EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
XICOR, INC.,
VALLEY ACQUISITION CORP.,
ANALOG INTEGRATION PARTNERS, LLC,
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇, AS THE MEMBER REPRESENTATIVE,
▇▇▇▇ ▇. ▇▇▇▇▇▇,
▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇▇▇▇,
RABINOVITCH VENTURES LIMITED LP,
AND
▇▇▇▇▇▇ VENTURES LIMITED LP
APRIL 16, 2002
TABLE OF CONTENTS
PAGE
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ARTICLE I THE MERGER............................................................................ 2
1.1 The Merger....................................................................... 2
1.2 Effective Time................................................................... 2
1.3 Effect of the Merger............................................................. 2
1.4 Articles of Incorporation and Bylaws............................................. 2
1.5 Directors and Officers........................................................... 3
1.6 Effect of Merger on the Capital Stock and Membership Interests of the
Constituent Companies............................................................ 3
1.7 Membership Interests Subject to Vesting.......................................... 6
1.8 Dissenting Membership Interests.................................................. 6
1.9 Surrender of Certificates........................................................ 6
1.10 No Further Ownership Rights in Membership Interests.............................. 8
1.11 Lost, Stolen or Destroyed Certificates........................................... 8
1.12 Taking of Necessary Action; Further Action....................................... 8
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE MEMBERS........................ 8
2.1 Organization of the Company...................................................... 8
2.2 Subsidiaries..................................................................... 9
2.3 Company Capital Structure........................................................ 9
2.4 Authority........................................................................10
2.5 No Conflict......................................................................10
2.6 Consents.........................................................................10
2.7 Company Financial Statements.....................................................11
2.8 No Undisclosed Liabilities.......................................................11
2.9 No Changes.......................................................................11
2.10 Tax Matters......................................................................13
2.11 Restrictions on Business Activities..............................................15
2.12 Title of Properties; Absence of Liens and Encumbrances; Condition of
Equipment........................................................................15
2.13 Intellectual Property............................................................16
2.14 Agreements, Contracts and Commitments............................................20
2.15 Interested Party Transactions....................................................22
2.16 Governmental Authorization.......................................................22
2.17 Litigation.......................................................................22
2.18 Accounts Receivable..............................................................22
2.19 Minute Books.....................................................................23
2.20 Environmental Matters............................................................23
2.21 Brokers' and Finders' Fees; Third Party Expenses.................................23
2.22 Employee Benefit Plans and Compensation..........................................24
2.23 Insurance........................................................................27
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TABLE OF CONTENTS
(CONTINUED)
PAGE
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2.24 Compliance with Laws.............................................................27
2.25 Warranties; Indemnities..........................................................27
2.26 Complete Copies of Materials.....................................................28
2.27 Information Statement............................................................28
2.28 Powers of Attorney...............................................................28
2.29 Representations Complete.........................................................28
ARTICLE III ADDITIONAL REPRESENTATIONS AND WARRANTIES OF THE MEMBERS............................28
3.1 Ownership of Membership Interests................................................28
3.2 Member Tax Matters...............................................................29
3.3 Absence of Claims by the Member..................................................29
3.4 No Registration..................................................................29
3.5 Investment Intent................................................................29
3.6 Investment Experience............................................................29
3.7 Speculative Nature of Investment.................................................29
3.8 Access to Data...................................................................30
3.9 Accredited Investor..............................................................30
3.10 Member Counsel...................................................................30
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB.....................................30
4.1 Organization, Standing and Power.................................................30
4.2 Authority........................................................................30
4.3 Capital Structure................................................................31
4.4 No Conflict......................................................................31
4.5 Consents.........................................................................31
4.6 SEC Documents; Parent Financial Statements.......................................32
4.7 Information Statement............................................................32
ARTICLE V ADDITIONAL AGREEMENTS.................................................................32
5.1 Registration Rights Agreement....................................................32
5.2 Restrictions on Transfer.........................................................33
5.3 Access to Information............................................................33
5.4 Confidentiality..................................................................33
5.5 Expenses.........................................................................33
5.6 Additional Documents and Further Assurances......................................33
5.7 Related Agreements...............................................................33
5.8 Nasdaq National Market...........................................................34
5.9 Tax Matters......................................................................34
5.10 Limitations on Sales.............................................................34
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TABLE OF CONTENTS
(CONTINUED)
PAGE
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ARTICLE VI CONDITIONS TO THE MERGER.............................................................35
6.1 Conditions to Obligations of Each Party to Effect the Merger.....................35
6.2 Conditions to the Obligations of Parent and Sub..................................35
6.3 Conditions to Obligations of the Company and the Members.........................37
ARTICLE VII SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION.........................38
7.1 Survival of Representations and Warranties.......................................38
7.2 Indemnification by the Company and the Members; Escrow Fund......................39
7.3 Limitation on Indemnification....................................................40
7.4 Indemnification Procedures.......................................................40
7.5 Member Representative............................................................42
ARTICLE VIII AMENDMENT AND WAIVER...............................................................43
8.1 Amendment........................................................................43
8.2 Extension; Waiver................................................................43
ARTICLE IX GENERAL PROVISIONS...................................................................43
9.1 Notices..........................................................................43
9.2 Interpretation...................................................................45
9.3 Counterparts.....................................................................45
9.4 Entire Agreement; Assignment.....................................................45
9.5 No Third Party Beneficiaries.....................................................45
9.6 Severability.....................................................................45
9.7 Other Remedies...................................................................45
9.8 Governing Law....................................................................45
9.9 Rules of Construction............................................................46
9.10 Attorneys' Fees..................................................................46
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AGREEMENT AND PLAN
OF
MERGER
This AGREEMENT AND PLAN OF MERGER (the "Agreement") is made and entered
into as of April 16, 2002 by and among Xicor, Inc., a California corporation
("Parent"); Valley Acquisition Corp., a Delaware corporation and a wholly-owned
subsidiary of Parent ("Sub"); Analog Integration Partners, LLC, a California
limited liability company (the "Company"); ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ (the "Member
Representative"); and ▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇
Ventures Limited LP, a California limited partnership, and ▇▇▇▇▇▇ Ventures
Limited LP, a California limited partnership (collectively, the "Members").
BACKGROUND
A. The Board of Directors of Parent, the Board of Directors of Sub, and
the Managers of the Company believe it is in the best interests of their
respective companies and stockholders and members, as the case may be, that
Parent acquire the Company through the statutory merger of Sub with and into the
Company (the "Merger") and, in furtherance thereof, have approved the Merger.
B. Pursuant to the Merger, among other things, all of the issued and
outstanding membership interests of the Company shall be converted into the
right to receive the consideration in a taxable transaction upon the terms and
conditions set forth herein.
C. The Company and each of the Members, on the one hand, and Parent and
Sub, on the other hand, desire to make certain representations, warranties,
covenants and other agreements in connection with the Merger.
D. Concurrently with the execution and delivery of this Agreement, as
material inducements to Parent and Sub to enter into this Agreement: (i) certain
Members of the Company are entering into a Registration Rights Agreement, each
in the form attached as Exhibit A (the "Registration Rights Agreement"), with
Parent; (ii) certain key employees of the Company and certain Members are
entering into Noncompetition Agreements, each in the form attached as Exhibit B
(the "Noncompetition Agreements"), with Parent; and (iii) Parent and the Member
Representative are entering into an Escrow Agreement, in the form attached as
Exhibit C (the "Escrow Agreement").
NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth in this Agreement, the parties agree as follows:
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ARTICLE I
THE MERGER
1.1 The Merger. At the Effective Time (as defined in Section 1.2 below)
and subject to and upon the terms and conditions of this Agreement and the
applicable provisions of the California Corporations Code ("California Law") and
the Delaware General Corporation Law ("Delaware Law"), Sub shall be merged with
and into the Company, the separate corporate existence of Sub shall cease, and
the Company shall continue as the surviving entity and as a wholly-owned
subsidiary of Parent. The surviving entity after the Merger is sometimes
referred to as the "Surviving Entity."
1.2 Effective Time. Unless this Agreement is terminated earlier pursuant
to Section 8.1, the closing of the Merger (the "Closing") will take place
simultaneously with the execution and delivery hereof by the parties hereto and
the satisfaction or waiver of the conditions set forth in Article VI hereof, at
the offices of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, Professional Corporation, ▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, unless another time and/or place is
mutually agreed upon in writing by Parent and the Company. The date upon which
the Closing actually occurs shall be referred to as the "Closing Date." On the
Closing Date, the parties shall cause the Merger to be consummated by filing: a
certificate of merger (or like instrument), in substantially the form attached
hereto as Exhibit D-1, with the Secretary of State of the State of California
(the "California Certificate of Merger"), in accordance with the applicable
provisions of California Law; and a certificate of merger (or like instrument),
in substantially the form attached hereto as Exhibit D-2, with the Secretary of
State of the State of Delaware (the "Delaware Certificate of Merger"), in
accordance with the applicable provisions of Delaware Law. The "Effective Time"
shall mean the later of: the time of acceptance by the Secretary of State of the
State of California of the California Certificate of Merger, or the time of
acceptance by the Secretary of State of the State of Delaware of the Delaware
Certificate of Merger.
1.3 Effect of the Merger. At the Effective Time, the effect of the Merger
shall be as provided in the applicable provisions of California Law and Delaware
Law. Without limiting the generality of the foregoing, and subject thereto, at
the Effective Time, except as otherwise agreed to pursuant to the terms of this
Agreement, all the property, rights, privileges, powers and franchises of the
Company and Sub shall vest in the Surviving Entity, and all debts, liabilities
and duties of the Company and Sub shall become the debts, liabilities and duties
of the Surviving Entity.
1.4 Articles of Incorporation and Bylaws.
(a) Unless otherwise determined by Parent prior to the Effective
Time, the Articles of Organization of the Surviving Entity at the Effective Time
shall be amended to provide that the Surviving Entity will be managed by only
one manager.
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(b) Unless otherwise determined by Parent prior to the Effective
Time, the Operating Agreement of the Surviving Entity at the Effective Time
shall be amended and restated in its entirety as set forth on Exhibit E.
1.5 Directors and Officers. Unless otherwise determined by Parent prior to
the Effective Time, the directors of Sub immediately prior to the Effective Time
shall be the managers of the Surviving Entity immediately after the Effective
Time, to hold the office of manager of the Surviving Entity in accordance with
the provisions of California Law and the Articles of Organization and Operating
Agreement of the Surviving Entity until their successors are duly elected and
qualified. Unless otherwise determined by Parent prior to the Effective Time,
the officers of Sub immediately prior to the Effective Time shall be the
officers of the Surviving Entity immediately after the Effective Time, to hold
office in accordance with the provisions of the Bylaws of the Surviving Entity.
1.6 Effect of Merger on the Capital Stock and Membership Interests of the
Constituent Companies.
(a) Definitions. For all purposes of this Agreement, the following
terms shall have the following respective meanings:
(i) "Aggregate Merger Consideration" shall mean the: (1) the
Aggregate Cash Consideration, and (2) the Aggregate Stock Consideration.
(1) "Aggregate Cash Consideration" shall mean Five
Million U.S. dollars ($5,000,000).
(2) "Aggregate Stock Consideration" shall mean 1,012,760
shares of Parent Common Stock (which equals (A) Ten Million U.S. dollars
($10,000,000), divided by (B) the Transaction Stock Price).
(ii) "Escrow Amount" shall mean 151,914 shares of Parent
Common Stock.
(iii) "GAAP" shall mean U.S. generally accepted accounting
principles, consistently applied.
(iv) "Knowledge" shall mean (i) with respect to the Company,
the actual knowledge of the Company's officers and directors and the knowledge
that such person would have obtained of the matter represented after due and
diligent inquiry thereof under the circumstances, and (ii) with respect to each
of the Members, the actual knowledge of such Member.
(v) "Material Adverse Effect" shall mean any change, event or
effect that is materially adverse to the business, assets (including intangible
assets), liabilities, condition
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(financial or otherwise), results of operations, prospects or capitalization of
the Company and its subsidiaries, taken as a whole.
(vi) "Member" shall mean a holder of any Membership Interest
immediately prior to the Closing Date.
(vii) "Membership Interest" shall mean each membership
interest or capital unit of the Company.
(viii) "Membership Interest Percentage" shall mean the
quotient obtained by dividing (x) a single Membership Interest by (y) the Total
Membership Interests.
(ix) "Parent Common Stock" shall mean shares of the common
stock, without par value, of Parent.
(x) "Pro Rata Portion" shall mean, with respect to each Member
of the Company, an amount equal to the quotient obtained by dividing (x) the
number of Membership Interests owned by such Member immediately prior to the
Effective Time by (y) the number of Total Membership Interests outstanding at
such time.
(xi) "SEC" shall mean the U.S. Securities and Exchange
Commission. (xii) "Total Membership Interests" shall be the aggregate number of
all Membership Interests issued and outstanding immediately prior to the
Effective Time, including without limitation any and all Membership Interests
issued or issuable pursuant to or upon exercise of options or other rights
therefor.
(xiii) "Transaction Stock Price" is equal to $9.874 per share
(which is the average closing price of Parent Common Stock over the five trading
days immediately preceding the date of this Agreement.
(b) Conversion of Membership Interests. At the Effective Time, by
virtue of the Merger and without any action on the part of the Sub, the Company
or any Member, each Membership Interest issued and outstanding immediately prior
to the Effective Time (other than any Dissenting Membership Interests, as
defined in Section 1.8) will be canceled and extinguished and converted
automatically into the right to receive, upon surrender of the certificate(s)
representing such Membership Interest and upon the terms and subject to the
conditions set forth in this Section 1.6 and throughout this Agreement
(including but not limited to the deposit of the Escrow Amount into the Escrow
Fund), the following consideration:
(i) Cash in an amount equal to: (A) the Membership Interest
Percentage, multiplied by (B) the Aggregate Cash Consideration; and
(ii) Such number of shares of Parent Common Stock equal to (A)
the Membership Interest Percentage, multiplied by (B) the Aggregate Stock
Consideration.
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(c) Escrow. Notwithstanding any other provision of this Section 1.6,
and as soon as practicable after the Closing Date, subject to and in accordance
with the Escrow Agreement and the other provisions of this Agreement, Parent
shall cause to be deposited the Escrow Amount in the Escrow Fund (as defined in
Section 7.2) for the purposes of partially securing the indemnification
obligations set forth in Article VII of this Agreement. The Pro Rata Portion of
the Escrow Amount of each Member shall be contributed into the Escrow Fund.
(d) Withholding Taxes. Any number of shares of Parent Common Stock
and any portion of the cash consideration issuable pursuant to Section 1.6(b) to
any Member shall be subject to, and reduced by, the amount of any state, federal
and foreign withholding taxes incurred (and not previously paid by or on behalf
of the Company) in connection with the acquisition of any Membership Interest
that had its vesting accelerated or the payment of a bonus in the form of
Membership Interests, if any, by such Member. For purposes of any such
reduction, a share of Parent Common Stock shall be valued at the Transaction
Stock Price.
(e) Member Loans.
(i) Loans to Members. In the event that any Member or employee
has outstanding loans from the Company as of the Effective Time, the Company
shall use its best efforts to ensure that such loan is paid in full by the
Member or employee prior to the Effective Time. In the event such loan is not
paid in full to the Company, the consideration payable to such Member pursuant
to this Section 1.6 shall be reduced by an amount equal to the outstanding
principal plus accrued interest of such Member's loans as of the Effective Time.
For purposes of any such reduction, a share of Parent Common Stock shall be
valued at the Transaction Stock Price.
(ii) Loans from Members. In the event that the Company has
outstanding loans from, or other amounts payable to, any Members as of the
Effective Time (including but not limited to those loans or amounts listed on
Schedule 1.6(e) to this Agreement), the Company shall use its best efforts to
ensure either that: (A) such loans or amounts are paid in full to the Members
prior to the Effective Time or (B) such loans or amounts are forgiven by the
Members. In the event such loans or amounts are not paid in full by the Company
or forgiven by the Members, the Aggregate Merger Consideration shall be reduced
by an amount equal to the outstanding principal plus accrued interest of the
loans or amounts as of the Effective Time. For purposes of any such reduction, a
share of Parent Common Stock shall be valued at the Transaction Stock Price.
(f) Capital Stock of Sub. Each share of Common Stock of Sub issued
and outstanding immediately prior to the Effective Time shall be converted into
and exchanged for one validly issued, fully paid and nonassessable membership
interest of the Surviving Entity. Each stock certificate of Sub evidencing
ownership of any such shares shall continue to evidence ownership of such
membership interests of the Surviving Entity.
(g) Fractional Shares. No fraction of a share of Parent Common Stock
will be issued, but in lieu thereof, each holder of Membership Interests who
would otherwise be entitled to a fraction of a share of Parent Common Stock
(after aggregating all fractional shares of Parent Common Stock to be received
by such holder) shall be entitled to receive from Parent an amount of
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cash (rounded to the nearest whole cent) equal to the product of (i) such
fraction, multiplied by (ii) the Transaction Stock Price.
1.7 Membership Interests Subject to Vesting. If any Membership Interests
issued and outstanding immediately prior to the Effective Time are unvested or
are subject to a repurchase option by the Company, risk of forfeiture or other
condition under any applicable stock or membership interest restriction
agreement or other agreement with the Company, then the shares of Parent Common
Stock and the cash consideration issued in exchange for such Membership
Interests shall also be unvested and subject to the same repurchase option, risk
of forfeiture or other condition (including any requirement that any unvested
shares be held in escrow), and the certificates representing such shares of
Parent Common Stock may accordingly be marked with appropriate legends in the
discretion of Parent.
1.8 Dissenting Membership Interests.
(a) Notwithstanding any other provisions of this Agreement to the
contrary, any Membership Interests held by a Member who has exercised and
perfected appraisal rights for such Membership Interests in accordance with
Sections 17600 through 17613 of California Law and who has not effectively
withdrawn or lost such appraisal rights ("Dissenting Membership Interests"),
shall not be converted into or represent a right to receive the consideration
set forth in Section 1.6 hereof, but the holder shall only be entitled to such
rights as are provided by California Law.
(b) Notwithstanding the provisions of Section 1.8(a) hereof, if any
holder of Dissenting Membership Interests shall effectively withdraw or lose
(through failure to perfect or otherwise) such holder's appraisal rights under
California Law, then, as of the later of the Effective Time and the occurrence
of such event, such holder's Membership Interests shall automatically be
converted into and represent only the right to receive the consideration set
forth in Section 1.6 hereof, without interest thereon, upon surrender of the
certificate(s) representing such Membership Interests.
(c) The Company shall give Parent (i) prompt notice of any written
demand for appraisal received by the Company pursuant to the applicable
provisions of California Law, and (ii) the opportunity to participate in all
negotiations and proceedings with respect to such demands. The Company shall
not, except with the prior written consent of Parent, make any payment with
respect to any such demands or offer to settle or settle any such demands. To
the extent that Parent or the Company makes any payment or payments in respect
of any Dissenting Membership Interests, Parent shall be entitled to recover
under the terms of Article VII hereof the aggregate amount by which such payment
or payments exceed the aggregate consideration that otherwise would have been
payable in respect of such Membership Interests.
1.9 Surrender of Certificates.
(a) Exchange Agent. American Stock Transfer & Trust Company shall
serve as the exchange agent (the "Exchange Agent") for the Merger.
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(b) Parent to Provide Cash and Parent Common Stock. Upon the terms
and subject to the conditions of Section 1.6, promptly after the Effective Time,
in exchange for outstanding Membership Interests, Parent shall make available to
the Exchange Agent for exchange in accordance with this Article I, the Aggregate
Cash Consideration and the Aggregate Stock Consideration issuable pursuant to
Section 1.6, less the Escrow Amount, which Parent shall deposit into the Escrow
Fund, with the Pro Rata Portion of each Member being contributed.
(c) Exchange Procedures. As promptly as practicable after the
Effective Time, Parent shall cause the Exchange Agent to mail to each holder of
record of a certificate(s) which, immediately prior to the Effective Time,
represented outstanding Membership Interests (the "Certificates"), whose
Membership Interests were converted into the right to receive shares of Parent
Common Stock and cash pursuant to Section 1.6: (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 may reasonably specify), and (ii) instructions for use in effecting the
surrender of the Certificates in exchange for certificate(s) representing shares
of Parent Common Stock and for the cash consideration. Upon surrender of
Certificates for cancellation to the Exchange Agent or to such other agent or
agents as may be appointed by Parent, together with such letter of transmittal,
duly completed and validly executed in accordance with the instructions thereto,
the holders of such Certificates shall be entitled to receive in exchange
therefor certificate(s) representing the number of whole shares of Parent Common
Stock and the appropriate cash consideration, and the Certificates so
surrendered shall forthwith be canceled. Until so surrendered, outstanding
Certificates will be deemed from and after the Effective Time, for all corporate
purposes other than the payment of dividends, to evidence the ownership of the
number of full shares of Parent Common Stock and the cash consideration into
which such Membership Interests shall have been so converted.
(d) Distributions With Respect to Unexchanged Membership Interests.
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
will be paid to the holder of any unsurrendered Certificates with respect to the
Membership Interests represented thereby until the holder of record of such
Certificates shall surrender such Certificates. Subject to applicable law,
following surrender of any such Certificates, the Exchange Agent shall deliver
to the record holder thereof, without interest, certificate(s) representing
whole shares of Parent Common Stock and the cash consideration issued in
exchange therefor.
(e) Transfers of Ownership. If any certificate for shares of Parent
Common Stock is to be issued in a name other than that in which the Certificates
surrendered in exchange therefor is registered, it will be a condition of the
issuance thereof that the Certificates so surrendered will be properly endorsed
and otherwise in proper form for transfer and that the person requesting such
exchange will have paid to Parent or any agent designated by it any transfer or
other taxes required by reason of the issuance of a certificate for shares of
Parent Common Stock in any name other than that of the registered holder of the
Certificates surrendered, or established to the satisfaction of Parent or any
agent designated by it that such tax has been paid or is not payable.
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(f) No Liability. Notwithstanding anything to the contrary in this
Section 1.9, neither the Exchange Agent, the Surviving Entity nor any party
hereto shall be liable to a holder of Membership Interests for any amount
properly paid to a public official pursuant to any applicable abandoned
property, escheat or similar law.
1.10 No Further Ownership Rights in Membership Interests. The shares of
Parent Common Stock and the cash consideration paid in respect of the surrender
for exchange of Membership Interests in accordance with the terms hereof
(including and any cash paid with respect to fractional shares of Parent Common
Stock) shall be deemed to be full satisfaction of all rights pertaining to such
Membership Interests, and there shall be no further registration of transfers on
the records of the Surviving Entity of Membership Interests which were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, Certificates are presented to the Surviving Entity for any reason, they
shall be canceled and exchanged as provided in this Article I.
1.11 Lost, Stolen or Destroyed Certificates. In the event any certificates
evidencing Membership Interests shall have been lost, stolen or destroyed, the
Exchange Agent shall issue in exchange for such lost, stolen or destroyed
certificates, upon the making of an affidavit of that fact by the holder
thereof, such shares of Parent Common Stock and such cash consideration as may
be required pursuant to Section 1.6 hereof; provided, however, that Parent may,
in its discretion and as a condition precedent to the issuance thereof, require
the owner of such lost, stolen or destroyed certificates to deliver a bond in
such amount as it may reasonably direct against any claim that may be made
against Parent or the Exchange Agent with respect to the certificates alleged to
have been lost, stolen or destroyed.
1.12 Taking of Necessary Action; Further Action. If at any time after the
Effective Time any further action is necessary or desirable to carry out the
purposes of this Agreement and to vest the Surviving Entity with full right,
title and possession to all assets, property, rights, privileges, powers and
franchises of the Company, then the officers, directors and managers of the
Company, Parent and Sub are fully authorized in the name of their respective
companies or otherwise to take, and will take, all such lawful and necessary
action.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF
THE COMPANY AND THE MEMBERS
The Company and each of the Members hereby jointly and severally represent
and warrant to Parent and Sub, subject to such exceptions as are specifically
disclosed in the disclosure schedules (referencing the appropriate section and
paragraph numbers) supplied by the Company and the Members to Parent and Sub and
dated as of the date hereof (the "Disclosure Schedule"), that on the date
hereof:
2.1 Organization of the Company. The Company is a limited liability
company duly organized, validly existing and in good standing under the laws of
the State of California. The Company has the power to own its properties and to
carry on its business as currently conducted and
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as currently contemplated to be conducted. The Company is duly qualified or
licensed to do business and is in good standing as a foreign limited liability
company in each jurisdiction in which it conducts business. The Company has
delivered to Parent a true and correct copy of its Articles of Organization and
Operating Agreement, including all amendments thereto, each of which is in full
force and effect. Section 2.1 of the Disclosure Schedule lists the managers and
officers of the Company.
2.2 Subsidiaries. The Company does not have, and has never had, any
subsidiaries and does not otherwise own, and has not otherwise owned, any share
in the capital of or any interest in, or control of, directly or indirectly, any
corporation, limited liability company, partnership, association, joint venture
or other business entity. References to the "Company" herein shall include the
Company and any of its past or present subsidiaries.
2.3 Company Capital Structure.
(a) The ownership of the Company consists of the Membership
Interests, all of which are issued and outstanding and all of which are set
forth on Section 2.3(a) of the Disclosure Schedule. The names, addresses,
domiciles and number of Membership Interests of each Member are set forth on
Section 2.3(a) of the Disclosure Schedule. Except as set forth on Section 2.3(a)
of the Disclosure Schedule, there are no Membership Interests authorized, issued
or outstanding. Except for the Membership Interests set forth on Section 2.3(a)
of the Disclosure Schedule, there are no classes or series of ownership
interests of the Company of any kind outstanding or issuable. All outstanding
Membership Interests are duly authorized, validly issued, fully paid and
non-assessable, and are not subject to preemptive rights created by statute, the
Articles of Organization or Operating Agreement of the Company, or any agreement
to which the Company is a party or by which it is bound. All Membership
Interests have been issued in compliance with all applicable federal and state
securities laws. The designations, powers, preferences, rights, qualifications,
limitations and restrictions in respect of the Membership Interests are as set
forth in the Company's Articles of Organization and Operating Agreement. There
are no declared or accrued but unpaid dividends with respect to any Membership
Interests. None of the Membership Interests are unvested or subject to a
repurchase option by the Company, risk of forfeiture or other condition under
any applicable stock or membership interest restriction agreement or other
agreement with the Company.
(b) There are no options, warrants or other rights to purchase any
of the Company's authorized or unissued Membership Interests. The Company has
never adopted or maintained any stock option plan or other plan providing for
equity compensation. There are no outstanding or authorized stock appreciation,
phantom stock, profit participation, or other similar rights with respect to the
Company. Except as contemplated hereby, there are no voting trusts, proxies, or
other agreements or understandings with respect to the Membership Interests of
the Company. As a result of the Merger, Parent will be the sole record and
beneficial holder of all of the Membership Interests and all rights to acquire
or receive any Membership Interests of the Company, whether or not such
Membership Interests are outstanding.
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(c) The requisite vote required to approve the Merger under
applicable law, the Company's Articles of Organization, Operating Agreement and
any other agreement to which the Company or any other Member of the Company is
bound is as follows: at least two-thirds of the outstanding Membership
Interests.
2.4 Authority. The Company and each of the Members have all requisite
power and authority to enter into this Agreement and any Related Agreement (as
defined below) to which they are party and to consummate the transactions
contemplated hereby and thereby. The execution and delivery of this Agreement,
any Related Agreement to which the Company is party and the consummation of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary corporate action on the part of the Company. No further action is
required on the part of the Company or any of the Members to authorize the
Agreement, any Related Agreement to which they are a party and the transactions
contemplated hereby and thereby, subject only to the approval of this Agreement
and the transactions contemplated hereby by the Members. This Agreement, any
Related Agreement to which the Company is a party and the Merger have been
unanimously approved by the managers of the Company, and the managers have
recommended to the Members to vote in favor of this Agreement, the Merger and
the transactions contemplated thereby. This Agreement and any Related Agreement
to which the Company and/or any of the Members is a party has been duly executed
and delivered by the Company and/or the Members, as the case may be, and
assuming the due authorization, execution and delivery by the other parties
hereto and thereto, constitute the valid and binding obligations of the Company
and each of the Members, enforceable against each such party in accordance with
their respective terms, except as such enforceability may be subject to the laws
of general application relating to bankruptcy, insolvency and the relief of
debtors and rules of law governing specific performance, injunctive relief or
other equitable remedies. For the purposes of this Agreement, the term "Related
Agreements" shall mean the Registration Rights Agreement, the Noncompetition
Agreements, the Escrow Agreement, the California Certificate of Merger, the
Delaware Certificate of Merger, and any other agreements to which the Company or
a Member is a party that it enters into in order to consummate the transactions
contemplated thereby.
2.5 No Conflict. The execution and delivery by the Company and each of the
Members of this Agreement and any Related Agreement to which the Company and/or
any Member is a party, and the consummation of the transactions contemplated
hereby and thereby, will not conflict with or result in any violation of or
default under (with or without notice or lapse of time, or both) or give rise to
a right of termination, cancellation, modification or acceleration of any
obligation or loss of any benefit under (any such event, a "Conflict"): (i) any
provision of the Articles of Organization or Operating Agreement of the Company,
each as amended to date; (ii) any Contract (as defined in Section 2.14(b) below)
to which the Company or any of its properties or assets (including intangible
assets), or to which any of the Members, is subject, or (iii) any judgment,
order, decree, statute, law, ordinance, rule or regulation applicable to the
Company or any of its properties (tangible and intangible) or assets, or
applicable to any of the Members.
2.6 Consents. No consent, waiver, approval, order or authorization of, or
registration, declaration or filing with any court, administrative agency or
commission or other federal, state,
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county, local or other foreign governmental authority, instrumentality, agency
or commission (each, a "Governmental Entity") or any third party, including a
party to any agreement with the Company (so as not to trigger any Conflict), is
required by or with respect to the Company or any of the Members in connection
with the execution and delivery of this Agreement, any of the Related Agreements
to which the Company or any of the Members is a party, or the consummation of
the transactions contemplated hereby or thereby, except for: (i) such consents,
waivers, approvals, orders, authorizations, registrations, declarations and
filings as may be required under applicable securities laws: (ii) the filing of
the California Certificate of Merger with the Secretary of State of the State of
California; (iii) the filing of the Delaware Certificate of Merger with the
Secretary of State of the State of Delaware; and (iv) the approval of this
Agreement and the transactions contemplated hereby by the Members.
2.7 Company Financial Statements. Section 2.7 of the Disclosure Schedule
sets forth (i) the Company's balance sheet as of December 31, 2001, and the
related statements of income, cash flow and members' equity (or similar
document) for the year ended December 31, 2001 and (ii) the Company's unaudited
balance sheet as of March 31, 2002, and the related unaudited statements of
income, cash flow and members' equity (or similar document) for the three-month
period ended March 31, 2002) (collectively, the "Financials"). The Financials
are correct in all material respects and have been prepared on a basis
consistent throughout the periods indicated and consistent with each other. The
Financials present fairly the financial condition, operating results and cash
flows of the Company (and its predecessors) as of the dates and during the
periods indicated therein. The Company's unaudited balance sheet as of March 31,
2002 is referred to hereinafter as the "Current Balance Sheet."
2.8 No Undisclosed Liabilities. The Company has no liability,
indebtedness, obligation, expense, claim, deficiency, guaranty or endorsement of
any type, whether accrued, absolute, contingent, matured, unmatured or other,
which individually or in the aggregate (i) has not been adequately reflected in
the Current Balance Sheet, or (ii) has not arisen in the ordinary course of
business consistent with past practices since March 31, 2002, and which are not,
individually or in the aggregate, material.
2.9 No Changes. Since March 31, 2002, there has not been, occurred or
arisen any:
(a) transaction by the Company except in the ordinary course of
business consistent with past practices;
(b) amendments or changes to the Articles of Organization or
Operating Agreement of the Company;
(c) capital expenditure or capital expenditure commitment by the
Company exceeding $5,000 individually or $10,000 in the aggregate;
(d) payment, discharge or satisfaction, in any amount in excess of
$5,000 in any one case, or $10,000 in the aggregate, of any claim, liability or
obligation (absolute, accrued,
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asserted or unasserted, contingent or otherwise), other than payment, discharge
or satisfaction in the ordinary course of business of liabilities reflected or
reserved against in the Current Balance Sheet;
(e) destruction of, damage to or loss of any material assets or
material business or loss of any material customer of the Company (whether or
not covered by insurance);
(f) labor trouble or claim of wrongful discharge or other unlawful
labor practice or action;
(g) change in accounting methods or practices (including any change
in depreciation or amortization policies or rates) by the Company;
(h) change in any election in respect of Taxes (as defined below),
adoption or change in any accounting method in respect of Taxes, agreement or
settlement of any claim or assessment in respect of Taxes, or extension or
waiver of the limitation period applicable to any claim or assessment in respect
of Taxes;
(i) revaluation by the Company of any of its assets;
(j) declaration, setting aside or payment of a dividend or other
distribution (whether in cash, stock, membership interests or property) in
respect of any Membership Interest, or any split, combination or
reclassification in respect of any Membership Interest, or any issuance or
authorization of any issuance of any other securities in respect of, in lieu of
or in substitution for Membership Interests, or any direct or indirect
repurchase, redemption, or other acquisition by the Company of any Membership
Interests (or options or other rights convertible into, exercisable or
exchangeable therefor);
(k) increase in the salary or other compensation payable or to
become payable by the Company to any of its officers, directors, employees or
advisors, or the declaration, payment or commitment or obligation of any kind
for the payment by the Company of a severance payment, termination payment,
bonus or other additional salary or compensation to any such person;
(l) any agreement, contract, covenant, instrument, lease, license or
commitment to which the Company is party or by which it or any of its assets
(including intangible assets) are bound or any termination, extension, amendment
or modification of the terms of any agreement, contract, covenant, instrument,
lease, license or commitment to which the Company is party or by which it or any
of its assets are bound;
(m) sale, lease or other disposition of any of the material assets
or material properties of the Company or any creation of any security interest
in such material assets or material properties;
(n) loan by the Company to any person or entity, incurring by the
Company of any indebtedness, guaranteeing by the Company of any indebtedness,
issuance or sale of any debt securities of the Company or guaranteeing of any
debt securities of others, except for advances to
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employees for travel and business expenses in the ordinary course of business
consistent with past practices that are set forth on Section 2.9(n) of the
Disclosure Schedule;
(o) waiver or release of any right or claim of the Company,
including any write-off or other compromise of any account receivable of the
Company;
(p) the commencement, settlement, notice or threat of any lawsuit or
proceeding or other investigation against the Company or its affairs, or any
reasonable basis for any of the foregoing;
(q) notice to the Company or its managers of any claim or potential
claim of ownership by any person other than the Company of the Company
Intellectual Property (as defined in Section 2.13 below) owned by or developed
or created by the Company or of infringement by the Company of any other
person's Intellectual Property (as defined in Section 2.13 below);
(r) issuance or sale, or contract to issue or sell, by the Company
of any Membership Interests, or any securities, warrants, options or rights to
purchase any of the foregoing;
(s) any (i) sale or license of any Company Intellectual Property or
entering into of any agreement with respect to the Company Intellectual Property
with any person or entity or with respect to the Intellectual Property of any
person or entity, (ii) purchase or license of any Intellectual Property or
entering into of any agreement with respect to the Intellectual Property of any
person or entity, (iii) agreement with respect to the development of any
Intellectual Property with a third party, or (iv) change in pricing or royalties
set or charged by the Company to its customers or licensees or in pricing or
royalties set or charged by persons who have licensed Intellectual Property to
the Company;
(t) agreement or modification to agreement pursuant to which any
other party was granted marketing, distribution, development or similar rights
of any type or scope with respect to any products or technology of the Company;
(u) hiring or termination of employees of the Company;
(v) event or condition of any character that has had or is
reasonably likely to have a Material Adverse Effect on the Company; or
(w) agreement by the Company or any officer or employees on behalf
of the Company to do any of the things described in the preceding clauses (a)
through (w) (other than negotiations with Parent and its representatives
regarding the transactions contemplated by this Agreement).
2.10 Tax Matters.
(a) Definition of Taxes. For the purposes of this Agreement, the
term "Tax" or, collectively, "Taxes" shall mean: (i) any and all federal, state,
local and foreign taxes, assessments
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and other governmental charges, duties, impositions and liabilities, including
taxes based upon or measured by gross receipts, income, profits, sales, use and
occupation, and value added, ad valorem, transfer, franchise, withholding,
payroll, recapture, employment, excise and property taxes, together with all
interest, penalties and additions imposed with respect to such amounts, (ii) any
liability for the payment of any amounts of the type described in clause (i)
above as a result of being a member of an affiliated, consolidated, combined or
unitary group for any period, and (iii) any liability for the payment of any
amounts of the type described in clauses (i) or (ii) above as a result of any
express or implied obligation to indemnify any other person or as a result of
any obligations under any agreements or arrangements with any other person with
respect to such amounts and including any liability for taxes of a predecessor
entity.
(b) Tax Returns and Audits.
(i) As of the Effective Time, the Company will have prepared
and timely filed all required federal, state, local and foreign returns,
estimates, information statements and reports ("Returns") relating to any and
all Taxes concerning or attributable to the Company or its operations and such
Returns are true and correct and have been completed in accordance with
applicable law.
(ii) As of the Effective Time, the Company (A) will have
timely paid all Taxes it is required to pay and withheld with respect to its
employees (and timely paid over to the appropriate Taxing authority) all federal
and state income taxes, Federal Insurance Contribution Act, Federal Unemployment
Tax Act and other Taxes required to be withheld, and (B) will have accrued on
the Current Balance Sheet all Taxes attributable to the periods preceding the
Current Balance Sheet and will not have incurred any liability for Taxes for the
period commencing after the date of the Current Balance Sheet and ending
immediately prior to the Effective Time, other than in the ordinary course of
business.
(iii) The Company has not been delinquent in the payment of
any Tax, nor is there any Tax deficiency or adjustment outstanding, assessed or
proposed against the Company, nor has the Company executed any waiver of any
statute of limitations on or extending the period for the assessment or
collection of any Tax.
(iv) No audit or other examination of any Return of the
Company is presently in progress, nor has the Company been notified of any
request for such an audit or other examination.
(v) The Company has made available to Parent, its legal
counsel and its accountants, copies of all Returns filed for all periods since
its inception.
(vi) There are (and immediately following the Effective Time
there will be) no liens, pledges, charges, claims, restrictions on transfer,
mortgages, security interests or other encumbrances of any sort (collectively,
"Liens") on the assets of the Company relating or attributable to Taxes other
than Liens for Taxes not yet due and payable.
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(vii) Neither the Company nor any of the Members has Knowledge
of any basis for the assertion of any claim for Taxes, which, if adversely
determined, would result in any Lien on the assets of the Company.
(viii) None of the Company's assets is treated as "tax-exempt
use property," within the meaning of Section 168(h) of the Code.
(ix) The Company has been treated as a partnership for Tax
purposes at all times since its inception.
(c) Executive Compensation Tax. There is no contract, agreement,
plan or arrangement to which the Company is a party, including, without
limitation, the provisions of this Agreement, covering any employee or former
employee of the Company, which, individually or collectively, could give rise to
the payment of any amount that would not be deductible pursuant to Sections 280G
or 404.
2.11 Restrictions on Business Activities. There is no agreement
(noncompete or otherwise), commitment, judgment, injunction, order or decree to
which the Company is a party or otherwise binding upon the Company, which has or
may reasonably be expected to have the effect of prohibiting or impairing any
business practice of the Company, any acquisition of property (tangible or
intangible) by the Company, the conduct of business by the Company or otherwise
limiting the freedom of the Company to engage in any line of business or to
compete with any person. Without limiting the generality of the foregoing, the
Company has not entered into any agreement under which the Company is restricted
from selling, licensing or otherwise distributing any of its technology or
products to, or providing services to, customers or potential customers or any
class of customers, in any geographic area, during any period of time or in any
segment of the market.
2.12 Title of Properties; Absence of Liens and Encumbrances; Condition of
Equipment.
(a) The Company owns no real property, nor has it ever owned any
real property. Section 2.12(a) of the Disclosure Schedule sets forth a list of
all real property currently leased by the Company, the name of the lessor, the
date of the lease and each amendment thereto and, with respect to any current
lease, the aggregate annual rental payable under any such lease. All such
current leases are in full force and effect, are valid and effective in
accordance with their respective terms, and there is no, under any of such
leases, any existing default or event of default (or event which with notice or
lapse of time, or both, would constitute a default) by the Company or, to the
Knowledge of the Company or any of the Members, by any other party.
(b) The Company has good and valid title to, or, in the case of
leased properties and assets, valid leasehold interests in, all of its tangible
properties and assets, real, personal and mixed, used or held for use in its
business, free and clear of any Liens, except: (i) as reflected in the Current
Balance Sheet, (ii) Liens for Taxes not yet due and payable, and (iii) such
imperfections of title and encumbrances, if any, which do not detract materially
from the value or interfere materially, or interfere with the present use, of
the property subject thereto or affected thereby.
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(c) Section 2.12(c) of the Disclosure Schedule lists all material
items of equipment (the "Equipment") owned or leased by the Company. Such
Equipment is (i) adequate for the conduct of the business of the Company as
currently conducted and as currently contemplated to be conducted, and (ii) in
good operating condition, regularly and properly maintained, subject to normal
wear and tear.
(d) The Company has sole and exclusive ownership, free and clear of
any Liens, of all customer lists, customer contact information, customer
correspondence and customer licensing and purchasing histories relating to its
current and former customers (the "Customer Information"). No person other than
the Company possesses any claims or rights with respect to use of the Customer
Information.
2.13 Intellectual Property.
(a) Definitions. For all purposes of this Agreement, the following
terms shall have the following respective meanings:
(i) "Intellectual Property" means all intellectual property
rights arising from or associated with the following, whether protected, created
or arising under the laws of the United States or any other jurisdiction:
(1) trade names, registered and unregistered trademarks
and service marks, Internet domain names, and trade dress and rights, and all
applications (including intent to use applications) to register any of the
foregoing (collectively, "Marks");
(2) patents or models, industrial designs and all
applications and applications to register any of the foregoing, including any
and all continuation, divisional, continuation-in-part, reexamination and
reissue patent applications, and any patents issuing therefrom (collectively,
"Patents");
(3) copyrights and all registrations and applications
therefor (collectively, "Copyrights");
(4) know-how, inventions, discoveries, improvements,
concepts, ideas, methods, processes, designs, plans, schematics, drawings,
formulae, technical data, specifications, research and development information,
data bases and other proprietary or confidential information, including customer
lists, technology and product roadmaps, business and marketing plans and
information, financial information (collectively, "Trade Secrets");
(5) mask work and similar rights, including rights
created under Sections 901-914 of Title 17 of the United States Code, including
all registrations and applications to register any of the foregoing, and any
other rights protecting integrated circuit or chip topographies or designs
(collectively, "Mask Works"); and
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(6) moral rights, publicity rights and any other
proprietary, intellectual or industrial property or similar intangible rights of
any kind or nature that do not comprise or are not protected by Marks, Patents,
Copyrights, Trade Secrets or Mask Works (collectively, "Other IP").
(ii) "Company Intellectual Property" means any Intellectual
Property that is owned by, controlled by or exclusively licensed to the Company.
(iii) "Scheduled Intellectual Property" shall mean (A) any
Company Intellectual Property; and (B) any other Intellectual Property that is
used or contemplated to be used in connection with the business of the Company,
or that is licensed to the Company.
(iv) "Registered Intellectual Property" shall mean
Intellectual Property that have been registered, filed, certified or otherwise
perfected by recordation with any state, government or other public legal
authority anywhere in the world.
(v) "Technology" shall mean: (A) the products and services
provided or proposed to be provided by the Company in connection with their
business; or (B) the technology, tools, materials, products and services that
Company uses and/or proposes to use in the operation of the business of the
Company.
(b) Section 2.13(b) of the Disclosure Schedule contains an accurate
and complete list of all Scheduled Intellectual Property. The Company owns or
has the right to use, as currently used or anticipated to be used, all Scheduled
Intellectual Property.
(c) Section 2.13(c) of the Disclosure Schedule contains an accurate
and complete list of all Registered Intellectual Property that is owned,
controlled or exclusively licensed to Company, specifying as to each the nature
of such right, any jurisdiction that has issued a registration with respect
thereto or in which an application for such a registration is pending, and any
applicable registration or application number. Section 2.13(c) of the Disclosure
Schedule also contains an accurate and complete list of all outside counsel
(including patent and trademark agents), and contact information therefor, who
are responsible for the prosecution or registration of Registered Intellectual
Property scheduled in Section 2.13(c), specifying the particular Registered
Intellectual Property for which each such outside counsel is so responsible.
Each item of Registered Intellectual Property that is owned, controlled or
exclusively licensed to Company is valid and subsisting, and all necessary
registration, maintenance and renewal fees in connection with such Registered
Intellectual Property have been paid and all necessary documents and
certificates in connection with such Registered Intellectual Property have been
filed with the relevant authorities in the United States or foreign
jurisdictions, as the case may be. All Patents, Marks, and Copyrights listed in
the Section 2.13(c) of the Disclosure Schedule are valid, enforceable and in
full force and were prosecuted in good faith, and all prosecutions for any
Registered Intellectual Property are proceeding in the ordinary course and no
party responsible for any such prosecution will cease or delay such prosecution
upon Closing. For each product, technology or service of the Company that
constitutes or includes a copyrightable work, the Company has registered the
Copyright in the latest version of such work with the United States Copyright
Office.
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(d) Section 2.13(d) of the Disclosure Schedule contains an accurate
and complete list of all licenses, sublicenses and other agreements pursuant to
which any person other than the Company is authorized to use any Company
Intellectual Property. The Company has not transferred ownership of, or granted
any exclusive license of or exclusive right to use, or authorized the retention
of any exclusive rights to use or joint ownership of, any Intellectual Property
that is or was Company Intellectual Property, to any other person. All Company
Intellectual Property, is free and clear of any Liens or other encumbrances.
(e) Section 2.13(e) of the Disclosure Schedule contains an accurate
and complete list of all licenses, sublicenses and other agreements as to which
the Company is a party and pursuant to which the Company is authorized to use
any Scheduled Intellectual Property owned or otherwise controlled by any third
party (other than so-called "shrink-wrap" single user end-user licenses granted
to the Company relating to "off the shelf" personal computer software that is
generally available on commercially reasonable terms from persons that are
unaffiliated with the Company and that is not incorporated into any product
marketed, sold or licensed, or used in the provision of any service provided, by
the Company). The Company has not granted an exclusive license in any such
Scheduled Intellectual Property, and the Company has not agreed not to license,
sublicense or otherwise use any Scheduled Intellectual Property.
(f) To the extent that any Intellectual Property has been developed
or created independently or jointly by any person other than the Company for
which the Company has, directly or indirectly, paid or otherwise sought to
obtain rights thereon, the Company has obtained a written, valid and enforceable
assignment sufficient to irrevocably transfer all rights in such Intellectual
Property to the Company and, to the maximum extent provided for by, and in
accordance with, applicable laws and regulations, the Company is the sole and
exclusive owner of, all such Intellectual Property and Company has recorded each
such assignment with the relevant governmental authorities, including the PTO,
the U.S. Copyright Office, or their respective equivalents in any relevant
foreign jurisdiction, as the case may be. No person who has licensed
Intellectual Property to, or provided Technology to, the Company has ownership
rights or license rights to improvements made by the Company in such
Intellectual Property or Technology.
(g) The Company has taken reasonable steps sufficient to secure and
protect for the Company's benefit all Company Intellectual Property, including
without limitation reasonable steps sufficient to safeguard and maintain the
secrecy and confidentiality of the Company Intellectual Property not otherwise
protected by Patent or Copyright. Without limitation on the generality of the
foregoing, the Company has obtained confidentiality and inventions assignment
agreements, in sufficient form that have protections and conditions
substantially similar in effect to those forms previously provided to Parent by
Company, from all of the past and present employees, independent contractors and
consultants of the Company involved in the creation or development of Company
Intellectual Property. No independent contractor or consultant who has performed
services related to the Company's business has (or upon Closing, will have) any
right, title, or interest in any Scheduled Intellectual Property.
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(h) The Scheduled Intellectual Property constitutes all the
Intellectual Property used in and/or necessary to the conduct of the business of
the Company as it currently is conducted or is currently contemplated to be
conducted, including without limitation the design, development, manufacture,
use, import and sale of products, technology and services (including products,
technology or services currently under development).
(i) There are no contracts, licenses or agreements between the
Company and any other person with respect to Scheduled Intellectual Property
under which there is any dispute regarding the scope of such agreement, or
performance under such agreement including with respect to any payments to be
made or received by the Company thereunder. There are no actions that must be
taken by the Company within 60 days of the Closing, including the payment of any
registration, maintenance or renewal fees or the filing of any documents,
applications or certificates for the purposes of maintaining, perfecting or
preserving or renewing any such Scheduled Intellectual Property.
(j) Neither this Agreement nor the transactions contemplated by this
Agreement, including the assignment to Parent by operation of law or otherwise
(to the extent that such transactions are deemed to effect such assignment) of
any contracts or agreements to which the Company is a party, will result in: (i)
Parent, Sub or the Company granting to any third party any right to any
Intellectual Property or Technology owned by, controlled by, or licensed to, any
of them; (ii) Parent, Sub or the Company being bound by, or subject to, any
non-compete or other material restriction on the operation or scope or their
respective businesses; or (iii) Parent, Sub or the Company being obligated to
pay any royalties or other material amounts to any third party in excess of
those payable by any of them, respectively, in the absence of this Agreement or
the transactions contemplated hereby. The execution, delivery, and performance
of this Agreement, and the consummation of the transactions contemplated hereby,
will not: (1) breach, violate, conflict with or otherwise adversely affect any
agreement governing any Scheduled Intellectual Property (including any licenses
to use the Scheduled Intellectual Property); (2) affect any rights or
obligations with respect to the Scheduled Intellectual Property, including the
scope of any licenses thereof or the terms and conditions under which any such
Scheduled Intellectual Property may be used; (3) cause the forfeiture or
termination or give rise to a right of forfeiture or termination of any
Scheduled Intellectual Property; (4) in any way impair the right of Parent to
use any Scheduled Intellectual Property as currently used or anticipated to be
used; or (5) in any way impair the right of Parent to bring any action for the
unauthorized use or disclosure, infringement or misappropriation of Company
Intellectual Property.
(k) To the best of the Company's Knowledge, no person is infringing
or misappropriating any Company Intellectual Property. The operation of the
business of the Company as it currently is conducted or is currently
contemplated to be conducted, including but not limited to the design,
development, use, import, manufacture and sale of the products, technology or
services (including products, technology or services currently under
development) of the Company has not, does not and will not infringe or
misappropriate the Intellectual Property of any person, violate the rights of
any person (including rights to privacy or publicity), or constitute unfair
competition or trade practices under the laws of any jurisdiction. The Company
has not: (i) received any oral,
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written, or other communication that the Company is or may be infringing,
misappropriating or otherwise using or disclosing in an unauthorized manner any
right or claimed right of any person, nor does the Company have any Knowledge of
any basis for any of the foregoing; (ii) received patent demand letters,
invitations to license or other correspondence proposing negotiations or
consideration of any license for patents; or (iii) any knowledge that any of the
Company Intellectual Property are being used or disclosed in an unauthorized
manner, infringed or misappropriated by any person.
(l) No Company Intellectual Property or Technology of the Company is
subject to any proceeding or outstanding decree, order, judgment or settlement
agreement or stipulation that restricts in any manner the use, transfer or
licensing thereof by the Company or may affect the validity, use or
enforceability of such Company Intellectual Property or Technology. None of the
Company Intellectual Property was developed by or on behalf of or using grants
or any other subsidies of any Governmental Entity.
(m) Other than "shrink-wrap" and similar widely available binary
code and commercial end-user licenses, Section 2.13(m) of the Disclosure
Schedule lists all contracts, licenses and agreements between the Company and
any other person wherein or whereby the Company has agreed to, or assumed, any
obligation or duty to warrant, indemnify, reimburse, hold harmless, guaranty or
otherwise assume or incur any obligation or liability or provide a right of
rescission with respect to the infringement or misappropriation by the Company
or other party of third party Intellectual Property.
(n) No product, technology, service, material or publication
published, distributed or offered by the Company, or conduct or statement of
Company constitutes obscene material, a defamatory statement or material, false
advertising or otherwise violates any law or regulation.
2.14 Agreements, Contracts and Commitments.
(a) The Company is not party to nor is it bound by:
(i) any employment or consulting agreement, contract or
commitment with an employee or individual consultant or salesperson or
consulting or sales agreement, contract or commitment with a firm or other
organization;
(ii) any agreement or plan, including without limitation any
option plan or purchase plan with respect to Membership Interests, 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;
(iii) any fidelity or surety bond or completion bond;
(iv) any lease of personal property having an annual rental
rate in excess of $5,000 individually or $10,000 in the aggregate;
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(v) any agreement, contract or commitment relating to capital
expenditures and involving future payments in excess of $5,000 individually or
$10,000 in the aggregate;
(vi) any agreement, contract or commitment relating to the
disposition or acquisition of assets or any interest in any business enterprise
outside the ordinary course of the Company's business;
(vii) any mortgages, indentures, guarantees, loans or credit
agreements, security agreements or other agreements or instruments relating to
the borrowing of money or extension of credit;
(viii) any purchase order or contract for the purchase of
materials involving in excess of $5,000 individually or $10,000 in the
aggregate;
(ix) any construction contracts;
(x) any dealer, distribution, joint marketing or development
agreement;
(xi) any sales representative, original equipment
manufacturer, value added, remarketer, reseller or independent software vendor
or other agreement for use or distribution of the Company's products, technology
or services; or
(xii) any other agreement, contract or commitment that
involves $5,000 individually or $10,000 in the aggregate or more and is not
cancelable without penalty within 30 days.
(b) The Company is in compliance with and has not breached, violated
or defaulted under, or received notice that it has breached, violated or
defaulted under, any of the terms or conditions of any agreement, contract,
covenant, instrument, lease, license or commitment to which it is party or by
which it is bound (collectively a "Contract"), nor is the Company or any of the
Members aware of any event that would constitute such a breach, violation or
default with the lapse of time, giving of notice or both. Each Contract is in
full force and effect and is not subject to any default thereunder, nor is any
party obligated to the Company pursuant thereto subject to any default
thereunder.
(c) The Company has obtained, or will obtain prior to the Effective
Time, all necessary consents, waivers and approvals of parties to any Contract
as are required thereunder in connection with the Merger or for such Contracts
to remain in effect without modification, limitation or alteration after the
Effective Time. Following the Effective Time, the Company will be permitted to
exercise all of its rights under the Contracts without the payment of any
additional amounts or consideration other than amounts or consideration which
the Company would otherwise be required to pay had the transactions contemplated
by this Agreement not occurred.
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2.15 Interested Party Transactions. No officer, director, manager or
Member of the Company has or has had, directly or indirectly: (i) an interest in
any entity which furnished or sold, or furnishes or sells, services, products or
technology that the Company furnishes or sells, or proposes to furnish or sell;
(ii) any interest in any entity that purchases from or sells or furnishes to the
Company, any goods or services; or (iii) a beneficial interest in any Contract
to which the Company is a party; provided, however, that ownership of no more
than 1% of the outstanding voting stock of a publicly traded corporation shall
not be deemed to be an "interest in any entity" for purposes of this Section
2.15.
2.16 Governmental Authorization. Each consent, license, permit, grant or
other authorization (i) pursuant to which the Company currently operates or
holds any interest in any of their properties, or (ii) which is required for the
operation of the Company's business as currently conducted or currently
contemplated to be conducted or the holding of any such interest (collectively,
"Company Authorizations") has been issued or granted to the Company. Section
2.16 of the Disclosure Schedule lists all Company Authorizations. The Company
Authorizations are in full force and effect, and shall remain in full force and
effect without modification after the Closing, and constitute all Company
Authorizations required to permit the Company to operate or conduct its business
or hold any interest in their properties or assets.
2.17 Litigation. There is no action, suit, claim or proceeding of any
nature pending or threatened against the Company, its properties (tangible or
intangible) or any of its officers or directors, nor is there any reasonable
basis therefor. There is no investigation or other proceeding pending or
threatened against the Company, any of their properties (tangible or intangible)
or any of their officers or directors by or before any Governmental Entity, nor
is there any reasonable basis therefor. No Governmental Entity has at any time
challenged or questioned the legal right of the Company to conduct their
operations as presently or previously conducted or as presently contemplated to
be conducted.
2.18 Accounts Receivable.
(a) The Company has made available to Parent and its accountants a
list of all accounts receivable of the Company as of March 31, 2002, together
with a range of days elapsed since invoice. All of the Company's accounts
receivable arose in the ordinary course of business, are carried at values that
have been consistently applied and are collectible except to the extent of
reserves therefor set forth in the Current Balance Sheet or, for receivables
arising subsequent to March 31, 2002, as reflected on the books and records of
the Company. No person has any Lien on any of the Company's accounts receivable
and no request or agreement for deduction or discount has been made with respect
to any of the Company's accounts receivable.
(b) Section 2.18(b) of the Disclosure Schedule sets forth the
customers of the Company, as well as the aggregate dollar amount of business
between the customer and the Company, from the beginning of fiscal year 2001 to
date. The Company has not received any customer complaints that the Company has
not been able to address to the satisfaction of the complainant.
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2.19 Minute Books. The minutes of the Company made available to counsel
for Parent are the only minutes of the Company and contain accurate summaries of
all meetings of the managers (or committees thereof) of the Company and all
meetings of the Members (or committees thereof) of the Company, or actions by
written consent since the time or organization of the Company.
2.20 Environmental Matters.
(a) Hazardous Material. The Company has not: (i) operated any
underground storage tanks at any property that the Company has at any time
owned, operated, occupied or leased; or (ii) illegally released any amount of
any substance that has been designated by any Governmental Entity or by
applicable federal, state or local law to be radioactive, toxic, hazardous or
otherwise a danger to health or the environment, including without limitation
PCBs, asbestos, petroleum, and urea-formaldehyde and all substances listed as
hazardous substances pursuant to the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended, or defined as a hazardous
waste pursuant to the United States Resource Conservation and Recovery Act of
1976, as amended, and the regulations promulgated pursuant to said laws (a
"Hazardous Material"). No Hazardous Materials are present in, on or under any
property, including the land and the improvements, ground water and surface
water thereof, that the Company has at any time owned, operated, occupied or
leased.
(b) Hazardous Materials Activities. The Company has not transported,
stored, used, manufactured, disposed of, released or exposed its employees or
others to Hazardous Materials in violation of any law in effect on or before the
Effective Time, nor has the Company disposed of, transported, sold, or
manufactured any product containing a Hazardous Material (any or all of the
foregoing being collectively referred to herein as "Hazardous Materials
Activities") in violation of any rule, regulation, treaty or statute promulgated
by any Governmental Entity in effect prior to or as of the date hereof to
prohibit, regulate or control Hazardous Materials or any Hazardous Material
Activity.
(c) Permits. The Company currently hold all environmental approvals,
permits, licenses, clearances and consents (the "Environmental Permits")
necessary for the conduct of the Company's Hazardous Material Activities,
respectively, and other businesses of the Company as such activities and
businesses are currently being conducted and as currently contemplated to be
conducted.
(d) Environmental Liabilities. No action, proceeding, revocation
proceeding, amendment procedure, writ, injunction or claim is pending or
threatened concerning any Environmental Permit, Hazardous Material or any
Hazardous Materials Activity of the Company. Neither the Company nor any of the
Members have any Knowledge of any fact or circumstance that is reasonably likely
to involve the Company in any environmental litigation or impose upon the
Company any environmental liability.
2.21 Brokers' and Finders' Fees; Third Party Expenses. The Company has not
incurred, nor will it incur, directly or indirectly, any liability for brokerage
or finders' fees or agents' commissions or any similar charges in connection
with the Agreement or any transaction
-23-
contemplated hereby. Section 2.21 of the Disclosure Schedule sets forth the
Company's current reasonable estimate of all Third Party Expenses (as defined in
Section 5.5 below) expected to be incurred by the Company in connection with the
negotiation and effectuation of the terms and conditions of this Agreement and
the transactions contemplated hereby.
2.22 Employee Benefit Plans and Compensation.
(a) Definitions. For all purposes of this Agreement, the following
terms shall have the following respective meanings:
(i) "Affiliate" shall mean any other person or entity under
common control with the Company within the meaning of Section 414(b), (c), (m)
or (o) of the Code, and the regulations issued thereunder.
(ii) "Company Employee Plan" shall mean any plan, program,
policy, practice, contract, agreement or other material arrangement providing
for compensation, severance, termination pay, deferred compensation, performance
awards, awards of any membership interests, fringe benefits or other employee
benefits or remuneration of any kind, whether written, unwritten or otherwise,
funded or unfunded, including without limitation, each "employee benefit plan,"
within the meaning of Section 3(3) of ERISA which is or has been maintained,
contributed to, or required to be contributed to, by the Company or any
Affiliate for the benefit of any Employee, or with respect to which the Company
or any Affiliate has or may have any liability or obligation.
(iii) "COBRA" shall mean the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended.
(iv) "DOL" shall mean the United States Department of Labor.
(v) "Employee" shall mean any current or former employee,
consultant or director of the Company or any Affiliate.
(vi) "Employee Agreement" shall mean each management,
employment, severance, consulting, relocation, repatriation, expatriation,
visas, work permit or other agreement, or contract between the Company or any
Affiliate and any Employee.
(vii) "ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended.
(viii) "FMLA" shall mean the Family Medical Leave Act of 1993,
as amended.
(ix) "IRS" shall mean the United States Internal Revenue
Service.
(x) "PBGC" shall mean the United States Pension Benefit
Guaranty Corporation.
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(xi) "Pension Plan" shall mean each Company Employee Plan,
which is an "employee pension benefit plan," within the meaning of Section 3(2)
of ERISA.
(b) Schedule. Section 2.22(b) of the Disclosure Schedule contains an
accurate and complete list of each Company Employee Plan and each Employee
Agreement under each Company Employee Plan or Employee Agreement. The Company
has no plan or commitment to establish any new Company Employee Plan or Employee
Agreement, to modify any Company Employee Plan or Employee Agreement, or to
enter into any Company Employee Plan or Employee Agreement. Section 2.22(b) of
the Disclosure Schedule also sets forth a table setting forth the name, annual
salary and, if applicable, bonus, of each employee of the Company.
(c) Documents. The Company has provided to Parent: (i) correct and
complete copies of all documents embodying each Company Employee Plan and each
Employee Agreement, including without limitation all amendments thereto and all
related trust documents; (ii) the three most recent annual reports (Form Series
5500 and all schedules and financial statements attached thereto), if any,
required under ERISA or the Code in connection with each Company Employee Plan;
(iii) if the Company Employee Plan is funded, the most recent annual and
periodic accounting of Company Employee Plan assets; (iv) the most recent
summary plan description together with the summary(ies) of material
modifications thereto, if any, required under ERISA with respect to each Company
Employee Plan; (v) all material written agreements and contracts relating to
each Company Employee Plan, including without limitation administrative service
agreements and group insurance contracts; (vi) all communications material to
any Employee or Employees relating to any Company Employee Plan and any proposed
Company Employee Plans, in each case, relating to any amendments, terminations,
establishments, increases or decreases in benefits, acceleration of payments or
vesting schedules or other events which would result in any liability to the
Company; (vii) all correspondence to or from any governmental agency relating to
any Company Employee Plan; (viii) all COBRA forms and related notices; (ix) all
policies pertaining to fiduciary liability insurance covering the fiduciaries
for each Company Employee Plan; (x) all discrimination tests for each Company
Employee Plan for the three (3) most recent closed plan years; and (xi) all
registration statements, annual reports (Form 11-K and all attachments thereto)
and prospectuses prepared in connection with each Company Employee Plan.
(d) Employee Plan Compliance. The Company has performed all
obligations required to be performed by it under, is not in default or violation
of, and has no Knowledge of any default or violation by any other party to each
Company Employee Plan, and each Company Employee Plan has been established and
maintained in accordance with its terms and in compliance with all applicable
laws, statutes, orders, rules and regulations, including but not limited to
ERISA or the Code. No "prohibited transaction," within the meaning of Section
4975 of the Code or Sections 406 and 407 of ERISA, and not otherwise exempt
under Section 408 of ERISA, has occurred with respect to any Company Employee
Plan. There are no actions, suits or claims pending, or, to the Knowledge of the
Company or any of the Members, threatened or reasonably anticipated (other than
routine claims for benefits) against any Company Employee Plan or against the
assets of any Company Employee Plan. Each Company Employee Plan can be amended,
terminated or otherwise discontinued after the Effective Time in accordance with
its terms, without
-25-
liability to Parent, the Surviving Entity, the Company or any Affiliate (other
than ordinary administration expenses). There are no audits, inquiries or
proceedings pending or, to the Knowledge of the Company or any of Members, or
any Affiliates, threatened by the IRS or DOL with respect to any Company
Employee Plan. Neither the Company nor any Affiliate is subject to any penalty
or tax with respect to any Company Employee Plan under Section 502(i) of ERISA
or Sections 4975 through 4980 of the Code.
(e) No Pension Plans. Neither the Company nor any other Affiliate
has ever maintained, established, sponsored, participated in, or contributed to,
any (i) any pension plan as defined in ERISA Section 3(2); (ii) Pension Plans
subject to Title IV of ERISA, or (iii) "multiemployer plan" within the meaning
of Section (3)(37) of ERISA.
(f) No Post-Employment Obligations. No Company Employee Plan
provides, or reflects or represents any liability to provide, retiree life
insurance, retiree health or other retiree employee welfare benefits to any
person for any reason, except as may be required by COBRA or other applicable
statute, and the Company has never represented, promised or contracted (whether
in oral or written form) to any Employee (either individually or to Employees as
a group) or any other person that such Employee(s) or other person would be
provided with retiree life insurance, retiree health or other retiree employee
welfare benefit, except to the extent required by statute.
(g) COBRA. The Company and each Affiliate has, prior to the
Effective Time, complied with the health care continuation requirements of
COBRA, the requirements of FMLA or any similar provisions of state law
applicable to its Employees.
(h) Effect of Transaction. The execution of this Agreement and the
consummation of the transactions contemplated hereby will not (either alone or
upon the occurrence of any additional or subsequent events) constitute an event
under any Company Employee Plan, Employee Agreement, trust or loan that will or
may result in any payment (whether of severance pay or otherwise), acceleration,
forgiveness of indebtedness, vesting, distribution, increase in benefits or
obligation to fund benefits with respect to any Employee, except as expressly
required by this Agreement.
(i) Employment Matters. The Company: (i) is in compliance with all
applicable foreign, federal, state and local laws, rules and regulations
respecting employment, employment practices, terms and conditions of employment
and wages and hours, in each case, with respect to Employees; (ii) has withheld
and reported all amounts required by law or by agreement to be withheld and
reported with respect to wages, salaries and other payments to Employees; (iii)
is not liable for any arrears of wages or any taxes or any penalty for failure
to comply with any of the foregoing; and (iv) is not liable for any payment to
any trust or other fund governed by or maintained by or on behalf of any
governmental authority, with respect to unemployment compensation benefits,
social security or other benefits or obligations for Employees (other than
routine payments to be made in the normal course of business and consistent with
past practice). There are no pending or, to the Knowledge of the Company or any
of the Members, threatened or reasonably anticipated
-26-
claims or actions against the Company under any worker's compensation policy or
long-term disability policy.
(j) Labor. No work stoppage or labor strike against the Company is
pending, threatened or reasonably anticipated. To the Knowledge of the Company,
there are neither any activities nor proceedings of any labor union to organize
any Employees, nor have there ever been. There are no actions, suits, claims,
labor disputes or grievances pending, threatened or reasonably anticipated
relating to any labor, safety or discrimination matters involving any Employee,
including without limitation charges of unfair labor practices or discrimination
complaints. The Company has not engaged in any unfair labor practices within the
meaning of the National Labor Relations Act. The Company is not presently, nor
has it been in the past, a party to, or bound by, any collective bargaining
agreement or union contract with respect to Employees and no collective
bargaining agreement is being negotiated by the Company.
(k) No Interference or Conflict. To the Knowledge of the Company or
any of the Members, no Member, officer, employee or consultant of the Company is
obligated under any contract or agreement subject to any judgment, decree or
order of any court or administrative agency that would interfere with such
person's efforts to promote the interests of the Company or that would interfere
with the Company's business. Neither the execution nor delivery of this
Agreement, nor the carrying on of the Company's business as presently conducted
or proposed to be conducted, nor any activity of such officers, directors,
employees or consultants in connection with the carrying on of the Company's
business as presently conducted or currently proposed to be conducted, will
conflict with or result in a breach of the terms, conditions or provisions of,
or constitute a default under, any contract or agreement under which any of such
officers, directors, employees or consultants is now bound.
2.23 Insurance. Section 2.23 of the Disclosure Schedule lists all
insurance policies and fidelity bonds covering the assets, business, equipment,
properties, operations, employees, officers and directors of the Company or any
Affiliate. There is no claim by the Company or any Affiliate pending under any
of such policies or bonds as to which coverage has been questioned, denied or
disputed by the underwriters of such policies or bonds. All premiums due and
payable under all such policies and bonds have been paid, and the Company and
its Affiliates are otherwise in material compliance with the terms of such
policies and bonds (or other policies and bonds providing substantially similar
insurance coverage). Neither the Company nor any of the Members have any
Knowledge of threatened termination of, or premium increase with respect to, any
of such policies.
2.24 Compliance with Laws. The Company has complied with, is not in
violation of, and has not received any notices of violation with respect to, any
foreign, federal, state or local statute, law or regulation.
2.25 Warranties; Indemnities. Except for the warranties and indemnities
contained in those contracts and agreements set forth in Section 2.13(h) of the
Disclosure Schedule and warranties implied by law, the Company has not given any
warranties or indemnities relating to products or technology sold or services
rendered by the Company.
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2.26 Complete Copies of Materials. The Company has delivered true and
complete copies of each document (or summaries of same) that has been requested
by Parent or its counsel.
2.27 Information Statement. The information supplied by the Company for
inclusion in the information statement sent to the holders of Membership
Interests to consider the Merger (the "Information Statement"), did not, on the
date the Information Statement was first mailed to the Members, or as of the
date hereof: contain any statement that, at such time and in light of the
circumstances under which it was made, was false or misleading with respect to
any material fact; omit to state any material fact necessary in order to make
the statements made therein not false or misleading; or omit to state any
material fact necessary to correct any statement in any earlier communication
with respect to the consent solicitation that became false or misleading.
Notwithstanding the foregoing, the Company makes no representation or warranty
with respect to any information supplied by Parent or Sub that is contained in
any of the foregoing documents.
2.28 Powers of Attorney. There are no outstanding powers of attorney
executed on behalf of the Company and/or any of the Members.
2.29 Representations Complete. None of the representations or warranties
made by the Company or any Member, nor any financial statement, other written
financial information or statements made in any exhibit, schedule or certificate
furnished by the Company or any Member pursuant to this Agreement, or furnished
in or in connection with documents mailed or delivered to the Members for use in
soliciting their consent to this Agreement and the Merger, contains or will
contain at the Effective Time any untrue statement of a material fact or omits
or will omit at the Effective Time to state any material fact necessary in order
to make the statements contained herein or therein, in light of the
circumstances under which they were made, not misleading. There is no event,
fact or condition that has caused, or that is reasonably likely to cause, a
Material Adverse Effect, that has not been set forth in this Agreement or the
Disclosure Schedule. The financial projections relating to the Company that were
delivered to Parent prior to the date of this Agreement ("Financial
Projections") constitute a reasonable estimate of the information purported to
be shown therein. The Company prepared such projections in good faith based upon
reasonable assumptions, and believes that there is a reasonable basis for such
projections. The Company is not aware of any fact or information that would lead
it to believe that the Financial Projections are misleading in any respect.
ARTICLE III
ADDITIONAL REPRESENTATIONS AND WARRANTIES OF THE MEMBERS
Each Member further represents and warrants severally and not jointly to
Parent and Sub, subject to such exceptions as are specifically disclosed in the
Disclosure Schedules, that on the date hereof:
3.1 Ownership of Membership Interests. Each Member is the sole record and
beneficial owner of the Membership Interests in the percentage set forth next to
his, her or its name in Section 2.3(a) of the Disclosure Schedule, and such
Membership Interests are to be sold pursuant to
-28-
this Agreement. Such Membership Interests are not subject to any Lien or to any
rights of first refusal of any kind. There are no options, warrants, calls,
rights, commitments or agreements of any character, written or oral, to which
each Member is party or by which he or it is bound obligating the Member to
issue, deliver, sell, repurchase or redeem, or cause to be issued, delivered,
sold repurchased or redeemed, any Membership Interests or obligating the Member
to grant or enter into any such option, warrant, call, right, commitment or
agreement. The Member has good and valid title to, and has the sole right to
transfer such Membership Interests to the Company. Such interests constitute all
of the Membership Interests owned, beneficially or of record, by the Member. The
Company will receive good title to such Membership Interests, subject to no
claim, lien, pledge, charge, security interest or other encumbrance retained,
granted or permitted by the Member. The Member has not engaged in any sale or
other transfer of its Membership Interests in contemplation of the Merger.
3.2 Member Tax Matters. The Member has had an opportunity to review with
its own tax advisors the Tax consequences to the Member of the Merger and the
transactions contemplated by this Agreement, including the sale of his, her or
its ownership interests in the Company to Parent. The Member understands that
he, she or it must rely solely on his, her or its advisors and not on any
statements or representations by Parent, or any of its agents. The Member
understands that he, she or it (and not Parent) shall be responsible for his,
her or its own tax liability that may arise as a result of the Merger or the
transactions contemplated by this Agreement.
3.3 Absence of Claims by the Member. The Member has no claim against the
Company whether present or future, contingent or unconditional, fixed or
variable under any contract or on any other legal basis whatsoever.
3.4 No Registration. The Member understands that the shares of Parent
Common Stock to be issued to the Member pursuant to the Merger have not been
registered under the Securities Act of 1933, as amended (the "Securities Act")
by reason of a specific exemption from the registration provisions of the
Securities Act, the availability of which depends upon, among other things, the
bona fide nature of the investment intent and the accuracy of the Member's
representations as expressed herein or otherwise made pursuant hereto.
3.5 Investment Intent. The Member is acquiring the shares of Parent Common
Stock pursuant to the Merger for investment for its own account, not as a
nominee or agent, and not with the view to, or for resale in connection with,
any distribution thereof.
3.6 Investment Experience. The Member has substantial experience in
evaluating and investing in private placement transactions of securities in
companies similar to Parent so that it is capable of evaluating the merits and
risks of its investment in Parent and has the capacity to protect its own
interests.
3.7 Speculative Nature of Investment. The Member acknowledges that the
Merger and its investment in shares of Parent Common Stock by way of the Merger
is highly speculative and entails a substantial degree of risk, and the Member
is in a position to lose the entire amount of such investment.
-29-
3.8 Access to Data. The Member has had an opportunity to discuss Parent's
business, management and financial affairs with Parent's management. The Member
has also had an opportunity to ask questions of officers of Parent, which
questions were answered to its satisfaction. The Member understands that such
discussions, as well as any information issued by Parent, were intended to
describe certain aspects of Parent's business and prospects, but were not
necessarily a thorough or exhaustive description. The Member acknowledges that
any business plans prepared by Parent have been, and continue to be, subject to
change and that any projections included in such business plans or otherwise are
necessarily speculative in nature, and it can be expected that some or all of
the assumptions underlying the projections will not materialize or will vary
significantly from actual results.
3.9 Accredited Investor. The Member is an "accredited investor" within the
meaning of Regulation D, Rule 501(a), promulgated by the Securities and Exchange
Commission.
3.10 Member Counsel. The Member acknowledges that it has had the
opportunity to review the Agreements, the exhibits and schedules attached hereto
and thereto and the transactions contemplated by the Agreements with its own
legal counsel. Each Member is relying solely on such counsel and not on any
statements or representations of the Company or its agents for legal advice with
respect to this investment or the transactions contemplated by the Agreements.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Parent and Sub hereby represent and warrant to the Company that on the
date hereof:
4.1 Organization, Standing and Power. Parent is a corporation duly
organized, validly existing and in good standing under the laws of the State of
California. Sub is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. Each of Parent and Sub has the
corporate power to own its properties and to carry on its business as currently
conducted and is duly qualified or licensed to do business and is in good
standing in each jurisdiction in which the failure to be so qualified or
licensed would have a material adverse effect on the business, assets (including
intangible assets), liabilities, condition (financial or otherwise), results of
operations or capitalization of Parent (a "Parent Material Adverse Effect").
4.2 Authority. Each of Parent and Sub has all requisite corporate power
and authority to enter into this Agreement and any Related Agreements to which
it is a party and to consummate the transactions contemplated hereby and
thereby. The execution and delivery of this Agreement, any Related Agreements to
which it is a party and the consummation of the transactions contemplated hereby
and thereby have been duly authorized by all necessary corporate action on the
part of Parent and Sub. As of the date hereof, this Agreement and the Merger
have been unanimously approved by the Board of Directors of Parent. This
Agreement and any Related Agreement to which Parent and Sub are parties have
been duly executed and delivered by Parent and Sub and, assuming the due
authorization, execution and delivery by the other parties hereto and thereto,
constitute the valid and binding obligations of Parent and Sub, enforceable in
accordance with their terms, except as such
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enforceability may be limited by principles of public policy and subject to the
laws of general application relating to bankruptcy, insolvency and the relief of
debtors and rules of law governing specific performance, injunctive relief or
other equitable remedies.
4.3 Capital Structure.
(a) The authorized stock of Parent consists of: (i) 75,000,000
shares of Common Stock, without par value, of which 22,413,711 shares were
issued and outstanding as of March 25, 2002, and (ii) 5,000,000 shares of
Preferred Stock, without par value, of which 75,000 are designated Series A
Participating Preferred Stock, of which no shares were issued and outstanding.
The authorized capital stock of Sub consists of 1,000 shares of Common Stock,
$0.001 par value, 1,000 shares of which, as of the date hereof, are issued and
outstanding and are held by Parent. All such shares of Parent and Sub have been
duly authorized, and all such issued and outstanding shares have been validly
issued, are fully paid and nonassessable, are free of any liens or encumbrances
other than any liens or encumbrances created by or imposed upon the holders
thereof, are not subject to preemptive rights created by statute, the Articles
of Incorporation or Bylaws of Parent as currently in effect or any agreement to
which Parent is a party or by which it is bound, and have been issued in
compliance with federal and state securities laws.
(b) The shares of Parent Common Stock to be issued pursuant to the
Merger will be duly authorized, validly issued, fully paid, non-assessable, free
of any liens or encumbrances and not subject to any preemptive rights or rights
of first refusal created by statute or the Articles of Incorporation or Bylaws
of Parent or Sub or any agreement to which Parent or Sub is a party or is bound
and will be issued in compliance with federal and state securities laws.
4.4 No Conflict. The execution and delivery by each of Parent and Sub of
this Agreement and any Related Agreements to which Parent and Sub are party do
not, and the consummation of the transactions contemplated hereby and thereby
will not, conflict with or result in any violation of or default under (with or
without notice or lapse of time, or both), or give rise to a Conflict under: (i)
any provision of the Articles of Incorporation or Bylaws, each as amended, of
Parent or Sub, (ii) any mortgage, indenture, lease, contract or other agreement
or instrument, permit, concession, franchise or license to which Parent or any
of its respective properties or assets are subject and which has been filed as
an exhibit to Parent's filings under the Securities Act or Exchange Act, or
(iii) any judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to Parent or Sub or their respective properties or assets, except in
each case where such Conflict will not have a Parent Material Adverse Effect.
4.5 Consents. No consent approval, order or authorization of or
registration, declaration or filing with any Governmental Entity is required by
or with respect to Parent in connection with the execution and delivery of this
Agreement by Parent and Sub or the consummation by Parent and Sub of the
transactions contemplated hereby, except for (i) the California Certificate of
Merger in California and the Delaware Certificate of Merger in Delaware as
provided in Section 1.2 herein, (ii) the filing, if any, of appropriate forms
with the Commission and National Association of Securities Dealers ("NASD"),
(iii) any filings as may be required under applicable state securities
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laws and the securities laws of any foreign country, (iv) the filing with the
NASDAQ National Market of a Notification Form for Listing of Additional Shares
with respect to the shares of Parent Common Stock issuable upon conversion of
the Membership Interests in the Merger, and (v) such other consents,
authorizations, filings, approvals and registrations which, if not obtained or
made, would not have a Material Adverse Effect on Parent and would not prevent,
materially alter or delay any of the transactions contemplated by this
Agreement.
4.6 SEC Documents; Parent Financial Statements. Parent has made available
(via ▇▇▇▇▇) to the Company a true and complete copy of each annual, quarterly
and other reports, registration statements and definitive proxy statement filed
by Parent with the SEC since January 1, 2001 (the "Parent SEC Documents"). As of
their respective filing dates, the Parent SEC Documents complied in all material
respects with the requirements of the Securities Act and the Exchange Act, as
the case may be, and the rules and regulations of the SEC promulgated thereunder
applicable to such Parent SEC Documents. None of the Parent SEC Documents
contained on their filing dates any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, except to the extent corrected by a subsequently filed
Parent SEC Document. The financial statements of Parent included in the Parent
SEC Documents (the "Parent Financial Statements") complied as to form in all
material respects with the published rules and regulations of the SEC with
respect thereto, were prepared in accordance with GAAP applied on a consistent
basis throughout the periods indicated (except as may be indicated in the notes
thereto or, in the case of unaudited financial statements, as permitted under
Form 10-Q under the Exchange Act) and fairly presented the consolidated
financial position of Parent and its consolidated subsidiaries as of the
respective dates thereof and the consolidated results of Parent's operations and
cash flows for the periods indicated (subject to, in the case of unaudited
statements, to normal and recurring year-end audit adjustments).
4.7 Information Statement. The information supplied by Parent for
inclusion in the Information Statement did not, on the date the Information
Statement was first mailed to the Members, or as of the date hereof: contain any
statement that, at such time and in light of the circumstances under which it
shall be made, was false or misleading with respect to any material fact; omit
to state any material fact necessary in order to make the statements made
therein not false or misleading; or omit to state any material fact necessary to
correct any statement in any earlier communication with respect to the consent
solicitation that became false or misleading. Notwithstanding the foregoing,
Parent makes no representation or warranty with respect to any information
supplied by Company, which is contained in any of the foregoing documents.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Registration Rights Agreement. Pursuant to a Registration Rights
Agreement, in the form attached hereto as Exhibit A, Parent shall agree to grant
rights with respect to the registration under the Securities Act of the resale
by each Member of the Parent Common Stock to be issued to
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such Member hereunder. The parties hereto acknowledge and agree that the Parent
Common Stock to be issued by Parent pursuant to this Agreement shall constitute
"restricted securities" within the meaning of Rule 144 promulgated under the
Securities Act ("Rule 144") until so registered.
5.2 Restrictions on Transfer. Each share of Parent Common Stock to be
issued hereunder shall be issued without any legend restricting transfer of such
shares except (i) as relates to restrictions on transfer by affiliates of the
Company pursuant to Rule 144 of the Securities Act; (ii) any legend relating to
any repurchase option, risk of forfeiture or other condition of any Membership
Interests, as set forth in Section 1.7 of this Agreement; and (iii) that
aggregate sales of Parent Common Stock by all Members shall not exceed 15% of
the Aggregate Stock Consideration in each quarter (on a non-cumulative basis) in
the one year following the Effective Time.
5.3 Access to Information. The Company agrees to provide to Parent and its
accountants, counsel and other representatives copies of internal financial
statements (including Tax returns and supporting documentation) promptly upon
request. No information or knowledge obtained in any investigation pursuant to
this Section 5.3 shall affect or be deemed to modify: any representation or
warranty contained herein, the conditions to the obligations of the parties to
consummate the Merger in accordance with the terms and provisions hereof, or the
indemnification obligations of the Company and the Members.
5.4 Confidentiality. Each party agrees that the information obtained in
any investigation pursuant to Section 5.4, or pursuant to the negotiation and
execution of this Agreement or the effectuation of the transactions contemplated
hereby, shall be governed by the terms of the Mutual Nondisclosure Agreement,
dated as of March 11, 2002, by and between Parent and the Company, and the
Non-Disclosure Agreement, dated as of April 2, 2002, by and between Parent and
the Company (collectively, the "Confidential Disclosure Agreements").
5.5 Expenses. All fees and expenses incurred in connection with the
Merger, including without limitation all legal, accounting, financial advisory,
consulting and all other fees and expenses of third parties ("Third Party
Expenses") incurred by a party in connection with the negotiation and
effectuation of the terms and conditions of this Agreement and the transactions
contemplated hereby shall be the obligation of the respective party incurring
such fees and expenses; provided, however, that the Members shall be responsible
for all such fees and expenses incurred by the Company.
5.6 Additional Documents and Further Assurances. Each party hereto, at the
request of another party hereto, shall execute and deliver such other
instruments and do and perform such other acts and things as may be necessary or
desirable for effecting completely the consummation of the Merger and the
transactions contemplated hereby
5.7 Related Agreements. Concurrently with the execution and delivery of
this Agreement, as material inducements to Parent and Sub to enter into this
Agreement: (i) certain Members of the Company are entering into a Registration
Rights Agreement, each in the form attached as Exhibit A, with Parent; (ii)
certain key employees of the Company and each of the Members are entering into
Noncompetition Agreements, each in the form attached as Exhibit B, with
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Parent; and (iii) Parent and the Member Representative are entering into an
Escrow Agreement, in the form attached as Exhibit C.
5.8 Nasdaq National Market. Parent shall use commercially reasonable
efforts to ensure that, concurrently with the effectiveness of the registration
statement contemplated by Section 5.1 of this Agreement, the shares of Parent
Common Stock to be delivered to the Members pursuant to this Agreement shall
have been accepted for listing on the Nasdaq National Market, subject to notice
of issuance.
5.9 Tax Matters.
(a) Tax Returns. The Members will be responsible for the preparation
and filing of all Returns relating to Taxes concerning or attributable to the
Company or its operations (including Returns to be filed after the Closing Date)
for all periods ending on or before the Closing Date (the "Pre-Closing Period").
The Members will pay all Taxes concerning or attributable to the Company or its
operations for the Pre-Closing Period. Parent shall be responsible for the
preparation and filing of all Returns relating to Taxes concerning or
attributable to the Company or its operations, and the payment of all Taxes with
respect thereto, for all periods beginning after the Closing Date (the
"Post-Closing Period"). Real or personal property taxes (or other similar Taxes)
shall be allocated to the Pre-Closing Period and the Post-Closing Period on a
daily basis.
(b) Cooperation. Each party shall (i) provide the other with such
assistance as may reasonably be required in connection with the preparation of
any Return and the conduct of any audit or other examination by any Taxing
authority or in connection with judicial or administrative proceedings relating
to any liability for Taxes concerning or attributable to the Company or its
operations and (ii) retain and provide the other with all records or other
information that may be relevant to the preparation of any such Return, or the
conduct of any such audit or examination, or other such proceeding. The Members
shall retain all documents, including prior years' Returns, supporting work
schedules and other records or information which may be relevant to any such
Return, audit or examination, or other proceeding, and shall not destroy or
otherwise dispose of any such records for six (6) years after closing without
the prior written consent of Parent.
(c) Transfer Taxes; Property Taxes. All sales, use, value-added,
gross receipts, excise, registration, recording, stamp duty, transfer or other
similar taxes or governmental fees ("Transfer Taxes") imposed or levied by
reason of, in connection with or attributable to this Agreement and the
transactions contemplated hereby shall be borne solely by the Members. The
parties shall cooperate with each other to the extent reasonably requested and
legally permitted to minimize any Transfer Taxes.
5.10 Limitations on Sales. Aggregate sales of Parent Common Stock by all
Members shall not exceed 15% of the Aggregate Stock Consideration in each
three-month period (on a non-cumulative basis) beginning on the Closing Date for
the one year following the Effective Time. If registration statement
contemplated by the Registration Rights Agreement referenced in Section 5.1
herein does not go effective in the first-three month period following the
Closing Date, then aggregate sales of Parent Common Stock by all Members shall
not exceed 20% of the Aggregate
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Stock Consideration in each of the three remaining three-month periods (on a
non-cumulative basis) in the one year following the Effective Time.
ARTICLE VI
CONDITIONS TO THE MERGER
6.1 Conditions to Obligations of Each Party to Effect the Merger. The
respective obligations of the Company and Parent to effect the Merger shall be
subject to the satisfaction at or prior to the Effective Time of the following
conditions:
(a) Member Approval. This Agreement and the Merger shall have been
approved and adopted by the Members of Company by the requisite vote under
applicable law and the Company's Articles of Organization.
(b) No Order. No Governmental Entity shall have enacted, issued,
promulgated, enforced or entered any statute, rule, regulation, executive order,
decree, injunction or other order (whether temporary, preliminary or permanent)
which is in effect and which has the effect of making the Merger illegal or
otherwise prohibiting consummation of the Merger.
(c) No Injunctions or Restraints; Illegality. No temporary
restraining order, preliminary or permanent injunction or other order issued by
any court of competent jurisdiction or other legal restraint or prohibition
preventing the consummation of the Merger shall be in effect, nor shall any
proceeding brought by an administrative agency or commission or other
governmental authority or instrumentality, domestic or foreign, seeking any of
the foregoing be pending.
(d) Certificate of Merger. The California Certificate of Merger
shall have been filed with the Secretary of State of the State of California,
and the Delaware Certificate of Merger shall have been filed with the Secretary
of State of the State of Delaware.
6.2 Conditions to the Obligations of Parent and Sub. The obligation of
Parent and Sub to effect the Merger shall be subject to the satisfaction at or
prior to the Effective Time of each of the following conditions, any of which
may be waived, in writing, exclusively by Parent:
(a) Representations, Warranties and Covenants.
(i) The representations and warranties of the Company and the
Members in this Agreement (other than the representations and warranties of the
Company and the Members as of a specified date, which will be true and correct
as of such date) shall be true and correct on and as of the date of this
Agreement.
(ii) Each of the Company and the Members shall have performed
and complied with all covenants and obligations under this Agreement required to
be performed and complied with by such parties as of the Effective Time.
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(b) Third-Party Consents. Parent shall have been furnished with
evidence satisfactory to it that the Company has obtained all consents, waivers,
approvals, and assignments listed in Schedule 6.2(b) to this Agreement. If
Parent waives the closing condition set forth in the previous sentence such that
the Company has not obtained all consents, waivers, approvals, and assignments
listed in Schedule 6.2(b) to this Agreement as of the Closing Date, the Company
shall use its best efforts to obtain the consents, waivers and approvals under
any of the Contracts set forth on Schedule 6.2(b) as soon as possible after the
Effective Time.
(c) Noncompetition Agreements. Each of the individuals set forth on
Schedule 6.2(c) shall have executed and delivered to Parent a Noncompetition
Agreement in the form attached hereto as Exhibit B, and all of such
Noncompetition Agreements shall be in full force and effect.
(d) Company Member Approval. As of the date of this Agreement,
Members holding at least two-thirds of the Total Membership Interests, which
Members are as set forth on Schedule 6.2(d) to this Agreement, shall have
approved this Agreement, the Merger and the transactions contemplated thereby.
Members holding no more than 1% of the Company Membership Interests shall have
exercised or given notice of their intent to exercise appraisal rights in
accordance with California Law.
(e) Company Legal Opinion. Parent shall have received a legal
opinion from ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇ LLP, legal counsel to the Company,
substantially in the form attached hereto as Exhibit F.
(f) Termination of 401(k) Plan. Parent shall have received from the
Company evidence that the Company's 401(k) plan has been terminated pursuant to
resolutions of the Company's Board of Directors (the form and substance of which
shall have been subject to review and approval of Parent), effective as of the
day immediately preceding the Closing Date, and Parent shall have received from
the Company evidence of taking any and all further actions as requested by
Parent.
(g) Certificate of the Company and the Members. Parent shall have
received a certificate, validly executed by each of the Members and the
principal executive officer of the Company for and on its behalf, to the effect
that, as of the Closing:
(i) all representations and warranties made by the Company and
the Members in this Agreement (other than the representations and warranties of
the Company and the Members as of a specified date, which will be true and
correct as of such date) were true and correct on and as of the date of this
Agreement;
(ii) all covenants and obligations under this Agreement to be
performed by the Company or the Members on or before the Closing have been so
performed; and
(iii) the conditions to the obligations of Parent and Sub set
forth in Section 6.2 have been satisfied (unless otherwise waived in accordance
with the terms hereof).
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(h) Certificate of Secretary of Company. Parent shall have received
a certificate, validly executed by the Secretary of the Company, certifying as
to (i) the correct form and effectiveness of the Articles of Organization and
the Operating Agreement of the Company, including all amendments thereto, and
(ii) the valid adoption of resolutions of the managers of the Company and the
Members approving this Agreement and the consummation of the transactions
contemplated hereby.
(i) Certificate of Good Standing. Parent shall have received a
certificate of good standing of the Company from the Secretary of State of the
State of California, dated within a reasonable period prior to the Closing.
(j) FIRPTA Certificate. Parent shall have received a properly
executed statement in a form reasonably acceptable to Parent (the "FIRPTA
Compliance Certificate") for purposes of satisfying Parent's obligations under
Treasury Regulation Section 1.1445-11T(d), validly executed by a duly authorized
officer of the Company.
(k) Continued Employment. Certain employees of Company, who are
listed on Schedule 6.2(k) to this Agreement, shall have accepted Parent's offers
of employment and shall have executed and the Company shall have delivered to
Parent Parent's standard confidentiality, proprietary information and assignment
of inventions agreement.
(l) Registration Rights Agreement. The Member Representative on
behalf of the Members shall have executed the Registration Rights Agreement and
such Registration Rights Agreement shall be in full force and effect.
(m) Acknowledgement of No Membership Interests. Parent shall have
received, in a form reasonably acceptable to Parent, an acknowledgement from the
individuals and entities listed on Schedule 6.2(m) to this Agreement, stating
that such individuals and entities do not own, as of immediately prior to the
Effective Time, any Membership Interests or any options, warrants or other
rights to purchase any authorized or unissued Membership Interests.
6.3 Conditions to Obligations of the Company and the Members. The
obligations of the Company and the Members to consummate and effect this
Agreement and the transactions contemplated hereby shall be subject to the
satisfaction at or prior to the Effective Time of each of the following
conditions, any of which may be waived, in writing, exclusively by the Company:
(a) Representations, Warranties and Covenants.
(i) The representations and warranties of Parent and Sub in
this Agreement (other than the representations and warranties of Parent as of a
specified date, which will be true and correct as of such date) shall be true
and correct on and as of the date of this Agreement.
(ii) Each of Parent and Sub shall have performed and complied
with all covenants and obligations of this Agreement required to be performed
and complied with by it as of the Effective Time.
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(b) Certificate of Parent. The Company shall have received a
certificate executed on behalf of Parent by the Chief Executive Officer to the
effect that, as of the Closing:
(i) all representations and warranties made by the Parent and
Sub in this Agreement (other than the representations and warranties of the
Parent and Sub as of a specified date, which will be true and correct as of such
date) were true and correct on and as of the date of this Agreement;
(ii) all covenants and obligations under this Agreement to be
performed by Parent and Sub on or before the Closing have been so performed; and
(iii) the conditions to the obligations of the Company and the
Members set forth in Section 6.3 have been satisfied (unless otherwise waived in
accordance with the terms hereof).
(c) Registration Rights Agreement. Parent shall have executed the
Registration Rights Agreement and such Registration Rights Agreement shall be in
full force and effect.
ARTICLE VII
SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION
7.1 Survival of Representations and Warranties.
(a) The representations and warranties of the Company and each of
the Members contained in this Agreement, or in any certificate or other
instrument delivered pursuant to this Agreement, shall remain in effect until,
and will expire upon the 18-month anniversary of the Closing Date (the
"Termination Date"). Notwithstanding the foregoing:
(i) the representations and warranties of the Company and each
of the Members contained in the following Sections shall survive indefinitely
and until the expiration of the applicable statute of limitations, respectively:
Section 2.1 (Organization of the Company); Section 2.3 (Company Capital
Structure); Section 2.8 (No Undisclosed Liabilities); Section 2.10 (Tax
Matters); Section 2.13 (Intellectual Property); and Section 2.20 (Environmental
Matters) (collectively, the "Surviving Representations");
(ii) the Termination Date shall have no effect upon any claims
based upon fraud; and
(iii) the representation, warranty, covenant or obligation
that is the subject matter of a Claim Notice (as defined in Section 7.1(c))
shall not so expire with respect to such Claim Notice or any subsequent Claim
Notice that is reasonably related to the subject matter of such Claim Notice,
but rather shall remain in full force and effect until such time as each and
every claim that is based upon, or that reasonably relates to, any breach or
alleged breach of such representation,
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warranty, covenant or obligation and that is reasonably related to the subject
matter of such Claim Notice or any such subsequent Claim Notice has been fully
and finally resolved, either by means of a written settlement agreement executed
on behalf of the Seller and the Purchaser or by means of a final, non-appealable
judgment issued by a court of competent jurisdiction.
(b) The representations, warranties, covenants and obligations of
the Company and each of the Members, and the rights and remedies that may be
exercised by the Indemnified Parties, shall not be limited or otherwise affected
by or as a result of any information furnished to, or any investigation made by
or any knowledge of, any of the Indemnified Parties or any of their
Representatives.
(c) For purposes of this Agreement, a "Claim Notice" relating to a
particular representation, warranty, covenant or obligation shall be deemed to
have been given if any Indemnified Party, acting in good faith, delivers to the
Company or any of the Members and the Escrow Agent a written notice stating that
such Indemnified Party believes that there is or has been a possible breach of
such representation, warranty, covenant or obligation and containing (i) a brief
description of the circumstances supporting such Indemnified Party's belief that
there is or has been such a possible breach, and (ii) a non-binding, preliminary
estimate of the aggregate dollar amount of the actual and potential damages that
have arisen and may arise as a direct or indirect result of such possible
breach.
7.2 Indemnification by the Company and the Members; Escrow Fund.
(a) The Company and the Members agree to jointly and severally
indemnify and hold Parent and its officers, directors and affiliates harmless
against all claims, losses, liabilities, damages, punitive damages, lawsuits,
administrative proceedings, investigations, audits, demands, assessments,
adjustments, judgments, settlement payments, penalties, fines, interest,
deficiencies, costs and expenses, including reasonable attorneys' fees and
expenses of investigation and defense (individually a "Loss" and collectively
"Losses") incurred by Parent, its officers, directors or affiliates (including
the Surviving Entity) (collectively, the "Indemnified Parties") directly or
indirectly as a result of:
(i) any inaccuracy or breach of a representation or warranty
of the Company or any Member contained in: (A) this Agreement; (B) any of the
Related Agreements; or (C) or in any certificate, instrument or other document
delivered by Company or any Member pursuant to the terms of this Agreement;
(ii) any failure by the Company or any of the Members to
perform or comply with any covenant contained in this Agreement or in any of the
Related Agreements;
(iii) any Dissenting Membership Interests; or
(iv) the failure of the Company to obtain all consents,
waivers, approvals, and assignments listed in Schedule 6.2(b) to this Agreement
within 15 days of the date of this Agreement.
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(b) As partial security for the indemnity provided to the
Indemnified Parties in this Article VII and by virtue of this Agreement, the
California Certificate of Merger and the Delaware Certificate of Merger, Parent
will deposit the Escrow Amount (plus any additional shares as may be issued in
respect of any stock split, stock dividend or recapitalization effected by
Parent after the Effective Time with respect to the Escrow Amount) with the
Escrow Agent (as defined in the Escrow Agreement), without any act of the
Company or the Members, such deposit of the Escrow Amount to constitute an
escrow fund (the "Escrow Fund"). The Escrow Fund shall be in existence
immediately following the Effective Time and shall terminate at 5:00 p.m.,
Pacific Time, on the Termination Date. For purposes of satisfying the
indemnification obligations of this Article VII, the shares of Parent Common
Stock in the Escrow Fund shall be valued at the Transaction Stock Price. The
Escrow Fund shall be governed by the terms of this Agreement and the Escrow
Agreement.
7.3 Limitation on Indemnification.
(a) Notwithstanding any provision of this Agreement to the contrary,
after the Effective Time, no Indemnified Party shall be entitled to
indemnification until such Indemnified party suffers Losses in excess of $50,000
in the aggregate (the "Basket Amount"), in which case an Indemnified Party shall
be entitled to recover all Losses including the Basket Amount; provided,
however, any amounts required to be paid with respect to Dissenting Membership
Interests or resulting from any failure by the Company or any of the Members to
perform or comply with any covenant contained in this Agreement or any Related
Agreement shall not be subject to such Basket Amount; and provided further,
however, that any amounts required to be paid by the Parent or the Surviving
Entity as a result of the Company's breach of, or any inaccuracy contained in,
Section 2.21 herein shall not be subject to such Basket Amount.
(b) Except for (i) claims based upon any failure by the Company of
any of the Members to perform or comply with any covenant contained in this
Agreement or any of the Related Agreements, (ii) claims based upon fraud or
intentional misconduct and/or (iii) claims as to any inaccuracy or breach of a
representation or warranty contained in the Surviving Representations, the
indemnification obligations of the Company and the Members under this Agreement
shall be subject to the foregoing:
(i) The maximum amount that the Indemnified Parties may
recover for Losses under the indemnification provisions of this Agreement shall
be limited to the Aggregate Merger Consideration. For purposes of this Section
7.3(b) the Aggregate Stock Consideration shall be valued on a per share basis at
the Transaction Stock Price.
(ii) The maximum amount that any particular Member shall be
liable with respect to any indemnification payments that the Company and the
Members are required to make hereunder is equal to such Member's Pro Rata
Portion of the Aggregate Merger Consideration.
7.4 Indemnification Procedures. All claims for indemnification under this
Article VII shall be asserted and resolved as follows:
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(a) Third-Party Claims. In the event any Indemnified Party becomes
aware of a third-party claim which Parent believes may result in a demand
against the Escrow Fund, Parent shall notify the Member Representative of such
claim, and the Member Representative, as representative for the Members, shall
be entitled, at its expense, to participate in, but not to determine or conduct,
the defense of such claim. The Indemnified Parties shall have the right in its
sole discretion to conduct the defense of and settle any such claim; provided,
however, that except with the written consent of the Member Representative, no
settlement of any such claim with third-party claimants shall alone be
determinative of the amount of Losses relating to such matter. In the event that
the Member Representative has consented to any such settlement, neither the
Member Representative nor any of the Members shall have the power or authority
to object to the amount of any claim by any Indemnified Party against the Escrow
Fund with respect to such settlement.
(b) Non-Third Party Claims.
(i) In the event an Indemnified Party has a claim hereunder
that does not involve a claim being asserted against or sought to be collected
by a third party, the Indemnified Party shall with reasonable promptness send a
Claim Notice with respect to such claim to the Member Representative and the
Escrow Agent. If the Member Representative does not notify the Indemnified Party
within 30 days from the date of receipt of such Claim Notice that the Member
Representative disputes such claim, the amount of such claim shall be
conclusively deemed a liability of the Members hereunder.
(ii) In case the Member Representative shall object in writing
to any claim made in accordance with this Section 7.4(b), the Indemnified Party
shall have fifteen (15) days to respond in a written statement to the objection
of the Member Representative. If after the expiration of such fifteen (15) day
period, there remains a dispute as to any claim, the parties shall attempt in
good faith for sixty (60) days to agree upon the rights of the respective
parties with respect to each of such claims. If the parties should so agree, a
memorandum setting forth such agreement shall be prepared and signed by both
parties.
(iii) If no such agreement can be reached after good faith
negotiation, either party may demand arbitration of the matter unless the amount
of the damage or loss is at issue in pending litigation with a third party, in
which event arbitration shall not be commenced until such amount is ascertained
or both parties agree to arbitration; and in either such event the matter shall
be settled by arbitration conducted by three arbitrators. Parent and the Member
Representative shall each select one arbitrator, and the two arbitrators so
selected shall select a third arbitrator, each of which arbitrators shall be
independent and have at least ten years relevant experience. However, if either
Parent or the Member Representative fails to designate an arbitrator within 15
days after the filing of a demand for arbitration (or similar document), the
arbitration shall proceed with the one arbitrator timely designed. The
arbitrators shall set a limited time period and establish procedures designed to
reduce the cost and time for discovery while allowing the parties an
opportunity, adequate in the sole judgment of the arbitrators, to discover
relevant information from the opposing parties about the subject matter of the
dispute. The arbitrators shall rule upon motions to compel or limit discovery
and shall have the authority to impose sanctions, including attorneys fees and
costs,
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to the extent as a court of competent law or equity, should the arbitrators
determine that discovery was sought without substantial justification or that
discovery was refused or objected to without substantial justification. The
decision of a majority of the three arbitrators as to the validity and amount of
any claim in such Claim Notice shall be binding and conclusive upon the parties
to this Agreement. Such decision shall be written and shall be supported by
written findings of fact and conclusions that shall set forth the award,
judgment, decree or order awarded by the arbitrators.
(iv) Judgment upon any award rendered by the arbitrators may
be entered in any court having jurisdiction. Any such arbitration shall be held
in Santa ▇▇▇▇▇ County, California under the rules then in effect of the American
Arbitration Association. For purposes of this Section 7.4(b), in any arbitration
hereunder in which any claim or the amount thereof stated in the Claim Notice is
at issue, the Indemnified Party shall be deemed to be the non-prevailing party
in the event that the arbitrators award such Indemnified Party less than the sum
of one-half (1/2) of the disputed amount plus any amounts not in dispute;
otherwise, the Company and the Members shall be deemed to be the non-prevailing
party. The non-prevailing party to an arbitration shall pay its own expenses,
the fees of each arbitrator, the administrative costs of the arbitration, and
the expenses, including without limitation, reasonable attorneys' fees and
costs, incurred by the other party to the arbitration.
(c) The Indemnified Party's failure to give reasonably prompt notice
to the Member Representative of any actual, threatened or possible claim or
demand which may give rise to a right of indemnification hereunder shall not
relieve the Members of any liability which the Members may have to the
Indemnified Party unless the failure to give such notice materially and
adversely prejudiced the Members.
7.5 Member Representative.
(a) As of the date hereof, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ shall be constituted
and appointed as agent and attorney-in-fact (the "Member Representative") for
and on behalf of each of the Members to give and receive notices and
communications, to agree to, negotiate, enter into settlements and compromises
of, and demand arbitration and comply with orders of courts and awards of
arbitrators with respect to claims, and to take all actions necessary or
appropriate in the judgment of the Member Representative for the accomplishment
of the foregoing. Such agency may be changed (whether pursuant to vacancy,
removal or resignation) by the vote of a majority of the Members from time to
time upon not less than thirty (30) days prior written notice to Parent. No bond
shall be required of the Member Representative, and the Member Representative
shall receive no compensation for its services, except for payment by the
Members of expenses, including fees of counsel, reasonably incurred by the
Member Representative in connection with the performance of its duties
hereunder.
(b) The Member Representative shall not be liable for any act done
or omitted hereunder as Member Representative while acting in good faith, and
any act done or omitted pursuant to the advice of counsel shall be conclusive
evidence of such good faith. The Members shall severally indemnify the Member
Representative and hold such agent harmless against any loss,
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liability or expense incurred without bad faith on the part of the Member
Representative and arising out of or in connection with the acceptance or
administration of the Member Representative's duties hereunder.
(c) A decision, act, consent or instruction of the Member
Representative shall constitute a decision of all Members and shall be final,
binding and conclusive upon each Member, and Parent may rely upon any decision,
act, consent or instruction of the Member Representative taken in such manner as
being the decision, act, consent or instruction of each and every Member. Parent
is hereby relieved from any liability to any person for any acts done by them in
accordance with such decision, act, consent or instruction of the Member
Representative.
ARTICLE VIII
AMENDMENT AND WAIVER
8.1 Amendment. This Agreement may be amended by the parties at any time by
execution of an instrument in writing signed on behalf of each of the parties
hereto; provided, however, for purposes of this Section 8.1, any amendment of
this Agreement signed by the Member Representative shall be binding upon and
effective against all Members whether or not they have signed such amendment.
8.2 Extension; Waiver. Parent and Sub, on the one hand, and the Company
and the Member Representative, on the other hand, may, to the extent legally
allowed, (i) extend the time for the performance of any of the obligations of
the other party hereto, (ii) waive any inaccuracies in the representations and
warranties made to such party contained herein or in any document delivered
pursuant hereto, and (iii) waive compliance with any of the agreements or
conditions for the benefit of such party contained herein. Any agreement on the
part of a party hereto to any such extension or waiver shall be valid only if
set forth in an instrument in writing signed on behalf of such party; provided,
however, that for purposes of this Section 8.2, any extension or waiver signed
by the Member Representative shall be binding upon and effective against all
Members whether or not they have signed such extension or waiver.
ARTICLE IX
GENERAL PROVISIONS
9.1 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally or by commercial
messenger or courier service, or mailed by registered or certified mail (return
receipt requested) or sent via facsimile (with acknowledgment of complete
transmission) to the parties at the following addresses (or at such other
address for a party as shall be specified by like notice); provided, however,
that notices sent by mail will not be deemed given until received:
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(a) if to Parent or Sub, to:
Xicor, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Chief Financial Officer
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇
Professional Corporation
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Page ▇▇▇▇▇▇▇▇▇, Esq.
▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
(b) if to the Company or the Members, to:
Analog Integration Partners LLC
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Principal Financial Officer
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: R. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Telephone No: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile No: (▇▇▇) ▇▇▇-▇▇▇▇
(c) if to the Member Representative:
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile No: (▇▇▇) ▇▇▇-▇▇▇▇
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9.2 Interpretation. The words "include," "includes" and "including" when
used herein shall be deemed in each case to be followed by the words "without
limitation." The table of contents and headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
9.3 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall constitute an original and all of which, when
taken together, shall be considered one and the same agreement.
9.4 Entire Agreement; Assignment. This Agreement, the Related Agreements,
the exhibits hereto, the Disclosure Schedule, the Confidential Disclosure
Agreements and the documents and instruments and other agreements among the
parties hereto referenced herein: (i) constitute the entire agreement among the
parties with respect to the subject matter hereof and supersede all prior
agreements and understandings both written and oral, among the parties with
respect to the subject matter hereof; and (ii) shall not be assigned by
operation of law or otherwise, except that Parent or Sub may each assign its
rights and delegate its obligations hereunder to its respective affiliates.
9.5 No Third Party Beneficiaries. This Agreement, the Related Agreements,
the exhibits hereto, the Disclosure Schedule, the Confidential Disclosure
Agreements and the documents and instruments and other agreements among the
parties hereto referenced herein are not intended to confer upon any person
other than the parties hereto any rights or remedies hereunder.
9.6 Severability. In the event that any provision of this Agreement or the
application thereof, becomes or is declared by a court of competent jurisdiction
to be illegal, void or unenforceable, the remainder of this Agreement will
continue in full force and effect and the application of such provision to
persons or circumstances other than those with respect to which it is deemed
void will be interpreted so as reasonably to effect the intent of the parties
hereto within the boundaries of applicable law. The parties further agree to
replace such void or unenforceable provision of this Agreement with a valid and
enforceable provision that will achieve, to the extent practicable within
applicable law, the economic, business and other purposes of such void or
unenforceable provision.
9.7 Other Remedies. Except as otherwise provided herein, any and all
remedies herein expressly conferred upon a party will be deemed cumulative with
and not exclusive of any other remedy conferred hereby, or by law or equity upon
such party, and the exercise by a party of any one remedy will not preclude the
exercise of any other remedy.
9.8 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of California, regardless of the laws that
might otherwise govern under applicable principles of conflicts of laws thereof.
Each of the parties hereto irrevocably consents to the exclusive jurisdiction
and venue of any court within Santa ▇▇▇▇▇ County, State of California, in
connection with any matter based upon or arising out of this Agreement or the
matters contemplated herein, agrees that process may be served upon them in any
manner authorized by the laws of the
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State of California for such persons and waives and covenants not to assert or
plead any objection which they might otherwise have to such jurisdiction, venue
and such process.
9.9 Rules of Construction. The parties hereto agree that they have been
represented by counsel during the negotiation and execution of this Agreement
and, therefor, waive the application of any law, regulation, holding or rule of
construction providing that ambiguities in an agreement or other document will
be construed against the party drafting such agreement or document.
9.10 Attorneys' Fees. If any action or other proceeding relating to the
enforcement of any provision of this Agreement is brought by any party hereto,
the prevailing party shall be entitled to recover reasonable attorneys' fees,
costs and disbursements (in addition to any other relief to which the prevailing
party may be entitled).
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IN WITNESS WHEREOF, Parent, Sub, the Company, the Member Representative
and each of the Members have caused this Agreement to be signed, all as of the
date first written above.
XICOR, INC. VALLEY ACQUISITION CORP.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
------------------------------------- -------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇
President and Chief Executive Officer President and Chief Executive Officer
ANALOG INTEGRATION PARTNERS LLC MEMBERS:
▇▇▇▇▇ ▇▇▇▇▇▇▇▇
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇
Manager and Chief Executive Officer By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
-------------------------------------
▇▇▇▇ ▇▇▇▇▇▇
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇
-------------------------------------
▇▇▇▇ ▇▇▇▇▇▇
Manager and Vice President By: /s/ ▇▇▇▇ ▇▇▇▇▇▇
-------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
-------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Manager and Vice President By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------------
RABINOVITCH VENTURES LIMITED LP
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
-------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
Manager By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
--------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇, General Partner
MEMBER REPRESENTATIVE ▇▇▇▇▇▇ VENTURES LIMITED LP
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇ ▇▇▇▇▇▇
------------------------------------- --------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, General Partner
[SIGNATURE PAGE TO AGREEMENT AND PLAN OF MERGER]