mortgage, indenture, lease, license, contract,
agreement or other instrument or obligation to which the Company or any of its
subsidiaries is a party or by which any of them or any of their respective
properties or assets may be bound or (iii) violate any order, writ, injunction,
decree, law, statute, rule or regulation applicable to the Company or any of its
subsidiaries or any of their respective properties or assets.
Section 2.7. No Default. Except as set forth in Section 2.7 of the
----------
Company Disclosure Schedule, neither the Company nor any of its subsidiaries is
in breach, default or violation (and no event has occurred that with notice or
the lapse of time or both would constitute a breach, default or violation) of
any term, condition or provision of (i) its Articles of Incorporation or bylaws
(or similar governing documents), (ii) any note, bond, mortgage, indenture, or
license or other material, contract, agreement or instrument or obligation to
which the Company or any of its subsidiaries is now a party or by which it or
any of its properties or assets may be bound or (iii) any order, writ,
injunction, decree, law, statute, rule or regulation applicable to the Company
or any of their respective subsidiaries or any of its properties or assets.
Section 2.8. No Undisclosed Liabilities; Absence of Changes. Except as
----------------------------------------------
and to the extent set forth in Section 2.8 of the Company Disclosure Schedule or
as and to the extent expressly set forth or provided for or reserved against in
the Company Balance Sheet, neither the Company nor any of its subsidiaries has
any liabilities or obligations of any nature, whether or not accrued, contingent
or otherwise, that would be required by generally accepted accounting principles
to be reflected on a balance sheet of the Company (including the notes thereto),
other than liabilities and obligations which, individually or in the aggregate,
will not have a Material Adverse Effect on the Company. Except as and to the
extent set forth in Section 2.8 of the Company Disclosure Schedule, since the
Company Balance Sheet Date, there have been no events, changes or effects with
respect to the Company or any of its subsidiaries that have had or
12
would reasonably be expected to have a Material Adverse Effect on the Company.
Without limiting the generality of the foregoing, except as and to the extent as
set forth in Section 2.8 of the Company Disclosure Schedule, since the Company
Balance Sheet Date, the Company and its subsidiaries have conducted their
respective businesses in all material respects only in, and have not engaged in
any material transaction other than according to, the ordinary and usual course
of such businesses consistent with past practices, and there has not been any
(i) material adverse change in the financial condition, properties, business,
results of operations or prospects of the Company and its subsidiaries (ii)
material damage, destruction or other casualty loss with respect to any material
asset or property owned, leased or otherwise used by the Company or any of its
subsidiaries, not covered by insurance; (iii) declaration, setting aside or
payment of any dividend or other distribution in respect of the capital stock of
the Company or any of its subsidiaries (other than wholly-owned subsidiaries) or
any repurchase, redemption or other acquisition by the Company or any of its
subsidiaries of any outstanding shares of capital stock or other securities of,
or other ownership interests in, the Company or any of its subsidiaries; (iv)
amendment of any material term of any outstanding security of the Company or any
of its subsidiaries; (v) incurrence, assumption or guarantee by the Company or
any of its subsidiaries of any indebtedness for borrowed money other than in the
ordinary course of business and in amounts and on terms consistent with past
practices (but in all events not exceeding Fifty Thousand Dollars ($50,000) in
the aggregate); (vi) creation or assumption by the Company or any of its
subsidiaries of any Lien on any material asset other than in the ordinary course
of business consistent with past practices (not to exceed Fifty Thousand Dollars
($50,000) in the aggregate with respect to the Indebtedness underlying such
Liens); (vii) loan, advance or capital contributions made by the Company or any
of its subsidiaries to, or investment in, any person other than (x) loans or
advances to employees in connection with business-related travel, (y) loans made
to employees consistent with past practices that are not in the aggregate in
excess of Fifty Thousand Dollars ($50,000), and (z) loans, advances or capital
contributions to or investments in wholly-owned subsidiaries, and in each case
made in the ordinary course of business consistent with past practices; (viii)
transaction or commitment made, or any contract or agreement entered into, by
the Company or any of its subsidiaries relating to its assets or business
(including the acquisition or disposition of any assets) or any relinquishment
by the Company or any of its subsidiaries of any contract, agreement or other
right, in any case, material to the Company and its subsidiaries, taken as a
whole, other than transactions and commitments in the ordinary course of
business consistent with past practices and those contemplated by this
Agreement; or (ix) change by the Company or any of its subsidiaries in its
accounting principles, practices or methods. Since the Company Balance Sheet
Date, except for increases in the ordinary course of business consistent with
past practices, there has not been any increase in the compensation payable or
that could become payable by the Company or any of its subsidiaries to (a)
officers of the Company or any of its subsidiaries or (b) any employee of the
Company or any of its subsidiaries whose annual cash compensation is Fifty
Thousand Dollars ($50,000) or more.
Section 2.9. Indebtedness; Bank Accounts; Receivables; Customers.
---------------------------------------------------
(a) Section 2.9(a) of the Company Disclosure Schedule provides
accurate and complete information (including amount and name of payee) with
respect to all Indebtedness of the Company or any of its subsidiaries. For
purposes hereof, "Indebtedness" of any person shall mean all items of
indebtedness of such person for borrowed money and purchase money
13
indebtedness, including without limitation capitalized lease obligations, which
in accordance with generally accepted accounting principles, would be included
in determining liabilities as shown on the liability side of the balance sheet
of such person as of the date as of which indebtedness is to be determined, and
shall also include all Contingent Obligations. For purposes hereof, "Contingent
Obligation" shall mean, as applied to any person, any direct or indirect
liability, contingent or otherwise, of that person with respect to any
Indebtedness, capital lease (other than as lessor), dividend, letter of credit,
surety bond, or other obligation of another, including, without limitation, any
such obligation directly or indirectly guarantied, endorsed (other than for
collection or deposit in the ordinary course of business), co-made or discounted
or sold with recourse by that person, or in respect of which that person is
otherwise directly or indirectly liable. The amount of any Contingent Obligation
shall be equal to the amount of the obligation so guarantied or otherwise
supported.
(b) Section 2.9(b) of the Company Disclosure Schedule provides
the account numbers, type of account and names of all individuals authorized to
draw on or make withdrawals from each account with respect to each account
maintained by or for the benefit of the Company or any of its subsidiaries at
any bank or other financial institution.
(c) Section 2.9(c) of the Company Disclosure Schedule provides
an accurate and complete breakdown and aging of all accounts receivable, notes
receivable and other receivables of the Company or any of its subsidiaries
(collectively, "Receivables") as of the Company Balance Sheet Date. Except as
set forth in Section 2.9(c) of the Company Disclosure Schedule, all existing
Receivables (including those Receivables reflected on the Financial Statements
that have not yet been collected and those Receivables that have arisen since
the Company Balance Sheet Date and have not yet been collected) (i) represent
valid obligations of customers of the Company or one of its subsidiaries arising
from bona fide transactions entered into in the ordinary course of business, and
(ii) have been collected or are current and will be collected by the Company or
one of its subsidiaries or the Surviving Corporation (without any counterclaim
or set-off) within ninety (90) days after the date due or, with respect to those
Receivables already more than 90 days past due, 45 days after the Closing Date,
in each case net of an allowance for doubtful accounts not to exceed amounts
reserved for on the Balance Sheet.
(d) Section 2.9(d) of the Company Disclosure Schedule identifies
and provides an accurate and complete breakdown of the revenues received from
each customer or other person that accounted for more than Fifty Thousand
Dollars ($50,000) of the revenues of the Company or any of its subsidiaries in
the fiscal year ended on the Company Balance Sheet Date, and identifies each
customer that is obligated to make payments to the Company or any of its
subsidiaries in an aggregate amount exceeding Fifty Thousand Dollars ($50,000)
per year. Neither the Company nor any of its subsidiaries has received any
notice or other communication indicating that any customer or other person
identified in Section 2.9(d) of the Company Disclosure Schedule intends or
expects to cease dealing with the Company and its subsidiaries or to effect a
material reduction in the volume of business transacted by such person with the
Company or any of its subsidiaries below historic levels.
(e) Except as disclosed in Section 2.9(e) of the Company
Disclosure Schedule, no customer of the Company or its subsidiaries has a right
of refund or set off from the Company or any of its subsidiaries.
14
Section 2.10. Litigation. Except as set forth in Section 2.10 of the
----------
Company Disclosure Schedule, there is no suit, claim, action, proceeding or
investigation pending or, to the knowledge of the Company, threatened against
the Company or any of its subsidiaries or any of their respective properties or
assets before any Governmental Entity. Neither the Company nor any of its
subsidiaries is subject to any outstanding order, writ, injunction or decree.
Section 2.11. Compliance with Applicable Law. The Company and its
------------------------------
subsidiaries hold all permits, licenses, variances, exemptions, orders and
approvals of all Governmental Entities necessary for the lawful conduct of their
respective businesses (the "Company Permits"), except for failures to hold such
permits, licenses, variances, exemptions, orders and approvals that would not,
individually or in the aggregate, have a Material Adverse Effect on the Company.
The Company and its subsidiaries are in compliance with the terms of the Company
Permits, except where the failure so to comply would not, individually or in the
aggregate, have a Material Adverse Effect on the Company. The businesses of the
Company and its subsidiaries are not being conducted in violation of any
material law, ordinance or regulation of the United States or any foreign
country or any political subdivision thereof or of any Governmental Entity. No
investigation or review by any Governmental Entity with respect to the Company
or any of its subsidiaries is pending or, to the knowledge of the Company,
threatened, nor, to the knowledge of the Company, has any Governmental Entity
indicated an intention to conduct the same, except as set forth in Section 2.11
of the Company Disclosure Schedule.
Section 2.12. Title to Properties; Absence of Liens and Encumbrances.
------------------------------------------------------
(a) Neither the Company nor any of its subsidiaries owns any fee
interest in any real property nor has it ever owned any fee interest in any real
property. Section 2.12(a) of the Company Disclosure Schedule sets forth a list
of all real property currently leased by the Company or any of its subsidiaries,
the name of the lessor and the date of the lease and each amendment thereto.
All such current real property leases are in full force and effect, are valid
and effective in accordance with their respective terms, and there is not, under
any of such leases, any existing material default or event of default (or event
which with notice or lapse of time, or both, would constitute a default) by or
with respect to the Company or any of its subsidiaries, or to the Company's
knowledge, by or with respect to any third party. Complete and correct copies
of such leases in effect on the date hereof have been delivered to Parent.
(b) The Company and its subsidiaries have good and valid title
to or, in the case of leased properties and assets, valid leasehold interests
in, all of their material properties and material assets, whether tangible or
intangible (including Intellectual Property), real, personal and mixed, free and
clear of any Liens except as reflected in the Financial Statements or in Section
2.12(b) of the Company Disclosure Schedule.
Section 2.13. Employee Benefit Plans; Labor Matters.
-------------------------------------
(a) Section 2.13(a) of the Company Disclosure Schedule lists all
employee benefit plans (as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")), and all bonus, stock
option, stock purchase, incentive, deferred compensation, supplemental
retirement, health, life, or disability insurance, dependent care, severance and
other similar fringe or employee benefit plans, programs or arrangements and any
15
current or former employment or executive compensation or severance agreements
written or otherwise maintained or contributed to for the benefit of or relating
to any employee or former employee of the Company or any of its subsidiaries,
any trade or business (whether or not incorporated) that is a member of a
controlled group including the Company or that is under common control with the
Company within the meaning of Section 414 of the Code (an "ERISA Affiliate"),
as well as each plan with respect to which the Company or an ERISA Affiliate
could incur liability under Section 4069 (if such plan has been or were
terminated) or Section 4212(c) of ERISA (together the "Employee Plans"). The
Company has made available to Parent, where applicable, a copy of (i) the three
most recent annual reports on Form 5500 filed with the Internal Revenue Service
(the "IRS") for each disclosed Employee Plan; (ii) the plan documents and
instruments governing each such Employee Plan (other than those referred to in
Section 4(b)(4) of ERISA); (iii) all governmental rulings, determinations,
opinions, and correspondences (and pending request for governmental rulings,
determinations and opinions); and (iv) any non-discrimination test reports for
each disclosed Employee Plan.
(b) Each Employee Plan has been maintained, funded, operated and
administered in compliance in all material respects with all applicable laws and
regulations, including but not limited to, ERISA, the Code, the Health Insurance
Portability and Accountability Act of 1996. Each Employee Plan that is intended
to be qualified under Section 401(a) of the Code and each trust forming a part
thereof that is intended to be exempt from taxation under Section 501(a) of the
Code has received a favorable determination letter from the IRS as to its
qualification and tax-exempt status and nothing has occurred since the date of
such determination letter that could adversely affect the qualification of such
Employee Plan or the tax-exempt status of such related trust. No event has
occurred and, to the knowledge of the Company, there currently exists no
condition or set of circumstances in connection with which the Company or any of
its subsidiaries could be subject to any liability under the terms of any
Employee Plans, ERISA, the Code or any other applicable law, including any
liability under Title IV of ERISA except as set forth in Section 2.13(b) of the
Company Disclosure Schedule. Each Employee Plan can be amended or terminated in
accordance with its terms and any applicable law without any material liability
to the Company other than that required by applicable law or for benefits
accrued or incurred before such amendment or termination.
(c) Section 2.13(c) of the Company Disclosure Schedule sets
forth a list as of the date hereof of (i) all employment agreements with
directors, officers or employees of the Company or any of its subsidiaries; (ii)
all agreements with consultants who are individuals obligating the Company or
any of its subsidiaries to make annual cash payments in an amount exceeding
Fifty Thousand Dollars ($50,000); (iii) all severance agreements, programs and
policies of the Company or any of its subsidiaries with or relating to its
employees except such programs and policies required to be maintained by law;
and (iv) all plans, programs, agreements and other arrangements of the Company
or any of its subsidiaries with or relating to its employees that contain change
in control provisions whether or not listed in other parts of the Company
Disclosure Schedule. The Company has made available to Parent copies (or
descriptions in detail reasonably satisfactory to Parent) of all such
agreements, plans, programs and other arrangements.
(d) Except as disclosed in Section 2.13(d) of the Company
Disclosure Schedule, there will be no payment, accrual of additional benefits,
acceleration of payments or
16
vesting of any benefit under any Employee Plan or any agreement or arrangement
disclosed under this Section 2.13 solely by reason of entering into or in
connection with the transactions contemplated by this Agreement.
(e) No Employee Plan that is a welfare benefit plan within the
meaning of Section 3(1) of ERISA provides benefits to former employees of the
Company or its ERISA Affiliates other than pursuant to Section 4980B of the Code
or similar state laws.
(f) There are no controversies relating to any Employee Plan or
other labor matters pending or, to the knowledge of the Company, threatened
between the Company or any of its subsidiaries and any of their respective
employees. Neither the Company nor any of its subsidiaries is a party to any
collective bargaining agreement or other labor union contract applicable to
persons employed by the Company or any of its subsidiaries except as disclosed
in Section 2.13(f) of the Company Disclosure Schedule, nor does the Company know
of any activities or proceedings of any labor union to organize any such
employees. There are no strikes, slowdowns, work stoppages, lockouts or, to the
Company's knowledge, threats thereof by or with respect to any employees of the
Company or any of its subsidiaries. Except as described in Section 2.13(f) of
the Company Disclosure Schedule, neither the Company nor any of its subsidiaries
is bound by any agreement, nor has it taken or omitted to take any action, that
restricts its ability to terminate the employment of any of its employees at any
time without payment or other liability.
Section 2.14. Agreements, Scheduled Contracts and Commitments.
-----------------------------------------------
(a) Scheduled Contracts. Except as set forth in Sections 2.8,
-------------------
2.13 and 2.14(a) of the Company Disclosure Schedule, neither the Company nor any
of its subsidiaries has, is a party to or is bound by:
(i) any collective bargaining agreements;
(ii) any agreements or arrangements that contain any
severance pay or post-employment liabilities or obligations;
(iii) any bonus, deferred compensation, sales compensation
plan, pension, profit sharing or retirement plans, or any other employee benefit
plans or arrangements or agreements to change any such plans whether written or
oral;
(iv) any employment or consulting agreement with an
employee or individual consultant, or any consulting or sales agreement under
which a firm or other organization provides services to the Company or any of
its subsidiaries in any case involving aggregate payments in excess of Fifty
Thousand Dollars ($50,000) in one year;
(v) any agreement or plan, including any stock option
plan, stock appreciation rights plan or stock purchase plan, any of the benefits
of which will be increased, or the vesting of benefits of which will be
accelerated, by the occurrence of any of the transactions contemplated by this
Agreement or the value of any of the benefits of which will be calculated on the
basis of any of the transactions contemplated by this Agreement;
17
(vi) any fidelity or surety bond or completion bond;
(vii) any lease of personal property having a value
individually in excess of Fifty Thousand Dollars ($50,000);
(viii) any agreement of indemnification or guaranty other
than expressly set forth in the Scheduled Contracts;
(ix) any agreement pursuant to which the Company or any
of its subsidiaries has granted, or may grant in the future, to any party a
source-code license or option or other right to use or acquire source-code;
(x) any agreement relating to capital expenditures and
involving future payments in excess of Fifty Thousand Dollars ($50,000);
(xi) any agreement relating to the disposition or
acquisition of assets, property or any interest in any business enterprise
outside the ordinary course of the Company's or its subsidiaries' business;
(xii) any mortgage, indenture, loan or credit agreement,
security agreement or other agreement or instrument relating to the borrowing of
money or extension of credit, including any guaranty referred to in clause
(viii) of this Section 2.14(a);
(xiii) any purchase order or contract for the purchase of
raw materials or services involving Fifty Thousand Dollars ($50,000) or more;
(xiv) any construction contract;
(xv) any distribution, joint marketing or development
agreement;
(xvi) any other agreement that involves Fifty Thousand
Dollars ($50,000) or more or is not cancelable without penalty upon notice of
thirty (30) days or less;
(xvii) any contract under which the Company or any of its
subsidiaries provides services to third parties for which it will receive
payments in excess of Fifty Thousand Dollars ($50,000) in a period of 12
consecutive months;
(xviii) any contract that contains a liquidated damages
provision for failure to meet performance or quality milestones; or
(xix) any other material agreement or commitment, whether
written or oral.
(b) Loss Contracts. Section 2.14(b) of the Company Disclosure
--------------
Schedule identifies all contracts (whether fixed price or time and materials
with a price cap or other contract having similar effect) under which the
Company or one of its subsidiaries provides products or services to a third
party and as to which the cost of performance has exceeded or is likely to
exceed the contract price and also sets forth, with respect to each such
contract, the
18
amount by which such cost of performance exceeds such contract price. Except as
set forth in Section 2.14(b) of the Company Disclosure Schedule, all contracts
under which the Company or one of its subsidiaries provides services to a third
party are capable of being performed at a cost equal to or less than the
contract price.
(c) No Government Contracts.
-----------------------
(i) Neither the Company nor any of its subsidiaries is or
ever was a party to any Government Contract or outstanding Bid.
(ii) For purposes hereof, "Bid" means any quotation, bid
or proposal by the Company or any of its affiliates which, if accepted or
awarded, would lead to a Government Contract for the design, manufacture or sale
of products or the provision of services by the Company or any of its
subsidiaries.
(iii) For purposes hereof, "Government Contract" means any
prime contract, subcontract, teaming agreement or arrangement, joint venture,
basic ordering agreement, letter contract, purchase order, delivery order, Bid,
change order, arrangement or other commitment of any kind relating to the
business of the Company or any of its subsidiaries between the Company or any of
its subsidiaries and (A) the U.S. Government, (B) any prime contractor to the
U.S. Government or (C) any subcontractor with respect to any contract described
in clause (A) or (B) of this sentence.
(d) No Contract Breaches. Except for such alleged breaches,
--------------------
violations and defaults, and events that would constitute a breach, violation or
default with the lapse of time, giving of notice, or both, as are all noted in
Section 2.14(d) of the Company Disclosure Schedule, neither the Company nor any
of its subsidiaries has in any material respect breached, violated or defaulted
under, or received notice that it has materially breached, violated or defaulted
under, any of the terms or conditions of any agreement, contract or commitment
required to be set forth in Sections 2.2, 2.18(e), 2.18(p), 2.14(a) or 2.14(b)
(any such agreement, contract or commitment, regardless of whether it is set
forth on such schedule, a "Scheduled Contract"). Each Scheduled Contract is in
full force and effect and, except as otherwise disclosed in Section 2.14(d) of
the Company Disclosure Schedule, is not subject to any default thereunder of
which the Company has knowledge by any party obligated to the Company or one of
its subsidiaries pursuant thereto.
(e) Consulting Agreements. With respect to the consulting
---------------------
agreements of the Company and its subsidiaries listed in Section 2.14(a) of the
Company Disclosure Schedule, (i) all of the agreements and understandings of the
Company or one of its subsidiaries, on the one hand, and each of the respective
third parties, on the other hand, are set forth in the copies of such agreements
provided to Parent, (ii) there are no other agreements, written or oral,
changing the rights or obligations of the Company or any of its subsidiaries
thereunder and (iii) except as set forth on Section 2.14(e) of the Company
Disclosure Schedule, the Company or one of its subsidiaries has retained all
rights to its Intellectual Property related to such agreements and the third
parties do not have any ownership interest, jointly or otherwise, in such
Intellectual Property.
19
Section 2.15. Interested Party Transactions. Except as set forth in
-----------------------------
Section 2.15 of the Company Disclosure Schedule, no member, manager, officer or
Affiliate of the Company or any of its subsidiaries (nor, to the knowledge of
the Company, any ancestor, sibling, descendant or spouse of any of such persons,
or any trust, partnership or corporation in which any of such persons has or has
had an economic interest), has or has had, directly or indirectly, (i) an
economic interest in any Person which has furnished or sold, or furnishes or
sells, services or products that the Company or one of its subsidiaries
furnishes or sells, or proposes to furnish or sell, (ii) an economic interest in
any Person that purchases from or sells or furnishes to, the Company or one of
its subsidiaries, any goods or services, (iii) a beneficial interest in any
Scheduled Contract or (iv) any contractual or other arrangement with the Company
or one of its subsidiaries; provided, however, that ownership of no more than
one percent (1%) of the outstanding voting stock of a publicly traded
corporation shall not be deemed an "economic interest in any person" for
purposes of this Section 2.15.
Section 2.16. Environmental Laws and Regulations.
----------------------------------
(a) Each of the Company and its subsidiaries is in material
compliance with all applicable federal, state, local and foreign laws and
regulations relating to pollution or protection of human health or the
environment (including ambient air, surface water, ground water, land surface or
subsurface strata) (collectively "Environmental Laws"), which compliance
includes, but is not limited to, the possession by the Company and its
subsidiaries of all material permits and other governmental authorizations
required under applicable Environmental Laws and compliance with the terms and
conditions thereof. Neither the Company nor any of its subsidiaries has
received written notice of or is the subject of any action, cause of action,
claim, investigation, demand or notice by any person alleging liability under or
non-compliance with any Environmental Law (an "Environmental Claim"). To the
knowledge of the Company, there are no existing facts that are reasonably likely
to prevent or interfere with such material compliance in the future. Neither
the Company nor any subsidiary is subject to any orders, decrees, injunctions or
other arrangements with any Governmental Entity or is subject to any indemnity
or other agreement with any third party relating to liability under any
Environmental Law.
(b) There are no Environmental Claims that are pending or, to
the knowledge of the Company, threatened against the Company or any of its
subsidiaries or, to the knowledge of the Company, against any person whose
liability for any Environmental Claim the Company or any of its subsidiaries has
or may have retained or assumed either contractually or by operation of law.
(c) The properties currently owned or operated by the Company
and its subsidiaries (including soils, groundwater, surface water, buildings or
other structures) are not contaminated with any Hazardous Substances. The
properties formerly owned or operated by the Company or any subsidiary were not
contaminated with any Hazardous Substances during the period of ownership or
operation of the Company or any subsidiary. Neither the Company nor any
subsidiary is subject to liability for any Hazardous Substance disposal or
contamination on any third party property.
20
For purposes hereof, "Hazardous Substance" means any substance that is: (i)
listed, classified or regulated pursuant to any Environmental Law; (ii) any
petroleum product or by-product, asbestos-containing material, lead-containing
paint or plumbing, polychlorinated biphenyls, radioactive materials or radon; or
(iii) any other substance which is the subject of regulatory action by any
Governmental Entity pursuant to any Environmental Law.
Section 2.17. Taxes.
-----
(a) Definitions. For purposes of this Agreement:
-----------
(i) the term "Tax" (including "Taxes") means (A) all
federal, state, local, foreign and other net income, gross income, gross
receipts, sales, use, ad valorem, transfer, franchise, profits, license, lease,
service, service use, withholding, payroll, employment, excise, severance,
stamp, occupation, premium, property, windfall profits, customs, duties or other
taxes, fees, assessments or charges of any kind whatsoever, together with any
interest and any penalties, additions to tax or additional amounts with respect
thereto, (B) any liability for payment of amounts described in clause (A)
whether as a result of transferee liability, of being a member of an affiliated,
consolidated, combined or unitary group for any period, or otherwise through
operation of law, and (C) any liability for the payment of amounts described in
clauses (A) or (B) as a result of any tax sharing, tax indemnity or tax
allocation agreement or any other express or implied agreement to indemnify any
other person; and
(ii) the term "Tax Return" means any return, declaration,
report, statement, information statement and other document required to be filed
with respect to Taxes.
(b) The Company and its subsidiaries have timely filed all
material Tax Returns they are required to have filed; and such Tax Returns are
accurate and correct in all material respects and do not contain a disclosure
statement under Section 6662 of the Code (or any predecessor provision or
comparable provision of state, local or foreign law).
(c) The Company and its subsidiaries have paid or adequately
provided in the most recent Financial Statements for all Taxes (whether or not
shown on any Tax Return) they are required to have paid or to pay. All Taxes
that the Company and its subsidiaries have been required to collect and withhold
have been duly withheld or collected and, to the extent required, have been paid
to the proper taxing authority.
(d) No material claim for assessment or collection of Taxes is
presently being asserted against the Company or its subsidiaries and neither the
Company nor any of its subsidiaries is a party to any pending action,
proceeding, or investigation by any governmental taxing authority nor does the
Company have knowledge of any such threatened action, proceeding or
investigation.
(e) Neither the Company nor any of its subsidiaries is a party
to any agreement, contract, arrangement or plan that has resulted or would
result, individually or in the aggregate, in connection with this Agreement or
any change of control of the Company or any of its subsidiaries, in the payment
of any "excess parachute payments" within the meaning of Section 28OG of the
Code.
21
(f) Neither the Company nor any of its subsidiaries is a party
to any Tax allocation or sharing agreement, other than any agreement entered
into in the ordinary course of business with customers, vendors, suppliers, and
lessors with respect to Taxes other than net income taxes.
(g) Neither the Company nor any of its subsidiaries has been a
member of an affiliated group filing a consolidated federal income Tax return
and none of them has any liability for the Taxes of another person (i) under
Section 1.1502-6 of the U.S. Treasury Regulations promulgated under the Code (or
any similar provision of state, local or foreign law) or (b) as a transferee or
successor.
(h) The Company is not, and has not been at any time, a "United
States real property holding corporation" within the meaning of Section
897(c)(2) of the Code.
Section 2.18. Intellectual Property.
---------------------
(a) Section 2.18(a) of the Company Disclosure Schedule sets
forth, for the Intellectual Property owned, in whole or in part, including
jointly with others, by the Company or any of its subsidiaries, a complete and
accurate list of all United States and foreign (a) patents and patent
applications; (b) Trademark registrations and applications and material
unregistered Trademarks; and (c) copyright registrations and applications,
indicating for each, the applicable jurisdiction, registration number (or
application number), and date issued (or date filed). For purposes of this
Agreement, "Intellectual Property" means: trademarks and service marks (whether
register or unregistered), trade names, designs and general intangibles of like
nature, together with all goodwill related to the foregoing (collectively,
"Trademarks"); patents (including any continuations, continuations in part,
reissue patents, reexamination certificates and applications for any of the
foregoing)(collectively "Patents"); copyrights (including any registrations and
applications therefor and whether registered or unregistered)(collectively
"Copyrights"); computer software; databases; works of authorship; mask works;
technology; trade secrets and other confidential information, know-how,
proprietary processes, formulae, algorithms, models, user interfaces, customer
lists, inventions, discoveries, concepts, ideas, techniques, methods, source
codes, object codes, methodologies and, with respect to all of the foregoing,
related confidential data or information (collectively, "Trade Secrets").
(b) Trademarks.
----------
(i) All Trademark registrations are currently in compliance
in all material respects with all legal requirements (including the timely post-
registration filing of affidavits of use and incontestability and renewal
applications) other than any requirement that, if not satisfied, would not
result in a cancellation of any such registration or otherwise materially affect
the priority and enforceability of the Trademark in question.
(ii) No registered Trademark has been within the last three
(3) years or is now involved in any opposition or cancellation proceeding in the
United States Patent and Trademark Office. No such action has been threatened
within the one-year period prior to the date of this Agreement.
22
(iii) There has been no prior use of any material Trademark
by any third party which would confer upon said third party superior rights in
any such Trademark.
(iv) All material Trademarks registered in the United
States have been in continuous use by the Company or its subsidiaries.
(v) The Company and its subsidiaries have taken the
actions described in Section 2.18(b) of the Company Disclosure Schedule to
police the Trademarks that are used in the United States against third party
infringement of which the Company is aware.
(c) Patents.
-------
(i) All Patents are currently in compliance with legal
requirements (including payment of filing, examination, and maintenance fees and
proofs of working or use) other than any requirement that, if not satisfied,
would not result in a revocation or otherwise materially affect the
enforceability of the Patent in question. Section 2.18(c) of the Company
Disclosure Schedule, sets forth a complete and accurate list of the patents
owned, or previously owned, by the Company.
(ii) No Patent has been or is now involved in any
interference, reissue, reexamination or opposing proceeding in the United States
Patent and Trademark Office. To the Company's knowledge, no such action has been
threatened within the one-year period prior to the date of this Agreement.
(iii) There is no patent, patent application, printed
publication or other prior art of any person that conflicts in any material
respect with any Patent.
(d) Trade Secrets.
-------------
(i) The Company has taken the steps described in Section
2.18(d) of the Company Disclosure Schedule to protect the Company's rights in
confidential information and Trade Secrets of the Company.
(ii) Without limiting the generality of Section 2.14(d)(i)
and except as would not be materially adverse to the Company or its business,
the Company enforces a policy of requiring each relevant employee, consultant
and contractor to execute proprietary information, confidentiality and
assignment agreements substantially in the Company's standard forms, a copy of
which has been furnished to Parent, and, except under confidentiality
obligations, there has been no disclosure by the Company or any subsidiary of
material confidential information or Trade Secrets.
(e) License Agreements. Section 2.18(e)(i) of the Company
------------------
Disclosure Schedule sets forth a complete and accurate list of all license
agreements granting to the Company or any of its subsidiaries any material right
to use or practice any rights under any Intellectual Property other than office
automation software used generally in the Company's or any of its subsidiaries'
operations and other software that is not used in connection with the design,
development, use, maintenance and support, testing, assembly and manufacture of
the Company's or any such subsidiary's products and is commercially available on
reasonable terms
23
to any person for a license fee of no more than Fifty Thousand Dollars ($50,000)
(collectively, the "Inbound License Agreements"), indicating for each the title
and the parties thereto and the amount of any future royalty or license fee
payable thereunder. Section 2.18(e)(ii) of the Company Disclosure Schedule sets
forth a complete and accurate list of all license agreements under which the
Company or any of its subsidiaries licenses software or grants other rights in
to use or practice any rights under any Intellectual Property, excluding
licenses with customers that in the twelve-month period prior to the date hereof
have purchased or licensed products for which the total payments to the Company
and its subsidiaries did not exceed Fifty Thousand Dollars ($50,000)
(collectively, the "Outbound License Agreements), indicating for each the title
and the parties thereto. There is no material outstanding or, to the Company's
knowledge, threatened dispute or disagreement with respect to any Inbound
License Agreement or any Outbound License Agreement.
(f) Ownership; Sufficiency of IP Assets. Except as set forth in
-----------------------------------
Section 2.18(f) of the Company Disclosure Schedule, the Company or one of its
subsidiaries owns or possesses adequate licenses or other rights to use, free
and clear of Liens, orders and arbitration awards, all of its Intellectual
Property used in and necessary to the conduct of its business. The Intellectual
Property identified in Section 2.18(a) of the Company Disclosure Schedule,
together with the Company's and its subsidiaries' unregistered copyrights and
the Company's and such subsidiaries' rights under the licenses granted to the
Company or any of its subsidiaries under the Inbound License Agreements,
constitute all the material Intellectual Property rights used in the operation
of the Company's and its subsidiaries' businesses as they are currently
conducted and are all the Intellectual Property rights necessary to operate such
businesses after the Effective Time in substantially the same manner as such
businesses have been operated by the Company prior thereto.
(g) Protection of IP. The Company has taken those steps set
----------------
forth in Section 2.18(g) of the Company Disclosure Schedule to protect the
Intellectual Property of the Company and its subsidiaries.
(h) No Infringement by the Company. The products used,
------------------------------
manufactured, marketed, sold or licensed by the Company, and all Intellectual
Property used in the conduct of the Company's and its subsidiaries' businesses
as currently conducted, do not infringe upon, violate or constitute the
unauthorized use of any rights owned or controlled by any third party, including
any Intellectual Property of any third party.
(i) No Pending or Threatened Infringement Claims. No litigation
--------------------------------------------
is now or, within the three (3) years prior to the date of this Agreement, was
pending and, to the Company's knowledge, no notice or other claim in writing has
been received by the Company within the one (1) year prior to the date of this
Agreement, (i) alleging that the Company any of its subsidiaries has engaged in
any activity or conduct that infringes upon, violates, or constitutes the
unauthorized use of the Intellectual Property rights of any third party or (ii)
challenging the ownership, use, validity or enforceability of any Intellectual
Property owned or exclusively licensed by the Company. Except as specifically
disclosed in one or more Sections of the Company Disclosure Schedules pursuant
to this Section 2.18, no Intellectual Property owned or licensed by the Company
or any of its subsidiaries is subject to any outstanding order, judgment,
decree, stipulation or agreement (other than Inbound License Agreements)
restricting the use
24
thereof by the Company or any such subsidiary or, in the case of any
Intellectual Property licensed to others, restricting the sale, transfer,
assignment or licensing thereof by the Company or any of its subsidiaries to any
person.
(j) No Infringement by Third Parties. To the Company's
--------------------------------
knowledge, no person is misappropriating, infringing, diluting, or violating any
Intellectual Property owned or exclusively licensed by the Company or any of its
subsidiaries, and no such claims have been brought against any person by the
Company or any of its subsidiaries.
(k) Assignment; Change of Control. The execution, delivery and
-----------------------------
performance by the Company of this Agreement, and the consummation by the
Company of the transactions contemplated hereby, will not result in the loss or
impairment of, or give rise to any right of any third party to terminate, any of
the Company's or any of its subsidiaries' rights to own any of its Intellectual
Property or their respective rights under the License Agreements, nor require
the consent of any Governmental Authority or third party in respect of any such
Intellectual Property.
(l) Software. The Software owned or purported to be owned by
--------
the Company or any of its subsidiaries and used in its business ("Owned
Software") set forth in Section 2.18(l) of the Company Disclosure Schedule, was
either (i) developed by employees of Company or any of its subsidiaries within
the scope of " means any and all (i) computer programs, including any and all
software implementations of algorithms, models and methodologies, whether in
source code or object code, (ii) their employment; (ii) developed by independent
contractors who have assigned their rights to the Company or any of its
subsidiaries pursuant to written agreements; or (iii) otherwise acquired by the
Company or a subsidiary from a third party. The Owned Software does not contain
any programming code, documentation or other materials or development
environments that embody Intellectual Property rights of any person other than
the Company or any of its subsidiaries, except for such materials or development
environments obtained by the Company or any of its subsidiaries from other
persons who make such materials or development environments generally available
to all interested purchasers or end-users on standard commercial terms or as
negotiated between the Company any such other person. For purposes hereof,
"Software databases and compilations, including any and all data and collections
of data, whether machine readable or otherwise, (iii) descriptions, flow-charts
and other work product used to design, plan, organize and develop any of the
foregoing, and (iv) all documentation, including user manuals and training
materials, relating to any of the foregoing.
(m) Performance of Existing Software Products. Section 2.18(m)
-----------------------------------------
of the Company Disclosure Schedule contains a list of (i) the Software products
that are manufactured by the Company or any of its subsidiaries and (ii) any
Software products marketed by the Company or any of its subsidiaries as to which
the Company or any such subsidiary warrants performance to the end user thereof
(collectively "Software Products"). All of such Software Products listed and
described in Section 2.18(m) of the Company Disclosure Schedule perform in all
material respects, free of significant bugs or programming errors, the functions
described in any protocol or standard applicable to the product, and any agreed
specifications or end user documentation or other information provided to
customers of the Company on which such customers relied when licensing or
otherwise acquiring such products. Further, where the Company or its
subsidiaries have represented such Software products to be compliant with any
25
protocol or standard adopted by an applicable standards setting body (such as
the IEEE or the ITU), said Software is compliant with that protocol or standard.
(n) Documentation. The Company and its subsidiaries have taken
-------------
all actions customary in the software industry to document the Software and its
operation, such that the materials comprising the Software, including the source
code and documentation, have been written in a clear and professional manner so
that they may be understood, modified and maintained in an efficient manner by
reasonably competent programmers.
(o) Year 2000 Compliance.
--------------------
(i) All of the Company's and its subsidiaries' Software
Products that are listed in Section 2.18(m) of the Company Disclosure Schedule
record, store, process and calculate and present calendar dates falling on and
after December 31, 1998, and will calculate any information dependent on or
relating to such dates in the same manner and with the same functionality, data
integrity and performance as the products record, store, process, calculate and
present calendar dates on or before December 31, 1998, or calculate any
information dependent on or relating to such dates (collectively "Year 2000
Compliant"). None of the material products of the Company or any of its
subsidiaries have lost or will lose significant functionality with respect to
the introduction of records containing dates falling on or after December 31,
1998 and all of the internal computer systems of the Company or any of its
subsidiaries comprised of software, hardware, databases or embedded control
systems (microprocessor controlled, robotic or other device) related to the
Company's and its subsidiaries' businesses (collectively, a "Business System"),
that constitutes any material part of, or is used in connection with the use,
operation or enjoyment of, any material tangible or intangible asset or real
property of the Company and its subsidiaries, including its accounting systems,
are Year 2000 Compliant. The current versions of the Company's and its
subsidiaries' software and all other Intellectual Property may be used after
December 31, 1998, such that such Software and Intellectual Property will
operate after such time period without error caused by date data that represents
or references different centuries or more than one century.
(ii) To the knowledge of the Company, all of the Company's
products and the conduct of the Company's business with customers and suppliers
will not be materially adversely affected by the advent of the year 2000, the
advent of the twenty-first century or the transition from the twentieth century
through the year 2000 and into the twenty-first century. Except as set forth in
Section 2.18(o) of the Company Disclosure Schedule, neither the Company nor any
of its subsidiaries is reasonably likely to incur material expenses arising from
or relating to the failure of any of its Business Systems or any products
(including all products sold on or prior to the date hereof) as a result of the
advent of the year 2000, the advent of the twenty-first century or the
transition from the twentieth century through the year 2000.
(p) Employee Confidentiality Agreements. Except as set forth in
-----------------------------------
Section 2.18(p) of the Company Disclosure Schedule, all current and former
employees and consultants of the Company or any of its subsidiaries whose duties
or responsibilities relate to the Company's or such subsidiary's business have
entered into confidentiality, invention assignment and proprietary information
agreements with the Company or such subsidiary in the form provided to Parent.
To the Company's knowledge, no employee or consultant of the
26
Company or any of its subsidiaries whose duties or responsibilities relate to
the Company's or any of its subsidiaries' business is obligated under any
agreement (including licenses, covenants or commitments of any nature) or
subject to any judgment, decree or order of any court or administrative agency,
or any other restriction that would interfere with the use of his or her best
efforts to carry out his or her duties for the Company or such subsidiary (other
than time commitments of independent contractors to their other clients) or that
would conflict with the Company's or any of its subsidiaries' business. The
carrying on of the Company's and its subsidiaries' business by such employees
and contractors of the Company or any of its subsidiaries and the conduct of the
Company's and its subsidiaries' business as presently proposed, will not, to the
Company's knowledge, conflict with or result in a breach of the terms,
conditions or provisions of, or constitute a default under, any contract,
covenant or instrument under which any of such employees or consultants or the
Company or any of its subsidiaries is now obligated. Except as set forth in
Section 2.18(p) of the Company Disclosure Schedule, it is not necessary to
utilize any inventions or any other Intellectual Property of any employees of or
consultants to the Company or any of its subsidiaries (or persons the Company or
one of its subsidiaries currently intends to hire) acquired prior to their
employment by the Company or one of its subsidiaries in order to carry on the
business of the Company and its subsidiaries as presently conducted. To the
Company's knowledge, at no time during the conception of or reduction to
practice of any of Intellectual Property owned by the Company or any of its
subsidiaries was any developer, inventor or other contributor to such
Intellectual Property operating under any grants from any Governmental Entity or
private source, performing research sponsored by any Governmental Entity or
private source or subject to any employment agreement or invention assignment or
nondisclosure agreement or other obligation with any third party that could
adversely affect the Company's or its subsidiaries' rights in such Intellectual
Property. Section 2.18(p) of the Company Disclosure Schedule lists each present
and past employee, independent contractor and consultant who participated in a
material way in the creation or development of any Owned Software or any other
material Intellectual Property, indicating, in the case of any such employee,
whether such employee is a present or past employee and, if a past employee and
to the extent known by the Company, the name of the current employer of such
past employee. Without limiting the generality of the foregoing, Section 2.18(p)
of the Company Disclosure Schedule specifically identifies each inventor named
in any Owned Patents (either individually or jointly with others), and indicates
whether such inventor is a current employee of the Company or one of its
subsidiaries and, if not a current employee of the Company or one of its
subsidiaries, (i) the relationship of such inventor to the Company or any of its
subsidiaries at the time the respective invention was made and the present
relationship, if any, of such inventor with the Company or any of its
subsidiaries and (ii) to the extent known by the Company, the employer and
current position of such inventor with such employer.
(q) Export Restrictions. Neither the Company nor any of its
-------------------
subsidiaries has exported or transmitted Software or other material in
connection with the Company's or its subsidiaries' business to any country to
which such export or transmission is restricted by any applicable law, without
first having obtained all necessary and appropriate United States or foreign
government licenses or permits.
(r) Disabling Code and Contaminants. The Owned Software is free
-------------------------------
of any disabling codes or instructions (a "Disabling Code"), and any virus or
other intentionally created,
27
undocumented contaminant (a "Contaminant"), that may, or may be used to,
access, modify, delete, damage or disable any Systems (as defined below) or that
may result in damage thereto. The Company and its subsidiaries have taken
reasonable steps and implemented reasonable procedures to ensure that its and
their internal computer systems used in connection with the Company's and its
subsidiaries' business (consisting of hardware, software, databases or embedded
control systems, "Systems") are free from Disabling Codes and Contaminants. The
Licensed Software is free of any Disabling Codes or Contaminants that may, or
may be used to, access, modify, delete, damage or disable any of the Systems or
that might result in damage thereto. Except as may be set forth in Section
2.18(r) of the Company Disclosure Schedule, the Company and its subsidiaries
have taken all reasonable steps to safeguard their respective Systems and
restrict unauthorized access thereto.
Section 2.19. Insurance. Each of the Company and its subsidiaries
---------
maintains insurance policies (the "Insurance Policies") against all risks of a
character and in such amounts as are usually insured against by similarly
situated companies in the same or similar businesses. Each Insurance Policy is
in full force and effect and is valid, outstanding and enforceable, and all
premiums due thereon have been paid in full. None of the Insurance Policies will
terminate or lapse (or be affected in any other materially adverse manner) by
reason of the transactions contemplated by this Agreement. Each of the Company
and its subsidiaries has complied in all material respects with the provisions
of each Insurance Policy under which it is the insured party. No insurer under
any Insurance Policy has canceled or generally disclaimed liability under any
such policy or, to the Company's knowledge, indicated any intent to do so or not
to renew any such policy. All material claims under the Insurance Policies have
been filed in a timely fashion.
Section 2.20. Certain Business Practices. None of the Company, any of its
--------------------------
subsidiaries or any directors, officers, agents or employees of the Company or
any of its subsidiaries has (i) used any funds for unlawful contributions,
gifts, entertainment or other unlawful expenses related to political activity,
(ii) made any unlawful payment to foreign or domestic government officials or
employees or to foreign or domestic political parties or campaigns or violated
any provision of the Foreign Corrupt Practices Act of 1977, as amended, or (iii)
made any other unlawful payment.
Section 2.21. Restrictions on Business Activities. Except as set forth
-----------------------------------
in Section 2.21 of the Company Disclosure Schedule, there is no agreement
(noncompete or otherwise), judgment, injunction, order or decree to which the
Company or any of its subsidiaries is a party or otherwise binding upon the
Company or any of its subsidiaries that has or is reasonably likely to have the
effect of prohibiting or impairing any business practice of the Company or any
of its subsidiaries, any acquisition of property (tangible or intangible) by the
Company or any of its subsidiaries or the conduct of business by the Company or
any of its subsidiaries. Without limiting the foregoing, except as set forth in
Section 2.21 of the Company Disclosure Schedule, neither the Company nor any of
its subsidiaries has entered into any agreement under which the Company or any
such subsidiary is restricted from selling, licensing or otherwise distributing
any of its products or providing services to any class of customers, in any
geographic area, during any period of time or in any segment of the market.
Section 2.22. Product and Service Warranties. Section 2.22 of the Company
------------------------------
Disclosure Schedule sets forth a summary of the written warranties and
guaranties by the Company or any
28
of its subsidiaries currently in effect with respect to any of its products or
services, complete and accurate copies of which have been delivered to Parent.
There have not been any material deviations from such warranties and guaranties,
and neither the Company, any of its subsidiaries nor any of their respective
salesmen, employees, distributors and agents is authorized to undertake warranty
and guaranty obligations to any customer or to other third parties in excess of
such warranties or guaranties. Except as set forth in Section 2.22 of the
Company Disclosure Schedule, neither the Company nor any of its subsidiaries has
made any oral warranty or guaranty with respect to any of its products or
services.
Section 2.23. Suppliers. The documents and information supplied by the
---------
Company to Parent or any of its representatives in connection with this
Agreement with respect to relationships and volumes of business done with its
significant suppliers are accurate in all material respects. During the last
twelve (12) months, the Company has received no notices of termination or
written threats of termination from any of the five (5) largest suppliers of the
Company and its subsidiaries, taken as a whole.
Section 2.24. Vote Required. The affirmative vote of the holders of a
-------------
majority of the outstanding Shares voting together (including the Series A
Preferred Stock, as converted) is the only vote of the holders of any class or
series of the Company's capital stock necessary to approve and adopt this
Agreement and the Merger.
Section 2.25. Affiliates. Except for the directors and executive officers
----------
of the Company, each of whom is listed in Section 2.25 of the Company Disclosure
Schedule, there are no persons who may be deemed to be affiliates of the Company
under Rule 145 under the Securities Act (the "Company Affiliates ").
Section 2.26. Brokers. Except for Broadview International LLC (the terms
-------
of which engagement have been fully disclosed to Parent), no broker, finder or
investment banker is entitled to any brokerage finder's or other fee or
commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of the Company.
Section 2.27. Minute Books. The minute books of the Company and its
------------
subsidiaries made available to Parent are the only minute books of the Company
and its subsidiaries and contain a reasonably accurate summary of all actions
taken at meetings of the Company Board (or committees thereof) or actions by
written consent since the time of organization of the Company and each of its
subsidiaries, as applicable.
29
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND ACQUISITION
Parent and Acquisition hereby represent and warrant to the Company as
follows:
Section 3.1. Organization.
------------
(a) Each of Parent and Acquisition is duly organized, validly
existing and in good standing under the laws of the State of Delaware and
California, respectively, and has all requisite power and authority to own,
lease and operate its properties and to carry on its businesses as now being
conducted. Parent has heretofore made available to the Company accurate and
complete copies of the Certificate or Articles of Incorporation and bylaws as
currently in full force and effect, of Parent and Acquisition.
(b) Each of Parent and Acquisition is duly qualified or licensed
and in good standing to do business in each jurisdiction in which the property
owned, leased or operated by it or the nature of the business conducted by it
makes such qualification or licensing necessary, except in such jurisdictions
where the failure to be so duly qualified or licensed and in good standing would
not have a Material Adverse Effect on Parent. The term "Material Adverse Effect
on Parent " means any circumstance, change in, or effect on Parent and its
subsidiaries, taken as a whole, (i) that is, or is reasonably likely in the
future to be, materially adverse to the operations, assets or liabilities
(including contingent liabilities), earnings or results of operations or
business (financial or otherwise) of Parent and its subsidiaries, taken as a
whole or (ii) that would reasonably be expected to prevent or materially delay
or impair the ability of Parent to consummate the Merger; provided, however,
that such term shall not include any circumstance or change related to (A)
general economic conditions, (B) securities markets generally or (C)
fluctuations in the price of Parent Common Stock unrelated to any event that
would otherwise constitute a Material Adverse Effect on Parent.
Section 3.2. Capitalization of Parent and its Subsidiaries.
---------------------------------------------
(a) The authorized capital stock of Parent consists of Forty
Million (40,000,000) shares of Parent Common Stock, of which Twenty Million,
Four Hundred Twenty Two Thousand and Forty Eight (20,422,048) shares of Parent
Common Stock were issued and outstanding as of December 31, 1999, and Five
Million (5,000,000) shares of preferred stock, $0.001 par value per share, none
of which are outstanding. All of the outstanding shares of Parent Common Stock
have been validly issued and are fully paid, nonassessable and free of
preemptive rights. As of December 31, 1999, Five Million, Eight Hundred Thirty-
Three Thousand, Two Hundred and Forty-Five (5,833,245) shares of Parent Common
Stock were reserved for issuance (excluding automatic future re-loads under
Parent's option or employee stock purchase plans, "Parent Reserved Shares") and
Three Million, Seven Hundred Forty Thousand, One Hundred and Sixty-Four
(3,740,164) were issuable upon or otherwise deliverable in connection with the
exercise of outstanding options, warrants and convertible securities. Between
December 31, 1999 and the date hereof, no shares of Parent's capital stock have
been issued, other than pursuant to the exercise of stock options, warrants and
convertible securities
30
that entitled the holders thereof to purchase Parent Reserved Shares and except
for grants of stock options to employees, officers and directors made in the
ordinary course of business and consistent with past practice that would entitle
the holders thereof to purchase Parent Reserved Shares. Except as set forth
above, as of the date hereof, there are outstanding (i) no shares of capital
stock or other voting securities of Parent (ii) no securities of Parent or its
subsidiaries convertible into or exchangeable for shares of capital stock, or
voting securities of Parent (iii) no options or other rights to acquire from
Parent or its subsidiaries and no obligations of Parent or its subsidiaries to
issue any capital stock, voting securities or securities convertible into or
exchangeable for capital stock or voting securities of Parent, and (iv) no
equity equivalent interests in the ownership or earnings of Parent or its
subsidiaries or other similar rights (collectively, "Parent Securities "). As of
the date hereof, there are no outstanding obligations of Parent or any of its
subsidiaries to repurchase, redeem or otherwise acquire any Parent Securities.
There are no shareholder agreements, voting trusts or other agreements or
understandings to which Parent is a party or by which it is bound relating to
the voting of any shares of capital stock of Parent. The forms of Certificate of
Incorporation and Bylaws of Parent filed with the SEC as exhibits to Parent's
S-1 Registration Statement for its initial public offering have not been amended
as of the date hereof.
(b) The Parent Common Stock constitutes the only classes of
equity securities of Parent or any of its subsidiaries registered or required to
be registered under the Exchange Act.
(c) At the Effective Time, the shares of Parent Common Stock
issuable to the shareholders of the Company pursuant to Article I shall be
validly issued, fully paid, nonassessable and free of preemptive rights of any
stockholders of Parent.
Section 3.3. Authority Relative to this Agreement. Each of Parent and
------------------------------------
Acquisition has all necessary corporate power and authority to execute and
deliver this Agreement and each of the other Transaction Documents to which it
is a party, to perform its obligations under this Agreement and each of the
other Transaction Documents to which it is a party and to consummate the
transactions contemplated hereby and thereby. The execution and delivery of
this Agreement and each of the other Transaction Documents to which Parent or
Acquisition is a party, and the consummation of the transactions contemplated
hereby and thereby, have been duly and validly authorized by the boards of
directors of Parent and Acquisition and by Parent as the sole shareholder of
Acquisition, and no other corporate proceedings on the part of Parent or
Acquisition are necessary to authorize this Agreement or any of the other
Transaction Documents to which it is a party or to consummate the transactions
contemplated hereby and thereby. This Agreement and each of the other
Transaction Documents to which Parent or Acquisition is a party have been duly
and validly executed and delivered by each of Parent and Acquisition and
constitute, assuming the due authorization, execution and delivery hereof by the
Company, the valid, legal and binding agreements of each of Parent and
Acquisition enforceable against each of Parent and Acquisition in accordance
with their respective terms, subject to any applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws now or hereafter in effect relating
to creditors' rights generally or to general principles of equity.
31
Section 3.4. SEC Reports; Financial Statements.
---------------------------------
(a) Parent filed with the Securities and Exchange Commission
(the "SEC") its final prospectus dated November 16, 1999 pursuant to Rule
424(b) under the Securities Act, as defined below (the "Parent SEC Reports")
which complied at the time of filing in all material respects with all
applicable requirements of the Securities Act of 1933, as amended (the
"Securities Act"), and the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), each law as in effect on the dates such forms reports and
documents were filed. None of such Parent SEC Reports, including any financial
statements or schedules included or incorporated by reference therein, contained
when filed any untrue statement of a material fact or omitted to state a
material fact required to be stated or incorporated by reference therein or
necessary in order to make the statements therein in light of the circumstances
under which they were made not misleading, except to the extent superseded by a
Parent SEC Report filed subsequently and prior to the date hereof. The audited
and any unaudited consolidated financial statements of Parent included in the
Parent SEC Reports fairly present in conformity in all material respects with
generally accepted accounting principles applied on a consistent basis (except
as may be indicated in the notes thereto and except for the absence of footnotes
in the unaudited financial statements), the consolidated financial position of
Parent and its consolidated subsidiaries as of the dates thereof and their
consolidated results of operations and changes in financial position for the
periods then ended (subject, in the case of any interim financial statements, to
normal year-end adjustments).
(b) Parent has delivered to the Company copies of an unaudited
balance sheet of Parent as of December 31, 1999 and the related statement of
earnings for the fiscal year ended December 31, 1999, which have been prepared
in all material respects in accordance with United States generally accepted
accounting principles consistently applied, and fairly present the financial
condition of Parent as of December 31, 1999 and the results of its operations
for the period covered thereby (subject to normal year-end adjustments and
except that such financial statements do not contain all required footnotes)
(the "Parent Interim Financial Statements").
(c) Except as disclosed in the Parent Interim Financial
Statements, no change in the business, assets, liabilities, condition (financial
or other), or results of operations of Parent has occurred between the date of
filing of the SEC Reports filed prior to the date hereof with the SEC and the
date hereof that would cause such SEC Reports, including the financial and
schedules included or incorporated by reference therein, to contain, as of the
date hereof, any untrue statement of a material fact or to omit to state a
material fact that would be required to be stated or incorporated by reference
therein or that would be necessary in order to make the statements contained
therein, as of the date hereof, not misleading.
Section 3.5. Information Supplied. None of the information supplied or to
--------------------
be supplied in writing by Parent or Acquisition for inclusion in the Information
Statement will, at the date mailed or furnished to shareholders of the Company
in connection with obtaining approval of the Merger, this Agreement and the
other Transaction Agreement 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 are made not misleading.
32
Section 3.6. Consents and Approvals; No Violations. Except for filings,
-------------------------------------
permits, authorizations, consents, and approvals as may be required under
applicable requirements of state securities or blue sky laws, and the filing and
recordation of the Certificate of Merger as required by the CGCL, no filing with
or notice to, and no permit authorization consent or approval of any
Governmental Entity is necessary for the execution and delivery by Parent or
Acquisition of this Agreement or any of the other Transaction Documents to which
it is a party or the consummation by Parent or Acquisition of the transactions
contemplated hereby and thereby. Neither the execution, delivery and
performance of this Agreement or any of the other Transaction Documents to which
it is a party by Parent or Acquisition nor the consummation by Parent or
Acquisition of the transactions contemplated hereby and thereby will (i)
conflict with or result in any breach of any provision of the respective
Certificate or Articles of Incorporation or bylaws (or similar governing
documents) of Parent or Acquisition or any of Parent's other subsidiaries, (ii)
result in a violation or breach of or constitute (with or without due notice or
lapse of time or both) a default (or give rise to any right of termination,
amendment, cancellation or acceleration or Lien) under any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, lease, license,
contract, agreement or other instrument or obligation to which Parent or
Acquisition or any of Parent's other subsidiaries is a party or by which any of
them or any of their respective properties or assets may be bound or (iii)
violate any order, writ, injunction, decree, law, statute, rule or regulation
applicable to Parent or Acquisition or any of Parent's other subsidiaries or any
of their respective properties or assets.
Section 3.7. Opinion of Financial Adviser. Warburg Dillon Read LLC (the
----------------------------
"Parent Financial Adviser") has delivered to the Board of Directors of Parent
its opinion to the effect that, as of the date hereof, the Maximum Merger
Consideration is fair, from a financial point of view, to Parent.
Section 3.8. Brokers. No broker finder or investment banker (other than
-------
the Parent Financial Adviser) is entitled to any brokerage finder's or other fee
or commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of Parent or Acquisition.
Section 3.9. No Prior Activities of Acquisition. Except for obligations
----------------------------------
incurred in connection with its incorporation or organization or the negotiation
and consummation of this Agreement and each of the other Transaction Documents
to which it is a party, and the transactions contemplated hereby and thereby,
Acquisition has neither incurred any obligation or liability nor engaged in any
business or activity of any type or kind whatsoever or entered into any
agreement or arrangement with any person.
ARTICLE IV
COVENANTS
Section 4.1. Conduct of Business of the Company. Except as contemplated
----------------------------------
by this Agreement or as described in Section 4.1 of the Company Disclosure
Schedule, during the period from the date hereof to the Effective Time, the
Company shall, and shall cause each of its subsidiaries to, conduct its
operations in the ordinary course of business consistent with past
33
practice and, to the extent consistent therewith, with no less diligence and
effort than would be applied in the absence of this Agreement, use its
commercially reasonable efforts to preserve intact its current business
organizations, keep available the service of its current officers and employees
and preserve its relationships with customers, suppliers, distributors, lessors,
creditors, employees, contractors and others having business dealings with it,
with the intention that its goodwill and ongoing businesses shall be unimpaired
at the Effective Time. Without limiting the generality of the foregoing, except
as otherwise expressly provided in this Agreement and except as described in
Section 4.1 of the Company Disclosure Schedule, prior to the Effective Time,
neither the Company nor any of its subsidiaries shall, without the prior written
consent of Parent:
(a) amend its Certificate or Articles of Incorporation or bylaws
(or other similar governing instruments);
(b) authorize for issuance, issue, sell, deliver or agree or
commit to issue, sell or deliver (whether through the issuance or granting of
options, warrants, commitments, subscriptions, rights to purchase or otherwise)
any stock of any class or any other debt or equity securities or equity
equivalents (including any stock options or stock appreciation rights) except
for the issuance and sale of Shares upon the exercise of Company Stock Options
granted under the Company Plans prior to the date hereof;
(c) split, combine or reclassify any shares of its capital
stock, declare, set aside or pay any dividend or other distribution (whether in
cash, stock or property or any combination thereof) in respect of its capital
stock, make any other actual, constructive or deemed distribution in respect of
its capital stock or otherwise make any payments to shareholders in their
capacity as such, or redeem or otherwise acquire any of its securities or any
securities of any of its subsidiaries;
(d) adopt a plan of complete or partial liquidation,
dissolution, merger, consolidation, restructuring, recapitalization or other
reorganization of the Company or any of its subsidiaries (other than the
Merger);
(e) alter through merger, liquidation, reorganization,
restructuring or any other fashion the corporate structure or ownership of any
subsidiary;
(f) (i) incur or assume any long-term or short-term Indebtedness
or issue any debt securities, in each case, except for borrowings under existing
lines of credit in the ordinary course of business and consistent with past
practices, or modify or agree to any amendment of the terms of any of the
foregoing; (ii) assume, guarantee, endorse or otherwise become liable or
responsible (whether directly, contingently or otherwise) for the obligations of
any other person except for obligations of subsidiaries of the Company incurred
in the ordinary course of business and consistent with past practices; (iii)
make any loans, advances or capital contributions to or investments in any other
person (other than customary loans or advances to employees in each case in the
ordinary course of business consistent with past practice not to exceed Fifty
Thousand Dollars ($50,000) in the aggregate); (iv) pledge or otherwise encumber
shares of capital stock of the Company or any of its subsidiaries; or (v)
mortgage or pledge any of its material assets, tangible or intangible, or create
or suffer to exist any material Lien thereupon;
34
(g) except as may be required by applicable law or as expressly
contemplated by this Agreement, enter into, adopt or amend or terminate any
bonus, profit sharing, special remuneration, compensation, severance,
termination, stock option, stock appreciation right, restricted stock,
performance unit, stock equivalent, stock purchase agreement, pension,
retirement, deferred compensation, employment, health, life, or disability
insurance, dependent care, severance or other employee benefit plan agreement,
trust, fund or other arrangement for the benefit or welfare of any director,
officer, employee or consultant in any manner or increase in any manner the
compensation or fringe benefits of any director, officer or employee or pay any
benefit not required by any plan and arrangement as in effect as of the date
hereof (including the granting of stock appreciation rights or performance
units);
(h) grant any severance or termination pay to any director, officer,
employee or consultant, except payments made pursuant to written agreements in
effect on the date hereof, the terms of which are in all material respects
completely and correctly disclosed in Section 4.1(h) of the Company Disclosure
Schedule or as required by applicable federal, state or local applicable law or
regulations;
(i) except as expressly contemplated by this Agreement, enter into or
amend any employment agreements, oral or written, increase the compensation
payable or to become payable by it to any of its officers, shareholders,
directors, employees or consultants, or adopt or amend any employee benefit plan
or arrangement, oral or written (including any amendment to the Company Plans or
the agreements thereunder), or increase the salaries or wage rates of its
officers, shareholders, directors, employees or consultants;
(j) terminate the employment of any manager or officer or grant any
severance or termination pay to any member, manager, officer or any other
employee, except payments made pursuant to written agreements or other legally
binding commitments disclosed to Parent in writing and in effect on the date
hereof;
(k) exercise its discretion or otherwise voluntarily accelerate the
vesting of any Company Stock Option as a result of the Merger, any other change
of control of the Company (as defined in the Company Plans) or otherwise;
(l) other than in the ordinary course of business and consistent with
past practices, (i) acquire, sell, lease, license, transfer or otherwise dispose
of any assets in any single transaction or series of related transactions having
a fair market value in excess of Fifty Thousand Dollars ($50,000) in the
aggregate; (ii) enter into any exclusive license, distribution, marketing, sales
or other agreement, (iii) enter into a "development services" or other similar
agreement, or (iv) acquire, sell, lease, license, transfer or otherwise dispose
of any Intellectual Property;
(m) except as may be required as a result of a change in applicable
law or in generally accepted accounting principles, change any of the accounting
principles, practices or methods used by it;
(n) revalue in any material respect any of its assets, including
writing down the value of inventory or writing-off notes or accounts receivable,
other than in the ordinary course of business and consistent with past
practices;
35
(o) (i) acquire (by merger, consolidation or acquisition of stock or
assets) any corporation, partnership or other business organization or entity or
division thereof or any equity interest therein; (ii) enter into any contract or
agreement other than in the ordinary course of business consistent with past
practice that would be material to the Company and its subsidiaries, taken as a
whole; (iii) amend, modify or waive any right under any Scheduled Contract or
any other material contract of the Company or any of its subsidiaries; (iv)
breach or otherwise violate the terms of any Scheduled Contracts; (v) modify its
standard warranty terms for its products or amend or modify any product
warranties in effect as of the date hereof in any material manner that is
adverse to the Company or any of its subsidiaries; or (v) authorize any new or
additional capital expenditure or expenditures if any such expenditure or
expenditures are not listed in the capital budget attached as Section 4.1(o) of
the Company Disclosure Schedule; or (vi) authorize any new or additional
manufacturing capacity expenditure or expenditures for any manufacturing
capacity contracts or arrangements;
(p) make or revoke any tax election or settle or compromise any
income tax liability or permit any insurance policy naming it as a beneficiary
or loss-payable to expire, or to be canceled or terminated, unless a comparable
insurance policy reasonably acceptable to Parent is obtained and in effect;
(q) allow any insurance policy relating to the Company's or any of
its subsidiaries' assets, properties or business to be amended or terminated
without replacing such policy with a policy providing at least equal coverage,
insuring comparable risks and issued by an insurance company financially
comparable to the prior insurance company;
(r) fail to file any Tax Returns when due (or, alternatively, fail to
file for available extensions) or fail to cause such Tax Returns when filed to
be complete and accurate in all material respects;
(s) fail to pay any Taxes or other material debts when due;
(t) commence any litigation or any binding dispute resolution process
(other than in respect of any breach of or claim arising under this Agreement),
or settle or compromise any pending or threatened suit, action, claim or other
dispute that (i) relates to the transactions contemplated hereby or (ii) the
settlement or compromise of which would involve more than Fifty Thousand Dollars
($50,000) or that would otherwise be material to the Company and its
subsidiaries, taken as a whole, or relates to any Intellectual Property matters;
(u) take any action or fail to take any action that could reasonably
be expected to (i) limit the utilization of any of the net operating losses,
built-in losses, tax credits or other similar items of the Company or its
subsidiaries under Section 382, 383, 384 or 1502 of the Code and the Treasury
Regulations thereunder, or (ii) cause any transaction in which the Company or
any of its subsidiaries was a party that was intended to be treated as a
reorganization under Section 368(a) of the Code to fail to qualify as a
reorganization under Section 368(a) of the Code;
(v) except as set forth in Section 4.1(v) of the Company Disclosure
Schedule, enter into any licensing, distribution, sponsorship, advertising or
other similar contracts, agreements, or obligations which may not be canceled
without penalty by the Company or its
36
subsidiaries upon notice of 30 days or less or which provide for payments by or
to the Company or its subsidiaries in an amount in excess of Fifty Thousand
Dollars ($50,000) over the term of the agreement;
(w) engage in any willful action with the intent to directly or
indirectly adversely impact any of the transactions contemplated by this
Agreement; or
(x) take or agree in writing or otherwise to take any of the actions
described in Sections 4.1(a) through 4.1(w) that it is prohibited from taking
(and it shall use all reasonable efforts not to take any action that would make
any of the representations or warranties of the Company contained in this
Agreement (including the Exhibits hereto) untrue or incorrect).
Section 4.2. Preparation of Information Statement. The Company and Parent
------------------------------------
shall diligently work together and promptly prepare and deliver to the Company's
shareholders the Information Statement. Parent shall also take any action
(other than qualifying to do business in any jurisdiction in which it is now not
so qualified) required to be taken under any applicable state securities laws in
connection with the issuance of Parent Common Stock in the Merger and upon the
exercise of Company Stock Options, and the Company shall furnish all information
concerning the Company and the holders of shares of Series A Preferred Stock and
Company Common Stock as may be reasonably requested in connection with any such
action.
Section 4.3. No Solicitation or Negotiation. Between the date hereof and
------------------------------
the earlier of the termination of this Agreement and the Effective Time, the
Company shall not (nor shall the Company permit any of its subsidiaries or any
of its or its subsidiaries' officers, directors, employees, agents,
representatives, shareholders or affiliates or cause any person on behalf of the
Company to) directly or indirectly, take any of the following actions with any
person other than Parent and Acquisition:
(a) solicit, initiate, entertain or encourage any proposals or
offers from, or conduct discussions with or engage in negotiations with any
person relating to any possible acquisition of the Company or any of its
subsidiaries (whether by way of merger, purchase of capital stock, purchase of
assets or otherwise), any material portion of its or their capital stock or any
other equity interest in the Company or any of its subsidiaries or any material
part of their respective assets;
(b) provide information with respect to it or any of its
subsidiaries to any person, other than Parent and Acquisition, relating to, or
otherwise cooperate with, facilitate or encourage any effort or attempt by any
such person with regard to, any possible acquisition of the Company or any of
its subsidiaries (whether by way of merger, purchase of capital stock, purchase
of assets or otherwise), any portion of its or their capital stock or any other
equity interest in the Company or any of its subsidiaries or any material part
of their respective assets; or
(c) enter into any agreement with any person providing for the
possible acquisition of the Company or any of its subsidiaries (whether by way
of merger, purchase of capital stock, purchase of assets or otherwise), any
portion of its or their capital stock or any other equity interest in the
Company or any of its subsidiaries or any material part of their respective
assets.
37
The Company Board shall not withdraw its recommendation of the transactions
contemplated hereby or approve or recommend an alternative transaction. The
Company shall promptly notify the Parent in the event it receives any proposal
or inquiry from a third party concerning a proposed acquisition of the Company,
including the terms and conditions thereof and the identity of the party
submitting such proposal, and shall advise Parent from time to time of the
status and any material developments concerning the same.
Section 4.4. Comfort Letter. The Company shall use all reasonable efforts
--------------
to cause ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP to deliver a letter dated not more than five (5)
days prior to the date of the Information Statement and addressed to itself and
Parent and their respective Boards of Directors in form and substance reasonably
satisfactory to Parent and customary in scope and substance for agreed-upon
procedures letters delivered by independent public accountants in connection
with the transactions contemplated by this Agreement.
Section 4.5. Approval of Shareholders. The Company shall take all actions
------------------------
necessary in accordance with the CGCL and its Articles of Incorporation and
bylaws to duly call, give notice of, convene and hold a meeting of or solicit
written consents from its shareholders (including, if necessary, a separate
meeting of holders of the Series A Preferred Stock) as promptly as practicable
to obtain their vote or written consent for the adoption and approval of this
Agreement and the transactions contemplated hereby (the "Shareholder
Proceedings"). The shareholder vote or the written consents required for the
adoption and approval of the transactions contemplated by this Agreement shall
be the vote required by the CGCL and the Company's Articles of Incorporation and
bylaws. The Company will, through the Company Board, recommend to its
shareholders approval of such matters. The Company and Parent shall promptly
prepare the Information Statement for the solicitation of a vote or the written
consents of the holders of Shares approving the Merger, which shall include the
recommendation of the Company Board that shareholders of the Company vote in
favor of the approval and adoption of this Agreement. Whenever any event occurs
which is required to be set forth in an amendment or supplement to the
Information Statement, the Company or Parent, as the case may be, will promptly
inform the other of such occurrence and cooperate in preparing and mailing to
shareholders of the Company, such amendment or supplement. Notwithstanding
anything to the contrary contained in this Agreement, the Company may adjourn or
postpone (i) the Shareholder Proceedings to the extent necessary to ensure that
any necessary supplement or amendment to the Information Statement is provided
to the Company's shareholders in advance of a vote or the acceptance of written
consents on the Merger and this Agreement or (ii) the time for which the
Shareholder Proceedings is originally scheduled (as set forth in the Information
Statement), if there are insufficient Shares represented, either in person or by
proxy, to constitute a quorum necessary to conduct the business of the
Shareholder Proceedings. Parent shall use all reasonable efforts to obtain all
necessary state securities law or "blue sky" permits and approvals required in
connection with the Merger and the consummation of the other transactions
contemplated by this Agreement and will pay all expenses incident thereto,
provided that the Company shall cooperate with Parent in obtaining such permits
and approvals as reasonably requested, at the expense of Parent.
38
Section 4.6. Access to Information.
---------------------
(a) Between the date hereof and the Effective Time, the Company
will give Parent and its authorized representatives reasonable access to all
employees, plants, offices, warehouses and other facilities and to all books and
records and personnel files of current employees of the Company and its
subsidiaries as Parent may reasonably require, and will cause its officers and
those of its subsidiaries to furnish Parent or its authorized representatives
with such financial and operating data and other information with respect to the
business and properties of the Company and its subsidiaries as Parent may from
time to time reasonably request.
(b) Between the date hereof and the Effective Time, the Company
shall furnish to Parent (i) within two (2) business days following preparation
thereof (and in any event within twenty (20) business days after the end of each
calendar month, commencing with December 1999), an unaudited balance sheet as of
the end of such month and the related statements of earnings, shareholders'
equity (deficit) and cash flows, (ii) within two (2) business days following
preparation thereof (and in any event within twenty (20) business days after the
end of each fiscal quarter) an unaudited balance sheet as of the end of such
quarter and the related statements of earnings, shareholders' equity (deficit)
and cash flows for the quarter then ended, and (iii) within two (2) business
days following preparation thereof (and in any event within ninety (90) calendar
days after the end of each fiscal year, an audited balance sheet as of the end
of such year and the related statements of earnings, shareholders' equity
(deficit) and cash flows, all of such financial statements referred to in
clauses (i), (ii) and (iii) to prepared in accordance with generally accepted
accounting principles in conformity with the practices consistently applied by
the Company with respect to such financial statements. All the foregoing shall
be in accordance with the books and records of the Company and shall fairly
present its financial position (taking into account the differences between the
monthly, quarterly and annual financial statements prepared by the Company in
conformity with its past practices) as of the last day of the period then ended.
(c) Each of the parties hereto will hold, and will cause its
consultants and advisors to hold, in confidence all documents and information
furnished to it by or on behalf of another party to this Agreement in connection
with the transactions contemplated by this Agreement pursuant to the terms of
that certain Confidentiality Agreement entered into between Broadview
International LLC, on behalf of the Company, and Parent dated September 14 ,1999
(the "Confidentiality Agreement").
Section 4.7. Certain Filings; Reasonable Efforts. Subject to the terms
-----------------------------------
and conditions herein provided, each of the parties hereto agrees to use all
reasonable efforts to take or cause to be taken all action and to do or cause to
be done all things reasonably necessary, proper or advisable under applicable
laws and regulations to consummate and make effective the transactions
contemplated by this Agreement, including using all reasonable efforts to do the
following, (i) cooperate in the preparation of the Information Statement and any
amendments thereto; (ii) obtain consents of all third parties and Governmental
Entities necessary, proper or advisable or reasonably requested by Parent or the
Company for the consummation of the transactions contemplated by this Agreement;
(iii) contest any legal proceeding relating to the Merger; and (iv) execute any
additional instruments necessary to consummate the transactions
39
contemplated hereby. Subject to the terms and conditions of this Agreement,
Parent and Acquisition agree to use all reasonable efforts to cause the
Effective Time to occur as soon as practicable after the Company shareholder
vote with respect to the Merger. The Company agrees to use all reasonable
efforts to encourage its employees to accept any offers of continued employment
extended by Parent. If at any time after the Effective Time any further action
is necessary to carry out the purposes of this Agreement the proper officers and
directors of each party hereto shall take all such necessary action.
Section 4.8. Public Announcements. Neither the Company nor any of its
--------------------
subsidiaries and affiliates shall issue any press release or otherwise make any
public statements with respect to the transactions contemplated by this
Agreement, including the Merger, or any proposed Third Party Acquisition,
without the prior consent of Parent.
Section 4.9. Conduct of Business of Parent. Except as contemplated by
-----------------------------
this Agreement, from the date hereof to the Effective Time, neither Parent nor
any of its subsidiaries shall, without the prior written consent of the Company:
(a) amend its Certificate or Articles of Incorporation (or other
similar governing instruments) in any manner that would reasonably be expected
to materially and adversely affect the shareholders of the Company after the
Effective Time; provided that nothing contained in this Section 4.9(a) shall
prohibit Parent from adopting a rights plan or similar "poison pill" plan;
(b) adopt a plan of complete or partial liquidation or
dissolution of Parent; provided that nothing contained in this Section 4.9 shall
prohibit Parent from merging with or into or being acquired or purchased by any
person; or
(c) take or agree in writing or otherwise to take any of the
actions described in Sections 4.9(a) and (b) that it is prohibited from taking
(and it shall use all reasonable efforts not to take any action that would make
any of the representations or warranties of Parent contained in this Agreement
(including the Exhibits hereto) untrue or incorrect).
Section 4.10. Indemnification and Directors' and Officers' Insurance.
------------------------------------------------------
(a) From and after the Effective Time, Parent shall cause the
Surviving Corporation to indemnify and hold harmless (and shall also cause the
Surviving Corporation to advance expenses as incurred to the fullest extent
permitted under applicable law to), to the extent not covered and paid by
insurance, each person who is now or has been prior to the date hereof or who
becomes prior to the Effective Time an officer or director of the Company or any
of the Company's subsidiaries (the "Indemnified D&O Persons") against (i) all
losses, claims, damages, costs, expenses (including counsel fees and expenses),
settlement, payments or liabilities arising out of or in connection with any
claim, demand, action, suit, proceeding or investigation based in whole or in
part on or arising in whole or in part out of the fact that such person is or
was an officer or director of the Company or any of its subsidiaries, whether or
not pertaining to any matter existing or occurring at or prior to the Effective
Time and whether or not asserted or claimed prior to or at or after the
Effective Time ("Indemnified D&O Liabilities"); (ii) all Indemnified D&O
Liabilities based in whole or in part on or arising in whole or in part
40
out of or pertaining to this Agreement or the transactions contemplated hereby,
in each case to the fullest extent required or permitted under applicable law
and in excess of the limits of Section 317 of the CGCL and (iii) all costs and
expenses, including attorneys fees and legal expenses incurred by any
Indemnified D&O Person in enforcing his or her rights under this Section 4.10.
Nothing contained herein shall make Parent, Acquisition, the Company or the
Surviving Corporation, an insurer, a co-insurer or an excess insurer in respect
of any insurance policies which may provide coverage for Indemnified D&O
Liabilities, nor shall this Section 4.10 relieve the obligations of any insurer
in respect thereto. The parties hereto intend, to the extent not prohibited by
applicable law, that the indemnification provided for in this Section 4.10 shall
apply without limitation to negligent acts or omissions by an Indemnified D&O
Person. Each Indemnified D&O Person is intended to be a third party beneficiary
of this Section 4.10 and may specifically enforce its terms. This Section 4.10
shall not limit or otherwise adversely affect any rights any Indemnified D&O
Person may have under any agreement with the Company or under the Company's
Articles of Incorporation or bylaws as presently in effect or under any
provision of applicable law.
(b) Neither Parent nor any of its affiliates shall be obligated
to guarantee the payment or performance of the Surviving Corporation's
obligations under subsection (a) of this Section 4.10 so long as the Surviving
Corporation honors such obligations to the extent of its net worth at the
Effective Time, and neither Parent nor any such affiliate shall have any
liability or obligation to any Indemnified D&O Person arising from the Surviving
Corporation's breach of, or inability to perform its obligations under, such
clauses in excess of the difference between the net worth of the Company at the
Effective Time (but such net worth shall in no way limit the Surviving
Corporation's indemnification obligations under this Section 4.10) and the
aggregate of all amounts paid by the Surviving Corporation in satisfaction of
such obligations.
(c) If requested by the Securityholder Agent, Parent shall use
commercially reasonable efforts to add the officers and directors of the Company
as additional insureds under Parent's directors and officers insurance policies,
at the sole expense of the Company's directors and officers.
Section 4.11. Notification of Certain Matters. The Company shall give
-------------------------------
prompt notice to Parent and Acquisition, and Parent and Acquisition shall give
prompt notice to the Company, of (i) the occurrence or nonoccurrence of any
event the occurrence or nonoccurrence of which has caused or would be likely to
cause any representation or warranty contained in this Agreement to be untrue or
inaccurate in any material respect at or prior to the Effective Time and (ii)
any material failure of the Company, Parent or Acquisition, as the case may be,
to comply with or satisfy in any material respect any covenant condition or
agreement to be complied with or satisfied by it hereunder; provided, however,
that the delivery of any notice pursuant to this Section 4.11 shall not cure
such breach or non-compliance or limit or otherwise affect the remedies
available hereunder to the party receiving such notice.
Section 4.12. Affiliates; Tax-Free Reorganization.
------------------------------------
(a) The Company shall use all reasonable efforts to obtain from
all Company Affiliates and from any person who may be deemed to have become a
Company Affiliate, after
41
the date of this Agreement and on or prior to the Effective Time, a letter
agreement substantially in the form of Exhibit A-1 as soon as practicable.
-----------
(b) Parent shall use all reasonable efforts to obtain from each
person who may be deemed to be an affiliate of Parent pursuant to Rule 145 under
the Securities Act, as soon as practicable after the date of this Agreement and
on or prior to the Effective Time, a letter agreement substantially in the form
of Exhibit A-2.
-----------
(c) The Company, on the one hand, and Parent and Acquisition, on
the other hand, shall execute and deliver to legal counsel to the Company and
Parent certificates substantially in the form attached hereto as Exhibits B-1
------------
and B-2, respectively, at such time or times as reasonably requested by such
---
legal counsel in connection with its delivery of an opinion with respect to the
transactions contemplated hereby and the Company and Parent shall each provide a
copy thereof to the other parties hereto. Prior to the Effective Time, none of
the Company, Parent and Acquisition shall take or cause to be taken any action
that would cause to be untrue (or fail to take or cause not to be taken any
action that would cause to be untrue) any of the representations and warranties
in Exhibit B-1 or B-2.
----------- ---
Section 4.13. Additions to and Modification of Company Disclosure
---------------------------------------------------
Schedule.
--------
Concurrently with the execution and delivery of this Agreement, the Company has
delivered to Parent a Company Disclosure Schedule that includes all of the
information required by the relevant provisions of this Agreement. In addition,
the Company shall deliver to Parent such additions to or modifications of any
Sections of the Company Disclosure Schedule necessary to make the information
set forth therein true, accurate and complete in all material respects as soon
as practicable after such information is available to the Company after the date
of execution and delivery of this Agreement; provided, however, that such
disclosure shall not be deemed to constitute an exception to its representations
and warranties under Article II, nor limit the rights and remedies of Parent and
Acquisition under this Agreement for any breach by the Company of such
representation and warranties.
Section 4.14. Employee Matters.
----------------
(a) Employees. All employees of the Company and its subsidiaries
---------
at the Effective Time are hereinafter referred to as "Continuing Employees."
Continuing Employees will be subject to employment at the will of the Surviving
Corporation unless there exists an employment agreement covering such Continuing
Employee which is assumed by the Surviving Corporation at the Effective Time.
As a condition of their continuing employment with the Surviving Corporation,
all Continuing Employees will be required to sign Parent's standard form of non-
disclosure, assignment of inventions and confidentiality agreement (the
"Employee Non-Disclosure Agreement").
(b) Company Employee Plans. At Parent's request, the Company
----------------------
shall take all necessary actions so that the Employee Plans are frozen or
terminated immediately prior to, at or immediately after the Effective Time.
(c) SARSEP Plan; Profit Sharing Plan. The Company shall cause
--------------------------------
the Company's SARSEP Plan (the "SARSEP Plan ") and the Company's Profit Sharing
Plan (the "Profit Sharing Plan ") to terminate on or immediately prior to the
Effective Time, without any
42
continuing obligation to the Company or the Surviving Corporation, other than
administrative matters in connection with such termination. The Company agrees
that any employee, consultant or any other person who, as of the date hereof, is
not a participant in or does not have rights under the SARSEP Plan, the Profit
Sharing Plan or the [Connected Systems Plan], shall not become a participant in,
or be granted any rights under, the SARSEP Plan, the Profit Sharing Plan or the
[Connected Systems Plan].
(d) Participation in Parent Plans. Parent has furnished to the
-----------------------------
Company descriptions of each of the material employee benefit plans made
available by it generally to its employees (the "Parent Plans"). Parent
covenants that the Continuing Employees shall either (i) continue to be eligible
to participate in substantially all of the Employee Plans existing immediately
prior to the Closing Date subject to its terms and conditions, or (ii) as soon
as practicable after the Closing Date, be eligible to participate in the Parent
Plans on substantially the same terms and conditions as similarly situated
employees of Parent and that for purposes of participation in any Parent Plan,
except for any "defined benefit plan" (as defined in ERISA) entitled, the
Continuing Employees shall receive full credit under the Parent Plan for the
time of service with the Company to the same extent as if such Continuing
Employees had been continuously employed for such periods of time with Parent,
and they shall not be subject to any pre-existing condition exclusions under any
health care plan maintained by Parent for the employees of the Parent or its
subsidiaries (except for those existing under any health care plan maintained by
the Company). Nothing in this section shall limit Parent's ability to modify or
terminate any employee benefit plan or arrangement including any Employee Plan
or Parent Plan in accordance with the terms of such plan and any applicable law.
Section 4.15. Registration Rights Agreement. On or prior to the Effective
-----------------------------
Time Parent shall execute and deliver to the Securityholder Agent, on behalf of
all shareholders of the Company, a registration rights agreement substantially
in the form of Exhibit F (the "Registration Rights Agreement").
---------
Section 4.16. Nasdaq Listing. Within thirty (30 days) after the
--------------
Effective Time, Parent shall cause the shares of Parent Common Stock to be
issued in exchange for the Shares to be approved for listing on the Nasdaq
National Market, subject to official notice of issuance.
ARTICLE V
CONDITIONS TO CONSUMMATION OF THE MERGER
Section 5.1. Conditions to Each Party's Obligations to Effect the Merger.
-----------------------------------------------------------
The respective obligations of each party hereto to effect the Merger are subject
to the satisfaction at or prior to the Effective Time of the following
conditions:
(a) this Agreement shall have been approved and adopted by the
requisite vote of the shareholders of the Company;
(b) no statue, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or enforced by any
United States federal or state
43
or foreign court or United States federal or state or foreign Governmental
Entity that prohibits, restrains, enjoins or restricts the consummation of the
Merger;
(c) any other governmental or regulatory notices, approvals or other
requirements necessary to consummate the transactions contemplated hereby and to
operate the Company's and its subsidiaries' business after the Effective Time in
all material respects as it was operated prior thereto and as it is presently
contemplated to be conducted in the future shall have been given, obtained or
complied with, as applicable;
(d) Parent shall have received all state securities laws or "blue
sky" permits and authorizations necessary to issue shares of Parent Common Stock
in exchange for Shares in the Merger; and
Section 5.2. Conditions to the Obligations of the Company. The obligation
--------------------------------------------
of the Company to effect the Merger is subject to the satisfaction at or prior
to the Effective Time of the following conditions:
(a) the representations and warranties of Parent and Acquisition
contained in this Agreement shall be true and correct, except to the extent that
the aggregate of all breaches thereof would not have a Material Adverse Effect
on Parent, as of the date hereof and at and as of the Effective Time with the
same effect as if made at and as of the Effective Time (except to the extent
such representations specifically relate to an earlier date, in which case such
representations shall be true and correct as of such earlier date and, in any
event, subject to the foregoing Material Adverse Effect qualification) and, at
the Closing, Parent and Acquisition shall have delivered to the Company a
certificate to that effect, executed by two (2) executive officers of Parent and
Acquisition;
(b) each of the material covenants and obligations of Parent and
Acquisition to be performed at or before the Effective Time pursuant to the
terms of this Agreement shall have been duly performed in all material respects
at or before the Effective Time and, at the Closing, Parent and Acquisition
shall have delivered to the Company a certificate to that effect, executed by
two (2) executive officers of Parent and Acquisition; provided, however, that in
connection with the compliance by Parent or Acquisition with any applicable law
(including the HSR Act) or obtaining the consent or approval of any Governmental
Entity whose consent or approval may be required to consummate the transactions
contemplated by this Agreement, Parent shall not be (i) required, or be
construed to be required, to sell or divest any material assets or business or
to restrict in any material respect any business operations in order to obtain
the consent or successful termination of any review of any such Governmental
Entity regarding the transactions contemplated hereby or (ii) prohibited from
owning, and no material limitation shall be imposed on Parent's ownership of,
any material portion of the Company's business or assets;
(c) the Company shall have received the opinion of tax counsel to
Parent to the effect that (i) the Merger will be treated for Federal income tax
purposes as a reorganization within the meaning of Section 368(a) of the Code
and (ii) each of Parent, Acquisition and the Company will be a party to the
reorganization within the meaning of Section 368(b) of the Code, which opinion
may rely on the representations set forth in Exhibits B-1 and B-2 and such other
------------ ---
44
representations as such counsel reasonably deems appropriate and such opinion
shall not have been withdrawn or modified in any material respect;
(d) the Company shall have received the opinion of legal counsel to
Parent and Acquisition as to the matters set forth in Exhibit C;
---------
(e) there shall have occurred no Material Adverse Effect on Parent;
and
(f) the Securityholder Agent shall have received, on behalf of all
shareholders of the Company, the Registration Rights Agreement executed by
Parent.
Section 5.3. Conditions to the Obligations of Parent and Acquisition. The
-------------------------------------------------------
respective obligations of Parent and Acquisition to effect the Merger are
subject to the satisfaction at or prior to the Effective Time of the following
conditions:
(a) the representations and warranties of the Company contained in
this Agreement, except for those contained in Section 2.2, shall be true and
correct, except to the extent that the aggregate of all breaches thereof would
not have a Material Adverse Effect on the Company, and the representatives and
warranties of the Company contained in Section 2.2 shall be true and correct in
all respects, in each case as of the date hereof and at and as of the Effective
Time with the same effect as if made at and as of the Effective Time (except to
the extent such representations specifically relate to an earlier date, in which
case such representations shall be true and correct as of such earlier date and,
in any event, subject to the foregoing Material Adverse Effect qualification)
and, at the Closing, the Company shall have delivered to Parent and Acquisition
a certificate to that effect, executed by two (2) executive officers of the
Company;
(b) each of the material covenants and obligations of the Company to
be performed at or before the Effective Time pursuant to the terms of this
Agreement shall have been duly performed in all material respects at or before
the Effective Time and, at the Closing, the Company shall have delivered to
Parent and Acquisition a certificate to that effect, executed by two (2)
executive officers of the Company;
(c) Parent shall have received from each affiliate of the Company
referred to in Section 2.21 an executed copy of the letter attached hereto as
Exhibit A-1;
------------
(d) there shall not have occurred a Material Adverse Effect on the
Company;
(e) Parent shall have received the opinion of tax counsel to Parent
reasonably acceptable to Parent to the effect that (i) the Merger will be
treated for Federal income tax purposes as a reorganization within the meaning
of Section 368(a) of the Code and (ii) each of Parent, Acquisition and the
Company will be a party to the reorganization within the meaning of Section
368(b) of the Code, which opinion may rely on the representations set forth in
Exhibits B-1 and B-2 and such other representations as such counsel reasonably
------------ ---
deems appropriate, and such opinion shall not have been withdrawn or modified in
any material respect;
(g) Parent shall have received the opinion of legal counsel to the
Company as to the matters set forth in Exhibit D;
---------
45
(h) the opinion of the Parent Financial Advisor described in Section
3.8 shall not have been withdrawn or modified in any material respect as a
result of any Material Adverse Effect on the Company;
(i) the Company shall have obtained the consent or approval of each
person listed on Schedule 5.3(i) whose consent or approval shall be required in
---------------
order to permit the succession by the Surviving Corporation pursuant to the
Merger to any agreement, instrument, obligation, right, permit or interest of
the Company or any subsidiary of the Company;
(j) no more that six percent (6%) of the outstanding Shares shall be
Dissenting Shares or other Shares with respect to which dissenter's rights have
not been terminated;
(k) Parent shall have received an executed Employment Agreement,
dated as of the date hereof, from each of the individuals identified on Schedule
--------
5.3(k) (i) ten (10) out of the thirteen (13) employees of the Company identified
----------
on Schedule 5.3(k)(ii) and such persons shall not have expressed their intent
-------------------
not to continue their respective employment with the Surviving Corporation or
Parent;
(l) Parent shall have received an executed Non-Competition
Agreement, dated as of the date hereof, from the Company and each of the Major
Company Shareholders, and such persons shall not have questioned the validity or
enforceability of any such agreements;
(m) Parent shall have received an executed Voting Agreement, dated
as of the date hereof, from the Company and each of the Major Company
Shareholders, and such persons shall not have questioned the validity or
enforceability of any such agreements;
(n) Parent shall have received an executed Escrow Agreement, in
substantially the form attached hereto as Exhibit E, from the Company, the
---------
Escrow Agent and the Securityholder Agent;
(o) Parent shall have received an executed Employee Non-Disclosure
Agreement from each of the individuals identified on Schedule 5.3(k)(i) and ten
------------------
(10) out of the thirteen (13) employees of the Company identified on Schedule
--------
5.3(k)(ii).
----------
(p) All actions necessary for the termination of the SARSEP Plan and
the Profit Sharing Plan effective as of the Effective Date shall have occurred,
without any continuing obligation to the Company or the Surviving Corporation,
other than administrative matters in connection with such termination.
(q) The Company shall have delivered to Parent the Final Audited
Financial Statements, and such Final Audited Financial Statements shall not
disclose any material adverse change from the corresponding balance sheet and
statement of earnings/operations included in the Financial Statements.
46
ARTICLE VI
TERMINATION; AMENDMENT; WAIVER
Section 6.1. Termination. This Agreement may be terminated and the Merger
-----------
may be abandoned at any time prior to the Effective Time, whether before or
after approval and adoption of this Agreement by the Company's shareholders:
(a) by mutual written consent of Parent, Acquisition and the
Company;
(b) by Parent and Acquisition or the Company if (i) any court of
competent jurisdiction in the United States or other United States federal or
state Governmental Entity shall have issued a final order, decree or ruling, or
taken any other final action, restraining, enjoining or otherwise prohibiting
the Merger and such order, decree, ruling or other action is or shall have
become nonappealable or (ii) the Merger has not been consummated by March 31,
2000 (the "Final Date. "); provided that no party may terminate this Agreement
pursuant to this clause (ii) if such party's failure to fulfill any of its
obligations under this Agreement shall have been a principal reason that the
Effective Time shall not have occurred on or before said date;
(c) by the Company (i) if any representations or warranties of
Parent or Acquisition shall have become untrue such that the conditions set
forth in Section 5.2(a) would be incapable of being satisfied by the Final Date,
provided, that the Company has not breached any of its obligations,
representations or warranties hereunder to an extent that would entitle Parent
or Acquisition to terminate this Agreement pursuant to Section 6.1(d); (ii) if
there shall have been a breach by Parent or Acquisition of any of their
respective covenants or agreements hereunder and Parent has not cured such
breach within fifteen (15) business days after notice by the Company thereof,
such that the conditions set forth in Section 5.2(b) would be incapable of being
satisfied within such 15 day period or, if within 15 days of the Final Date, by
the Final Date, provided that the Company has not breached any of its
obligations, representations or warranties hereunder to an extent that would
entitle Parent or Acquisition to terminate this Agreement pursuant to Section
6.1(d); or (iii) Parent's Board shall have withdrawn or adversely modified its
approval or recommendation of this Agreement or the Merger; or
(d) by Parent and Acquisition (i) if any representations or
warranties of the Company shall have become untrue such that the conditions set
forth in Section 5.3(a) would be incapable of being satisfied within such 15 day
period or, if within 15 days of the Final Date, provided, that neither Parent
nor Acquisition has breached any of their respective obligations hereunder to an
extent that would entitle the Company to terminate this Agreement pursuant to
Section 6.1(c); (ii) if there shall have been a breach by the Company of any of
its covenants or agreements hereunder such that the conditions set forth in
Section 5.3(b) would be incapable of being satisfied within such 15 day period
or, if within 15 days of the Final Date, by the Final Date, provided that
neither Parent nor Acquisition has breached any of its obligations hereunder to
an extent that would entitle the Company to terminate this Agreement pursuant to
Section 6.1(c); (iii) if the Company Board shall have withdrawn or adversely
modified its approval or recommendation of this Agreement or the Merger; (iv) if
the Company shall have ceased using all reasonable efforts to call, give notice
of, or convene or hold a shareholders' meeting to vote on or to solicit
shareholder written consent of the Merger as promptly as practicable after the
47
date hereof or shall have adopted a resolution not to effect any of the
foregoing; (v) if the Company shall have convened a meeting of its shareholders
to vote upon or attempted to obtain the written consent of its shareholders to
approve the Merger and shall have failed to obtain the requisite vote or consent
of its shareholders; or (vi) if more that six percent (6%) of the Shares shall
be Dissenting Shares or other Shares with respect to which dissenter's rights
have not been terminated.
Section 6.2. Effect of Termination. In the event of the termination and
---------------------
abandonment of this Agreement by the Company or Parent and Acquisition pursuant
to Section 6.1, this Agreement shall forthwith become void and have no effect
without any liability on the part of any party hereto or its affiliates,
directors, officers or shareholders other than the provisions of this Section
6.2 and Section 6.3 and the provisions of all of Articles VII and VIII (other
than Section 8.7, in which case, the only clauses that shall survive shall be
the clauses in such section that contain defined terms that are referenced in
the foregoing surviving sections); provided, however, that the Confidentiality
Agreement shall survive the termination of this Agreement. Nothing contained in
this Section 6.2 shall relieve any party from liability for any breach of this
Agreement prior to such termination for fraud or intentional misrepresentation.
Notwithstanding the foregoing, if this Agreement is terminated for any reason
whatsoever, then for a one (1) year period thereafter, neither Parent or
Acquisition nor the Company shall directly or indirectly (including, without
limitation, through any existing or future affiliate of such party), solicit any
existing and future employee of the other party (or any existing or future
affiliate of such party) to leave his or her employment with such other party or
knowingly induce or knowingly attempt to induce any such employee to terminate
or breach his or her employment agreement, if any, with such other party or any
existing or future affiliate of the Party.
Section 6.3. Fees and Expenses.
-----------------
(a) Except as specifically provided in this Section 6.3, each party
shall bear its own expenses in connection with this Agreement, the Merger and
the transactions contemplated hereby; provided, however, that, in the event that
the transactions contemplated by this Agreement are consummated, (i) Parent or
Acquisition shall pay all reasonable and documented expenses incurred by the
Company for financial, legal, accounting and other advisory services (including
the fees and expenses of Broadview LLC pursuant to its agreement with the
Company, which has been disclosed to Parent), excluding legal fees and legal
expenses in excess of Two Hundred Thousand Dollars ($200,000) and (ii) the
shareholders of the Company shall pay all legal fees and legal expenses of the
Company in excess of Two Hundred Thousand Dollars ($200,000), such amount to be
deducted from the Escrow Amount if necessary.
(b) If this Agreement is terminated by Parent pursuant to Section
6.1(d)(i) or 6.1(d)(ii) or by the Company pursuant to Section 6.1(d)(c)(i) or
6.1(d)(ii), the parties hereby agree that the non-breaching party would suffer
direct and substantial damages, which damages cannot be determined with
reasonable certainty. To compensate such party for such damages, the breaching
party shall pay the non-breaching party the sum of One Million Dollars
($1,000,000) in liquidated damages for expenses, whether or not any amount
described in Section 6.3(c) or 6.3(d) is due and payable. The obligations set
forth in this Section 6.3(b) are separate and distinct from the other
obligations of the parties contained in this Section 6.3.
48
(c) If this Agreement is terminated by Parent (i) pursuant to
Section 6.1(d)(iii), 6.1(d)(iv) or 6.1(d)(v), (ii) due to a breach by the
Company of any covenant contained in Section 4.3, or (iii) pursuant to Section
6.1(d)(i) or 6.1(d)(ii) as the result of the Company intentionally breaching any
of its representations, warranties, covenants, agreements or obligations herein
with the intent to cause a termination of this Agreement at a time when Parent
is in material compliance with its obligations under this Agreement, the Company
or the Major Company Shareholders enter or agree to enter into a transaction
with another person resulting in a substantial change of ownership of the
Company (by operation of law or otherwise) or any substantial portion of its
assets, then the parties hereby agree that Parent would suffer direct and
substantial damages, which damages cannot be determined with reasonable
certainty. To compensate Parent for such damages, the Company shall pay to
Parent the amount of Three Million, Five Hundred Thousand Dollars ($3,500,000)
immediately upon such termination. The Company hereby waives any right to set-
off or counterclaim against such amount and agrees that the obligations set
forth in this Section 6.3(c) are separate and distinct from the obligations of
the parties contained in Section 6.3(b).
(d) If this Agreement is terminated by the Company pursuant to
Section 6.1(c)(i) or 6.1(c)(ii) as the result of Parent intentionally breaching
any of its representations, warranties, covenants, agreements or obligations
herein with the intent to cause a termination of this Agreement at a time when
the Company is in material compliance with its obligations under this Agreement,
then the parties hereby agree that the Company would suffer direct and
substantial damages, which damages cannot be determined with reasonable
certainty. To compensate the Company for such damages, Parent shall pay to the
Company the amount of Three Million, Five Hundred Thousand Dollars ($3,500,000)
immediately upon such termination. Parent hereby waives any right to set-off or
counterclaim against such amount and agrees that the obligations set forth in
this Section 6.3(d) are separate and distinct from the obligations of the
parties contained in Section 6.3(b).
(e) Each of the Company, Parent and Acquisition acknowledges that
the agreements contained in this Article VI (including this Section 6.3) are an
integral part of the transactions contemplated by this Agreement and that,
without these agreements, Company, Parent and Acquisition would not enter into
this Agreement. Accordingly, if any party fails promptly to pay the amounts
required pursuant to Section 6.3 when due (including circumstances where, in
order to obtain such payment the other party(ies) commence a suit that results
in a final nonappealable judgment against such party for such amounts), such
party shall pay to the other party(ies) (i) their costs and expenses (including
attorneys' fees) in connection with such suit and (ii) interest on the amount
that was determined to be due and payable hereunder at the rate announced by
Chase Manhattan Bank as its "reference rate" in effect on the date such payment
was required to be made.
(f) In the event of any termination of this Agreement pursuant to
Section 6.1, the amounts that any party becomes entitled to receive under this
Section 6.3 by reason of such termination shall be the sole and exclusive right
and remedy of such party arising out of such termination or the reasons
therefore except for equitable remedies such as injunctive relief and specific
performance; provided, however, that nothing contained in this Section 6.2 shall
relieve any party from liability for any breach of this Agreement prior to such
termination for fraud or intentional misrepresentation
49
Section 6.4. Amendment. This Agreement may be amended by action taken by
---------
mutual agreement of the Company, Parent and Acquisition at any time before or
after approval of the Merger by the shareholders of the Company, but after any
such shareholder approval is obtained, no amendment shall be made that requires
the approval of such shareholders under applicable law without such approval.
This Agreement (including, subject to Section 4.12, the Company Disclosure
Schedule) may be amended only by an instrument in writing signed on behalf of
the parties hereto.
Section 6.5. Extension; Waiver. At any time prior to the Effective Time,
-----------------
each party hereto may (i) extend the time for the performance of any of the
obligations or other acts of the other party, (ii) waive any inaccuracies in the
representations and warranties of the other party contained herein or in any
document certificate or writing delivered pursuant hereto or (iii) waive
compliance by the other party with any of the agreements or conditions contained
herein. Any agreement on the part of any 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. The failure of any party hereto to assert any of its
rights hereunder shall not constitute a waiver of such rights.
ARTICLE VII
INDEMNIFICATION
Section 7.1. General Survival. The parties agree that, regardless of any
----------------
investigation made by the Parent and Acquisition, the representations,
warranties, covenants and agreements (in the case of covenants and agreements,
to the extent of performance or non-performance prior to the Effective Time) of
the Company contained in this Agreement shall survive the execution and delivery
of this Agreement for a period beginning on the date hereof and ending at 5:00
p.m., California time, on the first anniversary of the date on which the
Effective Time occurs (the "Survival Period"). The parties agree that,
regardless of any investigation made by the Company, the representations and
warranties of Parent contained in this Agreement shall survive the execution and
delivery of this agreement for a period beginning on the date hereof and ending
on the last day of the statute of limitations period applicable to claims made
under federal and state securities laws applicable to any such breached
representation and warranty; provided, however, that any claim under contract
law shall not survive beyond the one year anniversary of the date on which the
Effective Time occurs.
Section 7.2. Indemnification Provisions in General.
-------------------------------------
(a) Subject to Section 7.1, from and after the) shall be
indemnified and held harmless by each Effective Time, Parent, Acquisition and
the former shareholder of the Company, but only from Surviving Corporation and
their respective and to the extent of such shareholder's pro rata affiliates,
officers, directors, stockholders, portion of the Escrow Amount, from and
against representatives and agents (collectively the and in respect of any and
all Losses incurred by, "Indemnitees" resulting from, arising out of, relating
to,imposed upon or incurred by Parent, Acquisition, the Surviving Corporation or
any other Indemnitee by reason of:
50
(i) any inaccuracy in or breach of any of the Company's
representations, warranties, covenants or agreements (to the extent of
performance or non-performance prior to the Closing Date) contained in this
Agreement or any of the other Transaction Documents to which it is a party; and
(ii) any misrepresentation contained in the Company
Disclosure Schedule or in any other written statement or certificate furnished
to Parent, Acquisition or any other Indemnitee by or on behalf of the Company or
any Company shareholder in connection with the transactions contemplated by this
Agreement or any of the other Transaction Documents.
For purposes of this Agreement, the term "Losses" means any and all
deficiencies, judgments, settlements, demands, claims, suits, actions or causes
of action, assessments, liabilities, losses, damages (whether direct, indirect,
incidental or consequential), interest, fines, penalties, costs, expenses
(including reasonable legal, accounting and other costs and expenses of
professionals) incurred in connection with investigating, defending, settling or
satisfying any and all demands, claims, actions, causes of action, suits,
proceedings, assessments, judgments or appeals, and in seeking indemnification
therefor, and interest on any of the foregoing from the date incurred until paid
at the prime rate published from time to time by Chase Manhattan Bank.
(b) Any claims for indemnification hereunder must be set forth in
writing, contain a reasonably detailed description of the nature of and the
events or circumstances underlying the claim for indemnification hereunder and
be received by the Securityholder Agent not later than the expiration of the
Survival Period (a "Survival Period Indemnification Claim").
(c) No Indemnitee shall be entitled to indemnification hereunder
for any Losses until the aggregate amount of all Losses under all Survival
Period Indemnification Claim shall exceed Two Hundred and Fifty Thousand Dollars
($250,000) (the "Floor"), at which time all Losses incurred shall be subject to
indemnification hereunder in full, including the amount of the Floor; provided,
however, that the provisions of this Subsection (c) shall not apply with respect
to Losses in respect of Survival Period Indemnification Claim arising out of any
breach of the representations and warranties of the Company contained in
Sections 2.2 and 2.17, and Parent and the Surviving Corporation shall be
entitled to indemnification in the event of a breach of such Sections without
applicability of the Floor.
(d) No Indemnitee shall be entitled to indemnification hereunder
for any Losses for which no Survival Period Indemnification Claim is made prior
to the expiration of the Survival Period.
(e) Any indemnification payments made from the Escrow Account
pursuant to this Section 7.2 shall constitute an adjustment to the dollar amount
of the aggregate consideration payable by Parent to the holders of the capital
stock of the Company.
Section 7.3. Manner of Indemnification.
-------------------------
(a) To provide a fund against which an Indemnitee may assert
Survival Period Indemnification Claim under this Article VII, the Escrow Amount
shall be withheld and deposited into escrow pursuant to the Escrow Agreement in
accordance with Section 1.10(i).
51
The Escrow Amount so deposited, and interest and other earnings payable thereon,
shall be held and distributed in accordance with the Escrow Agreement.
(b) Each Survival Period Indemnification Claim shall be made only
in accordance with this Article VII and the Escrow Agreement.
Section 7.4. Securityholder Agent. For purposes of this Agreement,
--------------------
immediately and automatically upon the approval of this Agreement by the
requisite vote or written consent of the Company's shareholders, and, without
any further action on the part of any such shareholders, each shareholder of the
Company shall be deemed to have consented to the appointment of ▇▇▇▇▇ ▇. ▇▇▇▇,
as his, her or its representative (the "Securityholder Agent" ) and the
attorney-in-fact for and on behalf of each such Company shareholder, and the
taking by the Securityholder Agent of any and all actions and the making of any
decisions required or permitted to be taken by him under this Agreement, the
Escrow Agreement and the Registration Rights Agreement, including the exercise
of the power to (i) execute the Escrow Agreement and the Registration Rights
Agreement, (ii) authorize delivery to Parent and Acquisition of the Escrow
Amount, or any portion thereof, in satisfaction of Survival Period
Indemnification Claims, (iii) agree to, negotiate, enter into settlements and
compromises of and comply with orders of courts and awards of arbitrators with
respect to such Survival Period Indemnification Claims, (iv) resolve any
Survival Period Indemnification Claims and (v) take all actions necessary in the
judgment of the Securityholder Agent for the accomplishment of the foregoing and
all of the other terms, conditions and limitations of this Agreement, the Escrow
Agreement and the Registration Rights Agreement. Accordingly, the
Securityholder Agent has unlimited authority and power to act on behalf of each
Company shareholder with respect to this Agreement, the Registration Rights
Agreement and the Escrow Agreement and the disposition, settlement or other
handling of all Survival Period Indemnification Claims, rights or obligations
arising from and taken pursuant to each such agreement. The Company
shareholders will be bound by all actions taken by the Securityholder Agent in
connection with this Agreement, the Escrow Agreement or the Registration Rights
Agreement, and Parent and Acquisition shall be entitled to rely on any action or
decision of the Securityholder Agent. The Securityholder Agent will incur no
liability with respect to any action taken or suffered by him or her in reliance
upon any notice, direction, instruction, consent, statement or other document
believed by him or her to be genuine and to have been signed by the proper
person (and shall have no responsibility to determine the authenticity thereof),
nor for any other action or inaction, except his or her own willful misconduct
or gross negligence. In all questions arising under this Agreement, the
Registration Rights Agreement or the Escrow Agreement, the Securityholder Agent
may rely on the advice of counsel, and the Securityholder Agent will not be
liable to anyone for anything done, omitted or suffered in good faith by the
Securityholder Agent based on such advice. The Securityholder Agent will not be
required to take any action involving any expense unless the payment of such
expense is made or provided for in a manner satisfactory to him or her. At any
time, holders of a majority in interest of the Escrow Amount, determined at the
Effective Time, may appoint a new Securityholder Agent by written consent by
sending notice and a copy of the written consent appointing such new
Securityholder Agent signed by holders of a majority in interest of the Escrow
Amount to Parent and the Escrow Agent. Such appointment will be effective upon
the later of the date indicated in the consent or the date such consent is
received by Parent, Acquisition (or, if after the Effective Time, the Surviving
Corporation) and the Escrow Agent.
52
Section 7.5. Third-Party Claims. If Parent becomes aware of a third-
------------------
party claim that Parent believes, in good faith, may result in the assertion by
it of a Survival Period Indemnification Claim against the Escrow Amount, Parent
shall notify the Securityholder Agent of such claim, and the Securityholder
Agent, as representative for the Company shareholders, shall be entitled to
participate in any defense of such third party claim. The reasonable costs of
the defense of any third-party action or claim incurred by the Securityholder
Agent shall be paid by the Company shareholders out of the Escrow Amount.
Notwithstanding the immediately preceding sentence, Parent shall conduct such
defense, but shall not settle any such claim without the consent of the
Securityholder Agent, such consent not to be unreasonably withheld; provided,
however, that, if the consent of the Securityholder Agent is so obtained, such
settlement of that portion of any such claim shall alone be determinative of the
amount (but not the right of Parent to receive payment from the Escrow Amount)
of the Survival Period Indemnification Claim and neither the Securityholder
Agent nor any person who has a beneficial interest in the Escrow Amount shall
have any power or authority to object under any provision of this Article VII to
the amount of (but shall not be precluded from contesting the right of Parent to
make) any demand by Parent against the Escrow Amount with respect to such
settlement.
Section 7.6. Exclusive Remedy. Notwithstanding any other provision of
----------------
this Agreement to the contrary, the Escrow Amount shall be the sole and
exclusive remedy of the Indemnitees for, and no shareholder of the Company shall
have any personal liability whatsoever in respect of, any Survival Period
Indemnification Claims arising under this Agreement, including claims of breach
of any representation, warranty or covenant in this Agreement. Neither the
Escrow Agent nor the Securityholder Agent shall transfer any other property
other than the Escrow Amount in satisfaction of any Survival Period
Indemnification Claim. Notwithstanding the first two sentences of this Section
7.6, nothing in this Agreement shall be deemed a waiver by any party of any
right to specific performance or injunctive relief, or any right or remedy
arising by reason of any claim of fraud or intentional misrepresentation with
the respect to this Agreement or any of the other Transaction Documents or any
right set forth in Section 6.3.
ARTICLE VIII
MISCELLANEOUS
Section 8.1. Entire Agreement; Assignment. This Agreement (including the
----------------------------
Company Disclosure Schedule) (a) constitutes the entire agreement between the
parties hereto with respect to the subject matter hereof and supersedes all
other prior agreements and understandings both written and oral between the
parties with respect to the subject matter hereof and (b) shall not be assigned
by operation of law or otherwise; provided, however, that Acquisition may assign
any or all of its rights and obligations under this Agreement to any direct or
indirect wholly owned subsidiary of Parent, but no such assignment shall relieve
Acquisition of its obligations hereunder if such assignee does not perform such
obligations.
Section 8.2. Validity. If any provision of this Agreement or the
--------
application thereof to any person or circumstance is held invalid or
unenforceable, the remainder of this Agreement
53
and the application of such provision to other persons or circumstances shall
not be affected thereby and to such end the provisions of this Agreement are
agreed to be severable.
Section 8.3. Notices. All notices, requests, claims, demands and other
-------
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given upon receipt) by delivery in person, by
facsimile, by registered or certified mail (postage prepaid, return receipt
requested) or sent by nationally-recognized overnight courier to each other
party as set forth below or to such other address as the party to whom notice is
to be given may have furnished to the other parties hereto in writing in
accordance herewith. Any such notice or communication shall be deemed to have
been delivered and received (a) in the case of personal delivery, on the date of
such delivery, (b) in the case of facsimile, on the date sent if confirmation of
receipt is received and such notice is also promptly mailed by registered or
certified mail (return receipt requested), (c) in the case of a nationally-
recognized overnight courier in circumstances under which such courier
guarantees next business day delivery, on the next business day after the date
when sent and (d) in the case of mailing, on the fourth business day following
that on which the piece of mail containing such communication is posted:
if to Parent or Acquisition: Virata Corporation
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
with a copy to: ▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
if to the Company to: D2 Technologies, Inc.
▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇
with a copy to: Reicker, Clough, Pfau & ▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇
if to the Securityholder Agent: ▇▇▇▇▇ ▇. ▇▇▇▇
c/o D2 Technologies, Inc.
▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
54
with a copy to: Reicker, Clough, Pfau & ▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇
Section 8.4. Governing Law; Venue; Specific Performance; Waiver of Jury
----------------------------------------------------------
Trial.
-----
(a) THIS AGREEMENT SHALL BE DEEMED TO BE MADE IN AND IN ALL
RESPECTS SHALL BE INTERPRETED, CONSTRUED AND GOVERNED BY AND IN ACCORDANCE WITH
THE LAW OF THE STATE OF CALIFORNIA WITHOUT REGARD TO THE CONFLICT OF LAW
PRINCIPLES THEREOF. The parties hereby irrevocably submit to the jurisdiction
of the courts of the State of California and the Federal courts of the United
States of America located within the County of San Francisco in the State of
California solely in respect of the interpretation and enforcement of the
provisions of this Agreement and of the documents referred to in this Agreement,
and in respect of the transactions contemplated hereby, and hereby waive, and
agree not to assert, as a defense in any action, suit or proceeding for the
interpretation or enforcement hereof or of any such document, that it is not
subject thereto or that such action, suit or proceeding may not be brought or is
not maintainable in said courts or that the venue thereof may not be appropriate
or that this Agreement or any such document may not be enforced in or by such
courts, and the parties hereto irrevocably agree that all claims with respect to
such action or proceeding shall be heard and determined in such a California
State or Federal court. The parties hereby consent to and grant any such court
jurisdiction over the person of such parties and over the subject matter of such
dispute and agree that mailing of process or other papers in connection with any
such action or proceeding in the manner provided in Section 8.3 or in such other
manner as may be permitted by applicable law, shall be valid and sufficient
service thereof.
(b) The parties agree that irreparable damage would occur and
that the parties would not have any adequate remedy at law in the event that any
of the provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to an injunction or injunctions to prevent breaches of
this Agreement and to enforce specifically the terms and provisions of this
Agreement in any Federal court or California state court located within the
County of San Francisco in the State of California, this being in addition to
any other remedy to which they are entitled at law or in equity.
(c) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH
MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT
ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY
WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT
OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH PARTY CERTIFIES AND
ACKNOWLEDGES THAT (i) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY
HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF
55
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (ii) EACH SUCH PARTY
UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (iii) EACH SUCH
PARTY MAKES THIS WAIVER VOLUNTARILY, AND (iv) EACH SUCH PARTY HAS BEEN INDUCED
TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE WAIVERS AND
CERTIFICATIONS IN THIS SECTION 8.4(c).
Section 8.5. Descriptive Headings and Section References. The descriptive
-------------------------------------------
headings herein are inserted for convenience of reference only and are not
intended to be part of or to affect the meaning or interpretation of this
Agreement. All Article, Section, subsection, paragraph and clause references in
this Agreement are to Articles, Sections, subsections, paragraphs and clauses,
respectively, of this Agreement unless otherwise specified.
Section 8.6. Parties in Interest. This Agreement shall be binding upon
-------------------
and inure solely to the benefit of each party hereto and its successors and
permitted assigns and, except as expressly provided in this Agreement to the
contrary, nothing in this Agreement is intended to or shall confer upon any
other person any rights, benefits or remedies of any nature whatsoever under or
by reason of this Agreement nor shall any such person be entitled to assert any
claim hereunder; provided, however, that the Indemnified D&O Persons (and their
executors and heirs) are intended beneficiaries of Section 4.10.
Section 8.7. Certain Definitions. For purposes of this Agreement the
-------------------
term:
(a) "affiliate" means a person that, directly or indirectly,
through one or more intermediaries controls, is controlled by or is under common
control with the first-mentioned person;
(b) "business day" means any day other than a day on which the
Nasdaq National Market is closed;
(c) "capital stock" means common stock, preferred stock,
partnership interests, limited liability company interests or other ownership
interests entitling the holder thereof to vote with respect to matters involving
the issuer thereof;
(d) "include" or "including" means "include, without
limitation" or "including, without limitation," as the case may be, and the
language following "include" or "including" shall not be deemed to set forth an
exhaustive list.
(e) "knowledge" or "known" means, with respect to any fact,
circumstance, event or other matter in question, the actual knowledge of such
fact, circumstance, event or other matter, in the case of the Company, of those
persons listed in Section 8.7(e) of the Company Disclosure Schedule and, in the
case of Parent, of its executive officers. Any such individual will be deemed
to have knowledge of a particular fact, circumstance, event or other matter if
(i) such individual has actual knowledge of such fact, circumstance, event or
other matter, (ii) such fact, circumstance, event or other matter is reflected
in one or more documents (whether written or electronic, including e-mails sent
to or by such individual) in, or that have been in, such individual's
possession, including personal files of such person, or (iii) such fact,
circumstance, event or other matter is reflected in one or more documents
(whether written or electronic) contained in books and records of the Company
(in the case of knowledge of the
56
Company) or Parent (in the case of knowledge of Parent) that would reasonably be
expected to be reviewed by a person who has the duties and responsibilities of
such individual in the customary performance of such duties and
responsibilities.
(f) "Lien" means, with respect to any asset (including any
security), any mortgage, lien, pledge, charge, security interest or encumbrance
of any kind in respect of such asset; provided, however, that the term "Lien"
shall not include (i) statutory liens for Taxes that are not yet due and payable
or are being contested in good faith by appropriate proceedings or that are
otherwise not material and are fully reserved against in the Financial
Statements, (ii) statutory or common law liens to secure obligations to
landlords, lessors or renters under leases or rental agreements confined to the
premises rented, (iii) deposits or pledges made in connection with, or to secure
payment of, workers' compensation, unemployment insurance, old age pension or
other social security programs mandated under applicable laws, (iv) statutory or
common law liens in favor of carriers, warehousemen, mechanics and materialmen,
to secure claims for labor, materials or supplies and other like liens, and (v)
restrictions on transfer of securities imposed by applicable state and federal
securities laws.
(g) "Major Company Shareholders" means ▇▇▇▇▇ ▇. ▇▇▇▇ and ▇▇▇▇▇
▇. ▇▇▇▇▇▇▇.
(h) "person" means an individual, corporation, partnership,
limited liability company, association, trust, unincorporated organization or
other legal entity including any Governmental Entity; and
(i) "subsidiary" or "subsidiaries" of the Company, Parent, the
Surviving Corporation or any other person means any corporation, partnership,
limited liability company, association, trust, unincorporated association or
other legal entity of which the Company, Parent, the Surviving Corporation or
any such other person, as the case may be (either alone or through or together
with any other subsidiary), owns, directly or indirectly, 50% or more of the
capital stock the holders of which are generally entitled to vote for the
election of the board of directors or other governing body of such corporation
or other legal entity.
(j) "Transaction Documents" means, collectively, this Agreement
(including the Schedules and Exhibits hereto), the Voting Agreements, the Escrow
Agreement, the Employment Agreements, the Registration Rights Agreement, the
Non-competition Agreements, the Confidentiality Agreement and each of the other
agreements, documents, exhibits, schedules and instruments contemplated hereby
and thereby.
Section 8.8. Personal Liability. Except as and to the extent expressly
------------------
provided elsewhere in this Agreement, this Agreement shall not create or be
deemed to create or permit any personal liability or obligation on the part of
any direct or indirect shareholder of the Company or Parent or Acquisition or
any officer, director, employee, agent, representative or investor of any party
hereto.
57
Section 8.9. Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed to be an original but all of which
shall constitute one and the same agreement.
58
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
duly executed on its behalf as of the day and year first above written.
VIRATA CORPORATION
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Chief Executive Officer
D2 TECHNOLOGIES, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇
-----------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇
Title: President
VC ACQUISITION, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Chief Executive Officer
SECURITYHOLDER AGENT
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇
---------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇
59