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EXHIBIT 2.1
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
CYPRESS SEMICONDUCTOR CORPORATION,
CY ACQUISITION CORPORATION
AND
IC WORKS, INC.
DATED AS OF JANUARY 21, 1999
AS AMENDED ON FEBRUARY 9, 1999
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INDEX OF EXHIBITS
EXHIBIT DESCRIPTION
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Exhibit A Form of Voting Agreement
Exhibit B Merger Agreement
List on Individuals Signing Non-Competition and Employment
Exhibit C Agreements
Exhibit D Disclosure Schedule
Exhibit E-1 Form of Legal Opinion of Counsel to the Company
Exhibit E-2 Form of Legal Opinion of Counsel to Parent and Sub
Exhibit F Form of Noncompetition Agreement
Exhibit G Form of Company Affiliate Agreement
Exhibit H Form of Parent Affiliate Agreement
Exhibit I Form of Escrow Agreement
Exhibit J Form of Tax Representation Letter
Exhibit K Parent Disclosure Schedule
Exhibit L Form of Employment Agreement
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TABLE OF CONTENTS
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ARTICLE I.......................................................... 2
1.1 The Merger.................................................. 2
1.2 Effective Time.............................................. 2
1.3 Effect of the Merger........................................ 2
1.4 articles of incorporation; Bylaws........................... 2
1.5 Directors and Officers...................................... 2
1.6 Effect of Merger on the stock of the Constituent
Corporations................................................ 3
1.7 Dissenting Shares........................................... 8
1.8 Surrender of Certificates................................... 9
1.9 No Further Ownership Rights in Company stock................ 10
1.10 Lost, Stolen or Destroyed Certificates...................... 10
1.11 Taking of Necessary Action; Further Action.................. 10
1.12 Tax and Accounting Consequences............................. 11
ARTICLE II......................................................... 11
2.1 Organization of the Company................................. 11
2.2 Subsidiaries................................................ 11
2.3 Company Capital Structure................................... 11
2.4 Authority................................................... 12
2.5 No Conflict................................................. 13
2.6 Consents.................................................... 13
2.7 Company Financial Statements................................ 13
2.8 No Undisclosed Liabilities.................................. 13
2.9 No Changes.................................................. 14
2.10 Tax Matters................................................. 15
2.11 Restrictions on Business Activities......................... 17
2.12 Title of Properties; Absence of Liens and Encumbrances;
Condition of Equipment...................................... 17
2.13 Intellectual Property....................................... 17
2.14 Agreements, Contracts and Commitments....................... 21
2.15 Interested Party Transactions............................... 22
2.16 Governmental Authorization.................................. 22
2.17 Litigation.................................................. 22
2.18 Accounts Receivable; Inventory; Backlog..................... 22
2.19 Minute Books................................................ 23
2.20 Environmental Matters....................................... 23
2.21 Brokers' and Finders' Fees; Third Party Expenses............ 24
2.22 Employee Benefit Plans and Compensation..................... 24
2.23 Insurance................................................... 27
2.24 Compliance with Laws........................................ 27
2.25 Warranties; Indemnities..................................... 27
2.26 Materials and Parts......................................... 27
2.27 Representations Complete.................................... 27
2.28 Information Supplied........................................ 28
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PAGE
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ARTICLE III........................................................ 28
3.1 Organization, Standing and Power............................ 28
3.2 Authority................................................... 28
3.3 No Conflict................................................. 29
3.4 Capital Structure........................................... 29
3.5 SEC Documents; Parent Financial Statements.................. 30
3.6 No Material Adverse Change.................................. 30
3.7 Brokers' and Finders' Fees.................................. 30
3.8 NYSE Listing................................................ 30
3.9 Litigation.................................................. 30
3.10 Information Supplied........................................ 31
ARTICLE IV......................................................... 31
4.1 Conduct of Business of the Company.......................... 31
4.2 No Solicitation............................................. 34
4.3 Conduct of Business of the Company.......................... 34
ARTICLE V.......................................................... 36
5.1 Registration Statement...................................... 36
5.2 Access to Information....................................... 36
5.3 Confidentiality............................................. 37
5.4 Expenses.................................................... 37
5.5 Public Disclosure........................................... 37
5.6 Consents.................................................... 37
5.7 FIRPTA Compliance........................................... 37
5.8 Reasonable Efforts.......................................... 37
5.9 Notification of Certain Matters............................. 38
5.10 Additional Documents and Further Assurances................. 38
5.11 Employee Plans; Employees................................... 38
5.12 Employee Compensation....................................... 38
5.13 Affiliate Agreements........................................ 38
5.14 No Actions Inconsistent With Tax-Free Reorganization........ 39
5.15 NYSE Listing................................................ 39
5.16 Regulatory Filings.......................................... 39
5.17 Form S-8.................................................... 39
5.18 Company's Auditors.......................................... 39
5.19 Shareholder Approval........................................ 39
5.20 Pooling Accounting.......................................... 39
5.21 Indemnification............................................. 40
5.22 Termination of Contracts.................................... 40
5.23 CEO and CFO Responsibility.................................. 40
5.24 Employment Policy........................................... 40
5.25 Shareholder and Optionholder List........................... 41
ARTICLE VI......................................................... 41
6.1 Conditions to Obligations of Each Party to Effect the
Merger...................................................... 41
6.2 Conditions to Obligations of Company........................ 42
6.3 Conditions to the Obligations of Parent and Sub............. 43
6.4 Closing Deliverables........................................ 44
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ARTICLE VII........................................................ 46
7.1 Survival of Representations and Warranties.................. 46
7.2 Indemnification............................................. 46
7.3 Escrow Arrangements......................................... 46
ARTICLE VIII....................................................... 53
8.1 Termination................................................. 53
8.2 Effect of Termination....................................... 53
8.3 Loan........................................................ 54
8.4 Amendment................................................... 54
8.5 Extension; Waiver........................................... 54
ARTICLE IX......................................................... 55
9.1 Notices..................................................... 55
9.2 Interpretation.............................................. 55
9.3 Counterparts................................................ 55
9.4 Entire Agreement; Assignment................................ 56
9.5 Severability................................................ 56
9.6 Other Remedies.............................................. 56
9.7 Governing Law............................................... 56
9.8 Rules of Construction....................................... 56
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AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made and entered
into as of January 21, 1999 and amended on February 9, 1999, among Cypress
Semiconductor Corporation, a Delaware corporation ("Parent"), CY Acquisition
Corporation, a California corporation and wholly-owned subsidiary of Parent
("Sub"), and IC Works, Inc., a California corporation (the "Company").
RECITALS
A. The Boards of Directors of each of the Company, Parent and Sub believe it is
in the best interests of each company and their respective shareholders that
Parent acquire the Company through the statutory merger of the 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
securities of the Company shall be converted into the right to receive Parent
Common Stock (as defined herein), as set forth herein. Parent will assume all
outstanding stock options and warrants of the Company.
C. Ten percent (10%) of the shares of Parent Common Stock issued by Parent in
exchange for shares of Company Capital Stock in connection with the Merger shall
be placed in escrow by Parent, the release of which shall be contingent upon
certain events and conditions.
D. The Company, 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.
E. The parties intend, by executing this Agreement, to adopt a plan of
reorganization within the meaning of Section 368 of the Internal Revenue Code of
1986, as amended (the "Code").
F. Concurrent with the execution of this Agreement, as a material inducement to
Parent and Sub, all affiliates of Parent are entering into Parent Affiliate
Agreements in the form of Exhibit H hereto with Parent (the "Parent Affiliate
Agreements"); all affiliates of the Company are entering into Affiliate
Agreements in the Form of Exhibit G hereto with Parent (the "Company Affiliate
Agreements"); certain shareholders of the Company are entering into Voting
Agreements in the form of Exhibit A hereto with Parent (the "Voting
Agreements"); and the individuals listed on Exhibit C hereto are entering into
agreements not to compete with Parent (the "Noncompetition Agreements") in the
form of Exhibit F hereto and employment agreements (the "Employment Agreements")
in the form of Exhibit L hereto.
G. Concurrent with the execution of this Agreement, Parent and the Company shall
execute and deliver an Escrow Agreement in the form of Exhibit I hereto (the
"Escrow Agreement") and Parent shall deposit cash in an amount equal to the
principal amount of the Loan (as defined in the Escrow Agreement) pursuant to
the terms of the Escrow Agreement.
H. Concurrent with the execution of this Agreement, ▇▇▇▇▇ ▇▇▇, an individual
(the "CEO") and ▇▇▇ ▇▇▇▇▇, an individual (the "CFO") are executing and
delivering to
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Parent a certificate stating that each of them, in his capacity as an officer of
the Company, has read this Agreement.
NOW, THEREFORE, in consideration of the covenants, promises and representations
set forth herein, and for other good and valuable consideration, the parties
agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger. At the Effective Time (as defined in Section 1.2) and subject
to and upon the terms and conditions of this Agreement and the applicable
provisions of the California Corporations Code ("California Law"), the Sub shall
be merged with and into the Company, the separate corporate existence of the Sub
shall cease and the Company shall continue as the surviving corporation and as a
wholly-owned subsidiary of Parent. The surviving corporation after the Merger is
hereinafter sometimes referred to as the "Surviving Corporation."
1.2 Effective Time. Unless this Agreement is earlier terminated pursuant to
Section 8.1, the closing of the Merger (the "Closing") will take place as
promptly as practicable, but no later than five (5) business days following
satisfaction or waiver of the conditions set forth in Article VI, at the offices
of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, Professional Corporation, ▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇, ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, unless another place or time is agreed to in
writing by Parent and the Company. The date upon which the Closing actually
occurs is herein referred to as the "Closing Date." On the Closing Date, the
parties hereto shall cause the Merger to be consummated by filing an Agreement
of Merger (or like instrument) in the form to be delivered within fourteen (14)
days of the date of this Agreement to counsel to the Company with the Secretary
of State of the State of California (the "Merger Agreement"), in accordance with
the applicable provisions of California Law (the time of acceptance by the
Secretary of State of the State of California of such filing being referred to
herein as the "Effective Time").
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. Without limiting
the generality of the foregoing, and subject thereto, at the Effective Time, all
the property, rights, privileges, powers and franchises of the Company and Sub
shall vest in the Surviving Corporation, and all debts, liabilities and duties
of the Company and Sub shall become the debts, liabilities and duties of the
Surviving Corporation.
1.4 Articles of Incorporation; Bylaws.
(a) Unless otherwise determined by Parent prior to the Effective Time, at the
Effective Time, the Articles of Incorporation of Sub shall be the Articles of
Incorporation of the Surviving Corporation until thereafter amended as provided
by law and such Certificate of Incorporation; provided, however, that Section I
of the Articles of Incorporation of the Surviving Corporation shall be amended
to read as follows: "The name of the corporation is Raiders, Inc."
(b) The Bylaws of Sub, as in effect immediately prior to the Effective Time,
shall be the Bylaws of the Surviving Corporation until thereafter amended.
1.5 Directors and Officers. The directors of Sub immediately prior to the
Effective Time shall be the directors of the Surviving Corporation immediately
after the Effective Time,
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each to hold the office of director of the Surviving Corporation in accordance
with the provisions of California Law and the Articles of Incorporation and
Bylaws of the Surviving Corporation until their successors are duly qualified
and elected. The officers of the Sub immediately prior to the Effective Time
shall be the officers of the Surviving Corporation immediately after the
Effective Time, each to hold office in accordance with the provisions of the
Bylaws of the Surviving Corporation.
1.6 Effect of Merger on the Capital Stock of the Constituent Corporations.
(a) Certain Definitions. For all purposes of this Agreement, the following terms
shall have the following meanings:
"Broker's Fee" shall mean the aggregate amount payable by the Company
to Alliant Partners in connection with the Merger.
"Company Series A Preferred" shall mean shares of Series A Preferred
Stock of the Company.
"Company Series B Preferred" shall mean shares of Series B Preferred
Stock of the Company.
"Company Series C Preferred" shall mean shares of Series C Preferred
Stock of the Company.
"Company Series D Preferred" shall mean shares of Series D Preferred
Stock of the Company.
"Company Capital Stock" shall mean shares of Company Common Stock,
Company Preferred Stock and shares of any other capital stock of the
Company.
"Company Common Stock" shall mean shares of Common Stock of the
Company.
"Company Options" shall mean all issued and outstanding options and
rights to purchase Company Capital Stock other than Company Warrants.
"Company Preferred Stock" shall mean shares of Preferred Stock of the
Company.
"Company Warrants" shall mean all issued and outstanding warrants to
purchase Company Capital Stock.
"Determination Amount" shall mean $10,889,310.00.
"Option Exchange Ratio" shall mean the sum of (x) the Per Share Common
Preferential Consideration plus (y) the Per Share Participating
Consideration.
"Parent Common Stock" shall mean shares of the Common Stock of Parent.
"Participating Consideration" shall mean the difference of (x) the
Share Consideration minus (y) the Preferential Consideration (as defined in
Section 1.6(b)(i)).
"Share Consideration" shall equal (i) 13,700,000 shares of Parent
Common Stock, less (ii) the quotient obtained by dividing (x) the aggregate
exercise price of all Company Warrants outstanding as of the date of this
Agreement and any
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Company Warrants issued after the date of this Agreement and before the
Effective Time that are exercised prior to the Effective Time by using a
reduction in the number of shares issued upon exercise thereof in lieu of
payment of a cash exercise price by (y) the Trading Price (as defined
below).
"Shareholder" shall mean each holder of any Company Capital Stock
immediately prior to the Effective Time.
"Trading Price" shall be equal to the average of the closing sales
prices of the Parent Common Stock as reported on the New York Stock
Exchange ("NYSE") for the thirty (30) days ending three (3) days prior to
the Closing Date.
"Warrant Exchange Ratio" shall mean the sum of (x) the Per Share
Series D Preferential Consideration, Per Share Series C Preferential
Consideration, Per Share Series B Preferential Consideration, Per Share
Series A Preferential Consideration and Per Share Common Preferential
Consideration (each as defined in Section 1.6(b)(i)), as applicable to the
securities into which the Company Warrant is exercisable plus (y) the Per
Share Participating Consideration (as defined in Section 1.6(b)(ii). For
example, the Warrant Exchange Ratio for a Company Warrant exercisable into
Company Series A Preferred shall be the sum of the Per Share Series A
Preferential Consideration plus the Per Share Participating Consideration,
and the Warrant Exchange Ratio for a Company Warrant exercisable into
Company Common Stock shall be the sum of the Per Share Common Preferential
Consideration plus the Per Share Participating Consideration.
(b) Effect on Capital Stock. Subject to the terms and conditions of this
Agreement, as of the Effective Time, by virtue of the Merger and without any
action on the part of Parent, the Company or any other holder of any shares of
the Company, each share of the Company Capital Stock issued and outstanding
immediately prior to the Effective Time (other than any Dissenting Shares, as
defined in Section 1.7) will be canceled and extinguished and be converted
automatically into the right to receive, upon surrender of the certificate
representing such share of Company Capital Stock in the manner provided in
Section 1.8(c), as follows:
(i) Preferential Consideration. Prior and in preference to any
distribution of the Participating Consideration to holders of Company
Capital Stock, the holders of Company Series A Preferred, Company Series B
Preferred, Company Series C Preferred, Company Series D Preferred and
Company Common Stock shall be entitled to receive the following:
(A) Prior and in preference to any distribution pursuant to
paragraphs (B), (C), (D) or (E) below, each share of Company Series D
Preferred issued and outstanding immediately prior to the Effective Time
shall be entitled to receive that number of shares of Parent Common
Stock equal to the quotient of (x) $3.00 divided by (y) the Trading
Price (the "Per Share Series D Preferential Consideration"). The Per
Share Series D Preferential Consideration multiplied by the sum of the
number of shares of Company Series D Preferred issued and outstanding
immediately prior to the Effective Time and the number of shares of
Company Series D Preferred issuable upon exercise of Company Warrants
outstanding immediately prior to the Effective Time is herein referred
to as the "Series D Preferential Consideration." If the Share
Consideration is insufficient to permit the full payment of the Series D
Preferential Consideration, then each
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share of Company Series D Preferred shall be entitled to receive its pro
rata share of the Share Consideration.
(B) Prior and in preference to any distribution pursuant to
paragraphs (C), (D) or (E) below, in the event that the number of shares
of Parent Common Stock equal to the Share Consideration minus the Series
D Preferential Consideration is greater than zero, each share of Company
Series C Preferred issued and outstanding immediately prior to the
Effective Time shall be entitled to receive that number of shares of
Parent Common Stock equal to the quotient of (x) $3.00 divided by (y)
the Trading Price (the "Per Share Series C Preferential Consideration").
The Per Share Series C Preferential Consideration multiplied by the sum
of the number of shares of Company Series C Preferred issued and
outstanding immediately prior to the Effective Time and the number of
shares of Company Series C Preferred issuable upon exercise of Company
Warrants outstanding immediately prior to the Effective Time is herein
referred to as the "Series C Preferential Consideration." If the
difference of the Share Consideration minus the Series D Preferential
Consideration is less than the Series C Preferential Consideration, then
each share of Company Series C Preferred shall be entitled to receive
its pro rata share of such remaining Share Consideration.
(C) Prior and in preference to any distribution pursuant to
paragraphs (D) or (E) below, in the event that the number of shares of
Parent Common Stock equal to the Share Consideration minus the Series D
Preferential Consideration and Series C Preferential Consideration is
greater than zero, each share of Company Series B Preferred issued and
outstanding immediately prior to the Effective Time shall be entitled to
receive that number of shares of Parent Common Stock equal to the
quotient of (x) $3.00 divided by (y) the Trading Price (the "Per Share
Series B Preferential Consideration"). The Per Share Series B
Preferential Consideration multiplied by the sum of the number of shares
of Company Series B Preferred issued and outstanding immediately prior
to the Effective Time and the number of shares of Company Series B
Preferred issuable upon exercise of Company Warrants outstanding as of
the Effective Time is herein referred to as the "Series B Preferential
Consideration." If the difference of the Share Consideration minus the
Series D Preferential Consideration and Series C Preferential
Consideration is less than the Series B Preferential Consideration, then
each share of Company Series B Preferred shall be entitled to receive
its pro rata share of such remaining Share Consideration.
(D) Prior and in preference to any distribution pursuant to
paragraphs (E) below, in the event that the number of shares of Parent
Common Stock equal to the Share Consideration minus the Series D
Preferential Consideration, Series C Preferential Consideration and
Series B Preferential Consideration is greater than zero, each share of
Company Series A Preferred issued and outstanding immediately prior to
the Effective Time shall be entitled to receive that number of shares of
Parent Common Stock equal to the quotient of (x) $0.80 divided by (y)
the Trading Price (the "Per Share Series A Preferential Consideration").
The Per Share Series A Preferential Consideration multiplied by the sum
of the number of shares of Company Series A Preferred issued and
outstanding immediately prior to the Effective Time and the number of
shares of Company Series A Preferred issuable upon exercise of Company
Warrants outstanding
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immediately prior to the Effective Time is herein referred to as the
"Series A Preferential Consideration." If the difference of the Share
Consideration minus the Series D Preferential Consideration, Series C
Preferential Consideration and Series B Preferential Consideration is
less than the Series A Preferential Consideration, then each share of
Company Series A Preferred shall be entitled to receive its pro rata
share of such remaining Share Consideration.
(E) In the event that the number of shares of Parent Common Stock
equal to the Share Consideration minus the Series D Preferential
Consideration, Series C Preferential Consideration, Series B
Preferential Consideration and Series A Preferential Consideration is
greater than zero, each share of Company Common Stock issued and
outstanding immediately prior to the Effective Time shall be entitled to
receive that number of shares of Parent Common Stock equal to the
quotient of (x) $1.60 divided by (y) the Trading Price (the "Per Share
Common Preferential Consideration"). The Per Share Common Preferential
Consideration multiplied by the sum of the number of shares of Company
Common Stock issued and outstanding immediately prior to the Effective
Time and the number of shares of Company Common Stock issuable upon
exercise of Company Options and Company Warrants outstanding as of
immediately prior to the Effective Time is herein referred to as the
"Common Preferential Consideration." If the Share Consideration minus
the Series D Preferential Consideration, Series C Preferential
Consideration, Series B Preferential Consideration and Series A
Preferential Consideration is less than the Common Preferential
Consideration, then each share of Company Common Stock shall be entitled
to receive its pro rata share of such remaining Share Consideration.
Collectively, the Series D Preferential Consideration, Series C
Preferential Consideration, Series B Preferential Consideration, Series
A Preferential Consideration and Common Preferential Consideration are
herein referred to as "Preferential Consideration."
(ii) Participating Consideration. After full payment of the
Preferential Consideration pursuant to Section 1.6(b)(i), the Participating
Consideration shall be distributed as follows:
(A) Each holder of shares of Company Capital Stock, issued and
outstanding immediately prior to the Effective Time, shall be entitled
to receive the number of shares of Parent Common Stock equal to (x) the
Participating Consideration multiplied by (y) a fraction, the numerator
of which shall be the number of shares of Company Capital Stock
(treating all shares of Company Preferred Stock on an as-converted into
Company Common Stock basis in accordance with the terms of the Company's
Amended and Restated Articles of Incorporation in effect immediately
prior to the Effective Time) held by such holder immediately prior to
the Effective Time, and the denominator of which shall be the total
issued and outstanding shares of Company Capital Stock (treating all
shares of Company Preferred Stock on an as-converted into Company Common
Stock basis in accordance with the terms of the Company's Amended and
Restated Articles of Incorporation in effect immediately prior to the
Effective Time) plus the total of all shares of Company Capital Stock
issuable upon exercise of Company Options and Company Warrants (treating
all shares of Company Preferred Stock on an as-converted into Company
Common Stock basis in accordance with the terms of the Company's Amended
and
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Restated Articles of Incorporation in effect immediately prior to the
Effective Time), rounded to the nearest thousandth of a point (the "Per
Share Participating Consideration").
(c) Company Stock Options and Warrants to Purchase Company Capital Stock.
(i) At the Effective Time, each outstanding Company Option to purchase
shares of Company Capital Stock, whether or not exercisable, will be
assumed by Parent. Each Company Option so assumed by Parent under this
Agreement will continue to have, and be subject to, the same terms and
conditions governing such Company Option immediately prior to the Effective
Time (including, without limitation, any vesting schedule or repurchase
rights), except that (A) each Company Option will be exercisable (or will
become exercisable in accordance with its terms) for that number of whole
shares of Parent Common Stock equal to the product of the number of shares
of Company Common Stock that were issuable upon exercise of such Company
Option immediately prior to the Effective Time multiplied by the Option
Exchange Ratio, rounded down to the nearest whole number of shares of
Parent Common Stock, and (B) the per share exercise price for the shares of
Parent Common Stock issuable upon exercise of such assumed Company Option
will be equal to the quotient determined by dividing the exercise price per
share of Company Common Stock at which such Company Option was exercisable
immediately prior to the Effective Time by the Option Exchange Ratio,
rounded up to the nearest whole cent. After the Effective Time, Parent will
issue to each holder of an outstanding Company Option a notice describing
the foregoing assumption of such Company Option by Parent.
(ii) At the Effective Time, each outstanding Company Warrant to
purchase shares of Company Capital Stock will be assumed by Parent. Each
Company Warrant so assumed by Parent under this Agreement will continue to
have, and be subject to, the same terms and conditions governing such
Company Warrant immediately prior to the Effective Time, except that (A)
each Company Warrant will be exercisable (or will become exercisable in
accordance with its terms) for that number of whole shares of Parent Common
Stock equal to the product of the number of shares of Company Common Stock
that were issuable upon exercise of such Company Warrant (assuming the
conversion of any shares of Company Preferred Stock issuable upon exercise
thereof into shares of Company Common Stock in accordance with the
Company's Amended and Restated Articles of Incorporation in effect
immediately prior to the Effective Time) immediately prior to the Effective
Time multiplied by the applicable Warrant Exchange Ratio, rounded down to
the nearest whole number of shares of Parent Common Stock, and (B) the per
share exercise price for the shares of Parent Common Stock issuable upon
exercise of such assumed Company Warrant will be equal to the quotient
determined by dividing the exercise price per share of Company Common Stock
at which such Company Warrant was exercisable immediately prior to the
Effective Time by the applicable Warrant Exchange Ratio, rounded up to the
nearest whole cent. After the Effective Time, Parent will issue to each
holder of an outstanding Company Warrant a notice describing the foregoing
assumption of such Company Warrant by Parent.
(d) 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 share of common
stock of the Surviving Corporation. Each stock certificate of Sub evidencing
ownership of any such shares shall
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continue to evidence ownership of such shares of capital stock of the Surviving
Corporation.
(e) Fractional Shares. No fraction of a share of Parent Common Stock will be
issued, but in lieu thereof, each holder of shares of Company Capital Stock who
would otherwise be entitled to a fraction of a share of Parent Common Stock
(after aggregating all fractional shares of Parent Common Stock to be received
by such holder) shall be entitled to receive from Parent an amount of cash
(rounded to the nearest whole cent) equal to the product of (i) such fraction
and (ii) the Trading Price.
(f) Adjustments to Parent Common Stock. The number of shares of Parent Common
Stock issuable hereunder shall be adjusted to reflect fully the effect of any
stock split, reverse stock split, stock dividend (including any dividend or
distribution of securities convertible into Parent Common Stock or Company
Capital Stock), reorganization, recapitalization or the other like change with
respect to Parent Common Stock or Company Capital Stock after the date hereof.
(g) Maximum Shares of Parent Common Stock. Notwithstanding anything contained in
this Agreement to the contrary, nothing in Article I shall be deemed to require
Parent to issue at any time, now or in the future, more than the Share
Consideration (except as adjusted pursuant to Section 1.6(f)) in connection with
the Merger, including without limitation, upon conversion of all shares issuable
upon exercise of all outstanding Company Capital Stock, Company Options and
Company Warrants (whether or not currently exercisable) into shares of Parent
Common Stock.
1.7 Dissenting Shares.
(a) Notwithstanding any provision of this Agreement to the contrary, any shares
of Company Capital Stock held by a holder who has exercised and perfected
appraisal rights for such shares in accordance with California Law and who, as
of the Effective Time, has not effectively withdrawn or lost such appraisal
rights ("Dissenting Shares"), shall not be converted into or represent a right
to receive the consideration for Company Capital Stock pursuant to Section 1.6,
but the holder thereof shall only be entitled to such rights as are granted by
California Law.
(b) Notwithstanding the provisions of subsection (a), if any holder of
Dissenting Shares shall effectively withdraw or lose (through failure to perfect
or otherwise) his or her appraisal rights, then, as of the later of Effective
Time and the occurrence of such event, such holder's shares shall automatically
be converted into and represent only the right to receive the consideration for
Company Capital Stock as provided in Section 1.6, without interest thereon, upon
surrender of the certificate representing such shares.
(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, or as required under California Law,
voluntarily 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 Shares, 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 shares.
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1.8 Surrender of Certificates.
(a) Exchange Agent. The corporate secretary of Parent or an institution selected
by Parent and reasonably satisfactory to the Company shall serve as exchange
agent (the "Exchange Agent") in the Merger.
(b) Parent to Provide Shares. Promptly after the Effective Time, and in any
event within twenty (20) business days thereafter, Parent shall make available
to the Exchange Agent for exchange in accordance with this Article I,
Certificates representing the shares of Parent Common Stock issuable pursuant to
Section 1.6(b) and any dividends or distributions to which Shareholder may be
entitled pursuant to Section 1.8(d) in exchange for all of the outstanding
shares of Company Capital Stock; provided, however, that on behalf of the
Shareholders, pursuant to Section 7.3 hereof, Parent shall deposit into an
escrow account the Escrow Amount (as defined herein) on behalf of each
Shareholder. The portion of the Escrow Amount contributed on behalf of each
Shareholder shall be in proportion to the aggregate number of shares of Parent
Common Stock which such Shareholder would otherwise be entitled to receive in
the Merger by virtue of ownership of outstanding shares of Company Capital
Stock.
(c) Exchange Procedures. Promptly after the Effective Time, and in any event
within twenty (20) business days thereafter, Parent shall cause the Exchange
Agent to mail to each holder of record (as of the Effective Time) of a
certificate or certificates (the "Certificates") which immediately prior to the
Effective Time represented outstanding shares of Company Capital Stock whose
shares were converted into the right to receive shares of Parent Common Stock
pursuant to Section 1.6(b), cash in lieu of any fractional shares pursuant to
Section 1.6(e) and any dividends or other distributions payable pursuant to
Section 1.8(d): (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 certificates representing shares of Parent Common Stock pursuant to
Section 1.6(b), cash in lieu of any fractional shares pursuant to Section 1.6(e)
and any dividends or other distributions payable pursuant to Section 1.8(d).
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 certificates representing the number of whole
shares of Parent Common Stock pursuant to Section 1.6(b), payment in lieu of
fractional shares which such holders have the right to receive pursuant to
Section 1.6(e) and any dividends or distributions payable pursuant to Section
1.8(d), 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, subject to Section 1.8(d) as to the
payment of dividends, to evidence the ownership of the number of full shares of
Parent Common Stock into which such shares of Company Capital Stock shall have
been so converted and the right to receive an amount in cash in lieu of the
issuance of any fractional shares in accordance with Section 1.6(e) and any
dividends or distributions payable pursuant to Section 1.8(d).
(d) Distributions With Respect to Unexchanged Shares. No dividends or other
distributions declared or made after the date of this Agreement with respect to
Parent Common Stock with a record date after the Effective Time will be paid to
the holders of any unsurrendered Certificates with respect to the shares of
Parent Common Stock represented
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thereby until the holders 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 holders thereof,
without interest, certificates representing whole shares of Parent Common Stock
issued in exchange therefor along with payment in lieu of fractional shares
pursuant to Section 1.6(e) hereof and the amount of any such dividends or other
distributions with a record date after the Effective Time payable with respect
to such whole shares of Parent Common Stock.
(e) Transfers of Ownership. If certificates for shares of Parent Common Stock
are to be issued in a name other than that in which the Certificates surrendered
in exchange therefor are 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 persons 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 certificates 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.
(f) No Liability. Notwithstanding anything to the contrary in this Section 1.8,
none of the Exchange Agent, the Surviving Corporation or any party hereto shall
be liable to a holder of shares of Company Capital Stock for any amount properly
paid to a public official pursuant to any applicable abandoned property, escheat
or similar law.
1.9 No Further Ownership Rights in Company Capital Stock. All consideration
paid in respect of the surrender for exchange of shares of Company Capital Stock
in accordance with the terms hereof, shall be deemed to be full satisfaction of
all rights pertaining to such shares of Company Capital Stock, and there shall
be no further registration of transfers on the records of the Surviving
Corporation of shares of Company Capital Stock which were outstanding
immediately prior to the Effective Time. If, after the Effective Time, Company
Stock Certificates are presented to the Surviving Corporation for any reason,
they shall be canceled and exchanged as provided in this Article I.
1.10 Lost, Stolen or Destroyed Certificates. In the event any certificates
evidencing shares of Company Capital Stock shall have been lost, stolen or
destroyed, the Exchange Agent shall issue 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 other amounts, if any, as
may be required pursuant to Section 1.6(e) and Section 1.8(d); 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 sum 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.
1.11 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 Corporation with full
right, title and possession to all assets, property, rights, privileges, powers
and franchises of the Company, Parent and Sub, the officers and directors of the
Company, Parent and Sub are fully authorized in the name of their respective
corporations or otherwise to take, and will take, all such lawful and necessary
action.
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1.12 Tax and Accounting Consequences. The parties intend that the Merger shall
constitute a reorganization within the meaning of Section 368 of the Internal
Revenue Code of 1986, as amended (the "Code") and be accounted for as a pooling
of interests.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent and Sub, subject to such
exceptions as are specifically disclosed in the disclosure schedule (referencing
the appropriate section and paragraph numbers) supplied by the Company to Parent
and attached hereto as Exhibit D (the "Disclosure Schedule"), that on the date
hereof and as of the Effective Time as though made at the Effective Time:
2.1 Organization of the Company. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of California.
The Company has the corporate power to own its properties and to carry on its
business as now being conducted. The Company is duly qualified to do business
and in good standing as a foreign corporation in each jurisdiction in which the
failure to be so qualified would have, or would reasonably be expected to have,
a Material Adverse Effect. For all purposes of this Agreement, the term
"Material Adverse Effect" means any change, event, effect or condition that is
materially adverse to the business, assets (including intangible assets),
financial condition, or results of operations of the Company. The Company has
delivered a true and correct copy of its Articles of Incorporation and Bylaws,
each as amended to date, to Parent. Section 2.1 of the Disclosure Schedule lists
the directors and officers of the Company. The operations now being conducted by
the Company have not been conducted under any other name.
2.2 Subsidiaries. The Company does not have, and has never had, any
subsidiaries or affiliated companies and does not otherwise own, and has not
otherwise owned, any shares in the capital of or any interest in, or control,
directly or indirectly, any corporation, partnership, association, joint venture
or other business entity.
2.3 Company Capital Structure.
(a) As of the date hereof, the authorized capital stock of the Company consisted
of 57,000,000 shares of authorized Company Common Stock of which 2,172,338
shares were issued and outstanding, and 24,665,000 shares of Preferred Stock, of
which 11,875,000 shares were designated Series A Preferred Stock of which
11,312,500 were issued and outstanding, 5,540,000 shares were designated Series
B Preferred Stock, 4,423,000 of which were issued and outstanding, 3,500,000
shares were designated Series C Preferred Stock, 3,500,000 of which were issued
and outstanding, and 3,750,000 shares were designated Series D Preferred Stock,
3,516,426 of which were issued and outstanding. As of the date hereof, the
Company Capital Stock other than Company Common Stock was held in the amounts
set forth in Section 2.3(a) of the Disclosure Schedule (with the names and
domicile addresses of such persons to be provided no later than three (3)
business days after the date of this Agreement). All outstanding shares of
Company Capital Stock are duly authorized, validly issued, fully paid and
non-assessable and not subject to preemptive rights created by statute, the
Articles of Incorporation or Bylaws of the Company or any agreement to which the
Company is a party or by which it is bound and have been issued in compliance
with federal and state securities laws. There are no
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declared or accrued unpaid dividends with respect to any shares of the Company
Capital Stock. The Company has no other capital stock authorized, issued or
outstanding.
(b) Except for the Company's 1992 Stock Option Plan (the "Stock Option Plan"),
the Company's 1995 Employee Stock Purchase Plan (the "Purchase Plan") and the
Company's Directors' Stock Plan (the "Directors' Plan"), the Company has never
adopted or maintained any stock option plan or other plan providing for equity
compensation of any person. The Company has reserved 3,550,000 shares of Company
Common Stock for issuance to employees and consultants pursuant to the Stock
Option Plan, and 2,411,769 shares are subject to outstanding unexercised options
granted pursuant to the Stock Option Plan as of the date hereof. The Company has
reserved 150,000 shares of Company Common Stock for issuance to directors
pursuant to the Directors' Plan, and 150,000 shares are subject to outstanding
unexercised options granted pursuant to the Directors' Plan as of the date
hereof. No shares are subject to outstanding grants pursuant to the Purchase
Plan as of the date hereof. Section 2.3(b) of the Disclosure Schedule sets forth
for each outstanding Company Option as of December 31, 1998, an identification
number of the holder as noted on the Company's records and the number of shares
of Company Common Stock subject to such Company Option. Section 2.3(b) of the
Disclosure Schedule also sets forth the name of the holder of any Company
Capital Stock other than Company Common Stock subject to vesting, the number of
shares of Company Capital Stock other than Company Common Stock subject to
vesting and the vesting schedule for such Company Capital Stock other than
Company Common Stock, including the extent vested to date. There are Company
Warrants outstanding for the purchase of 901,525 shares of Company Common Stock
and 562,500 shares of Company Series A Preferred. There are no other options,
warrants, calls, rights, commitments or agreements of any character, written or
oral, to which the Company is a party or by which it is bound obligating the
Company to issue, deliver, sell, repurchase or redeem, or cause to be issued,
delivered, sold, repurchased or redeemed, any shares of the capital stock of the
Company or obligating the Company to grant, extend, accelerate the vesting of,
change the price of, otherwise amend or enter into any such option, warrant,
call, right, commitment or agreement. 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
voting stock of the Company.
2.4 Authority. Subject only to the requisite approval of this Agreement and the
Merger by the Shareholders, the Company has all requisite power and authority to
enter into this Agreement and the Escrow Agreement and to consummate the
transactions contemplated hereby and thereby. The execution and delivery of this
Agreement and the Escrow Agreement 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, and no further action is required
on the part of the Company to authorize the Agreement, the Escrow Agreement and
the transactions contemplated hereby and thereby, subject only to the approval
of this Agreement and the Merger by the Shareholders. This Agreement and the
Merger have been unanimously approved by the Board of Directors of the Company.
This Agreement and the Escrow Agreement to which the Company is a party have
been duly executed and delivered by the Company and, assuming the due
authorization, execution and delivery by the other parties hereto and thereto,
constitute the valid and binding obligation of the Company, enforceable in
accordance with their respective terms, subject to the laws of general
application relating to bankruptcy,
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insolvency and the relief of debtors and to rules of law governing specific
performance, injunctive relief or other equitable remedies.
2.5 No Conflict. Subject only to the approval of this Agreement and the Merger
by the Shareholders, the execution and delivery of this Agreement does not, and
the consummation of the transactions contemplated hereby will not, conflict
with, or result in any violation of, or default under (with or without notice or
lapse of time, or both), or give rise to a right of termination, cancellation,
modification or acceleration of any obligation or loss of any benefit under (any
such event, a "Conflict") (i) any provision of the Articles of Incorporation and
Bylaws of the Company, (ii) any agreement, contract, covenant, instrument,
lease, concession, franchise, license or commitment to which the Company is a
party or by which it is bound or to which or any of its properties or assets is
subject (collectively a "Contract") or (iii) any judgment, permit, order,
decree, statute, law, ordinance, rule or regulation applicable to the Company or
its properties or assets; except in the case of clauses (ii) and (iii) for such
Conflicts that do not have or would not reasonably be likely to have a Material
Adverse Effect.
2.6 Consents. Section 2.6 of the Disclosure Schedule accurately lists (i) each
consent, waiver, approval or authorization of any third party, including a party
to any Contract (so as not to trigger any Conflict), and (ii) each registration,
declaration or filing with, any court, administrative agency or commission or
other federal, state, county, local or other foreign governmental authority,
instrumentality, agency or commission ("Governmental Entity") which is required
by or with respect to the Company in connection with the execution and delivery
of this Agreement or the consummation of the transactions contemplated hereby,
except for (i) such consents, waivers, approvals, orders, authorizations,
registrations, declarations and filings as may be required under applicable
securities laws and the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as
amended (the "HSR Act"), (ii) the filing of the Merger Agreement with the
Secretary of State of the State of California, and (iii) such consents, waivers,
approvals and authorizations that the lack of receipt thereof do not have or
would not reasonably be likely to have a Material Adverse Effect.
2.7 Company Financial Statements. Section 2.7 of the Disclosure Schedule sets
forth the Company's audited consolidated balance sheet as of March 31, 1998 and
the related audited consolidated statements of income and cash flow for the
twelve-month periods ended March 31, 1998 and March 31, 1997 (the "Year-End
Financials") and the Company's unaudited balance sheet as of December 26, 1998
(the "Most Recent Balance Sheet"), and the related unaudited statements of
income and cash flow for the nine months then ended (the "Interim Financials").
The Year-End Financials and the Interim Financials are correct in all material
respects and have been prepared in accordance with GAAP applied on a basis
consistent throughout the periods indicated and consistent with each other,
except that the unaudited financials do not contain any footnotes. The Year-End
Financials and Interim Financials present fairly the consolidated financial
condition and consolidated operating results of the Company and any consolidated
subsidiaries as of the dates and during the periods indicated therein, subject
in the case of the Interim Financials, to normal year-end adjustments, which are
not reasonably expected to be material in amount or significance.
2.8 No Undisclosed Liabilities. The Company has no liability (which is
material), indebtedness, obligation, expense, claim, deficiency, guaranty or
endorsement of any type, whether accrued, absolute, contingent, matured,
unmatured or other (whether or not of a nature required to be reflected on the
face of a balance sheet in accordance with GAAP),
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except for (i) those liabilities which are reflected on the Most Recent Balance
Sheet and (ii) those liabilities which were incurred after the date of the Most
Recent Balance Sheet in the ordinary course of the Company's business consistent
with past practice.
2.9 No Changes. Since December 26, 1998 and until the date of this Agreement,
without the prior written consent of Parent, there has not been, occurred or
arisen any:
(a) amendments or changes to the Articles of Incorporation or Bylaws
of the Company;
(b) capital expenditure or commitment by the Company, exceeding
$50,000 individually or $100,000 in the aggregate;
(c) destruction of, damage to or loss of any material assets, business
or, to the Company's knowledge, customer of the Company (whether or not
covered by insurance); provided, however, that any loss of customer after
the date of this Agreement shall be disregarded;
(d) significant labor trouble or claim of wrongful discharge or other
unlawful labor practice or action;
(e) change in accounting methods or practices (including any change in
depreciation or amortization policies or rates) by the Company;
(f) revaluation by the Company of any of its assets;
(g) declaration, setting aside or payment of a dividend or other
distribution with respect to the capital stock of the Company or any direct
or indirect redemption, purchase or other acquisition by the Company of its
capital stock, other than repurchases from employees or consultants in
connection with termination pursuant to existing contractual arrangements
and at a per share price not in excess of the effective per share price of
Company Common Stock in the Merger (as calculated as of the date of such
repurchase);
(h) 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 bonus or other additional salary
or compensation to any such person except as otherwise expressly
contemplated by this Agreement;
(i) any agreement, contract, covenant, instrument, lease, license or
commitment to which the Company is a party or by which it or any of its
assets is bound or any termination, extension, amendment or modification
the terms of any agreement, contract, covenant, instrument, lease, license
or commitment to which the Company is a party or by which it or any of its
assets is bound;
(j) sale, lease, license or other disposition of any of the assets or
properties of the Company or any creation of any security interest in such
assets or properties, except for the sale of the Company's existing
products in the ordinary course of business;
(k) 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,
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except for advances to employees for travel and business expenses in the
ordinary course of business, consistent with past practice;
(l) waiver or release of any material right or claim of the Company
including any write-off or other compromise of any account receivable of
the Company, except in the ordinary course of business consistent with past
practice;
(m) the commencement or notice or, to the Company's knowledge, threat
or reasonable basis therefor of any lawsuit or, to the Company's knowledge,
proceeding or investigation against the Company or its affairs;
(n) notice 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) or of infringement by the Company of any other person's
Intellectual Property (as defined in Section 2.13);
(o) issuance or sale, or contract to issue or sell, by the Company of
any shares of its capital stock or securities exchangeable, convertible or
exercisable therefor, or any securities, warrants, options or rights to
purchase any of the foregoing, other than to employees and consultants in
the ordinary course of business with standard four-year vesting schedules,
in the case of employees, and consistent with past practice, in the case of
consultants;
(p) (i) sale or entering into any license agreement with respect to
the Company's Intellectual Property with any third party or (ii) purchase
or entering into any license agreement with respect to the intellectual
property of any third party, except as permitted pursuant to Section 4.1;
(q) any event or condition of any character that has had a Material
Adverse Effect on the Company; or
(r) negotiation or agreement by the Company or any officer or employee
thereof to do any of the things described in the preceding clauses (a)
through (q) (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, "Tax" or,
collectively, "Taxes," means (i) any and all federal, state, local and foreign
taxes, assessments and other governmental charges, duties, impositions and
liabilities in the nature of taxes, 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) 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 clause (i)
or (ii) 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.
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(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 of the Company or its operations and such Returns are true
and correct and have been completed in accordance with applicable law.
(ii) (A) As of the Effective Time, the Company will have paid all
Taxes it is required to pay and will have withheld with respect to its
employees all federal and state income taxes, FICA, FUTA and other Taxes
required to be withheld, and (B) the Company has accrued on the Most Recent
Balance Sheet all Taxes attributable to the periods covered by the Most
Recent Balance Sheet and will not have incurred any liability for Taxes for
the period 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 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 that is still in effect.
(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 no liabilities for unpaid federal, state, local
and foreign Taxes which have not been accrued or reserved against on the
Most Recent Balance Sheet, whether asserted or unasserted, contingent or
otherwise.
(vi) The Company has made available to Parent or its legal counsel,
copies of all foreign, federal and state income and all state sales and use
Returns for the Company filed for all periods since its inception.
(vii) 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 to or
attributable to Taxes other than Liens for Taxes not yet due and payable.
(viii) The Company's assets are treated as "tax-exempt use property,"
within the meaning of Section 168(h) of the Code.
(ix) The Company has filed any consent agreement under Section 341(f)
of the Code or agreed to have Section 341(f)(4) of the Code apply to any
disposition of a subsection (f) asset (as defined in Section 341(f)(4) of
the Code) owned by the Company.
(x) The Company is not a party to any tax sharing, indemnification or
allocation agreement nor does the Company owe any amount under any such
agreement, other than this Agreement.
(xi) The Company is not and has not been at any time, a "United States
Real Property Holding Corporation" within the meaning of Section 897(c)(2)
of the Code.
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(c) Executive Compensation Tax. There is no contract, agreement, plan or
arrangement to which the Company is a party as of the date of this Agreement,
including but not limited to the provisions of this Agreement, covering any
employee or former employee of Company, individually or collectively, that could
give rise to the payment of any amount that would not be deductible pursuant to
Sections 280G, 404 or 162(m) of the Code.
2.11 Restrictions on Business Activities. Except for sales force agreements
with exclusive territories terminable upon notice of one (1) year or less by the
Company without any penalty or payment of any kind and other ordinary course
agreements of a similar nature consistent with past practice, 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 have the effect of prohibiting or impairing any business
practice of the Company, any acquisition of property (tangible or intangible) by
the Company or the conduct of business by the Company. The Company has not
entered into any agreements not to compete or any agreements limiting the
freedom of the Company to engage in any line of business. Without limiting the
foregoing, the Company has not entered into any agreement under which it 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 does not own any 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. All such current leases are in full
force and effect, are valid and effective in accordance with their respective
terms, and there is not, under any of such leases, any existing material default
or event of default (or event which with notice or lapse of time, or both, would
constitute a material default).
(b) The Company has good and valid title to, or, in the case of leased
properties and assets, valid leasehold interests in, all of their respective
tangible properties and assets, real, personal and mixed, used or held for use
in its business, free and clear of any Liens, except as reflected in the Most
Recent Balance Sheet and except for Liens for Taxes not yet due and payable and
such imperfections of title and encumbrances, if any, which are not material in
character, amount or extent, and which do not detract from the value, or
interfere with the present use, of the property subject thereto or affected
thereby.
(c) Within seven (7) days of the date of this Agreement, the Company shall
provide Parent with a list all items of equipment (the "Equipment") with an
individual value in excess of $50,000 owned or leased by the Company and such
Equipment is (i) reasonably adequate for the conduct of business of the Company
as currently conducted and (ii) in reasonably good operating condition,
regularly and properly maintained, subject to normal wear and tear.
2.13 Intellectual Property.
(a) For the purposes of this Agreement, the following terms have the following
definitions:
"Intellectual Property" shall mean any or all industrial and
intellectual property rights, including, but not limited to all of the
following and all rights in, arising out of, or associated therewith: (i)
all United States and foreign patents and applications
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therefor and all reissues, divisions, renewals, extensions, provisionals,
continuations and continuations-in-part thereof; (ii) all inventions
(whether patentable or not), invention disclosures, improvements, trade
secrets, proprietary information, proprietary processes or formulae,
franchises, licenses, know how, technology, technical data and customer
lists, and all documentation relating to any of the foregoing; (iii) all
copyrights, copyrights registrations and applications therefor and all
other rights corresponding thereto throughout the world; (iv) all mask
works, mask work registrations and applications therefor; (v) all
industrial designs and any registrations and applications therefor
throughout the world; (vi) all trade names, logos, common law trademarks
and service marks; trademark and service ▇▇▇▇ registrations and
applications therefor and all goodwill associated therewith throughout the
world; (vii) all databases and data collections and all rights therein
throughout the world; (viii) all computer software including all source
code, object code, algorithms, display screens, layouts, firmware,
development tools, files, records and data, all media on which any of the
foregoing is recorded, all Web addresses, sites and domain names; (ix) any
similar, corresponding or equivalent rights to any of the foregoing; (x)
any and all other industrial or intellectual property; and (xi) all
documentation related to any of the foregoing.
"Company Intellectual Property" shall mean any Intellectual Property
that is owned by or exclusively licensed to the Company.
"Registered Intellectual Property" shall mean all United States,
international and foreign: (i) patents, patent applications (including
provisional applications); (ii) registered trademarks, applications to
register trademarks, intent-to-use applications, or other registrations or
applications related to trademarks; (iii) registered copyrights and
applications for copyright registration; (iv) any mask work registrations
and applications to register mask works; and (v) any other Company
Intellectual Property that is the subject of an application, certificate,
filing, registration or other document issued by, filed with, or recorded
by, any state, government or other public legal authority.
(b) Section 2.13(b) of the Disclosure Schedule lists all Registered Intellectual
Property owned by, or filed in the name of, the Company (the "Company Registered
Intellectual Property") and the Company will update such schedule within one (1)
business day of the date of this Agreement to list any proceedings or actions
before any court, tribunal (including the United States Patent and Trademark
Office (the "PTO") or equivalent authority anywhere in the world) related to any
of the Company Registered Intellectual Property Rights.
(c) Each item of Company Intellectual Property necessary to produce the
Company's current products and products under development is free and clear of
any Liens. The Company (i) is the exclusive owner of all trademarks and trade
names presently being used or presently proposed to be used in connection with
the operation or conduct of the business of the Company, including the sale of
any products or technology or the provision of any services by the Company and
(ii) owns exclusively, and has good title to, all copyrighted works that are
developed by the Company for its current products or products under development.
(d) To the extent that any Intellectual Property necessary for the Company's
current products and products under development has been developed or created by
any person other than the Company for which the Company has, directly or
indirectly, paid, the
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Company has a written agreement with such person with respect thereto, and the
Company thereby has obtained ownership of all such Intellectual Property by
operation of law or by valid assignment or has obtained a license for such
Intellectual Property.
(e) The Company has not transferred ownership of or granted any license of or
right to use or authorized the retention of any rights to use any Intellectual
Property that is Company Intellectual Property necessary to the Company's
current products or products under development to any other person.
(f) Other than "shrink-wrap" and similar widely available commercial end-user
licenses, the contracts, licenses and agreements listed in Section 2.13(f) of
the Disclosure Schedule include all contracts, licenses and agreements to which
the Company is a party with respect to any Intellectual Property. No person who
has licensed Intellectual Property necessary for the Company's current products
or products under development to the Company has ownership rights or license
rights to improvements made by the Company in such Intellectual Property which
has been licensed to the Company.
(g) Section 2.13(g) 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 such other person of the Intellectual
Property of any person other than the Company.
(h) The operation of the business of the Company as it currently is conducted or
currently is planned to be conducted by the Company, including but not limited
to the Company's design, development, use, import, manufacture and sale of the
products, technology or services (including products, technology or services
currently under development) of the Company does not infringe or misappropriate
the Intellectual Property of any person, violate the rights of any person
(including rights to privacy and publicity), or constitute unfair competition or
trade practices under the laws of any jurisdiction, and the Company has not
received notice from any person claiming that such operation or any act,
product, technology or service (including products, technology or services
currently under development) of the Company infringes or misappropriates the
Intellectual Property of any person or constitutes unfair competition or trade
practices under the laws of any jurisdiction (nor is the Company aware of any
basis therefor).
(i) Each item of Company Registered Intellectual Property relating to the
Company's current products or products under development is valid and
subsisting, and all necessary registration, maintenance and renewal fees in
connection with such Company Registered Intellectual Property have been paid and
all necessary documents and certificates in connection with such Company
Registered Intellectual Property have been filed with the relevant patent,
copyright, trademark or other authorities in the United States or foreign
jurisdictions, as the case may be, for the purposes of maintaining such
Registered Intellectual Property. There are no actions that must be taken by the
Company within sixty (60) days of the Closing Date, 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 Registered Intellectual Property. For each product or
technology 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
U.S. Copyright Office. In each case in which the Company has acquired ownership
of any Intellectual Property rights relating to the Company's
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current products or products under development from any person, the Company has
obtained a valid and enforceable assignment sufficient to irrevocably transfer
all rights in such Intellectual Property (including the right to seek past and
future damages with respect to such Intellectual Property) to the Company and,
to the maximum extent provided for by, and in accordance with, applicable laws
and regulations, the 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.
(j) There are no contracts, licenses or agreements between the Company and any
other person with respect to Company Intellectual Property under which there is
any dispute known to the Company 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.
(k) To the knowledge of the Company, no person is infringing or misappropriating
any Company Intellectual Property.
(l) The Company has a policy requiring each employee, consultant and contractor
to execute proprietary information, confidentiality and assignment agreements
substantially in the Company's standard forms, and all current employees,
consultants and contractors of the Company have executed such an agreement.
(m) There is no pending or, to the best knowledge of the Company, threatened
claim or litigation contesting the validity, ownership or right to use, sell,
license or dispose of any Company Intellectual Property, nor to the best
knowledge of the Company is there any basis for such a claim, nor has the
Company received any notice asserting that any Company Intellectual Property or
the proposed use, sale, license or disposition thereof conflicts or will
conflict with the rights of any other party.
(n) No Company Intellectual Property or product, technology or service of the
Company is subject to any proceeding or outstanding decree, order, judgment,
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.
(o) To the Company's knowledge, no (i) product, technology, service or
publication of the Company, (ii) material published or distributed by the
Company or (iii) conduct or statement of Company constitutes obscene material, a
defamatory statement or material or false advertising.
(p) All of the Company's products (including products currently under
development) will record, store, process, calculate and present calendar dates
falling on and after (and if applicable, spans of time including) January 1,
2000, and will calculate any information dependent on or relating to such dates
in the same manner, and with the same functionality, data integrity and
performance, as the products record, store, process, calculate and present
calendar dates on or before December 31, 1999, or calculate any information
dependent on relating to such dates (collectively, "Year 2000 Compliant"). All
of the Company's products will lose no functionality with respect to the
introduction of records containing dates falling on or after January 1, 2000.
All of the Company's internal computer and technology products and systems are
Year 2000 Compliant.
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2.14 Agreements, Contracts and Commitments.
(a) The Company is not a party to nor is either 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,
other than consulting agreements in the ordinary course of business
containing appropriate confidentiality, proprietary information and
invention assignment provisions,
(ii) any agreement or plan, including, without limitation, any stock
option plan, stock appreciation rights plan or stock purchase plan, any of
the benefits of which will be increased, or the vesting of benefits of
which will be accelerated, by the occurrence of any of the transactions
contemplated by this Agreement or the value of any of the benefits of which
will be calculated on the basis of any of the transactions contemplated by
this Agreement,
(iii) any fidelity or surety bond or completion bond,
(iv) any lease of personal property having a book value individually
in excess of $50,000 or $100,000 in the aggregate,
(v) any agreement, contract or commitment relating to capital
expenditures and involving future payments by the Company in excess of
$50,000 individually or $100,000 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, 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 $50,000 individually or $100,000 in the aggregate to
be incurred by the Company following the date of this Agreement,
(ix) any construction contracts,
(x) any distribution, joint marketing or development agreement,
(xi) any other agreement, contract or commitment that involves
$100,000 or more or is not terminable upon notice of 90 or fewer days by
the Company without penalty or payment of any kind, or
(xii) any agreement to be responsible for or to indemnify any other
person against any claim, liability, cost or expense concerning any
environmental matter, contamination of any property or any other claim
arising from the condition of any real property or the improvements
thereon.
(b) The Company is in compliance with and has not materially breached, violated
or defaulted under, or received notice it has breached, violated or defaulted
under any of the terms or conditions of any Contract. The Company is not aware
of any event that would constitute a material breach, violation or default with
the lapse of time, giving of notice or
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both of a material Contract. Each Contract is in full force and effect and is
not subject to any default thereunder by any party obligated to the Company
pursuant thereto.
2.15 Interested Party Transactions. No officer, director or, to the Company's
knowledge, five percent (5%) or greater shareholder (nor any ancestor, sibling,
descendant or spouse of any of such officer, director, or to the Company's
knowledge, Shareholder, or any trust, partnership or corporation in which any of
such officer, director, or to the Company's knowledge, Shareholder has or has
had an interest), 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,
or (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; provided, that ownership of (x) no more than one percent (1%) of the
outstanding voting stock of a publicly traded entity or (y) in the case of
shareholders, no more than five percent (5%) of any other entity shall not be
deemed an "interest in any entity" for purposes of this Section 2.15.
2.16 Governmental Authorization. The Company possesses all material consents,
licenses, permits, grants or other authorizations issued to the Company by a
Governmental Entity which is required for the operation of its business or the
holding of any interest in any of their properties (herein collectively called
"Company Authorizations"). The Company Authorizations are in full force and
effect and constitute all Company Authorizations required to permit the Company
to operate or conduct its business or hold any interest in its properties or
assets.
2.17 Litigation. There is no action, suit or proceeding of any nature pending,
or, to the Company's knowledge, threatened, against the Company, its properties
or any of its officers or directors (in their capacities as such), nor, to the
knowledge of the Company, is there any reasonable basis therefor. To the
Company's knowledge, there is no investigation pending or threatened against the
Company, its properties or any of its officers or directors (in their capacities
as such) by or before any Governmental Entity, nor, to the knowledge of the
Company, is there any reasonable basis therefor. No Governmental Entity has at
any time challenged or questioned the legal right of the Company to conduct its
operations as presently conducted.
2.18 Accounts Receivable; Inventory; Backlog.
(a) The Company has made available to Parent an accounts receivable report of
the Company ("Accounts Receivable") as of November 30, 1998, indicating (x) the
aggregate dollar amount of Account Receivables due to the Company in each the
following time periods: (1) within 0 - 30 days, (2) within 31 - 60 days, (3)
within 61 - 90 days, (4) within 91 - 120 days and (5) after 120 days, and (y)
for any Account Receivable that is 90 or more days in arrears, the dollar amount
by individual account and the reason such account is in excess of 90 days in
arrears. The name of any individual Account Receivable does not need to be
included in such list.
(b) Except as set forth on Section 2.18(b) of the Disclosure Schedule, all
Accounts Receivable of the Company arose in the ordinary course of business, are
carried at values determined in accordance with GAAP consistently applied and
are collectible except to the extent of reserves therefor set forth in the Most
Recent Balance Sheet. No person has any Lien on any of such Accounts Receivable
and no request or agreement for deduction or discount has been made with respect
to any of such Accounts Receivable.
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(c) Schedule 2.18(c) sets forth an inventory report as of November 30, 1998 in
the form typically prepared for the CEO and the CFO on a monthly basis. All of
the inventories of the Company reflected on the Most Recent Balance Sheet and
the Company's books and records on the date hereof were purchased, acquired or
produced in the ordinary and regular course of business and in a manner
consistent with the Company's regular inventory practices and are set forth on
the Company's books and records in accordance with the practices and principles
of the Company consistent with the method of treating said items in prior
periods. None of the inventory of the Company reflected on the Most Recent
Balance Sheet or on the Company's books and records as of the date hereof (in
either case net of the reserve therefor) is obsolete, defective or in excess of
the needs of the business of the Company reasonably anticipated for the normal
operation of the business consistent with past practices and outstanding
customer contracts. The presentation of inventory on the Year-End Financials and
Most Recent Balance Sheet conform to GAAP and such inventory is stated at the
lower of cost (determined using the first-in, first-out method) or net
realizable value.
(d) Schedule 2.18(d) sets forth the Company's total backlog as of the date
hereof listed by the quarter in which such backlog is scheduled to be shipped by
the Company, and the amounts listed therein represent orders received in the
ordinary course of business and are recorded as backlog consistent with the
Company's methods for recording unfulfilled orders.
2.19 Minute Books. The minutes of the Company made available to counsel for
Parent are the only minutes of the Company and contain a reasonably complete
summary of all meetings of the Board of Directors (or committees thereof) of the
Company and its shareholders or actions by written consent since the time of
incorporation 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 material 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"), but excluding office and janitorial supplies properly and
safely maintained. No Hazardous Materials are present as a result of the actions
of the Company or, to the Company's knowledge, as a result of any actions of any
other person or otherwise, 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 either of them disposed of, transported, sold, or manufactured any
product containing a Hazardous Material (any or all of the foregoing being
collectively referred to as "Hazardous Materials Activities") in violation of
any rule, regulation, treaty or statute
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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 material environmental approvals,
permits, licenses, clearances and consents (the "Environmental Permits")
necessary for the conduct of the Company's Hazardous Material Activities and
other businesses of the Company as such activities and businesses are currently
being conducted.
(d) Environmental Liabilities. No action, proceeding, revocation proceeding,
amendment procedure, writ, injunction or claim is pending, or to the Company's
knowledge, threatened concerning any Environmental Permit, Hazardous Material or
any Hazardous Materials Activity of the Company. The Company is not aware of any
fact or circumstance which could involve the Company in any environmental
litigation or impose upon the Company any environmental liability.
2.21 Brokers' and Finders' Fees; Third Party Expenses. Except as set forth in
Section 2.21 of the Disclosure Schedule and for the Broker's Fee, 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 contemplated hereby. Section
2.21 of the Disclosure Schedule sets forth the principal terms and conditions of
any agreement, written or oral, with respect to such fees.
2.22 Employee Benefit Plans and Compensation.
(a) For purposes of this Section 2.22, the following terms shall have the
meanings set forth below:
(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 thereunder.
(ii) "Employee Plan" shall refer to any plan, program, policy,
practice, contract, agreement or other arrangement providing for bonuses,
severance, termination pay, deferred compensation, pensions, profit
sharing, performance awards, stock or stock-related awards, fringe benefits
or other employee benefits of any kind, whether formal or informal, written
or otherwise, funded or unfunded and whether or not legally binding,
including without limitation, any plan 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" (as defined below), and
pursuant to which the Company or any Affiliate has or may have any material
liability, contingent or otherwise; and
(iii) "Employee" shall mean any current, former, or retired employee,
consultant, officer, or director of the Company or any Affiliate.
(iv) "Employee Agreement" shall refer to each offer letter or
employment, severance, consulting or similar agreement or contract between
the Company or any Affiliate and any Employee. For purposes of this
definition, "offer letter" shall mean an offer letter containing severance
or bonus payment obligations or provisions affecting stock options or
restricted stock that are not reflected in such employee's stock option
agreement, restricted stock purchase agreement or in the related stock
option plan.
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(b) Schedule. The Company has provided an accurate and complete list of each
Employee Plan and each Employee Agreement, together with a schedule of all
liabilities, whether or not accrued, under each such Employee Plan or Employee
Agreement. The Company has no plan or commitment, whether legally binding or
not, to establish any new Employee Plan or Employee Agreement, to modify any
Employee Plan or Employee Agreement (except to the extent required by law or to
conform any such Employee Plan or Employee Agreement to the requirements of any
applicable law, in each case as previously disclosed to Parent in writing, or as
required by this Agreement), or to enter into any Employee Plan or Employee
Agreement, nor does it have any intention or commitment to do any of the
foregoing.
(c) Documents. The Company has provided to Parent, (i) correct and complete
copies of all documents embodying each Employee Plan and each Employee Agreement
including all amendments thereto and copies of all forms of agreement and
enrollment used therewith; (ii) the most recent annual actuarial valuations, if
any, prepared for each Employee Plan; (iii) the three most recent annual reports
(Series 5500 and all schedules thereto), if any, required under ERISA or the
Code in connection with each Employee Plan or related trust; (iv) the most
recent summary plan description together with the most recent summary of
material modifications, if any, required under ERISA with respect to each
Employee Plan; (v) all IRS determination letters and rulings relating to Company
Employee Plans and copies of all applications and correspondence to or from the
IRS or the Department of Labor ("DOL") with respect to any Employee Plan; (vi)
if the Employee Plan is funded, the most recent annual and periodic accounting
of Employee Plan assets; (vii) all material agreements and contracts relating to
each Employee Plan, including but not limited to, administrative service
agreements, group annuity contracts and group insurance contracts; and (viii)
all communications material to any Employee or Employees relating to any
Employee Plan and any proposed 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.
(d) Employee Plan Compliance. (i) The Company has performed in all material
respects all obligations required to be performed by it under each Employee Plan
and each 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 ERISA and the Code; (ii) each Employee Plan intended
to qualify under Section 401(a) of the Code and each trust intended to qualify
under Section 501(a) of the Code has either received a favorable determination
letter with respect to each such Plan from the IRS or has remaining a period of
time under applicable Treasury regulations or IRS pronouncements in which to
apply for such a determination letter and make any amendments necessary to
obtain a favorable determination; (iii) no "prohibited transaction," within the
meaning of Section 4975 of the Code or Section 406 or 407 of ERISA, has occurred
with respect to any Company Employee Plan; (iv) there are no actions, suits or
claims pending, or, to the Knowledge of the Company threatened or anticipated
(other than routine claims for benefits) against any Employee Plan or against
the assets of any Employee Plan; (v) each Employee Plan can be amended,
terminated or otherwise discontinued after the Effective Time in accordance with
its terms, without material liability to the Company, Parent, Sub or any
Affiliate (other than ordinary administration expenses typically incurred in a
termination event); (vi) there are no inquiries or proceedings pending or, to
the knowledge of the Company or any Affiliates, threatened by the IRS or DOL
with respect to any Employee Plan; and (vii) neither the Company nor
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any Affiliate is subject to any penalty or tax with respect to any Employee Plan
under Section 402(i) of ERISA or Section 4975 through 4980 of the Code.
(e) Pension Plans. The Company does not now, nor has it ever, maintained,
established, sponsored, participated in, or contributed to, any Pension Plan
which is subject to Part 3 of Subtitle B of Title I of ERISA, Title IV of ERISA
or Section 412 of the Code.
(f) Multiemployer Plans. At no time has the Company contributed to or been
requested to contribute to any Multiemployer Plan.
(g) No Post-Employment Obligations. No Employee Plan provides, or has any
liability to provide, life insurance, medical or other employee benefits to any
current Employee upon his or her retirement or termination of employment for any
reason, except as may be required by statute, and the Company has not
represented, promised or contracted (whether in oral or written form) to any
current Employee (either individually or to Employees as a group) that such
current Employee(s) would be provided with life insurance, medical or other
employee welfare benefits upon their retirement or termination of employment,
except to the extent required by statute.
(h) No COBRA Violation. Neither the Company nor any Affiliate has, prior to the
Effective Time violated any of the health care continuation requirements of the
Consolidated Omnibus Budget Reconciliation Act of 1985, as amended, or any
similar provisions of state law applicable to its employees.
(i) Effect of Transaction. The execution of this Agreement and the consummation
of the transactions contemplated hereby will not constitute an event under any
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.
(j) Employment Matters. The Company (i) is in compliance in all material
respects with all applicable 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 all amounts required by
law or by agreement to be withheld from the wages, salaries and other payments
to Employees or other persons who by virtue of their activities performed on
behalf of the Company may be deemed employees within the meaning of applicable
law; (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 or to any governmental or administrative
authority, with respect to unemployment compensation benefits, social security
or other benefits or obligations for Employees or other persons who by virtue of
their activities performed on behalf of the Company may be deemed employees
within the meaning of applicable law (other than routine payments to be made in
the normal course of business and consistent with past practice).
(k) Labor. No work stoppage or labor strike against the Company is pending, or
to the knowledge of the Company, threatened. The Company is not involved in or
threatened with any labor dispute, grievance, or litigation relating to labor,
safety or discrimination matters involving any Employee, including, without
limitation, charges of unfair labor practices or discrimination complaints,
which, if adversely determined, would, individually or in the aggregate, result
in material liability to the Company, Parent or Sub. The Company has not engaged
in any unfair labor practices which could, individually or in the aggregate,
directly or indirectly result in a liability to the Company. The Company is not
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presently, nor has either in the past, been 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.
(l) No Interference or Conflict. To the knowledge of the Company, no
Shareholder, 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 proposed to be conducted, will, to the Company's knowledge, conflict with or
result in a breach of the terms, conditions or provisions of, or constitute a
default under, any contract or agreement under which any of such officer's,
directors, employees or consultants is now bound.
2.23 Insurance. The Company has provided Parent with a list of all insurance
policies and fidelity bonds covering the assets, business, equipment,
properties, operations, employees, officers and directors of the Company. There
is no claim by the Company 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 is otherwise in compliance with the terms
of such policies and bonds (or other policies and bonds providing substantially
similar insurance coverage). The Company has no knowledge of any 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 material
foreign, federal, state or local statute, law or regulation that has had or is
reasonably likely to have a Material Adverse Effect.
2.25 Warranties; Indemnities. Except for the warranties and indemnities
contained in those contracts and agreements set forth in Section 2.13(g) of the
Disclosure Schedule, the Company has not given any warranties or indemnities
relating to products or technology sold or licensed or services rendered by the
Company, other than standard warranties and indemnities in the ordinary course
of business.
2.26 Materials and Parts. To the Company's knowledge, there is no actual or
threatened shortage of materials or parts from any source that has had or is
reasonably likely to have a Material Adverse Effect.
2.27 Representations Complete. None of the representations or warranties made
by the Company in this Agreement (as modified by the Disclosure Schedule), nor
any statement made in any Schedule or certificate furnished by the Company
pursuant to this Agreement or furnished by the Company in or in connection with
documents mailed or delivered to the Shareholders 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 the light of the circumstances under
which made, not misleading.
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2.28 Information Supplied. The information supplied by the Company specifically
for inclusion in the Registration Statement or Permit Application (each as
defined in Section 5.1) shall not at the time such Registration Statement is
filed with the SEC or such Permit Application is filed with the Department of
Corporations (as defined in Section 5.1), as applicable, at any time such
Registration Statement or Permit Application, as applicable, is amended or
supplemented, and at the time such Registration Statement becomes effective
under the Securities Act of 1933, as amended ("Securities Act") or such Permit
Application is approved by the Department of Corporations, as applicable,
contain any untrue statement of material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein not misleading. The information supplied by the Company specifically for
inclusion in the Proxy statement (as defined in Section 5.1) to be sent to the
Shareholders shall not, on the date the Proxy Statement is first mailed to the
Shareholders and at the time of the meeting of the Shareholders held to vote on
the approval and adoption of this Agreement and the transactions contemplated
hereby, contain any untrue statement of material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein not misleading or omit to state any material fact necessary
to correct any statement in any earlier communication with respect to the
solicitation of proxies or consents for the approval of this Agreement which has
become false or misleading. Notwithstanding the foregoing, the Company makes no
representation or warranty with respect to any information supplied by Parent or
Sub which is contained in any of the foregoing documents.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Parent and Sub represent and warrant to the Company, subject to such exceptions
as are specifically disclosed in the Parent Disclosure Schedule (referencing the
appropriate section and paragraph numbers) supplied by Parent to the Company and
attached hereto as Exhibit K (the "Parent Disclosure Schedule"), as follows:
3.1 Organization, Standing and Power. Parent is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
Sub is a corporation duly organized, validly existing and in good standing under
the laws of the State of California. Each of Parent and Sub has the corporate
power to own its properties and to carry on its business as now being conducted
and is duly qualified to do business and is in good standing in each
jurisdiction in which the failure to be so qualified would have a Parent
Material Adverse Effect (as defined below). Parent has made available a true and
correct copy of the Certificate of Incorporation and Bylaws of Parent and the
Articles of Incorporation and Bylaws of Sub, as amended to date, to counsel for
the Company.
3.2 Authority. Each of Parent and Sub has all requisite corporate power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of Parent and Sub. This Agreement
has been duly executed and delivered by Parent and Sub and constitutes the valid
and binding obligations of Parent and Sub, enforceable in accordance with its
terms, except as such enforceability may be limited by principles of public
policy and subject to the laws of general application relating to bankruptcy,
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insolvency and the relief of debtors and rules of law governing specific
performance, injunctive relief or other equitable remedies.
3.3 No Conflict. The execution and delivery of this Agreement does not, and the
consummation of the transactions contemplated hereby will not conflict with, or
result in any violation of, or default under (with or without notice or lapse of
time, or both), or give rise to a Conflict under any provision of the
Certificate of Incorporation, as amended, and Bylaws of Parent or Sub or any
judgment, order, decree, statute, law, ordinance, rule or regulation applicable
to Parent or Sub or its properties or assets, except where such Conflict will
not have a Parent Material Adverse Effect. For all purposes of this Agreement,
the term "Parent Material Adverse Effect" means any change, event, effect or
condition that is materially adverse to the business, assets (including
intangible assets), financial condition or results of operations of Parent and
its subsidiaries taken as a whole.
3.4 Capital Structure.
(a) The authorized stock of Parent consists of 250,000,000 shares of Common
Stock, $.01 par value, of which 85,987,003 shares were issued and outstanding as
of the quarter ended September 28, 1998, and 5,000,000 shares of undesignated
Preferred Stock, $.01 par value. No shares of Preferred Stock are issued or
outstanding as of the quarter ended September 28, 1998. The authorized capital
stock of Sub consists of 1,000 shares of Common Stock, $.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 and are free of any liens or encumbrances other than any liens or
encumbrances created by or imposed upon the holders thereof. As of the date
hereof, Parent has also reserved 44,100,000 shares of Common Stock for issuance
pursuant to its employee and director stock and option plans, 24,681,318 of
which were subject to outstanding options at September 28, 1998. From September
28, 1998 through the date hereof, Parent has not issued any shares of its
capital stock except in the ordinary course of business pursuant to its employee
and director stock option plans. As of the date hereof, there are no other
options, warrants, calls, rights, commitments or agreements of any character to
which Parent is a party or by which it is bound obligating Parent to issue,
deliver, sell, repurchase or redeem, or cause to be issued, delivered, sold,
repurchased or redeemed, any shares of the capital stock of Parent or obligating
Parent to grant, extend or enter into any such option, warrant, call, right,
commitment or agreement.
(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.
Subject to the issuance of a permit by the Department of Corporations (as
defined in Section 5.1) qualifying Parent's issuance of the shares of Parent
Common Stock in the Merger, Parent shall issue the shares of Parent Common Stock
in the merger in a transaction exempt from registration pursuant to Section
3(a)(10) of the Securities Act and such shares shall not be legended except for
such legends as may be required: (a) under the Company Affiliate Agreement, (b)
with respect to California, by the Department of Corporations, or (c) with
respect to other states, as required by state securities laws. In the case of
any transfer of shares of Parent Common Stock by a Company shareholder, Parent
will (i) authorize the transfer and direct its transfer agent to transfer and
record the transfer of such shares of parent Common Stock and to deliver
unlegended certificates to the transferee and (ii) provide the
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transfer agent with all reasonable documentation and representations required
from the Parent and necessary to effect such transfer, provided, however, in the
case of a person who executed a Company Affiliate Agreement and who is a Company
affiliate under Rule 145 of the Securities Act, such person has complied with
the Company Affiliate Agreement and provided Parent with customary assurances as
to its compliance with the volume limitations, brokers' transaction and manner
of sale requirements to the extent required by Rule 145.
3.5 SEC Documents; Parent Financial Statements. Parent has made available to
the Company a true and complete copy of all of its filings with the SEC since
December 29, 1997 until the date of this Agreement (the "SEC Documents"). As of
their respective filing dates, the SEC Documents complied in all material
respects with the requirements of the Exchange Act and the Securities Act, and
as of their respective filing dates and the date of this Agreement, none of the
SEC Documents contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make the
statements made therein, in light of the circumstances in which they were made,
not misleading, in each case except to the extent corrected by a subsequently
filed SEC Document or a press release made by Parent prior to the date of this
Agreement. The SEC documents contain an audited consolidated balance sheet of
Parent as of December 29, 1997 and the related audited consolidated statements
of income and cash flow for the year then ended and the Parent's unaudited
consolidated balance sheet as of September 28, 1998 (the "Parent Balance Sheet")
and the related unaudited consolidated statements of income and cash flow for
the nine month period then ended (collectively, the "Parent Financials"). The
Parent Financials, and notes thereto, are correct in all material respects and
have been prepared in accordance with GAAP applied on a basis consistent
throughout the periods indicated and consistent with each other. The Parent
Financials present fairly the financial condition and operating results and cash
flows of the Parent as of the dates and during the periods indicated therein,
subject, in the case of unaudited statements, to normal year-end adjustments,
which are not reasonably expected to be material in amount or significance.
Since December 29, 1997 and until the date of this Agreement, there has been no
material change in Parent's accounting policies, except as described in the
notes to the Parent Financials.
3.6 No Material Adverse Change. Since the date of the balance sheet included in
the Parent's report on Form 10-Q filed November 10, 1998 (as amended by Parent's
report on Form 10-Q/A filed December 2, 1998) and until the date of this
Agreement, Parent has conducted its business in the ordinary course and there
has not occurred: (a) any Parent Material Adverse Effect; (b) any amendments or
changes in the Articles of Incorporation or Bylaws of Parent; or (c) any damage
to, destruction or loss of any assets of the Parent, (whether or not covered by
insurance) that materially and adversely affects the financial condition,
business or prospects of Parent and its subsidiaries, taken as a whole.
3.7 Brokers' and Finders' Fees. The Parent 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 this Agreement or any
transaction contemplated hereby.
3.8 NYSE Listing. All shares of Parent Common Stock registered under the
Securities Act have been duly listed on the NYSE.
3.9 Litigation. There is no action, suit, proceeding, claim, arbitration or
investigation pending or as to which Parent has received any notice of assertion
against Parent, which in
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any manner challenges or seeks to prevent, enjoin, alter or materially delay any
of the transactions contemplated by this Agreement.
3.10 Information Supplied. The information supplied by Parent or Sub
specifically for inclusion in the Registration Statement or Permit Application
(each as defined in Section 5.1) shall not at the time such Registration
Statement is filed with the SEC or such Permit Application is filed with the
Department of Corporations (as defined in Section 5.1), as applicable, at any
time such Registration Statement or Permit Application, as applicable, is
amended or supplemented, and at the time such Registration Statement becomes
effective under the Securities Act or such Permit Application is approved by the
Department of Corporations, as applicable, contain any untrue statement of
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein not misleading. The
information supplied by Parent or Sub specifically for inclusion in the Proxy
Statement (as defined in Section 5.1) to be sent to the Shareholders shall not,
on the date the Proxy Statement is first mailed to the Shareholders and at the
time of the meeting the Shareholders held to vote on the approval and adoption
of this Agreement and the transactions contemplated hereby, contain any untrue
statement of material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein not
misleading or omit to state any material fact necessary to correct any statement
in any earlier communication with respect to the solicitation of proxies or
consents for the approval of this Agreement which has become false or
misleading. Notwithstanding the foregoing, Parent makes no representation or
warranty with respect to any information supplied by the Company which is
contained in any of the foregoing documents.
ARTICLE IV
CONDUCT PRIOR TO THE EFFECTIVE TIME
4.1 Conduct of Business of the Company. During the period from the date of this
Agreement and continuing until the earlier of the termination of this Agreement
or the Effective Time, the Company agrees (except to the extent that Parent
shall otherwise consent in writing), to carry on the Company's business in the
usual, regular and ordinary course in substantially the same manner as
heretofore conducted, to pay the debts and Taxes of the Company when due (unless
they are being contested in good faith), to pay or perform other obligations
when due, and, to the extent consistent with such business, use commercially
reasonable efforts consistent with past practice and policies to preserve intact
the Company's present business organizations, keep available the services of the
Company's present officers and key employees and preserve the Company's
relationships with customers, suppliers, distributors, licensors, licensees, and
others having business dealings with it, all with the goal of preserving
unimpaired the Company's goodwill and ongoing businesses at the Effective Time.
The Company shall promptly notify Parent of any material event or occurrence or
emergency not in the ordinary course of business of the Company and any material
event involving the Company. Except as expressly contemplated by this Agreement
as set forth in Section 4.1 of the Disclosure Schedule, without the prior
written consent of Parent, the Company shall not and shall not agree in writing
or otherwise to:
(a) (i) Sell, transfer or enter into any material license agreement
with respect to the Company Intellectual Property with any person or entity
or (ii) except for material license agreements that are in the ordinary
course of business, buy or enter
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into any license agreement with respect to the Intellectual Property of any
person or entity;
(b) Except for Contracts that are both (i) terminable upon notice of
one (1) year or less by the Company without any penalty or payment and (ii)
in the ordinary course of business consistent with past practice, enter
into any Contract or amend any provisions of a Contract pursuant to which
any other party is granted marketing, distribution or similar rights with
respect to any products or technology of the Company;
(c) Amend or otherwise modify (or agree to do so), except in the
ordinary course of business consistent with past practice, or take
affirmative actions to violate the terms of, any of the Contracts set forth
or described in the Disclosure Schedule;
(d) Commence or settle any litigation;
(e) Declare, set aside or pay any dividends on or make any other
distributions (whether in cash, stock or property) in respect of any of its
capital stock, or split, combine or reclassify any of its capital stock or
issue or authorize the issuance of any other securities in respect of, in
lieu of or in substitution for shares of capital stock of the Company, or
repurchase, redeem or otherwise acquire, directly or indirectly, any shares
of the capital stock of the Company (or options, warrants or other rights
exercisable therefor), other than repurchases from employees or consultants
in connection with termination pursuant to existing contractual
arrangements and at a per share price not in excess of the effective per
share price of Company Common Stock in the Merger (as calculated as of the
date of such repurchase);
(f) Except for the issuance of shares of Company capital stock upon
exercise or conversion of presently outstanding Company options or warrants
or the issuance of options at a price no less than ninety percent (90%) of
the product of (x) the Option Exchange Ratio calculated as of the date of
grant multiplied by (y) the closing sale price of Parent Common Stock as
reported on the NYSE on the date of grant and subject to the Company's
standard four-year vesting schedule to new employees in the ordinary course
of business, issue, grant, deliver or sell or authorize or propose the
issuance, grant, delivery or sale of, or purchase or propose the purchase
of, any shares of its capital stock or securities convertible into, or
subscriptions, rights, warrants or options to acquire, or other agreements
or commitments of any character obligating it to issue or purchase any such
shares or other convertible securities;
(g) Cause or permit any amendments to its Articles of Incorporation or
Bylaws;
(h) Acquire or agree to acquire by merging or consolidating with, or
by purchasing any assets or equity securities of, or by any other manner,
any business or any corporation, partnership, association or other business
organization or division thereof, or otherwise acquire or agree to acquire
any assets which are material, individually or in the aggregate, to the
Company's business;
(i) Sell, lease, license or otherwise dispose of any of its properties
or assets with a book value in excess of $100,000 which are not
Intellectual Property, except in the ordinary course of business and
consistent with past practices;
(j) Incur any indebtedness for borrowed money, or guarantee any such
indebtedness or issue or sell any debt securities or guarantee any debt
securities of others, in excess of $250,000 in the aggregate, other than
loans in the ordinary course
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of business consistent with past practice with respect to terminated
employees who are not officers of the Company;
(k) Grant any loans to others or purchase debt securities of others or
amend the terms of any outstanding loan agreement, in excess of $100,000 in
the aggregate, other than loans in the ordinary course of business
consistent with past practice with respect to terminated employees who are
not officers of the Company;
(l) Grant any severance or termination pay (i) to any director or
officer or (ii) to any other employee, except payments made pursuant to
standard written agreements outstanding on the date hereof and disclosed in
the Disclosure Schedule or in the ordinary course of business consistent
with past practice with respect to terminated employees who are not
officers of the Company;
(m) Adopt any employee benefit plan, or enter into any employment
contract, pay or agree to pay any special bonus or special remuneration to
any director or employee, or increase the salaries or wage rates of its
employees, other than (i) in the ordinary course of business consistent
with past practice with respect to terminated employees who are not
officers of the Company, (ii) actions consistent with the Company's past
practice to retain employees who have decided to resign from the Company,
(iii) salary increases of no more than ten percent (10%) of any employee's
then current base salary in the ordinary course of business consistent with
past practice and (iv) bonuses less than of $20,000 per individual in the
ordinary course of business consistent with past practice;
(n) Revalue any of its assets, including without limitation writing
down the value of inventory or writing off notes or accounts receivable,
other than in the ordinary course of business;
(o) Pay, discharge or satisfy, in an amount in excess of $25,000 (in
any one case) or $100,000 (in the aggregate), any claim, liability or
obligation (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction in the
ordinary course of business of liabilities reflected or reserved against in
the Most Recent Balance Sheet;
(p) Make or change any material election in respect of Taxes, adopt or
change any accounting method in respect of Taxes, enter into any closing
agreement, settle any claim or assessment in respect of Taxes, or consent
to any extension or waiver of the limitation period applicable to any claim
or assessment in respect of Taxes;
(q) Except where terminable upon notice by the Company of one (1) year
or less without any penalty or payment, enter into any agreement or
arrangement relating to the design, development or manufacture of
integrated circuits or any foundry or assembly, test or manufacturing
subcontractor agreement;
(r) Accelerate the vesting schedule of any of the outstanding Company
Options or Company Capital Stock;
(s) Hire or terminate employees or encourage employees to resign,
other than in the ordinary course of business;
(t) Take any action that would be reasonably likely to interfere with
Parent's ability to account for the Merger as a pooling of interests; or
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(u) Incur any capital expenditure or commitment by the Company,
exceeding $100,000 individually.
4.2 No Solicitation. Until the earlier of the Effective Time or the date of
termination of this Agreement pursuant to the provisions of Section 8.1 hereof,
the Company will not (nor will the Company permit any of its officers,
directors, agents, representatives or affiliates to) directly or indirectly,
take any of the following actions with any party other than Parent and its
designees: (a) solicit, encourage, initiate or participate in any negotiations
or discussions with respect to, any offer or proposal to acquire all,
substantially all or a significant portion of the Company's business, properties
or technologies or any portion of the Company's capital stock (whether or not
outstanding) whether by merger, purchase of assets, tender offer or otherwise,
or effect any such transaction, (b) disclose any information not customarily
disclosed to any person concerning the Company's business, technologies or
properties or afford to any person or entity access to its properties,
technologies, books or records, (c) assist or cooperate with any person to make
any proposal to purchase all or any part of the Company's capital stock or
assets, or (d) enter into any agreement with any person providing for the
acquisition of all or any significant portion of the Company (whether by way of
merger, purchase of assets, tender offer or otherwise). In addition to the
foregoing, if the Company receives, prior to the Effective Time or the
termination of this Agreement, any offer, proposal, or request relating to any
of the above, the Company shall immediately notify Parent thereof, including
information as to the identity of the offeror or the party making any such offer
or proposal and the specific terms of such offer or proposal, as the case may
be, and such other information related thereto as Parent may reasonably request.
Until the earlier of the Effective Time or the date of termination of this
Agreement pursuant to the provisions of Section 8.1 hereof, the Company will not
(nor will the Company to permit any of its officers, directors, agent,
representatives or affiliates to) take any action to prepare a registration
statement, prepare a "roadshow" presentation to potential investors or otherwise
pursue an initial public offering of Company Capital Stock. The parties hereto
agree that irreparable damage would occur in the event that the provisions of
this Section 4.2 were not performed in accordance with their specific terms or
were otherwise breached. It is accordingly agreed by the parties that Parent
shall be entitled to seek an injunction or injunctions to prevent breaches of
the provisions of this Section 4.2 and to enforce specifically the terms and
provisions hereof in any court of the United States or any state having
jurisdiction, this being in addition to any other remedy to which Parent may be
entitled at law or in equity.
4.3 Conduct of Business of the Company. Except as expressly set forth in
Section 4.3 of the Disclosure Schedule, without the prior written consent of
Parent, the CEO or the CFO shall not directly or on behalf of the Company, nor
shall the CEO, the CFO or the Board of Directors of the Company authorize any
person to, on behalf of the Company:
(a) (i) Sell, transfer or enter into any material license agreement
with respect to the Company Intellectual Property with any person or entity
or (ii) except for material license agreements that are in the ordinary
course of business, buy or enter into any material license agreement with
respect to the Intellectual Property of any person or entity;
(b) Except for Contracts that are both (i) terminable upon notice of
one (1) year or less by the Company without any penalty or payment and (ii)
in the ordinary course of business consistent with past practice, enter
into any material Contract or amend any material provisions of a Contract
pursuant to which any other
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party is granted marketing, distribution or similar rights with respect to
any products or technology of the Company;
(c) Declare, set aside or pay any dividends on or make any other
distributions (whether in cash, stock or property) in respect of any of its
capital stock, or split, combine or reclassify any of its capital stock or
issue or authorize the issuance of any other securities in respect of, in
lieu of or in substitution for shares of capital stock of the Company, or
repurchase, redeem or otherwise acquire, directly or indirectly, any shares
of the capital stock of the Company (or options, warrants or other rights
exercisable therefor), other than repurchases from employees or consultants
in connection with termination pursuant to existing contractual
arrangements and at a per share price not in excess of the effective per
share price of Company Common Stock in the Merger (as calculated as of the
date of such repurchase);
(d) Except for the issuance of shares of Company capital stock upon
exercise or conversion of presently outstanding Company options or warrants
or the issuance of options at a price no less than ninety percent (90%) of
the product of (x) the Option Exchange Ratio calculated as of the date of
grant multiplied by (y) the closing sale price of Parent Common Stock as
reported on the NYSE on the date of grant and subject to the Company's
standard four-year vesting schedule to new employees in the ordinary course
of business, issue, grant, deliver or sell or authorize or propose the
issuance, grant, delivery or sale of, or purchase or propose the purchase
of, any shares of its capital stock or securities convertible into, or
subscriptions, rights, warrants or options to acquire, or other agreements
or commitments of any character obligating it to issue or purchase any such
shares or other convertible securities;
(e) Cause or permit any amendments to its Articles of Incorporation or
Bylaws;
(f) Acquire or agree to acquire by merging or consolidating with, or
by purchasing any assets or equity securities of, or by any other manner,
any business or any corporation, partnership, association or other business
organization or division thereof, or otherwise acquire or agree to acquire
any assets which are material, individually or in the aggregate, to the
Company's business;
(g) Grant any loan to any director or officer;
(h) Grant any severance or termination pay to any director or officer;
(i) Pay or agree to pay any special bonus or special remuneration to
or for the benefit of any director or officer;
(j) Except for Contracts that are terminable upon notice of one (1)
year or less by the Company without any penalty or payment, enter into any
agreement or arrangement relating to the design, development or manufacture
of integrated circuits or any foundry manufacturing subcontractor
agreement;
(k) Accelerate the vesting schedule of any of the outstanding Company
Options or Company Capital Stock; or
(l) Take any action that would be reasonably likely to interfere with
Parent's ability to account for the Merger as a pooling of interests.
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ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Registration Statement or Permit Application. As promptly as practicable
after the execution of this Agreement, the Company shall prepare, with the
cooperation of Parent, a proxy statement (the "Proxy Statement"), and Parent
will prepare and file either (a) a registration statement on Form S-4 (the
"Registration Statement") filed with the SEC or (b) an application for a
fairness hearing and permit (the "Permit Application") filed with the California
Department of Corporations (the "Department of Corporations"), in which the
Proxy Statement will be included as a prospectus or an exhibit, as applicable.
The decision to file a Registration Statement or a Permit Application shall be
made by Parent in its sole discretion. Each of Parent and the Company shall
provide promptly to the other such information concerning its business and
financial statements and affairs as, in the reasonable judgment of the providing
party or its counsel, may be required or appropriate for inclusion in the Proxy
Statement and the Registration Statement or Permit Application, as applicable,
or in any amendments or supplements thereto, and to cause its counsel and
auditors to cooperate with the other's counsel and auditors in the preparation
of the Proxy Statement and the Registration Statement or Permit Application, as
applicable. Each of the Company and Parent shall use its respective reasonable
best efforts to respond to any comments of the SEC or Department of
Corporations, as applicable, and have the Registration Statement declared
effective under the Securities Act or the Permit Application approved and
issued, as applicable, as promptly as practicable after such filing. The Company
will cause the Proxy Statement to be mailed to the Shareholders at the earliest
practicable time after the Registration Statement is declared effective by the
SEC or the permit is issued by the Department of Corporations, as applicable. As
promptly as practicable after the date of this Agreement, the Company and Parent
will prepare and file any other filings required under the Exchange Act, the
Securities Act or any other Federal, foreign or Blue Sky laws relating to the
Merger and the transactions contemplated by this Agreement (the "Other
Filings"). Each of the Company and Parent will notify the other promptly upon
the receipt of any comments from the SEC or the Department of Corporations, as
applicable, or their respective staff and of any request by the SEC or the
Department of Corporations, as applicable, or their respective staff or any
other government officials for amendments or supplements to the Registration
Statement or Permit Application, the Proxy Statement or any Other Filing or for
additional information and will supply the other with copies of all
correspondence between such party or any of its representatives, on the one
hand, and the SEC or the Department of Corporations, as applicable, or their
respective staff or any other government officials, on the other hand, with
respect to the Registration Statement or Permit Application, the Proxy
Statement, the Merger or any Other Filing. The Proxy Statement, the Registration
Statement or Permit Application, as applicable, and the Other Filings will
comply in all material respects with all applicable requirements of law and the
rules and regulations promulgated thereunder. Whenever any event occurs which is
required to be set forth in an amendment or supplement to the Proxy Statement,
the Registration Statement or Permit Application, as applicable, or any Other
Filing, the Company or Parent, as the case may be, will promptly inform the
other of such occurrence and cooperate in filing with the SEC or the Department
of Corporations, as applicable, or their respective staff or any other
government officials, and/or mailing to the Shareholders, such amendment or
supplement.
5.2 Access to Information. The Company shall afford Parent and its accountants,
counsel and other representatives, reasonable access during normal business
hours during the period prior to the Effective Time to (a) all of the Company's
properties, books, contracts,
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commitments and records, (b) all other information concerning the business,
properties and personnel (other than their identities) (subject to restrictions
imposed by applicable law) of the Company as Parent may reasonably request and
(c) all key employees of the Company as identified by Parent; provided however
that the Company shall not be required to provide any information to Parent
hereunder that could reasonably be believed to affect the Company's ability
effectively to compete with Parent should the transactions contemplated hereby
fail to be consummated (e.g., design specifications, product strategy, etc.).
The Company agrees to provide to Parent and its accountants, counsel and other
representatives copies of internal financial statements (including by returns
and supporting documentation) promptly upon request. Parent shall provide the
Company with copies of such publicly available information about Parent as the
Company may request. Parent shall allow any executive officer of the Company
reasonable access to the Chief Financial Officer of Parent to make inquiries and
request and receive information in respect of Parent or Sub deemed by such Chief
Financial Officer in the exercise of his judgment to be reasonably requested by
the Company in the context of the transactions provided for herein and to be
similar in nature to the information previously provided by the Company to
Parent. No information or knowledge obtained in any investigation pursuant to
this Section 5.2 shall affect or be deemed to modify any representation or
warranty contained herein or the conditions to the obligations of the parties to
consummate the Merger.
5.3 Confidentiality. Subject to Section 5.5 hereof, each of the parties hereto
agrees that the information obtained in any investigation pursuant to Section
5.2 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 Confidentiality Agreement dated as of August 31, 1998
between the Company and Parent (the "Non-Disclosure Agreement").
5.4 Expenses. Whether or not the Merger is consummated, all fees and expenses
incurred in connection with the Merger including, without limitation, all legal,
accounting, financial advisory, consulting and all other fees and expenses of
third parties ("Third Party Expenses") incurred by a party in connection with
the negotiation and effectuation of the terms and conditions of this Agreement
and the transactions contemplated hereby, shall be the obligation of the
respective party incurring such fees and expenses.
5.5 Public Disclosure. Unless otherwise required by law, prior to the Effective
Time, no disclosure (whether or not in response to an inquiry) of the subject
matter of this Agreement shall be made by any party hereto unless approved by
Parent prior to release, provided that such approval shall not be unreasonably
withheld, subject, in the case of Parent, to Parent's obligation to comply with
applicable securities laws and the rules and regulations of any national
securities exchange.
5.6 Consents. The Company shall use its commercially reasonable efforts to
obtain the consents, waivers, assignments and approvals under any of the
Contracts as may be required in connection with the Merger so as to preserve for
the Surviving Corporation all rights of, and benefits to, the Company under such
Contracts.
5.7 FIRPTA Compliance. On the Closing Date, the Company shall deliver to Parent
a properly executed statement in a form reasonably acceptable to Parent for
purposes of satisfying Parent's obligations under Treasury Regulation Section
1.1445-2(c)(3).
5.8 Reasonable Efforts. Subject to the terms and conditions provided in this
Agreement, each of the parties hereto shall use commercially reasonable efforts
to take promptly, or
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cause to be taken, all actions, and to do promptly, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated hereby, to obtain
all necessary waivers, consents and approvals and to effect all necessary
registrations and filings and to remove any injunctions or other impediments or
delays, legal or otherwise, in order to consummate and make effective the
transactions contemplated by this Agreement for the purpose of securing to the
parties hereto the benefits contemplated by this Agreement; provided that Parent
shall not be required to agree to any divestiture by Parent or the Company or
any of Parent's subsidiaries or affiliates of shares of capital stock or of any
business, assets or property of Parent or its subsidiaries or affiliates or of
the Company, its affiliates, or the imposition of any material limitation on the
ability of any of them to conduct their businesses or to own or exercise control
of such assets, properties and stock.
5.9 Notification of Certain Matters. The Company and the Parent shall give
prompt notice to one another of (i) the occurrence or non-occurrence of any
event, the occurrence or non-occurrence of which is likely to cause any
representation or warranty of such entity contained in this Agreement to be
untrue or inaccurate at or prior to the Effective Time and (ii) any failure of
such entity to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it hereunder, in each case such that the condition
set forth in Section 6.3(a), 6.3(e) or 6.2(a), as applicable, would not be
satisfied; provided, however, that the delivery of any notice pursuant to this
Section 5.9 shall not limit or otherwise affect any remedies available to the
party receiving such notice. No disclosure by the Company or Parent pursuant to
this Section 5.9, however, shall be deemed to amend or supplement the Disclosure
Schedule or Parent Disclosure Schedule or prevent or cure any
misrepresentations, breach of warranty or breach of covenant.
5.10 Additional Documents and Further Assurances. Each party hereto, at the
request of another party hereto, shall execute and deliver such other
instruments and do and perform such other acts and things as may be necessary or
desirable for effecting completely the consummation of this Agreement and the
transactions contemplated hereby.
5.11 Employee Plans; Employees. The Company agrees (i) to cause its 401(k) plan
to terminate effective as of the day immediately preceding the Closing Date and
(ii) to cause all of its other Employee Plans to terminate as soon as
practicable following the Closing, unless Parent in its sole discretion
determines before such time to maintain such plans.
5.12 Employee Compensation. Each employee of the Company who remains an
employee of Parent after the Effective Time shall be eligible to receive salary
and benefits (such as medical benefits, bonuses, 401(k) and stock options)
consistent with Parent's standard Human Resource policies.
5.13 Affiliate Agreements. Schedule 5.13 sets forth those persons who, in the
Company's reasonable judgment, are or may be "affiliates" of the Company within
the meaning of Rule 145 (each such person an "Affiliate") promulgated under the
Securities Act ("Rule 145"). The Company shall provide Parent such information
and documents as Parent shall reasonably request for purposes of reviewing such
list. Each of the Company and Parent has delivered or shall cause to be
delivered to the other, concurrently with the execution of this Agreement, from
each of their respective Affiliates, an executed Affiliate Agreement in the
forms attached as Exhibit G and Exhibit H, respectively, which shall include a
covenant that each Affiliate, subject to certain exceptions, shall not sell,
transfer or otherwise dispose of any shares of Parent Common Stock until Parent
has published financial statements containing at least 30 days of combined
financial results of Parent and
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the Company. Parent and Sub shall be entitled to place appropriate legends on
the certificates evidencing any Parent Common Stock to be received by such
Affiliates pursuant to the terms of this Agreement, and to issue appropriate
stop transfer instructions to the transfer agent for Parent Common Stock,
consistent with the terms of such Affiliate Agreements.
5.14 No Actions Inconsistent With Tax-Free Reorganization. Parent, Sub and the
Company shall (and, following the Effective Time, Parent shall cause the Company
to) take no action with respect to the Capital Stock, assets or liabilities of
the Company that would cause the Merger to fail to qualify as a "reorganization"
within the meaning of Section 368(a)(1)(A) of the Code.
5.15 NYSE Listing. Parent agrees to authorize for listing on the NYSE the
shares of Parent Common Stock issuable, and those required to be reserved for
issuance, in connection with the Merger, upon official notice of issuance.
5.16 Regulatory Filings. As soon as may be reasonably practicable, the Company
and Parent each shall file with the United States Federal Trade Commission (the
"FTC") and the Antitrust Division of the United States Department of Justice
("DOJ") Notification and Report Forms relating to the transactions contemplated
herein as required by the HSR Act, as well as comparable pre-merger notification
forms required by the merger notification or control laws and regulations of any
applicable jurisdiction, as agreed to by the parties. The Company and Parent
each shall promptly (a) supply the other with any information which may be
required in order to effectuate such filings, (b) cooperate and coordinate with
the other to supply any additional information which reasonably may be required
by the FTC, the DOJ or the competition or merger control authorities of any
other jurisdiction and which the parties may reasonably deem appropriate, and
(c) use their reasonable efforts to facilitate approval of the Merger by the FTC
and the DOJ and under the HSR Act; provided that Parent shall not be required to
agree to any divestiture by Parent or the Company or any of Parent's
subsidiaries or affiliates of shares of capital stock or of any business, assets
or property of Parent or its subsidiaries or affiliates or of the Company or its
subsidiaries or its affiliates, or the imposition of any material limitation on
the ability of any of them to conduct their businesses or to own or exercise
control of such assets, properties or stock.
5.17 Form S-8. As of the date of this Agreement, Parent represents and warrants
that it is eligible to register shares on Form S-8. If available for use by
Parent, Parent shall file a registration statement on Form S-8 to register
shares of Parent Common Stock issuable upon exercise of assumed Company Options
within 45 days after the Closing Date, and shall use its reasonable efforts to
maintain the effectiveness of such registration statement consistent with
Parent's practice with similar registration statements related to employee stock
plans.
5.18 Company's Auditors. The Company will use its commercially reasonable
efforts to cause its management and its independent auditors to facilitate on a
timely basis (i) the preparation of financial statements (including pro forma
financial statements if required) as required by Parent to comply with
applicable SEC regulations, and (ii) the review of any Company audit or review
work papers for up to the past three (3) years, including the examination of
selected interim financial statements and data.
5.19 Shareholder Approval. As promptly as practicable after the execution of
this Agreement and consistent with Section 5.1 of this Agreement, the Company
shall submit
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this Agreement and the transactions contemplated hereby to the Shareholders for
approval and adoption as provided by California Law and its Articles of
Incorporation and Bylaws. The Company shall use its reasonable best efforts to
solicit and obtain the consent of the Shareholders sufficient to approve the
Merger and this Agreement and to enable the Closing to occur as promptly as
practicable. The materials submitted to the Shareholders shall be subject to
review and approval by Parent and include information regarding the Company, the
terms of the Merger and this Agreement and the unanimous recommendation of the
Board of Directors of the Company regarding the Merger and this Agreement. The
Company shall deliver to Parent, concurrently with the execution of this
Agreement, executed Voting Agreements in the form attached hereto as Exhibit A
from the persons and entities listed on Schedule 5.19 hereto.
5.20 Pooling Accounting. Parent and the Company shall each use its reasonable
best efforts to cause the business combination to be effected by the Merger to
be accounted for as a pooling of interests. Each of Parent and the Company shall
use its reasonable best efforts to cause its respective employees, directors,
stockholders and affiliates not to take any action that would adversely affect
the ability of Parent to account for the business combination to be effected by
the Merger as a pooling of interests. Neither Parent nor the Company shall take
any action, including the acceleration of vesting of any options, warrants,
restricted stock or other rights to acquire shares of the capital stock of the
Company, which reasonably would be expected to (i) interfere with Parent's
ability to account for the Merger as a pooling of interests or (ii) jeopardize
the tax-free nature of the reorganization hereunder.
5.21 Indemnification. From and after the Effective Time, Parent shall cause the
Surviving Corporation to fulfill and honor in all respects the obligations of
the Company pursuant to indemnification agreements in the form attached as an
exhibit to the Disclosure Schedule between the Company and its directors and
officers existing prior to the date hereof. Parent shall (i) assume as of the
Effective Time all obligations of the Company pursuant to the Company's Articles
of Incorporation and Bylaws as they are in effect on the date hereof and (ii)
pay all amounts that become due and payable under such provisions. This Section
5.21 shall survive the consummation of the Merger, is intended to benefit the
Company, the Surviving Corporation and each indemnified party, shall be binding,
jointly and severally, on all successors and assigns of the Surviving
Corporation and Parent, and shall be enforceable by the indemnified parties.
5.22 Termination of Contracts. The Company shall use its commercially
reasonable efforts to terminate the Investors' Rights Agreement dated November
18, 1997, and all employment and consulting agreements between the Company and
▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ and ▇▇▇▇▇ ▇▇ ▇▇▇▇
immediately prior to the Closing and to obtain full releases of liability in
connection with such agreements; provided, however, that all provisions of such
employment and consulting agreements relating to confidentiality and invention
assignment shall not be terminated and shall survive the termination of such
agreements indefinitely.
5.23 CEO and CFO Responsibility. The CEO and CFO hereby agree to send
correspondence to each of the officers and directors of the Company no later
than three (3) days after the date of this Agreement in the form of Schedule
5.23 to this Agreement.
5.24 Employment Policy. Parent and the Company will adopt and maintain in
effect from the Closing for a minimum period of twenty-four (24) months
thereafter an employment policy applicable to all employees of the Company other
than ▇▇▇▇▇ ▇▇▇, or in
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the event that ▇▇▇▇▇ ▇▇▇ is not employed by Parent or the Company, CW that will
provide there will be (i) no reduction in salary for any such employee, (ii) no
material reduction in the aggregate benefits and perquisites offered to any such
employee, (iii) no relocation of such employee to a facility outside the San
Francisco Bay Area, and (iv) no termination of such employee, in each case
unless approved by both the chief executive officer of Parent and ▇▇▇▇▇ ▇▇▇.
Notwithstanding the preceding sentence, (i) in the event that ▇▇▇▇▇ ▇▇▇ is not
employed by Parent or the Company, such reduction, relocation or termination
shall required the approval of the chief executive officer of Parent and ▇▇▇▇
▇▇▇▇ and (ii) in the event that Parent implements a company-wide human resources
action, the Company will be treated in a manner consistent with Parent's
employees. (For example, if Parent implements a five (5%) percent salary
reduction for all its employees, the Company's employees will be treated in a
manner consistent with Parent's employees.)
5.25 Shareholder and Optionholder List. At least three (3) days prior to the
Closing, the Company shall deliver to Parent (i) a list of the names and
addresses of the holders of Company Capital Stock and the amounts held by such
holders as of the Effective Time and (ii) a list of the names and addresses of
the holders of Company Options and Company Warrants and the vesting schedule and
grant dates for each such Company Option outstanding as of 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
condition:
(a) Shareholder Approval. This Agreement shall have been approved and
adopted, and the Merger shall have been duly approved, by the requisite
vote under applicable law and the Company's Articles of Incorporation, by
the Shareholders of the Company.
(b) Tax Opinions. The Company and Parent shall each have received
written opinions from their respective counsel, Venture Law Group and
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, Professional Corporation, to the effect
that the Merger will constitute a reorganization within the meaning of
Section 368(a) of the Code; provided, however, that if the counsel to
either the Company or Parent does not render such opinion, this condition
shall nonetheless be deemed to be satisfied with respect to such party if
counsel to the other party renders such opinion to such party. The parties
to this Agreement agree to execute and deliver Tax Representation Letters
in the form attached as Exhibit J hereto to such counsel for the purpose of
rendering such opinions.
(c) Registration Statement Effective or Permit Application Approved;
Proxy Statement. The SEC shall have declared the Registration Statement
effective or the Department of Corporations shall have approved the Permit
Application and issued the permit requested thereunder, as applicable. No
stop order suspending the effectiveness of the Registration Statement or
any part thereof shall have been issued and no proceeding for that purpose,
and no similar proceeding in respect of the Proxy Statement or Permit
Application shall have been initiated or threatened in writing by the SEC
or Department of Corporations, as applicable.
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(d) HSR Act. All waiting periods under the HSR Act relating to the
transactions contemplated hereby have expired or been terminated early.
6.2 Conditions to Obligations of Company. The obligation of the Company to
consummate and effect the Merger 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. The representations and
warranties of Parent and Sub in this Agreement are true and correct in all
material respects as of the date hereof (without giving effect to any
materiality or Material Adverse Effect qualifications therein) and, except
to the extent such representations and warranties speak as of an earlier
date, shall be true and correct as of the Effective Time as though such
representations and warranties were made on and as of such time (without
giving effect to any materiality or Material Adverse Effect qualifications
therein) and 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; provided, however, that
if any inaccuracies or breaches in any such representations and warranties
and any failure to perform and comply with such covenants, in the aggregate
(without giving effect to any materiality or Material Adverse Effect
qualifications therein), have not caused and would not reasonably be likely
to cause Parent to incur a liability in excess of $90,000,000 or have not
had and would not reasonably be likely to have an adverse impact on the
business, assets (including intangible assets), results of operations or
financial condition of Parent in excess of $90,000,000, this condition will
be deemed to have been satisfied; provided further, that for purposes of
this Section 6.2(a), any change, event, effect or condition on the
business, assets, condition or results of operation of Parent (x) that is
primarily attributable to the Merger or the announcement or effects of
announcement of the Merger or (y) relating to a degradation of revenues and
profits as a result of business operations of Parent after the date of this
Agreement shall be disregarded.
(b) No Material Adverse Changes or Effect. Since the date of this
Agreement, there has occurred no change, event, effect or condition that
has caused or is reasonably likely to cause Parent to incur a liability in
excess of $90,000,000 or has or is reasonably likely to have an adverse
impact on the business, assets (including intangible assets), results of
operations, or financial condition of Parent in excess of $90,000,000;
provided, however, that, for purposes of this Section 6.2(b), any change,
event, effect or condition on the business, assets, condition or results of
operation of Parent (x) that is primarily attributable to the Merger or the
announcement or effects of announcement of the Merger or (y) relating to a
degradation of revenues and profits as a result of business operations of
Parent after the date of this Agreement shall be disregarded.
(c) Legal Opinion. At or prior to the Closing, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
& ▇▇▇▇▇▇, Professional Corporation, shall execute and deliver to the
Company a legal opinion in the form of Exhibit E-2 hereto.
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6.3 Conditions to the Obligations of Parent and Sub. The obligations of Parent
and Sub to consummate and effect the Merger 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 Parent:
(a) Representations, Warranties and Covenants. The representations and
warranties of the Company in this Agreement are true and correct in all
material respects as of the date hereof (without giving effect to any
materiality or Material Adverse Effect qualifications therein) and, except
to the extent such representations and warranties speak as of an earlier
date, shall be true and correct as of the Effective Time as though such
representations and warranties were made on and as of such time (without
giving effect to any materiality or Material Adverse Effect qualifications
therein) and the Company shall have performed and complied with all
covenants and obligations required to be performed and complied by with it
as of the Effective Time; provided however that if any inaccuracies or
breaches in any such representations and warranties and any failure to
perform and comply with such covenants, in the aggregate (without giving
effect to any materiality or Material Adverse Effect qualifications
therein), have not caused and would not reasonably be likely to cause the
Company to incur a liability in excess of the Determination Amount or have
not had and would not reasonably be likely to have an adverse impact on the
business, assets (including intangible assets), results of operations or
financial condition of the Company in excess of the Determination Amount,
this condition will be deemed to have been satisfied; provided further
that, for purposes of this Section 6.3(a), any change, event, effect or
condition on the business, assets, condition or results of operation of the
Company that is (x) primarily attributable to the Merger or the
announcement or effects of announcement of the Merger or (y) relating to a
degradation of revenues and profits as a result of business operations of
the Company after the date of this Agreement shall be disregarded.
(b) No Material Adverse Changes or Effect. Since the date of this
Agreement, there has occurred no change, event, effect or condition that
has caused or is reasonably likely to cause the Company to incur a
liability in excess of the Determination Amount or has or is reasonably
likely to have an adverse impact on the business, assets (including
intangible assets), results of operations, or financial condition of the
Company in excess of the Determination Amount; provided, however, that, for
purposes of this Section 6.3(b), any change, event, effect or condition on
the business, assets, condition or results of operation of the Company (x)
that is primarily attributable to the Merger or the announcement or effects
of announcement of the Merger or (y) relating to a degradation of revenues
and profits as a result of business operations of the Company after the
date of this Agreement shall be disregarded.
(c) Shareholder Approval; Dissenters. Shareholders holding at least
ninety percent (90%) of the Company Capital Stock, including not less than
a majority of the outstanding Company Common Stock and a majority of the
outstanding Company Preferred Stock, including at least 66.7% of the Series
D Preferred Stock of the Company, shall have approved this Agreement, the
Merger and the transactions contemplated hereby and thereby.
(d) Opinions of Accountants. Parent shall have received (i) from Ernst
& Young LLP, independent auditors for the Company, a copy of a letter
addressed to the Company dated as of the Closing Date in substance
reasonably satisfactory to Parent (which may contain customary
qualifications and assumptions) to the effect
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that Ernst & Young LLP concurs with Company management's conclusion that no
conditions exist related to the Company that would preclude Parent from
accounting for the Merger as a "pooling-of-interests" and (ii) from
PricewaterhouseCoopers LLP, independent accountants for Parent, a letter
dated as of the Closing Date in substance reasonably satisfactory to Parent
(which may contain customary qualifications and assumptions) to the effect
that PricewaterhouseCoopers LLP concurs with Parent management's conclusion
that no conditions exist related to Parent that would preclude Parent from
accounting for the Merger as a "pooling-of-interests."
(e) Knowing or Intentional Breaches of Covenants. Neither the CEO nor
the CFO has knowingly and willfully breached or knowingly and intentionally
breached, nor has the CEO, the CFO or the Board of Directors of the Company
authorized any person to breach, any of the covenants or agreements
contained in Sections 4.2, 4.3, 5.1 or 5.23 hereof; provided, however that
nothing contained herein or elsewhere in this Agreement shall be deemed to
create any personal liability on the CEO, CFO or any member of the Board of
Directors of the Company.
(f) Legal Opinion. At or prior to the Closing, Venture Law Group shall
execute and deliver to Parent a legal opinion in the form of Exhibit E-1
hereto.
6.4 Closing Deliverables. At the Closing, each of the following transactions
shall occur:
(a) Company Performance. At the Closing, the Company shall deliver to
Parent and Sub the following:
(i) Certificate of the Company. A certificate executed on behalf of
the Company by its Chief Executive Officer to the effect that, as of the
Effective Time, (i) all representations and warranties of the Company in
this Agreement are true and correct in all material respects as of the
date hereof (without giving effect to any materiality or Material
Adverse Effect qualifications therein) and, except to the extent such
representations and warranties speak as of an earlier date, shall be
true and correct as of the Effective Time as though such representations
and warranties were made on and as of such time (without giving effect
to any materiality or Material Adverse Effect qualifications therein)
and the Company shall have performed and complied with all covenants and
obligations required to be performed and complied by with it as of the
Effective Time, except where any inaccuracies or breaches in any such
representations and warranties and any failure to perform and comply
with such covenants, in the aggregate (without giving effect to any
materiality or Material Adverse Effect qualifications therein), have not
caused and would not reasonably be likely to cause the Company to incur
a liability in excess of the Determination Amount or have not had and
would not reasonably be likely to have an adverse impact on the
business, assets (including intangible assets), results of operations or
financial condition of the Company in excess of the Determination
Amount; provided, however, that, for purposes of this Section 6.3(a),
any change, event, effect or condition on the business, assets,
condition or results of operation of the Company that is (x) primarily
attributable to the Merger or the announcement or effects of
announcement of the Merger or (y) relating to a degradation of revenues
and profits as a result of business operations of the Company after the
date of this Agreement shall be disregarded and (ii) the provisions set
forth in Section 6.3(b) and (c) have been satisfied.
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(ii) Certificates of Good Standing. Certificates of compliance or
certificates of good standing of the Company as of the most recent
practicable date from the appropriate governmental authority of the
jurisdiction of its incorporation and any other jurisdiction where the
Company is or is required to be qualified to do business.
(iii) Secretary's Certificate. A certificate of the Secretary of
the Company including the Board of Directors and shareholder resolutions
approving this Agreement and the transactions contemplated hereby, a
certified copy of the Articles of Incorporation and Bylaws, each as in
effect as of the Closing Date.
(b) Parent and Sub Performance. At the Closing, Parent and Sub shall
deliver to the Company the following:
(i) Certificate of Parent. A certificate executed on behalf of
Parent by an Executive Vice President to the effect that, as of the
Effective Time, (i) all representations and warranties of Parent and Sub
in this Agreement are true and correct in all material respects as of
the date hereof (without giving effect to any materiality or Material
Adverse Effect qualifications therein) and, except to the extent such
representations and warranties speak as of an earlier date, shall be
true and correct as of the Effective Time as though such representations
and warranties were made on and as of such time (without giving effect
to any materiality or Material Adverse Effect qualifications therein)
and 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, except where any
inaccuracies or breaches in any such representations and warranties and
any failure to perform and comply with such covenants, in the aggregate
(without giving effect to any materiality or Material Adverse Effect
qualifications therein), have not caused and would not reasonably be
likely to cause Parent to incur a liability in excess of $90,000,000 or
have not had and would not reasonably be likely to have an adverse
impact on the business, assets (including intangible assets), results of
operations or financial condition of Parent in excess of $90,000,000;
provided, however, that for purposes of this Section 6.2(a), any change,
event, effect or condition on the business, assets, condition or results
of operation of Parent that is (x) primarily attributable to the Merger
or the announcement or effects of announcement of the Merger or (y)
relating to a degradation of revenues and profits as a result of
business operations of the Company after the date of this Agreement
shall be disregarded and (ii) the provision set forth in Section 6.2(b)
has been satisfied.
(ii) Certificates of Good Standing. Certificates of compliance or
certificates of good standing of Parent and Sub as of the most recent
practicable date from the appropriate governmental authority of the
jurisdiction of their respective incorporation.
(iii) Secretary's Certificate. A certificate of the Secretary of
Parent including the Board of Directors resolutions approving this
Agreement and the transactions contemplated hereby, a certified copy of
the Certificate of Incorporation and Bylaws, each as in effect as of the
Closing Date.
(c) CEO and CFO Performance. At the Closing, the CEO and the CFO shall
deliver to Parent a certificate executed on by each of the CEO and CFO to
the effect
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that, as of the Effective Time, the condition set forth in Section 6.3(e)
has been satisfied; provided, however, that nothing contained herein or
elsewhere in this Agreement shall be deemed to create any personal
liability on the CEO or CFO.
ARTICLE VII
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
7.1 Survival of Representations and Warranties. The Company's representations
and warranties in this Agreement or in any instrument delivered pursuant to this
Agreement shall terminate on the earlier of (i) the date of the auditor's report
for the first audit of Parent's financial statements reflecting combined
operations of Parent and the Surviving Corporation following the Closing Date or
(ii) the twelve (12) month anniversary of the Closing Date. All of the Parent's
and Sub's representations and warranties contained herein or in any instrument
delivered pursuant to this Agreement shall terminate at the Effective Time.
Nothing in this Section 7.1 limits the Shareholders' rights under applicable
securities laws.
7.2 Indemnification. The Company and the Shareholders agree to indemnify and
hold Parent and its officers, directors and affiliates harmless against all
claims, losses, liabilities, damages, deficiencies, costs and expenses,
including reasonable attorneys' fees and expenses of investigation and defense
(hereinafter individually a "Loss" and collectively "Losses") incurred by
Parent, its officers, directors, or affiliates (including the Surviving
Corporation) directly or indirectly as a result of (i) any inaccuracy or breach
of a representation or warranty of the Company contained in this Agreement
(assuming for purposes hereof that references to materiality and Material
Adverse Effect contained in such representations and warranties are disregarded)
or (ii) any failure by the Company to perform or comply with any covenant
contained in this Agreement (assuming for purposes hereof that references to
materiality and Material Adverse Effect contained in such representations and
warranties are disregarded). The Shareholders shall not have any right of
contribution from the Company with respect to any Loss claimed by Parent, its
officers, directors or affiliates after the Effective Time.
7.3 Escrow Arrangements.
(a) Escrow Fund. As security for the indemnity provided for in Section 7.2
hereof and by virtue of this Agreement, the Company and the Shareholders will be
deemed to have received and deposited with the Escrow Agent (as defined below)
the Escrow Amount (as defined below) (plus any additional shares as may be
issued upon any stock split, stock dividend or recapitalization effected by
Parent after the Effective Time with respect to the Escrow Amount) without any
act of the Company or any Shareholders. As soon as practicable after the
Effective Time, the Escrow Amount, without any act of any Shareholders, will be
deposited with U.S. Bank Trust, N.A. (or other institution acceptable to Parent
and the Securityholder Agent (as defined in Section 7.3(g) below)) as Escrow
Agent (the "Escrow Agent"), such deposit to constitute an escrow fund (the
"Escrow Fund") to be governed by the terms set forth herein and, subject to the
provisions of Section 7.3(f)(iii) at Parent's sole cost and expense. Nothing
herein shall limit the liability of the Parent or the Company for any breach of
any representation, warranty, or covenant contained in this Agreement if the
Merger does not close. Parent may not receive any shares from the Escrow Fund
unless and until Officer's Certificates (as defined in paragraph (d)(i) below)
identifying Losses in excess of $2,000,000 have been delivered to
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the Escrow Agent as provided in paragraph (d) below (which amount cannot include
any individual Loss of $15,000 or less); provided, however, that with respect to
Losses relating to inaccuracies or breaches of the representations and
warranties set forth in Sections 2.3, 2.13 or 2.20 or the agreement set forth in
Section 1.6(h), the aforementioned $2,000,000 and $15,000 thresholds shall not
be applicable for purposes of claims of Losses against the Escrow Amounts.
"Escrow Amount" shall mean the number of shares of Parent Common Stock equal to
ten percent (10%) of the shares issued in exchange for Company Capital Stock
pursuant to this Agreement.
(b) Escrow Period; Distribution upon Termination of Escrow Periods. Subject to
the following requirements, the Escrow Fund shall be in existence immediately
following the Effective Time and shall terminate at 5:00 p.m., P.S.T., on the
date that is the earlier of (i) the date of the auditor's report for the first
audit of Parent's financial statements reflecting combined operations of Parent
and the Surviving Corporation following the Closing Date or (ii) the twelve (12)
month anniversary of the Closing Date (the "Escrow Period"); provided that the
Escrow Period shall not terminate with respect to such remaining portion of the
Escrow Fund (or some portion thereof) that in the reasonable judgment of Parent,
subject to the objection of the Securityholder Agent (as defined in Section
7.3(g) below) and the subsequent arbitration of the matter in the manner
provided in Section 7.3(f) hereof, is necessary to satisfy (x) any then pending
unsatisfied claims specified in any Officer's Certificate delivered to the
Escrow Agent prior to the termination of the Escrow Period and (y) any
unsatisfied claims specified in any Officer's Certificate delivered to the
Escrow Agent prior to termination of the Escrow Period with respect to facts and
circumstances existing prior to the termination of such Escrow Period. As soon
as all such claims have been resolved and all Third Party Expenses have been
paid pursuant to Section 5.4 hereof, the Escrow Agent shall deliver to the
Shareholders the remaining portion of the Escrow Fund not required to satisfy
such claims and Third Party Expenses. Deliveries of Escrow Amounts to the
Shareholders pursuant to this Section 7.3(b) shall be made in proportion to
their respective original contributions to the Escrow Fund.
(c) Protection of Escrow Fund.
(i) The Escrow Agent shall hold and safeguard the Escrow Fund during
the Escrow Period, shall treat such fund as a trust fund in accordance with
the terms of this Agreement and not as the property of Parent and shall
hold and dispose of the Escrow Fund only in accordance with the terms
hereof.
(ii) Any shares of Parent Common Stock or other equity securities
issued or distributed by Parent (including shares issued upon a stock
split) ("New Shares") in respect of Parent Common Stock in the Escrow Fund
which have not been released from the Escrow Fund shall be added to the
Escrow Fund and become a part thereof. New Shares issued in respect of
shares of Parent Common Stock which have been released from the Escrow Fund
shall not be added to the Escrow Fund but shall be distributed to the
record holders thereof. Cash dividends on Parent Common Stock shall not be
added to the Escrow Fund but shall be distributed to the record holders
thereof.
(iii) Each Shareholder shall have voting rights and the right to
distributions of dividends with respect to the shares of Parent Common
Stock contributed to the Escrow Fund by such Shareholders (and on any
voting securities added to the Escrow Fund in respect of such shares of
Parent Common Stock). As the record holder of
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such shares, the Escrow Agent shall vote such shares in accordance with the
instructions of the Shareholders having the beneficial interest therein and
shall promptly deliver copies of all proxy solicitation materials to such
Shareholders. Parent shall show the Parent Common Stock contributed to the
Escrow Fund as issued and outstanding on its balance sheet.
(d) Claims Upon Escrow Fund.
(i) Upon receipt by the Escrow Agent at any time on or before the last
day of the Escrow Period of a certificate signed by any officer of Parent
(an "Officer's Certificate"): (A) stating that Parent has paid or properly
accrued or reasonably anticipates that it will have to pay or accrue
Losses, and (B) specifying in reasonable detail the individual items of
Losses included in the amount so stated, the date each such item was paid
or properly accrued, or the basis for such anticipated liability, and the
nature of the misrepresentations, breach of warranty or covenant to which
such items is related, the Escrow Agent shall, subject to the provisions of
this Section 7.3 (including Section 7.3(e) hereof), deliver to Parent out
of the Escrow Fund as promptly as practicable, shares of Parent Common
Stock held in the Escrow Fund in an amount equal to such Losses.
(ii) For the purposes of determining the number of shares of Parent
Common Stock to be delivered to Parent out of the Escrow Fund as indemnity
pursuant to Section 7.3(b) and 7.3(d)(i) hereof, the shares of Parent
Common Stock shall be valued at the closing sales price of Parent Common
Stock as reported on the NYSE on the Closing Date.
(e) Objections to Claims. At the time of delivery of any Officer's Certificate
to the Escrow Agent, a duplicate copy of such certificate shall be delivered to
the Securityholder Agent and for a period of thirty (30) days after such
delivery, the Escrow Agent shall make no delivery to Parent of any Escrow
Amounts pursuant to Section 7.3(d) hereof unless the Escrow Agent shall have
received written authorization from the Securityholder Agent to make such
delivery. After the expiration of such thirty (30) day period, the Escrow Agent
shall make delivery of shares of Parent Common Stock from the Escrow Fund in
accordance with Section 7.3(d) hereof, provided that no such payment or delivery
may be made if the Securityholder Agent shall object in a written statement to
the claim made in the Officer's Certificate, and such statement shall have been
delivered to the Escrow Agent prior to the expiration of such thirty (30) day
period.
(f) Resolution of Conflicts; Arbitration.
(i) In case the Securityholder Agent shall so object in writing to any
claim or claims made in any Officer's Certificate, the Securityholder Agent
and Parent shall attempt in good faith to agree upon the rights of the
respective parties with respect to each of such claims. If the
Securityholder Agent and Parent should so agree, a memorandum setting forth
such agreement shall be prepared and signed by both parties and shall be
furnished to the Escrow Agent. The Escrow Agent shall be entitled to rely
on any such memorandum and distribute shares of Parent Common Stock from
the Escrow Fund in accordance with the terms thereof.
(ii) If no such agreement can be reached after good faith negotiation
within ten (10) business days after the date the written objection of the
Securityholder Agent is delivered to the Escrow Agent and Parent, either
Parent or the Securityholder Agent may demand arbitration of the matter
unless the amount of the
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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 Securityholder Agent shall each select one neutral and
independent arbitrator, and the two arbitrators so selected shall select a
third neutral and independent arbitrator. 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,
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 Officer's Certificate shall be
binding and conclusive upon the parties to this Agreement, and
notwithstanding anything in Section 7.3(e) hereof, the Escrow Agent shall
be entitled to act in accordance with such decision and make or withhold
payments out of the Escrow Fund in accordance therewith. Such decision
shall be written and shall be supported by written findings of fact and
conclusions which shall set forth the award, judgment, decree or order
awarded by the arbitrators.
(iii) Judgment upon any award rendered by the arbitrators may be
entered in any court having jurisdiction. Any such arbitration shall be
held in Santa ▇▇▇▇▇ County, California under the rules then in effect of
the American Arbitration Association. The arbitrators shall determine how
all expenses relating to the arbitration shall be paid, including without
limitation, the respective expenses of each party, the fees of each
arbitrator and the administrative fee of the American Arbitration
Association.
(g) Securityholder Agent of the Shareholders; Power of Attorney.
(i) In the event that the Merger is approved, effective upon such
vote, and without further act of any Shareholders, ▇▇▇▇ ▇▇▇▇ shall be
appointed as agent and attorney-in-fact (the "Securityholder Agent") for
each Shareholder of the Company (except such Shareholders, if any, as shall
have perfected their dissenters' rights under California law), for and on
behalf of Shareholders, to give and receive notices and communications, to
authorize delivery to Parent of shares of Parent Common Stock from the
Escrow Fund in satisfaction of claims by Parent, to object to such
deliveries, to agree to, negotiate, enter into settlements and compromises
of, and demand arbitration and comply with orders of courts and awards of
arbitrators with respect to such claims, and to take all actions necessary
or appropriate in the judgment of Securityholder Agent for the
accomplishment of the foregoing. Such agency may be changed by the
Shareholders from time to time upon not less than thirty (30) days prior
written notice to Parent; provided that the Securityholder Agent may not be
removed unless holders of a majority interest of the Escrow Fund agree to
such removal and to the identity of the substituted agent. No bond shall be
required of the Securityholder Agent, and the Securityholder Agent shall
not receive compensation for his or her services. Notices or communications
to or from the Securityholder Agent shall constitute notice to or from each
of the Shareholders.
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(ii) The Securityholder Agent shall not be liable for any act done or
omitted hereunder as Securityholder Agent while acting in good faith and in
the exercise of reasonable judgment. The Shareholders on whose behalf the
Escrow Amount was contributed to the Escrow Fund shall severally indemnify
the Securityholder Agent and hold the Securityholder Agent harmless against
any loss, liability or expense incurred without gross negligence or bad
faith on the part of the Securityholder Agent and arising out of or in
connection with the acceptance or administration of the Securityholder
Agent's duties hereunder, including the reasonable fees and expenses of any
legal counsel retained by the Securityholder Agent.
(h) Actions of the Securityholder Agent. A decision, act, consent or instruction
of the Securityholder Agent shall constitute a decision of all the Shareholders
for whom a portion of the Escrow Amount otherwise issuable to them are deposited
in the Escrow Fund and shall be final, binding and conclusive upon each of such
Shareholders, and the Escrow Agent and Parent may rely upon any such decision,
act, consent or instruction of the Securityholder Agent as being the decision,
act, consent or instruction of each and every such Shareholder. The Escrow Agent
and Parent are hereby relieved from any liability to any person for any acts
done by them in accordance with such decision, act, consent or instruction of
the Securityholder Agent.
(i) Third-Party Claims. In the event Parent becomes aware of a third-party claim
which Parent believes may result in a demand against the Escrow Fund, Parent
shall notify the Securityholder Agent of such claim, and the Securityholder
Agent and the Shareholders of the Company shall be entitled, at their expense,
to participate in any defense of such claim. Parent shall settle any such claim
only with the consent of the Company; provided, however, that except with the
consent of the Securityholder Agent, no settlement of any such claim with
third-party claimants shall be determinative of the amount of any claim against
the Escrow Fund. In the event that the Securityholder Agent has consented to any
such settlement, the Securityholder Agent shall have no power or authority to
object under any provision of this Article VII to the amount of any claim by
Parent against the Escrow Fund with respect to such settlement.
(j) Escrow Agent's Duties.
(i) The Escrow Agent shall be obligated only for the performance of
such duties as are specifically set forth herein, and as set forth in any
additional written escrow instructions which the Escrow Agent may receive
after the date of this Agreement which are signed by an officer of Parent
and the Securityholder Agent, and may rely and shall be protected in
relying or refraining from acting on any instrument reasonably believed to
be genuine and to have been signed or presented by the proper party or
parties. The Escrow Agent shall not be liable for any act done or omitted
hereunder as Escrow Agent while acting in good faith and in the exercise of
reasonable judgment, and any act done or omitted pursuant to the advice of
counsel shall be conclusive evidence of such good faith.
(ii) The Escrow Agent is hereby expressly authorized to disregard any
and all warnings given by any of the parties hereto or by any other person,
excepting only orders or process of courts of law, and is hereby expressly
authorized to comply with and obey orders, judgments or decrees of any
court. In case the Escrow Agent obeys or complies with any such order,
judgment or decree of any court, the Escrow Agent shall not be liable to
any of the parties hereto or to any other person by reason of such
compliance, notwithstanding any such order, judgment or decree being
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subsequently reversed, modified, annulled, set aside, vacated or found to
have been entered without jurisdiction.
(iii) The Escrow Agent shall not be liable in any respect on account
of the identity, authority or rights of the parties executing or delivering
or purporting to execute or deliver this Agreement or any documents or
papers deposited or called for hereunder.
(iv) The Escrow Agent shall not be liable for the expiration of any
rights under any statute of limitations with respect to this Agreement or
any documents deposited with the Escrow Agent.
(v) In performing any duties under the Agreement, the Escrow Agent
shall not be liable to any party for damages, losses, or expenses, except
for negligence or willful misconduct on the part of the Escrow Agent. The
Escrow Agent shall not incur any such liability for (A) any act or failure
to act made or omitted in good faith, or (B) any action taken or omitted in
reliance upon any instrument, including any written statement of affidavit
provided for in this Agreement that the Escrow Agent shall in good faith
believe to be genuine, nor will the Escrow Agent be liable or responsible
for forgeries, fraud, impersonations, or determining the scope of any
representative authority. In addition, the Escrow Agent may consult with
the legal counsel in connection with Escrow Agent's duties under this
Agreement and shall be fully protected in any act taken, suffered, or
permitted by him/her in good faith in accordance with the advice of
counsel. The Escrow Agent is not responsible for determining and verifying
the authority of any person acting or purporting to act on behalf of any
party to this Agreement.
(vi) If any controversy arises between the Parties to this Agreement,
or with any other party, concerning the subject matter of this Agreement,
its terms or conditions, the Escrow Agent will not be required to determine
the controversy or to take any action regarding it. The Escrow Agent may
hold all documents and shares of Parent Common Stock and may wait for
settlement of any such controversy by final appropriate legal proceedings
or other means as, in the Escrow Agent's discretion, the Escrow Agent may
be required, despite what may be set forth elsewhere in this Agreement. In
such event, the Escrow Agent will not be liable for damage.
Furthermore, the Escrow Agent may at its option, file an action of
interpleader requiring the Parties to answer and litigate any claims and
rights among themselves. The Escrow Agent is authorized to deposit with the
clerk of the court all documents and shares of Parent Common Stock held in
escrow, except all cost, expenses, charges and reasonable attorney fees
incurred by the Escrow Agent due to the interpleader action and which the
Parties jointly and severally agree to pay. Upon initiating such action,
the Escrow Agent shall be fully released and discharged of and from all
obligations and liability imposed by the terms of this Agreement.
(vii) Parent agrees to indemnify and hold Escrow Agent harmless
against any and all losses, claims, damages, liabilities, and expenses,
including reasonable costs of investigation, counsel fees, including
allocated costs of in-house counsel and disbursements that may be imposed
on Escrow Agent or incurred by Escrow Agent in connection with the
performance of his/her duties under this Agreement, including but not
limited to any litigation arising from this Agreement or involving its
subject matter other than arising out of its negligence or willful
misconduct.
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(viii) The Escrow Agent may resign at any time upon giving at least
thirty (30) days' written notice to Parent and the Securityholder Agent;
provided, however, that no such resignation shall become effective until
the appointment of a successor escrow agent which shall be accomplished as
follows: the Parties shall use their reasonable best efforts to mutually
agree on a successor escrow agent within thirty (30) days after receiving
such notice. If the Parties fail to agree upon a successor escrow agent
within such time, the Escrow Agent shall have the right to appoint a
successor escrow agent authorized to do business in the state of
California. The successor escrow agent shall execute and deliver an
instrument accepting such appointment and it shall, without further acts,
be vested with all the estates, properties, rights, powers, and duties of
the predecessor escrow agent as if originally named as escrow agent. The
Escrow Agent shall be discharged from any further duties and liability
under this Agreement.
(k) Fees. All fees of the Escrow Agent for performance of its duties hereunder
shall be paid by Parent in accordance with the standard fee schedule of the
Escrow Agent. It is understood that the fees and usual charges agreed upon for
services of the Escrow Agent shall be considered compensation for ordinary
services as contemplated by this Agreement. In the event that the conditions of
this Agreement are not promptly fulfilled, or if the Escrow Agent renders any
service not provided for in this Agreement, or if the Parties request a
substantial modification of its terms, or if any controversy arises, or if the
Escrow Agent is made a party to, or intervenes in, any litigation pertaining to
the Escrow Fund or its subject matter, the Escrow Agent shall be reasonably
compensated for such extraordinary services and reimbursed for all costs,
attorney's fees, including allocated costs of in-house counsel, and expenses
occasioned by such default, delay, controversy or litigation. The Parent
promises to pay these sums upon demand.
(l) Exclusive Remedy.
(i) The indemnity set forth in this Article VII and the Escrow Fund
provided for herein shall apply only to breaches by the Company of any
representation, warranty, covenant or agreement of the Company contained
herein, by reason of any misrepresentation by the Company made in or
pursuant to this Agreement. Except as provided in the following sentence,
resort to the Escrow Fund shall be the exclusive right and remedy of Parent
for such breaches or any claims, demand, actions or other causes of action
brought against the Company or its shareholders, officers or directors.
Notwithstanding the foregoing, the existence of this Article VII and the
rights and restrictions set forth herein do not limit any other potential
remedies of Parent with respect to any knowing and intentional or
fraudulent breaches by the Company or its officers or directors of the
representations and warranties or covenants of the Company contained in
this Agreement.
(ii) Notwithstanding anything in this Article VII to the contrary, the
maximum amount of the Company's and the Shareholders' indemnification
obligations with respect to any Losses relating to inaccuracies or breaches
of the representations and warranties set forth in Section 2.13 shall be
limited to $3,000,000 (assuming for purposes hereof that references to
materiality and Material Adverse Effect contained in such representations
and warranties are disregarded), and any losses, liabilities, damages,
deficiencies, costs or expenses in excess of such amount shall not be
deemed Losses for the purposes of this Article VII. Notwithstanding
anything in this Article VII to the contrary, the maximum amount of the
Company's and the Shareholders' indemnification obligations with respect to
any Losses relating to
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inaccuracies or breaches of the representations and warranties set forth in
Section 2.20 shall be limited to $3,000,000 (assuming for purposes hereof
that references to materiality and Material Adverse Effect contained in
such representations and warranties are disregarded), and any losses,
liabilities, damages, deficiencies, costs or expenses in excess of such
amount shall not be deemed Losses for the purposes of this Article VII.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
8.1 Termination. This Agreement may be terminated and the Merger abandoned at
any time prior to the Effective Time only:
(a) by mutual consent of the Company and Parent;
(b) Parent or the Company if: (i) the Effective Time has not occurred
by June 30, 1999; (ii) there shall be a final nonappealable order of a
federal or state court in effect preventing consummation of the Merger; or
(iii) there shall be any statute, rule, regulation or order enacted,
promulgated or issued or deemed applicable to the Merger by any
Governmental Entity that would make consummation of the Merger illegal;
(c) by Parent if there shall be any action taken, or any statute,
rule, regulation or order enacted, promulgated or issued or deemed
applicable to the Merger by any Governmental Entity, which would: (i)
prohibit Parent's or Sub's ownership or operation of any portion of the
business of the Company or (ii) compel Parent or the Company to dispose of
or hold separate all or a portion of the business or assets of the Company
or Parent as a result of the Merger;
(d) by Parent if it is not in material breach of its obligations under
this Agreement and there has been a breach of any representation, warranty,
covenant or agreement contained in this Agreement on the part of the
Company such that the condition set forth in Section 6.3(a) or 6.3(e) would
not be satisfied and such breach has not been cured within twenty (20)
calendar days after written notice to the Company; provided, however, that,
no cure period shall be required for a breach which by its nature cannot be
cured;
(e) by the Company if it is not in material breach of its obligations
under this Agreement and there has been a breach of any representation,
warranty, covenant or agreement contained in this Agreement on the part of
Parent or Sub such that the condition set forth in Section 6.2(a) would not
be satisfied and such breach has not been cured within twenty (20) calendar
days after written notice to Parent; provided, however, that no cure period
shall be required for a breach which by its nature cannot be cured.
Where action is taken to terminate this Agreement pursuant to this
Section 8.1, it shall be sufficient for such action to be authorized by the
Board of Directors (as applicable) of the party taking such action.
8.2 Effect of Termination. In the event of termination of this Agreement as
provided in Section 8.1, this Agreement shall forthwith become void and, except
as otherwise provided in Section 8.3, there shall be no liability or obligation
on the part of Parent, Sub or the
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Company, or their respective officers, directors or shareholders, provided that
each party shall remain liable for any breaches of this Agreement prior to its
termination; provided further that, the provisions of Sections 5.3
(confidentiality), 5.4 (expenses) and 5.5 (public disclosure), and Articles VIII
and IX of this Agreement shall remain in full force and effect and survive any
termination of this Agreement.
8.3 Loan.
(a) Upon delivery to the Escrow Agent of the Payment Certificate (as defined in
the Escrow Agreement) pursuant to the provisions of Sections 4 and 5 of the
Escrow Agreement, the Company shall receive the Loan (as defined in the Escrow
Agreement) under the following circumstances (each a "Triggering Event"):
(i) the Closing has not occurred; and
(ii) this Agreement is terminated for any or no reason so long as such
termination is pursuant to Section 8.1 above.
(b) In the event Parent has breached this Agreement at any time prior to
termination of this Agreement, payment of the Loan pursuant to Section 8.3
hereof and the Escrow Agreement shall constitute liquidated damages and shall be
the Company's sole and exclusive remedy for any damages arising under or in
connection with this Agreement; provided that in the event of a breach by Parent
of the covenant set forth in Section 5.3 hereof, or in the event Parent asserts
any claim for any loss, cost, damages or expenses against the Company or its
officers, directors, shareholders or agents in connection with this Agreement,
no such limitation of damages shall apply.
8.4 Amendment. This Agreement may be amended by the parties hereto at any time
by execution of an instrument in writing signed on behalf of Parent, Sub and the
Company.
8.5 Extension; Waiver. At any time prior to the Effective Time, Parent and Sub,
on the one hand, and the Company 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.
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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:
(a) if to Parent or Sub, to:
Cypress Semiconductor Corporation
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Chief Executive Officer
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇
Professional Corporation
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
(b) if to the Company, to
IC Works, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: President
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Venture Law Group
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇ ▇▇ ▇▇▇▇▇
Attention: Tae ▇▇▇ ▇▇▇▇, Esq.
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
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,
all of which shall be considered one and the same agreement and shall become
effective when
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one or more counterparts have been signed by each of the parties and delivered
to the other party, it being understood that all parties need not sign the same
counterpart.
9.4 Entire Agreement; Assignment. This Agreement, the Exhibits hereto, the
Nondisclosure Agreement, and the documents and instruments and other agreements
among the parties hereto referenced herein: (a) constitute the entire agreement
among the parties with respect to the subject matter hereof and supersede all
prior agreements and understandings both written and oral, among the parties
with respect to the subject matter hereof; (b) except as contemplated by Section
5.21 are not intended to confer upon any other person any rights or remedies
hereunder; and (c) shall not be assigned (other than by operation of law),
except that Parent and Sub may assign their respective rights hereunder to their
respective affiliates, provided that no such assignment shall relieve Parent or
Sub of their respective obligations hereunder.
9.5 Severability. In the event that any provision of this Agreement or the
application thereof, becomes or is declared by a court of competent jurisdiction
to be illegal, void or unenforceable, the remainder of this Agreement will
continue in full force and effect and the application of such provision to other
persons or circumstances will be interpreted so as reasonably to effect the
intent of the parties hereto. The parties further agree to replace such void or
unenforceable provision of this Agreement with a valid and enforceable provision
that will achieve, to the extent possible, the economic, business and other
purposes of such void or unenforceable provision.
9.6 Other Remedies. Except as otherwise provided herein, any and all remedies
herein expressly conferred upon a party will be deemed cumulative with and not
exclusive of any other remedy conferred hereby, or by law or equity upon such
party, and the exercise by a party of any one remedy will not preclude the
exercise of any other remedy.
9.7 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of California, regardless of the laws that
might otherwise govern under applicable principles of conflicts of laws thereof.
Each of the parties hereto irrevocably consent to exclusive jurisdiction and
venue of any court within Santa ▇▇▇▇▇ County, State of California, in connection
with any matter based on or arising out of this Agreement or the matters
contemplated hereby (other than as expressly provided in Article VII), agrees
that process may be served on them in any manner authorized by the laws of the
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.
9.8 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.
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IN WITNESS WHEREOF, Parent, Sub and the Company have caused this Agreement to be
signed, all as of the date first written above.
CYPRESS SEMICONDUCTOR
CORPORATION
/s/ Cypress Semiconductor Corporation
CY ACQUISITION CORPORATION
/s/ CY Acquisition Corporation
SECURITYHOLDER AGENT
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇
IC WORKS, INC.
/s/ IC WORKS, Inc.
ESCROW AGENT
/s/ U.S. Bank Trust, N.A.
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