EXHIBIT 2.1
EXECUTION VERSION
SECOND AMENDED AND RESTATED
AGREEMENT AND PLAN OF REORGANIZATION
BY AND BETWEEN
MAGMA DESIGN AUTOMATION, INC.
MAGMA ACQUISITION CORP.
AND
MOSCAPE, INC.
Dated as of July 7, 2000
EXECUTION VERSION
TABLE OF CONTENTS
Page
ARTICLE 1 THE MERGER......................................................................................... 2
1.1 The Merger.................................................................................. 2
1.2 Effective Time.............................................................................. 2
1.3 Effect of the Merger on Constituent Corporations............................................ 2
1.4 Certificate of Incorporation and Bylaws of Surviving Corporation............................ 2
1.5 Directors and Officers of Surviving Corporation............................................. 3
1.6 Aggregate Share Number; Effect on Outstanding Securities of Company......................... 3
1.7 Dissenting Shares........................................................................... 5
1.8 Exchange Procedures......................................................................... 6
1.9 No Further Ownership Rights in Company Capital Stock........................................ 7
1.10 Lost, Stolen or Destroyed Certificates...................................................... 7
1.11 Taking of Necessary Action; Further Action.................................................. 8
1.12 Exemption From Registration; California Permit.............................................. 8
ARTICLE 2 REPRESENTATIONS AND WARRANTIES OF THE COMPANY...................................................... 8
2.1 Organization and Qualification.............................................................. 8
2.2 Authority Relative to this Agreement........................................................ 8
2.3 Capital Stock............................................................................... 9
2.4 No Subsidiaries............................................................................. 10
2.5 Directors and Officers...................................................................... 10
2.6 No Conflicts................................................................................ 10
2.7 Books and Records; Organizational Documents................................................. 10
2.8 Company Financial Statements................................................................ 10
2.9 Absence of Changes.......................................................................... 11
2.10 No Undisclosed Liabilities.................................................................. 12
2.11 Taxes....................................................................................... 12
2.12 Legal Proceedings........................................................................... 14
2.13 Compliance With Laws and Orders............................................................. 14
2.14 Benefit Plans; ERISA........................................................................ 14
2.15 Real Property............................................................................... 16
2.16 Tangible Personal Property.................................................................. 16
2.17 Intellectual Property....................................................................... 17
2.18 Contracts................................................................................... 19
2.19 Insurance................................................................................... 21
2.20 Affiliate Transactions...................................................................... 21
2.21 Employees; Labor Relations.................................................................. 22
2.22 Environmental Matters....................................................................... 23
2.23 Substantial Customers and Suppliers......................................................... 24
2.24 Accounts Receivable......................................................................... 24
2.25 Inventory................................................................................... 24
2.26 Other Negotiations; Brokers; Third Party Expenses........................................... 25
2.27 Banks and Brokerage Accounts................................................................ ▇▇
-▇-
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇.▇▇ ▇▇▇▇▇▇▇▇ Obligations........................................................................ 25
2.29 Foreign Corrupt Practices Act............................................................... 26
2.30 Pooling of Interests........................................................................ 26
2.31 Real Property Holding Corporation........................................................... 26
2.32 Financial Projections....................................................................... 26
2.33 Disclosure.................................................................................. 26
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB............................................ 26
3.1 Organization and Qualification.............................................................. 26
3.2 Authority Relative to this Agreement........................................................ 27
3.3 Issuance of Parent Common Stock............................................................. 27
3.4 Parent Financial Statements................................................................. 27
3.5 Absence of Changes Since Parent Balance Sheet Date.......................................... 27
3.6 No Conflicts................................................................................ 28
3.7 Pooling of Interests........................................................................ 29
3.8 Information to be Supplied by Parent........................................................ 29
3.9 Litigation.................................................................................. 29
3.10 Capitalization.............................................................................. 29
3.11 Related-Party Transactions.................................................................. 30
3.12 Tax Returns and Payments.................................................................... 31
3.13 Environmental and Safety Laws............................................................... 31
3.14 Permits..................................................................................... 31
3.15 Governmental Consents....................................................................... 31
3.16 Registration Rights......................................................................... 31
3.17 Intellectual Property....................................................................... 31
3.18 Proprietary Information and Inventions Agreements........................................... 32
3.19 Employees; Employee Compensation............................................................ 32
3.20 Insurance................................................................................... 32
3.21 Material Contracts and Other Commitments.................................................... 33
3.22 Title to Property and Assets; Leases........................................................ 33
3.23 Subsidiaries................................................................................ 33
3.24 Ownership of Merger Sub; No Prior Activities................................................ 33
3.25 Directors and Officers...................................................................... 33
3.26 Books and Records; Organizational Documents................................................. 33
3.27 Compliance With Laws and Orders............................................................. 34
3.28 Foreign Corrupt Practices Act............................................................... 34
3.29 Disclosure.................................................................................. 34
ARTICLE 4 CONDUCT PRIOR TO THE EFFECTIVE TIME................................................................ 34
4.1 Conduct of Business of the Company.......................................................... 34
4.2 No Solicitation............................................................................. 37
ARTICLE 5 ADDITIONAL AGREEMENTS.............................................................................. 38
5.1 Information Statement; Permit Application................................................... 38
5.2 Information to be Provided by the Company................................................... 39
5.3 Information to be Supplied by Parent........................................................ 40
-ii-
EXECUTION VERSION
5.4 Stockholder Approval........................................................................ 40
5.5 Access to Information....................................................................... 40
5.6 Confidentiality............................................................................. 41
5.7 Expenses.................................................................................... 41
5.8 Public Disclosure........................................................................... 41
5.9 Consents.................................................................................... 42
5.10 FIRPTA Compliance........................................................................... 42
5.11 Notification of Certain Matters............................................................. 42
5.12 Pooling of Interests Accounting............................................................. 42
5.13 Company Affiliate Agreements................................................................ 42
5.14 Parent Affiliate Agreements................................................................. 42
5.15 Additional Documents and Further Assurances................................................. 42
5.16 Company's Auditors.......................................................................... 43
ARTICLE 6 CONDITIONS TO THE MERGER........................................................................... 43
6.1 Conditions to Obligations of Each Party to Effect the Merger................................ 43
6.2 Additional Conditions to Obligations of the Company......................................... 43
6.3 Additional Conditions to the Obligations of Parent and Merger Sub........................... 44
ARTICLE 7 SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS; ESCROW PROVISIONS............... 45
7.1 Survival of Representations, Warranties, Covenants and Agreements........................... 45
7.2 Escrow Provisions........................................................................... 46
7.3 Indemnification by Parent................................................................... 53
ARTICLE 8 TERMINATION, AMENDMENT AND WAIVER.................................................................. 53
8.1 Termination................................................................................. 53
8.2 Effect of Termination....................................................................... 54
8.3 Amendment................................................................................... 54
8.4 Extension; Waiver........................................................................... 54
ARTICLE 9 MISCELLANEOUS PROVISIONS........................................................................... 55
9.1 Notices..................................................................................... 55
9.2 Entire Agreement............................................................................ 56
9.3 Further Assurances; Post-Closing Cooperation................................................ 56
9.4 Waiver...................................................................................... 56
9.5 Third Party Beneficiaries................................................................... 56
9.6 No Assignment; Binding Effect............................................................... 56
9.7 Headings.................................................................................... 56
9.8 Invalid Provisions.......................................................................... 56
9.9 Governing Law............................................................................... 57
9.10 Consent to Jurisdiction and Service of Process.............................................. 57
9.11 Construction................................................................................ 57
9.12 Counterparts................................................................................ 57
9.13 Covenant Not to Solicit..................................................................... 57
9.14 Remedies.................................................................................... 58
9.15 Specific Performance........................................................................ 58
-iii-
EXECUTION VERSION
ARTICLE 10 DEFINITIONS....................................................................................... 58
10.1 Definitions................................................................................. 58
-iv-
EXECUTION VERSION
Exhibits
--------
Exhibit A - Certificate of Merger
Exhibit B - Stockholder Certificate
Exhibit C - Company Affiliate Agreement
Exhibit D - Parent Affiliate Agreement
Exhibit E - Pillsbury Madison & Sutro LLP Legal Opinion
Exhibit F - Noncompetition Agreement
Exhibit G - Support Agreement
Exhibit H - Escrow Agent Fee Schedule
Exhibit I - Amended and Restated Investors' Rights Agreement
Exhibit J - Amended and Restated Certificate of Incorporation of Parent
Schedules
---------
Schedule 5.13 - Company Affiliates
Schedule 5.14 - Parent Affiliates
Schedule 6.3(f) - Company Stockholders Executing Support Agreements
-v-
EXECUTION VERSION
SECOND AMENDED AND RESTATED
AGREEMENT AND PLAN OF REORGANIZATION
THIS SECOND AMENDED AND RESTATED AGREEMENT AND PLAN OF REORGANIZATION
is made and entered into as of July 7, 2000, by and among MAGMA DESIGN
------------
AUTOMATION, INC., a Delaware corporation ("Parent"), MAGMA ACQUISITION CORP., a
---------------- -----------------------
Delaware corporation and a wholly owned subsidiary of Parent ("Merger Sub"), and
MOSCAPE, INC., a Delaware corporation (the "Company"), and with respect to
-------------
Article 7 only, ▇▇▇▇ ▇▇▇▇ as Stockholder Agent and U.S. Bank Trust, National
Association as Escrow Agent. Capitalized terms used and not otherwise defined
herein have the meanings set forth in Article 10.
RECITALS:
A. The Boards of Directors of each of Parent, Merger Sub and the
Company believe it is in the best interests of Parent, Merger Sub and the
Company and their respective stockholders that Parent acquire the Company
through the merger of Merger Sub with and into the Company (the "Merger") and,
------
in furtherance thereof, have approved the Merger.
B. The Boards of Directors of each of Parent, Merger Sub and the
Company have approved the Merger and this Agreement and the transactions
contemplated hereby by resolutions dated May 30, 2000, May 31, 2000, June 14,
2000, and July 5, 2000, respectively.
C. Pursuant to the Merger, among other things, and subject to the terms
and conditions of this Agreement, (i) all of the issued and outstanding shares
of Company Common Stock and all of the issued and outstanding shares of Company
Series A Preferred Stock shall be converted into the right to receive shares of
Common Stock of Parent ("Parent Common Stock"), (ii) all of the issued and
-------------------
outstanding shares of Company Series B Preferred Stock and Series C Preferred
Stock shall be converted into the right to receive shares of newly created
Parent Series F-1 Preferred Stock and Parent Series F-2 Preferred Stock,
respectively (collectively, "New Preferred Stock"), (iii) all outstanding
-------------------
Company Options to acquire or receive shares of Company Capital Stock will be
assumed by Parent subject to the terms and conditions set forth herein; and (iv)
all outstanding Company Warrants to acquire or receive shares of Company Capital
Stock shall be exchanged for Parent Warrants.
D. Parent, Merger Sub and the Company intend that the Merger shall (i)
constitute a reorganization within the meaning of Section 368(a) of the Code,
and (ii) qualify as a Pooling of Interests.
E. Concurrently with the execution of this Agreement, and as a
condition and inducement to Parent's and Merger Sub's willingness to enter into
this Agreement, each of the Company stockholders set forth on Schedule 6.3(f) is
entering into a Support Agreement substantially in the form attached hereto as
Exhibit G.
---------
-1-
EXECUTION VERSION
F. The Company, Parent and Merger Sub desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger.
NOW, THEREFORE, in consideration of the covenants, promises,
representations and warranties set forth herein, and for other good and valuable
consideration, intending to be legally bound hereby, the parties agree as
follows:
ARTICLE 1
THE MERGER
1.1 The Merger. At the Effective Time and subject to and upon the terms
----------
and conditions of this Agreement and the applicable provisions of Delaware Law,
Merger Sub shall be merged with and into the Company, the separate corporate
existence of the Merger Sub shall cease, and the Company shall continue as the
surviving corporation and wholly owned subsidiary of Parent. The Company is
sometimes referred to herein as the "Surviving Corporation."
1.2 Effective Time. Unless this Agreement is earlier terminated pursuant
--------------
to Section 8.1, the closing of the Merger (the "Closing") will take place as
-------
promptly as practicable, but no later than five (5) Business Days following
satisfaction or waiver of the conditions set forth in Article 6, at the offices
of Pillsbury Madison & Sutro LLP, ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇, unless another place or time is agreed to 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 a Certificate of Merger (or like instrument), in
substantially the form attached hereto as Exhibit A (the "Certificate of
--------- --------------
Merger"), with the Secretary of State of the State of Delaware, in accordance
------
with the relevant provisions of applicable law (the time of acceptance by the
Secretary of State of Delaware of such filing being referred to herein as the
"Effective Time"). The parties currently intend that the Closing Date will occur
--------------
on or prior to July 31, 2000.
1.3 Effect of the Merger on Constituent Corporations. At the Effective
------------------------------------------------
Time, the effect of the Merger shall be as provided in the applicable provisions
of Delaware Law. Without limiting the generality of the foregoing, and subject
thereto, at the Effective Time, all the property, rights, privileges, powers and
franchises of Merger Sub and the Company shall vest in the Surviving
Corporation, and all debts, liabilities, obligations, restrictions, disabilities
and duties of Merger Sub and the Company shall become the debts, liabilities,
obligations, restrictions, disabilities and duties of the Surviving Corporation.
1.4 Certificate of Incorporation and Bylaws of Surviving Corporation.
----------------------------------------------------------------
(a) At the Effective Time, the certificate of incorporation of Merger Sub,
as in effect immediately prior to the Effective Time, shall be the certificate
of incorporation of the Surviving Corporation until thereafter amended as
provided by law and by such certificate of incorporation and bylaws of the
Surviving Corporation.
(b) The bylaws of Merger Sub, as in effect immediately prior to the
Effective Time, shall be the bylaws of the Surviving Corporation until
thereafter amended as provided by such bylaws, the certificate of incorporation
and applicable law.
-2-
EXECUTION VERSION
1.5 Directors and Officers of Surviving Corporation. The directors of
-----------------------------------------------
Merger Sub immediately prior to the Effective Time shall be the directors of the
Surviving Corporation, each to hold office in accordance with the certificate of
incorporation and bylaws of the Surviving Corporation. The officers of Merger
Sub immediately prior to the Effective Time shall be the officers of the
Surviving Corporation, each to hold office in accordance with the bylaws of the
Surviving Corporation.
1.6 Aggregate Share Number; Effect on Outstanding Securities of Company.
-------------------------------------------------------------------
The maximum number of unregistered shares of Parent Common Stock and New
Preferred Stock to be issued at the Effective Time (including Parent Common
Stock and New Preferred Stock to be reserved for issuance upon exercise of any
of the Company Options to be assumed by Parent as provided herein and upon
exercise of any of the Company Warrants to be exchanged for Parent Warrants as
provided herein) in exchange for the acquisition by Parent of all outstanding
shares of Company Capital Stock and all vested and unvested Company Options and
Company Warrants which are unexpired and unexercised shall be the Aggregate
Share Number. No adjustment shall be made in the number of shares of Parent
Common Stock and New Preferred Stock issued in the Merger as a result of any
consideration (in any form whatsoever) received by the Company from the date
hereof to the Effective Time as a result of any exercise, conversion or exchange
of Company Options or Company Warrants. 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 or Merger Sub, the Company or the holder of any
shares of the Company Capital Stock, Company Options or Company Warrants, the
following shall occur:
(a) Conversion of Company Capital Stock. At the Effective Time, each share
-----------------------------------
of Company Capital Stock issued and outstanding immediately prior to the
Effective Time (other than any shares of Company Capital Stock to be canceled
pursuant to Section 1.6(b) and any Dissenting Shares (as provided in Section
1.7)) will be canceled and extinguished and be converted automatically into the
right to receive that number of shares of unregistered Parent Common Stock or
New Preferred Stock equal to the Common Stock Exchange Ratio (in the case of
Company Common Stock, including shares of Company Series A Preferred Stock that
have converted into Company Common Stock), the Series B Exchange Ratio (in the
case of Company Series B Preferred Stock) or the Series C Exchange Ratio (in the
case of Company Series C Preferred Stock), as the case may be, rounded down to
the nearest whole share of Parent Common Stock, Series F-1 Preferred Stock or
Series F-2 Preferred Stock, as appropriate.
(b) Cancellation of Parent-Owned and Company-Owned Stock. Each share of
----------------------------------------------------
Company Capital Stock owned by Parent or the Company or any Subsidiary of Parent
or the Company, if any, immediately prior to the Effective Time shall be
automatically canceled and extinguished without any conversion thereof and
without any further action on the part of Parent, Merger Sub or the Company.
(c) Company Options and Company Warrants. At the Effective Time all
------------------------------------
unexpired and unexercised Company Options and Company Warrants then outstanding,
whether vested or unvested, shall be assumed or exchanged by Parent in
accordance with provisions described below.
-3-
EXECUTION VERSION
(i) At the Effective Time, each unexpired and unexercised Company
Option then outstanding, whether vested or unvested, shall be, in
connection with the Merger, assumed by Parent. Each Company Option so
assumed by Parent under this Agreement shall continue to have, and be
subject to, the same terms and conditions as were applicable to such
Company Option immediately prior to the Effective Time, provided that (A)
such Company Option shall be exercisable for that number of whole shares of
Parent Common Stock or New Preferred Stock, as applicable, equal to the
product of the number of shares of Company Capital Stock that were issuable
upon exercise of such Company Option immediately prior to the Effective
Time multiplied by the Exchange Ratio applicable to the series or class of
Company Capital Stock subject to the Company Option (rounded down to the
nearest whole number of shares of Parent Common Stock or New Preferred
Stock, as applicable) and (B) the per share exercise price for the shares
of Parent Common Stock or New Preferred Stock, as applicable, issuable upon
exercise of such assumed Company Option shall be equal to the quotient
determined by dividing the exercise price per share of Company Capital
Stock at which such Company Option was exercisable immediately prior to the
Effective Time by the Exchange Ratio applicable to the series or class of
Company Capital Stock subject to the Company Option (rounded up to the
nearest whole cent).
(ii) It is the intention of the parties that the Company Options
assumed by Parent shall qualify following the Effective Time as incentive
stock options as defined in Section 422 of the Code to the same extent the
Company Options qualified as incentive stock options immediately prior to
the Effective Time and the provisions of this Section 1.6(c) shall be
applied consistent with this intent.
(iii) Promptly following the Effective Time, Parent will issue to
each holder of an unexpired and unexercised Company Option an instrument
evidencing the foregoing assumption of such Company Option by Parent.
(iv) At the Effective Time, each unexpired and unexercised Company
Warrant then outstanding, whether vested or unvested, shall be, in
connection with the Merger, exchanged by Parent for an equivalent Parent
Warrant. Each Company Warrant so exchanged by Parent for Parent Warrants
under this Agreement shall have, and shall be subject to, terms and
conditions substantially similar to those applicable to such Company
Warrant immediately prior to the Effective Time, provided that (A) such
Company Warrant shall be exercisable for that number of whole shares of
Parent Common Stock or New Preferred Stock, as applicable, equal to the
product of the number of shares of Company Capital Stock that were issuable
upon exercise of such Company Warrant immediately prior to the Effective
Time multiplied by the Exchange Ratio applicable to the class or series of
Company Capital Stock subject to the Company Warrant (rounded down to the
nearest whole number of shares of Parent Common Stock or New Preferred
Stock, as applicable) and (B) the per share exercise price for the shares
of Parent Common Stock or New Preferred Stock, as applicable, issuable upon
exercise of such exchanged Company Warrant shall be equal to the quotient
determined by dividing the exercise price per share of Company Capital
Stock at
-4-
EXECUTION VERSION
which such Company Warrant was exercisable immediately prior to the
Effective Time by the Exchange Ratio applicable to the series or class of
Company Capital Stock subject to the Company Warrant (rounded up to the
nearest whole cent).
(v) Parent will reserve sufficient shares of Parent Common Stock or
New Preferred Stock, as applicable, for issuance pursuant to this Section
1.6(c).
(d) Adjustments to Exchange Ratios. The Exchange Ratios shall be equitably
------------------------------
adjusted to reflect fully the effect of any stock split, reverse split, stock
combination, stock dividend (including any dividend or distribution of
securities convertible into Parent Common Stock, New Preferred Stock or Company
Capital Stock), reorganization, reclassification, recapitalization or other like
change with respect to Parent Common Stock, New Preferred Stock or Company
Capital Stock occurring after the date hereof and prior to the Effective Time.
(e) Fractional Shares. No fraction of a share of Parent Common Stock or
-----------------
New Preferred 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 or New Preferred Stock (after aggregating all
fractional shares of Parent Common Stock or such series of New Preferred Stock
to be received by such holder) shall be entitled to receive from Parent an
amount of cash (rounded up to the nearest whole cent) equal to the product of
(a) such fraction, multiplied by (b) the Average Price applicable to such
shares.
(f) Capital Stock of Merger Sub. At the Effective Time, by virtue of the
---------------------------
Merger and without any action on the part of Merger Sub, Parent, the Company,
the holders of any shares of Company Capital Stock or the holders of any capital
stock of Merger Sub, each share of Common Stock of Merger Sub issued and
outstanding immediately prior to the Effective Time shall be converted into and
become one validly issued, fully paid and nonassessable share of Common Stock of
the Surviving Corporation. Each stock certificate of Merger Sub evidencing
ownership of any such shares shall continue to evidence ownership of such shares
of capital stock of the Surviving Corporation.
1.7 Dissenting Shares.
-----------------
(a) Notwithstanding any provision of this Agreement to the contrary, any
shares of Company Capital Stock held by a holder who has demanded and perfected
appraisal rights for such shares in accordance with Delaware Law and who, as of
the Effective Time, has not effectively withdrawn or lost such appraisal or
dissenters' rights ("Dissenting Shares"), shall not be converted into or
represent a right to receive Parent Common Stock or New Preferred Stock pursuant
to Section 1.6, but the holder thereof shall only be entitled to such rights as
are granted by Delaware Law.
(b) Notwithstanding the provisions of subsection (a) above, if any holder
of shares of Company Capital Stock who demands appraisal of such shares under
Delaware Law shall effectively withdraw or lose (through failure to perfect or
otherwise) the right to appraisal, then, as of the later of (i) the Effective
Time or (ii) the occurrence of such event, such holder's shares shall
automatically be converted into and represent only the right to receive Parent
Common
-5-
EXECUTION VERSION
Stock or New Preferred Stock and fractional shares as provided in Section 1.6,
if any, without interest thereon, upon surrender of the certificate representing
such shares.
(c) The Company shall give Parent (i) prompt notice of its receipt of any
written demands for appraisal of any shares of Company Capital Stock,
withdrawals of such demands, and any other instruments relating to the Merger
served pursuant to Delaware Law and received by the Company, and (ii) the
opportunity to participate in all negotiations and proceedings with respect to
demands for appraisal under Delaware Law. The Company shall not, except with the
prior written consent of Parent or as may be required under applicable law,
voluntarily make any payment with respect to any demands for appraisal of
Company Capital Stock or offer to settle or settle any such demands.
1.8 Exchange Procedures.
-------------------
(a) Parent Common Stock and New Preferred Stock. As soon as practicable
-------------------------------------------
after the Effective Time, Parent shall make available to the Exchange Agent for
exchange in accordance with this Article 1, the aggregate number of shares of
Parent Common Stock and New Preferred Stock issuable in exchange for outstanding
shares of Company Capital Stock (and a sufficient amount of cash for payment of
fractional share interests, if any, pursuant to Section 1.6(e) hereof).
(b) Exchange Procedures. As soon as practicable after the Effective Time,
-------------------
the Surviving Corporation shall cause to be mailed to each holder of record of a
certificate or certificates (the "Certificates") which immediately prior to the
------------
Effective Time represented outstanding shares of Company Capital Stock
(including certificates for shares of Company Preferred Stock which have been
converted to shares of Company Common Stock but for which new certificates have
not been issued) and which shares were converted into shares of Parent Common
Stock or New Preferred Stock pursuant to Section 1.6, (i) a letter of
transmittal in customary form (which shall specify that delivery shall be
effected, and risk of loss and title to the Certificates shall pass, only upon
delivery of the Certificates to the Exchange Agent and shall be in such form and
have such other provisions 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 or New Preferred
Stock plus cash in lieu of fractional shares in accordance with Section 1.6(e)
hereof. Upon surrender of a Certificate for cancellation to the Exchange Agent
or to such other agent or agents as may be appointed by Parent, together with
such letter of transmittal, duly completed and validly executed in accordance
with the instructions thereto, the holder of such Certificate shall be entitled
to receive in exchange therefor a certificate representing the number of whole
shares of Parent Common Stock or New Preferred Stock plus cash in lieu of
fractional shares in accordance with Section 1.6(e), to which such holder is
entitled pursuant to Section 1.6, and the Certificate so surrendered shall be
canceled. Until surrendered, each outstanding Certificate that, prior to the
Effective Time, represented shares of Company Capital Stock (including
Certificates for shares of Company Preferred Stock which have been converted to
shares of Company Common Stock but for which new certificates have not been
issued) will be deemed from and after the Effective Time, for all corporate
purposes, other than the payment of dividends, to evidence the ownership of the
number of full shares of Parent Common Stock or New Preferred Stock into which
such
-6-
EXECUTION VERSION
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).
(c) Distributions With Respect to Unexchanged Shares of Company Capital
-------------------------------------------------------------------
Stock. No dividends or other distributions with respect to Parent Common Stock
-----
or New Preferred Stock declared or made after the Effective Time and with a
record date after the Effective Time will be paid to the holder of any
unsurrendered Certificate with respect to the shares of Parent Common Stock or
New Preferred Stock represented thereby until the holder of record of such
Certificate shall surrender such Certificate for exchange. Subject to applicable
Law, following surrender of any such Certificate, there shall be paid to the
record holder of the certificates representing whole shares of Parent Common
Stock or New Preferred Stock issued in exchange therefor, without interest, at
the time of such surrender, the amount of dividends or other distributions with
a record date after the Effective Time theretofore payable with respect to such
whole shares of Parent Common Stock or New Preferred Stock.
(d) Transfers of Ownership. If any certificate for shares of Parent Common
----------------------
Stock or New Preferred Stock is to be issued in a name other than that in which
the Certificate surrendered in exchange therefor is registered, it will be a
condition of the issuance thereof that (i) the Certificate so surrendered will
be properly endorsed and otherwise in proper form for transfer and that the
person requesting such exchange will have paid to Parent or any agent designated
by it any transfer or other taxes required by reason of the issuance of a
certificate for shares of Parent Common Stock or New Preferred Stock in any name
other than that of the registered holder of the Certificate surrendered, or
established to the satisfaction of Parent or any agent designated by it that
such tax has been paid or is not payable; and (ii) the Person surrendering such
Certificate provide the Company with an opinion of counsel, acceptable to the
Company, that such transfer does not violate state or federal securities laws.
1.9 No Further Ownership Rights in Company Capital Stock. All shares of
----------------------------------------------------
Parent Common Stock or New Preferred Stock issued upon the surrender for
exchange of shares of Company Capital Stock in accordance with the terms hereof
(including any cash paid in respect thereof) shall be deemed to have been issued
in full satisfaction of all rights pertaining to such shares of Company Capital
Stock, and there shall be no further registration of transfers on the records of
the Company of shares of Company Capital Stock which were outstanding
immediately prior to the Effective Time. If, after the Effective Time,
Certificates are presented to the Surviving Corporation for any reason, they
shall be canceled and exchanged as provided in this Article 1.
1.10 Lost, Stolen or Destroyed Certificates. In the event any certificates
--------------------------------------
evidencing shares of Company Capital Stock shall have been lost, stolen or
destroyed, the Exchange Agent shall issue certificates representing such shares
of Parent Common Stock or New Preferred Stock and cash for fractional shares, if
any, as may be required pursuant to Section 1.6(e) in exchange for such lost,
stolen or destroyed Certificates, upon the making of an affidavit of that fact
by the holder thereof; provided, however, that Parent or the Exchange Agent may,
-------- -------
in its discretion and as a condition precedent to the issuance thereof, require
the owner of such lost, stolen or destroyed Certificates to deliver a bond in
such sum as it may reasonably direct as indemnity against any claim that may be
made against Parent or the Exchange Agent with respect to the Certificates
alleged to have been lost, stolen or destroyed.
-7-
EXECUTION VERSION
1.11 Taking of Necessary Action; Further Action. If, at any time after the
------------------------------------------
Effective Time, any such further action is necessary or desirable to carry out
the purposes of this Agreement and to vest the Surviving Corporation with full
right, title and possession to all assets, property, rights, privileges, powers
and franchises of the Company, the officers and directors of the Surviving
Corporation are fully authorized to take, and will take, all such lawful and
necessary action.
1.12 Exemption From Registration; California Permit. The shares of Parent
----------------------------------------------
Common Stock and New Preferred Stock to be issued pursuant to Section 1.6 hereof
in connection with the Merger will be issued in a transaction exempt from
registration under the Securities Act by reason of Section 3(a)(10) thereof, or
pursuant to Section 5.1(c) hereof, by reason of Section 4(2) of the Securities
Act and SEC rules and regulations promulgated thereunder. Subject to the
provisions of Section 5.1(c) hereof, the shares of Parent Common Stock and New
Preferred Stock to be issued pursuant to Section 1.6 in connection with the
Merger will be qualified under the California Code, pursuant to Section 25121
thereof, after a fairness hearing has been held pursuant to the authority
granted by Section 25142 of such law (the "Fairness Hearing"), and such Fairness
----------------
Hearing shall also address the assumption by Parent of all Company Options
pursuant to Section 1.6 hereof. Each of Parent and the Company shall use all
requisite commercially reasonable efforts (i) to file promptly following the
execution and delivery of this Agreement, an application for issuance of a
permit pursuant to Section 25121 of the California Code to issue such securities
(including the Parent Warrants) and to assume such Company Options (the
"California Permit") and (ii) to obtain the California Permit as promptly as
-----------------
practicable thereafter.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to each of Parent and Merger
Sub, subject to such exceptions as are specifically disclosed in the Disclosure
Schedule delivered herewith and dated as of the date hereof, as follows:
2.1 Organization and Qualification. The Company is a corporation duly
------------------------------
organized, validly existing and in good standing under the Laws of the state of
Delaware, and has full corporate power and authority to conduct its business as
now conducted and as currently proposed to be conducted and to own, use and
lease its Assets and Properties. The Company is duly qualified, licensed or
admitted to do business and is in good standing in each jurisdiction in which
the ownership, use or leasing of its Assets and Properties, or the conduct or
nature of its business, makes such qualification, licensing or admission
necessary. Section 2.1 of the Disclosure Schedule lists each state where the
--------------------------------------
Company is qualified to do business.
2.2 Authority Relative to this Agreement. Subject only to the requisite
------------------------------------
approval of the Merger and this Agreement by the stockholders of the Company,
the Company has full corporate power and authority to execute and deliver this
Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby. The execution and delivery by the Company of
this Agreement and the consummation by the Company of the transactions
contemplated hereby have been duly and validly authorized by all necessary
action by the Board
-8-
EXECUTION VERSION
of Directors of the Company, and no other action on the part of the Board of
Directors of the Company is required to authorize the execution, delivery and
performance of this Agreement and the consummation by the Company of the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by the Company and, assuming the due authorization,
execution and delivery hereof by Parent, constitutes a legal, valid and binding
obligation of the Company enforceable against the Company in accordance with its
respective terms, except as the enforceability thereof may be limited by
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or
other similar Laws relating to the enforcement of creditors' rights generally
and by general principles of equity.
2.3 Capital Stock. The authorized capital stock of the Company consists
-------------
only of 14,000,000 shares of Common Stock, $.001 par value per share (the
"Company Common Stock"), of which 3,879,659 shares of Common Stock are issued
--------------------
and outstanding as of the date hereof, and 6,478,564 shares of Preferred Stock,
$.001 par value per share (the "Company Preferred Stock"). The designation and
-----------------------
status of the Company Preferred Stock is as follows: 2,800,000 shares are
designated as Series A Preferred Stock, all of which are issued and outstanding
as of the date hereof; 1,023,564 shares are designated as Series B Preferred
Stock, 943,669 of which are issued and outstanding as of the date hereof; and
2,655,000 shares are designated as Series C Preferred Stock, 2,562,905 of which
are issued and outstanding as of the date hereof. All of the issued and
outstanding shares of Company Common Stock and Company Preferred Stock are
validly issued, fully paid and nonassessable, and have been issued in compliance
with all applicable federal, state and foreign securities Laws. Except as
disclosed in Section 2.3 of the Disclosure Schedule, no shares of Company Common
--------------------------------------
Stock or Company Preferred Stock are held in treasury or are reserved for
issuance. Section 2.3 of the Disclosure Schedule lists the name and state of
--------------------------------------
residence of each holder of Company Common Stock and Company Preferred Stock.
Immediately prior to the Effective Time, all of the outstanding shares of
Company Series A Preferred Stock will have converted into shares of Company
Common Stock on a one share of Company Series A Preferred Stock for one share of
Company Common Stock basis (the "Conversion"). Except as disclosed in Section
---------- -------
2.3 of the Disclosure Schedule, as of the date hereof (a) there are no
------------------------------
outstanding Company Options or agreements, arrangements or understandings to
which the Company is a party (written or oral) to issue Options with respect to
the Company, (b) there are no preemptive rights or rights of participation or
agreements, arrangements or understandings to issue preemptive rights with
respect to the issuance or sale of Company Capital Stock created by statute, the
certificate of incorporation or bylaws of the Company, or any agreement or other
arrangement to which the Company is a party or to which it is bound, and (c)
there are no agreements, arrangements or understandings to which the Company is
a party (written or oral) pursuant to which the Company has the right to elect
to satisfy any Liability by issuing Company Common Stock or Equity Equivalents.
With respect to each Company Option, Section 2.3 of the Disclosure Schedule sets
--------------------------------------
forth the holder thereof, the state of residence of such holder, the date of
grant or issuance, the number and type of securities issuable thereunder, and,
if applicable, the exercise price therefor, the exercise period and vesting
schedule thereof and, if applicable, any acceleration provisions of such Company
Option. The Company is not a party or subject to any agreement or understanding,
and, to the Company's knowledge, there is no agreement or understanding between
or among any Persons which affects or relates to the voting, or giving of
written consents, with respect to the Company.
-9-
EXECUTION VERSION
2.4 No Subsidiaries. The Company has no Subsidiaries and does not
---------------
otherwise hold any equity, membership, partnership, joint venture or other
ownership interest in any Person.
2.5 Directors and Officers. The name of each director and officer of the
----------------------
Company on the date hereof, and his or her position with the Company, are listed
in Section 2.5 of the Disclosure Schedule.
--------------------------------------
2.6 No Conflicts. The execution and delivery by the Company of this
------------
Agreement does not, and the performance by the Company of its obligations under
this Agreement and the consummation of the transactions contemplated hereby do
not and will not:
(a) conflict with or result in a violation or breach of any of the terms,
conditions or provisions of the certificate of incorporation or bylaws of the
Company;
(b) subject to obtaining the consents, approvals and actions, making the
filings and giving the notices disclosed in Section 2.6 of the Disclosure
-----------------------------
Schedule, if any, conflict with or result in a violation or breach of any term
--------
or provision of any Law or Order applicable to the Company or any of its Assets
and Properties; or
(c) except as disclosed in Section 2.6 of the Disclosure Schedule, (i)
--------------------------------------
conflict with or result in a violation or breach of, (ii) constitute (with or
without notice or lapse of time or both) a default under, (iii) require the
Company to obtain any consent, approval or action of, make any filing with or
give any notice to any Person as a result or under the terms of, (iv) result in
or give to any Person any right of termination, cancellation, acceleration or
modification in or with respect to, (v) result in or give to any Person any
additional rights or entitlement to increased, additional, accelerated or
guaranteed payments under or (vi) result in the creation or imposition of any
Lien upon the Company or any of its Assets and Properties under, any Contract or
License to which the Company is a party or by which any of its Assets and
Properties is bound.
2.7 Books and Records; Organizational Documents. The minute books and
-------------------------------------------
stock record books and other similar records of the Company that have been
provided or made available to Parent or its counsel prior to the execution of
this Agreement, are complete and correct in all respects and have been
maintained in accordance with sound business practices. Such minute books
contain a true and complete record of all action taken at all meetings and by
all written consents in lieu of meetings of the directors, stockholders and
committees of the board of directors of the Company through the date hereof. The
Company has prior to the execution of this Agreement delivered to Parent true
and complete copies of its certificate of incorporation and bylaws, both as
amended through the date hereof.
2.8 Company Financial Statements. Section 2.8 of the Disclosure Schedule
---------------------------- --------------------------------------
sets forth the Company Financials. The Company 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 as may be indicated in the notes thereto, and, in the case of the
Interim Financial Statements, subject to normal year-end adjustments, which
adjustments will not be material in amount or significance). The Company
Financials present fairly the financial condition and operating results of the
Company as of the dates and during the periods indicated therein, subject, in
the case of the Interim Financial Statements, to normal year-
-10-
EXECUTION VERSION
end adjustments, which adjustments will not be material in amount or
significance, and except that the Interim Financial Statements may not contain
footnotes.
2.9 Absence of Changes. Since the Audited Financial Statement Date, except
------------------
as set forth in Section 2.9 of the Disclosure Schedule, there has not been any
--------------------------------------
material adverse change, or any event or development which, individually or
together with other such events, could reasonably be expected to result in a
material adverse change, in the Business or Condition of the Company. None of
the other representations or warranties set forth in this Article 2 shall be
deemed to limit the foregoing. In addition, without limiting the foregoing,
except as expressly contemplated hereby and except as disclosed in Section 2.9
-----------
of the Disclosure Schedule, there has not occurred since the Audited Financial
--------------------------
Statement Date:
(a) any declaration, setting aside or payment of any dividend or other
distribution in respect of the Company Capital Stock (or other equity interests
of the Company), or any direct or indirect redemption, purchase or other
acquisition by the Company of any such capital stock (or other equity interests)
of or any Option with respect to the Company;
(b) any modification or amendment of any right of any holder of any
outstanding shares of Company Capital Stock of, or Option with respect to, the
Company;
(c) (i) any increase in salary, rate of commissions, rate of consulting
fees or any other compensation of any current or former officer, director,
stockholder, employee or consultant of the Company; (ii) any payment by the
Company of consideration of any nature whatsoever (other than salary,
commissions or consulting fees and customary benefits paid to any current or
former officer, director, stockholder, employee or consultant of the Company) to
any current or former officer, director, stockholder, employee or consultant of
the Company; (iii) any establishment or modification of (A) targets, goals,
pools or similar provisions under any Benefit Plan, employment Contract or other
employee compensation arrangement or (B) salary ranges, increased guidelines or
similar provisions in respect of any Benefit Plan, employment Contract or other
employee compensation arrangement; or (iv) any adoption, entering into,
amendment, modification or termination (partial or complete) of any Benefit
Plan;
(d) (i) any incurrence by the Company of Indebtedness or (ii) any
voluntary purchase, cancellation, prepayment or complete or partial discharge in
advance of a scheduled payment date with respect to, or waiver of any right of
the Company under, any Indebtedness of or owing to the Company;
(e) any physical damage, destruction or other casualty loss (whether or
not covered by insurance) affecting any of the real or personal property or
equipment of the Company in an aggregate amount exceeding $15,000;
(f) any write-off or write-down of or any determination to write off or
write-down any of the Assets and Properties of the Company in an aggregate
amount exceeding $15,000;
(g) any purchase of any Assets and Properties of any Person or disposition
of, or incurrence of a Lien on, any Assets and Properties of the Company, other
than acquisitions or dispositions of inventory in the ordinary course of
business of the Company consistent with past practice;
-11-
EXECUTION VERSION
(h) any entering into, amendment, modification, termination (partial or
complete) or granting of a waiver under or giving any consent with respect to
(i) any Contract which is required (or had it been in effect on the date hereof
would have been required) to be disclosed in the Disclosure Schedule pursuant to
Section 2.15(a) or 2.18(a) or (ii) any other Contract related to Company
Intellectual Property;
(i) any capital expenditures or commitments by the Company for additions
to property, plant or equipment of the Company constituting capital assets in an
aggregate amount exceeding $15,000;
(j) any commencement, termination or change by the Company of any line of
business;
(k) any transaction by the Company with any officer, director,
stockholder, Affiliate or Associate of the Company, other than pursuant to any
Contract in effect on the Audited Financial Statement Date and disclosed to
Parent pursuant to Section 2.18 or other than pursuant to any contract of
employment and listed pursuant to Section 2.18 of the Disclosure Schedule;
---------------------------------------
(l) any change in the accounting or Tax methods or procedures of the
Company;
(m) any Contract or other transaction not in the ordinary course of
business consistent with past practice; or
(n) any entering into by the Company of any Contract to do or engage in
any of the foregoing, including with respect to any Business Combination not
otherwise restricted by the foregoing paragraphs.
2.10 No Undisclosed Liabilities. Except as reflected or reserved against in
--------------------------
the Company Financials (including the notes thereto) or as disclosed in Section
-------
2.10 of the Disclosure Schedule, there are no Liabilities of, relating to or
-------------------------------
affecting the Company or any of its Assets and Properties, other than
Liabilities incurred in the ordinary course of business consistent with past
practice since the Audited Financial Statement Date and in accordance with the
provisions of this Agreement which, in the aggregate, are not material to the
Business or Condition of the Company and are not for tort or for breach of
contract.
2.11 Taxes. Except as disclosed in Section 2.11 of the Disclosure
----- ------------------------------
Schedule:
---------
(a) All Tax Returns required to have been filed by or with respect to the
Company or any affiliated, consolidated, combined, unitary or similar group of
which the Company is or was a member (a "Relevant Group") have been duly and
--------------
timely filed, and each such Tax Return correctly and completely reflects Tax
liability and all other information required to be reported thereon. All Taxes
due and payable by the Company or any member of a Relevant Group, whether or not
shown on any Tax Return, have been paid or accrued on the Company Financials.
(b) The provisions for Taxes due by the Company reflected in the Company
Financials are sufficient for all unpaid Taxes, not yet due and payable, of the
Company and, as of the Closing Date, such provisions, as adjusted for the
passage of time through the Closing Date,
-12-
EXECUTION VERSION
will be sufficient for the then unpaid Taxes, being current Taxes not yet due
and payable, of the Company.
(c) The Company is not a party to any agreement extending the time within
which to file any Tax Return. No claim has ever been made by a jurisdiction in
which the Company does not file Tax Returns that it is or may be subject to
taxation by that jurisdiction.
(d) The Company has withheld and paid all Taxes required to have been
withheld and paid in connection with amounts paid or owing to any employee,
creditor, independent contractor or other Person.
(e) The Company does not expect any Taxing Authority to assess additional
Taxes against or in respect of it for any past period. There is no dispute or
claim concerning any Tax liability of the Company either (i) threatened, claimed
or raised by any Taxing Authority or (ii) of which the Company is or reasonably
should be aware. There are no Liens for Taxes upon the Assets or Properties of
the Company. Section 2.11 of the Disclosure Schedule indicates those Tax
---------------------------------------
Returns, if any, of the Company that have been audited, and indicates those Tax
Returns of the Company that currently are the subject of audit. The Company has
delivered to Parent complete and correct copies of all federal, state, local and
foreign income Tax Returns filed by, and all Tax examination reports and
statements of deficiencies assessed against or agreed to by, the Company since
the fiscal year ended December 31, 1997.
(f) The Company has not waived any statute of limitations in respect of
Taxes or agreed to any extension of time with respect to any Tax assessment or
deficiency.
(g) The Company has not received any written ruling related to Taxes or
entered into any agreement with a Taxing Authority relating to Taxes.
(h) The Company has no liability for the Taxes of any Person other than
the Company (i) under Section 1.1502-6 of the Treasury regulations (or any
similar provision of state, local or foreign Law), (ii) as a transferee or
successor, (iii) by Contract or (iv) otherwise.
(i) The Company (i) has neither agreed to make nor is required to make any
adjustment under Section 481 of the Code (or any comparable provision of state,
local or foreign Law) by reason of a change in accounting method and (ii) is not
a "consenting corporation" within the meaning of Section 341(f)(1) of the Code
or comparable provisions of any state statutes, and none of the Assets and
Properties of the Company are subject to an election under Section 341(f) of the
Code or comparable provisions of any state local or foreign Law.
(j) The Company is not a party to or nor is bound by any obligations under
any tax sharing, tax allocation, tax indemnity or similar agreement or
arrangement.
(k) The Company is not a party to any joint venture, partnership or other
arrangement that is treated as a partnership for federal income Tax purposes.
(l) The Company has not made any payments, is not obligated to make any
payments, nor is it a party to any Contract (including this Agreement) that
under any circumstances
-13-
EXECUTION VERSION
could require it to make any payments that are not deductible as a result of the
provisions set forth in Section 280G of the Code and the Treasury regulations
thereunder.
(m) There is currently no limitation on the utilization of the net
operating losses, built-in losses, capital losses, Tax credits or other similar
items of the Company under (i) Section 382 of the Code, (ii) Section 383 of the
Code, (iii) Section 384 of the Code, (iv) Section 269 of the Code and (v)
Section 1502 of the Code and Treasury regulations promulgated thereunder.
(n) The Company is not nor has it ever been a United States real property
holding corporation within the meaning of Section 897(c)(1)(A)(ii) of the Code.
2.12 Legal Proceedings.
-----------------
(a) Except as set forth in Section 2.12 of the Disclosure Schedule:
---------------------------------------
(i) there are no Actions or Proceedings pending or, to the knowledge
of the Company, threatened against, relating to or affecting the Company or
its Assets and Properties;
(ii) there are no facts or circumstances known to the Company that
could reasonably be expected to give rise to any Action or Proceeding
against, relating to or affecting the Company;
(iii) the Company has not received notice, and does not otherwise have
knowledge of any Orders outstanding against the Company; and
(iv) the Company has not received notice and does not otherwise have
knowledge of any defects, dangerous or substandard conditions in the
products or materials sold, distributed, or currently proposed to be sold
or distributed by the Company that could cause bodily injury, sickness,
disease, death or damage to property, or result in loss of use of property,
or any claim, suit, demand for arbitration or notice seeking damages for
bodily injury, sickness, disease, death, or damage to property, or loss of
use of property.
(b) Prior to the execution of this Agreement, the Company has delivered to
Parent all responses of counsel for the Company to auditor's requests for
information for the preceding three (3) years (together with any updates
provided by such counsel) regarding Actions or Proceedings pending or threatened
against, relating to or affecting the Company. Section 2.12(b) of the Disclosure
---------------------------------
Schedule sets forth all Actions or Proceedings relating to or affecting the
--------
Company or any of its Assets and Properties during the five (5) year period
prior to the date hereof (or since inception, if a shorter period).
2.13 Compliance With Laws and Orders. Except as disclosed in Section 2.13
------------------------------- ------------
of the Disclosure Schedule, the Company is not nor has it been at any time in
--------------------------
violation of or in default under, any Law or Order applicable to the Company or
any of its Assets and Properties.
2.14 Benefit Plans; ERISA. All Benefit Plans of the Company are listed in
--------------------
Section 2.14 of the Disclosure Schedule, and copies of all plan documents,
---------------------------------------
written descriptions of plans,
-14-
EXECUTION VERSION
actuarial reports and filings with any Governmental or Regulatory Authority and
determinations with respect to such Benefit Plans) have been delivered or made
available to Parent. None of the Benefit Plans are Defined Benefit Plans. Except
as disclosed in Section 2.14 of the Disclosure Schedule:
---------------------------------------
(a) each Benefit Plan has at all times been maintained and administered in
accordance with its terms, and each such Benefit Plan and the administration
thereof complies, and has at all times complied, in all material respects with
the requirements of all applicable Law, including ERISA and the Code;
(b) each Benefit Plan intended to qualify under Section 401(a) of the Code
has at all times since its adoption been so qualified, and each trust which
forms a part of any such plan has at all times since its adoption been tax
exempt under Section 501(a) of the Code;
(c) the Company is not now, nor at any time has it been, a member of a
controlled group, as defined in Section 412(n)(6)(b) of the Code, with any other
company, entity or enterprise;
(d) the Company does not presently maintain or contribute to, nor any time
has it maintained or contributed to, any single-employer plan (within the
meaning of Section 3(41) of ERISA) subject to Title IV of ERISA, and the Company
is not aware of any circumstances pursuant to which the Company could have
liability to any party under Title IV of ERISA;
(e) no Benefit Plan is a "multiemployer" plan within the meaning of
Section 3(37) of ERISA;
(f) the Company has not incurred, nor does it reasonably expect to incur,
any liability for any tax imposed under Sections 4971 through 4980B of the Code
or civil liability under Section 502(i) or (l) of ERISA;
(g) no benefit under any Benefit Plan, including any severance or
parachute payment plan or agreement, will be established or become accelerated,
vested or payable by reason of any transaction contemplated under this
Agreement;
(h) no Benefit Plan provides health or death benefit coverage beyond the
termination of an employee's employment, except as required by Part 6 of
Subtitle B of Title I of ERISA or Section 4980B of the Code;
(i) no Action or Proceeding (excluding claims for benefits incurred in the
ordinary course of Plan activities) have been brought or, to the knowledge of
the Company, threatened against or with respect to any Benefit Plan and there
are no facts or circumstances known to the Company that could reasonably be
expected to give rise to any such Action or Proceeding;
(j) no Tax has been incurred under Section 511 of the Code with respect to
any Benefit Plan (or trust or other funding vehicle pursuant thereto); and
(k) all contributions to Benefit Plans that were required to be made under
such Benefit Plans have been made; and all benefits accrued under any unfunded
Benefit Plan have
-15-
EXECUTION VERSION
been paid, accrued or otherwise adequately reserved in accordance with GAAP, and
the Company has performed all material obligations required to be performed as
of such date under all Benefit Plans.
2.15 Real Property.
-------------
(a) Section 2.15(a) of the Disclosure Schedule contains a true and correct
------------------------------------------
list of (i) each parcel of real property leased by the Company (as lessor or
lessee) (the "Leased Real Property") and (ii) all Liens relating to or affecting
--------------------
any parcel of real property referred to in clause (i) to which the Company is a
party. The Company owns no real property.
(b) Subject to the terms of its respective leases, the Company has a valid
and subsisting leasehold estate in and the right to quiet enjoyment of the
Leased Real Properties for the full term of the leases relating thereto. Each
lease referred to in clause (i) of paragraph (a) above is a legal, valid and
binding agreement of the Company, enforceable in accordance with its terms, and
of each other Person that is a party thereto, and except as set forth in Section
-------
2.15(b) of the Disclosure Schedule, there is no, and the Company has not
----------------------------------
received notice of any, default (or any condition or event which, after notice
or lapse of time or both, would constitute a default) thereunder. The Company
does not owe brokerage commissions or finders fees with respect to any such
Leased Real Property, except to the extent that the Company may renew the term
of any such lease, in which case, any such commissions and fees would be in
amounts that are reasonable and customary for the spaces so leased, given their
intended use and terms.
(c) Except as disclosed in Section 2.15(c) of the Disclosure Schedule, all
------------------------------------------
material improvements on the Leased Real Property are in good operating
condition and in a state of good maintenance and repair, ordinary wear and tear
excepted, and such improvements are in all material respects adequate and
suitable for the purposes for which they are presently being used and, to the
knowledge of the Company, there are no condemnation or appropriation proceedings
pending or threatened against any of such real property or the improvements
thereon.
(d) The Company has no knowledge, nor has the Company received any notice,
of any Action or Proceeding, actual or threatened, against the Company or the
Leased Real Property by any Person which would materially affect the future use,
occupancy or value of the Leased Real Property or any part thereof.
2.16 Tangible Personal Property. The Company is in possession of and has
--------------------------
good and marketable title to, or has valid leasehold interests in or valid
rights under Contract to use, all tangible personal property used in the conduct
of its business, including all tangible personal property reflected on the
Company Financials and tangible personal property acquired since the Audited
Financial Statement Date, other than property disposed of since such date in the
ordinary course of business consistent with past practice. All such tangible
personal property is free and clear of all Liens and is adequate and suitable in
all material respects for the conduct by the Company of its business as
presently conducted, and is in good working order and condition in all material
respects, ordinary wear and tear excepted, and its use complies in all material
respects with all applicable Laws.
-16-
EXECUTION VERSION
2.17 Intellectual Property.
---------------------
(a) Section 2.17(a) of the Disclosure Schedule lists all Company
------------------------------------------
Registered Intellectual Property and lists any proceedings or actions pending as
of the date hereof before any court, tribunal (including the PTO or equivalent
authority anywhere in the world) related to any of the Company Registered
Intellectual Property.
(b) Each item of Company Intellectual Property, including all Company
Registered Intellectual Property listed in Section 2.17(a) of the Disclosure
---------------------------------
Schedule and, except for Intellectual Property licensed to the Company under any
--------
License, each item of Company Intellectual Property is owned exclusively by the
Company and is free and clear of any Liens. The Company (i) has the right to all
trademarks, trade names and internet indicia 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 Company
products or other works of authorship that the Company otherwise purports to own
provided that such works may incorporate copyrighted works or works of
authorship of third parties which are licensed to the Company.
(c) To the extent that any Intellectual Property has been developed or
created by any Person other than the Company, the Company has a written
agreement with such Person with respect thereto and the Company thereby has
either obtained ownership of, and is the exclusive owner of, all such
Intellectual Property by operation of law or by valid assignment of any such
rights or has obtained a License under or to such Intellectual Property.
(d) Except pursuant to agreements described in Section 2.17(d) of the
----------------------
Disclosure Schedule, the Company has not transferred ownership of or granted any
-------------------
License of or other right to use or authorized the retention of any rights to
use any Intellectual Property that is or was Company Intellectual Property, to
any other Person other than nonexclusive use and resale rights to customers and
distributors of the Company in the ordinary course of business consistent with
past practice.
(e) The Company Intellectual Property constitutes all the Intellectual
Property used in and/or necessary to the conduct of its business as it currently
is conducted and as presently proposed to be conducted, including the design,
development, manufacture, use, import and sale of the products, technology and
services of the Company (including products, technology or services currently
under development).
(f) Other than "shrink-wrap" and similar widely available commercial end-
user licenses, the Contracts and Licenses listed in Section 2.17(f) of the
----------------------
Disclosure Schedule include all Contracts and Licenses to which the Company is a
-------------------
party with respect to any Intellectual Property. No Person other than the
Company has ownership rights to improvements made by the Company in Intellectual
Property which has been licensed to the Company.
(g) Section 2.17(g) of the 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
-17-
EXECUTION VERSION
with respect to the infringement or misappropriation by the Company or such
other Person of the Intellectual Property of any Person other than the Company.
(h) The operation of the business of the Company as currently conducted or
as presently proposed to be conducted, including the Company's design,
development, use, import, manufacture and sale of the products, technology or
services (including products, technology or services currently under
development) of the Company does not (i) willfully infringe or (ii) to the best
of the Company's knowledge (but without conducting any special research or
patent search), infringe or misappropriate the Intellectual Property of any
Person, violate the rights of any Person (including rights to privacy or
publicity), or constitute unfair competition or trade practices under any Laws.
The Company has not received notice from any Person claiming that such operation
of the business of the Company as described in the preceding sentence or any
act, product, technology or service (including products, technology or services
currently under development) of the Company infringes or misappropriates the
Intellectual Property of any Person or constitutes unfair competition or trade
practices under any Law, nor has the Company received a request or invitation to
obtain a License from any Person with respect to such act, technology or
service.
(i) Each item of Company Registered Intellectual Property is valid and
subsisting, and all necessary registration, maintenance, renewal fees, annuity
fees and taxes in connection with such Registered Intellectual Property have
been paid and all necessary documents and certificates in connection with such
Company Registered Intellectual Property have been filed with the relevant
patent, copyright, trademark or other authorities in the United States or
foreign jurisdictions, as the case may be, for the purposes of maintaining such
Registered Intellectual Property. Section 2.17(i) of the Disclosure Schedule
------------------------------------------
lists all actions that must be taken by the Company within one hundred eighty
(180) days from the date hereof, including the payment of any registration,
maintenance, renewal fees, annuity fees and taxes or the filing of any
documents, applications or certificates for the purposes of maintaining,
perfecting or preserving or renewing any Company Registered Intellectual
Property. Except as set forth on Section 2.17(i) of the Disclosure Schedule, the
------------------------------------------
Company has registered the copyright or mask work with the U.S. Copyright Office
for the latest version of each product or technology of the Company that
constitutes or includes a copyrightable work or a mask work. In each case in
which the Company has acquired any Intellectual Property rights from any Person,
the Company has obtained a valid and enforceable assignment sufficient to
irrevocably transfer all rights in such Intellectual Property (including the
right to seek past and future damages with respect to such Intellectual
Property) to the Company and, to the maximum extent provided for by, and in
accordance with, applicable Laws, the Company has recorded each such assignment
with the relevant Governmental or Regulatory Authority, including the PTO, the
U.S. Copyright Office, or their respective equivalents in any relevant foreign
jurisdiction, as the case may be.
(j) There are no Contracts, 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.
-18-
EXECUTION VERSION
(k) To the knowledge of the Company after due inquiry, no Person is
infringing or misappropriating any Company Intellectual Property.
(l) The Company has taken all reasonable steps to protect the Company's
rights in confidential information and trade secrets of the Company or provided
by any other Person to the Company subject to a duty of confidentiality. Without
limiting the foregoing, the Company has, and enforces, a policy requiring each
employee, consultant and independent contractor to execute proprietary
information, confidentiality and invention and copyright assignment agreements
substantially in the form set forth in Section 2.17(l) of the Disclosure
---------------------------------
Schedule, and all current and former employees, consultants and independent
--------
contractors of the Company have executed such an agreement.
(m) No Company Intellectual Property or product, technology or service of
the Company is subject to any Order or Action or Proceeding that restricts, or
that is reasonably expected to restrict in any manner, the use, transfer or
licensing of any Company Intellectual Property by the Company or that may affect
the validity, use or enforceability of such Company Intellectual Property.
(n) No (i) product, technology, service or publication of the Company,
(ii) material published or distributed by the Company or (iii) conduct or
statement of Company constitutes obscene material, a defamatory statement or
material, false advertising or, to the knowledge of the Company, otherwise
violates any Law.
2.18 Contracts.
---------
(a) Section 2.18(a) of the Disclosure Schedule (with paragraph references
------------------------------------------
corresponding to those set forth below) contains a true and complete list of
each of the following Contracts or other arrangements (true and complete copies
or, if none, reasonably complete and accurate written descriptions of which,
together with all amendments and supplements thereto and all waivers of any
terms thereof, have been provided to or made available to Parent prior to the
execution of this Agreement), to which the Company is a party or by which any of
its Assets and Properties is bound:
(i) (A) all Contracts to which the Company is a party (excluding
Benefit Plans) providing for a commitment of employment or consultant
services for a specified or unspecified term, the name, position and rate
of compensation of each Person party to such a Contract and the expiration
date of each such Contract; and (B) any written or unwritten
representations, commitments, promises, communications or courses of
conduct involving an obligation of the Company to make payments (with or
without notice, passage of time or both) to any Person in connection with,
or as a consequence of, the transactions contemplated hereby or to any
employee who is disclosed in Section 2.21(a) of the Disclosure Schedule,
------------------------------------------
other than with respect to salary or incentive compensation payments in the
ordinary course of business consistent with past practice;
(ii) all Contracts to which the Company is a party with any Person
containing any provision or covenant prohibiting or limiting the ability of
the
-19-
EXECUTION VERSION
Company to engage in any business activity or compete with any Person or
prohibiting or limiting the ability of any Person to compete with the
Company or prohibiting or limiting disclosure of confidential or
proprietary information;
(iii) all partnership, joint venture, stockholders' or other similar
Contracts to which the Company is a party with any Person;
(iv) all Contracts to which the Company is a party relating to
Indebtedness in an amount of $15,000 or more of the Company;
(v) all Contracts to which the Company is a party outside the
ordinary course of business (A) with independent contractors, distributors,
dealers, manufacturers' representatives, sales agencies or franchisees, (B)
with aggregators, manufacturers and equipment vendors, and (C) with respect
to the sale of services, products or both, to customers;
(vi) all guarantees of any Indebtedness made by the Company or other
obligations of the Company to any Person;
(vii) all Contracts to which the Company is a party relating to (A)
the future disposition or acquisition of any Assets and Properties with an
aggregate value of $15,000 or more, and (B) any Business Combination;
(viii) all Contracts between or among the Company, on the one hand,
and any current or former officer, director, stockholder, Affiliate or
Associate of the Company or any Associate of any such officer, director,
stockholder or Affiliate, on the other hand, other than Contracts disclosed
pursuant to Section 2.20(a)(i);
(ix) all collective bargaining or similar labor contracts to which
the Company is a party;
(x) all Contracts to which the Company is a party that (A) limit or
contain restrictions on the ability of the Company to declare or pay
dividends on, to make any other distribution in respect of or to issue or
purchase, redeem or otherwise acquire its capital stock, to incur
Indebtedness, to incur or suffer to exist any Lien, to purchase or sell any
Assets and Properties, to change the lines of business in which it
participates or engages, (B) require the Company to maintain specified
financial ratios or levels of net worth or other indicia of financial
condition or (C) require the Company to maintain insurance in certain
amounts or with certain coverages;
(xi) all powers of attorney and comparable delegations of authority;
and
(xii) all other Contracts not otherwise required to be disclosed in
Section 2.18(a) of the Disclosure Schedule which are material to the
------------------------------------------
Business or Condition of the Company (for purposes of this Section
2.18(a)(xii) only, the
-20-
EXECUTION VERSION
parties agree that only Contracts that (A) involve payments of more than
$25,000 or (B) extend for more than one (1) year beyond the date hereof
shall be considered material to the Business or Condition of the Company).
(b) Each Contract required to be disclosed in Section 2.18(a) of the
----------------------
Disclosure Schedule is in full force and effect and constitutes a legal, valid
-------------------
and binding agreement, enforceable in accordance with its terms, of each party
thereto; and except as disclosed in Section 2.18(b) of the Disclosure Schedule,
------------------------------------------
to the knowledge of the Company, no other party to such Contract is, nor has
received notice that it is, in violation or breach of or default under any such
Contract (or with notice or lapse of time or both, would be in violation or
breach of or default under any such Contract).
(c) Except as disclosed in Section 2.18(c) of the Disclosure Schedule, the
------------------------------------------
Company is not a party to nor bound by any Contract that has been or could
reasonably be expected to be, individually or in the aggregate with any other
similar Contracts, materially adverse to the Business or Condition of the
Company or that has been or could reasonably be expected to result, individually
or in the aggregate with any such other Contracts in Losses to the Company or be
materially adverse to the Business or Condition of the Company.
2.19 Insurance. Section 2.19 of the Disclosure Schedule contains a true and
--------- ---------------------------------------
complete list (including the names and addresses of the insurers, the expiration
dates thereof, the annual premiums and payment terms thereof, the period of time
covered thereby and a brief description of the interests insured thereby) of all
liability, property, workers' compensation, directors' and officers' liability
and other insurance policies currently in effect that insure the business,
operations or employees of the Company or affect or relate to the ownership, use
or operation of any of the Assets and Properties of the Company and that (a)
have been issued to the Company or (b) to the knowledge of the Company, have
been issued to any Person (other than the Company) for the benefit of the
Company. The insurance coverage provided by the policies described in clause (a)
above will not terminate or lapse by reason of any of the transactions
contemplated by this Agreement. Each policy listed in Section 2.19 of the
-------------------
Disclosure Schedule is valid and binding and in full force and effect, all
-------------------
premiums due thereunder have been paid when due and neither the Company or the
Person to whom such policy has been issued has received any notice of
cancellation or termination in respect of any such policy or is in default
thereunder, and the Company has no knowledge of any reason or state of facts
that could reasonably be expected to lead to the cancellation of such policies.
The insurance policies listed in Section 2.19 of the Disclosure Schedule are in
---------------------------------------
amounts and have coverages as required by any Contract to which the Company is a
party or by which any of its Assets and Properties is bound. Section 2.19 of the
-------------------
Disclosure Schedule contains a list of all claims made under any insurance
-------------------
policies covering the Company in the last two (2) years. The Company has not
received notice that any insurer under any policy referred to in this Section
2.19 is denying liability with respect to a claim thereunder or defending under
a reservation of rights clause.
2.20 Affiliate Transactions.
----------------------
(a) Except as disclosed in Section 2.20(a) of the Disclosure Schedule, (i)
------------------------------------------
there are no Contracts or Liabilities between the Company, on the one hand, and
(A) any current or former officer, director, stockholder, or to the Company's
knowledge, any Affiliate or Associate of the
-21-
EXECUTION VERSION
Company or (B) any Person who, to the Company's knowledge, is an Associate of
any such officer, director, stockholder or Affiliate, on the other hand, (ii)
the Company does not provide or cause to be provided any assets, services or
facilities to any such current or former officer, director, stockholder,
Affiliate or Associate, (iii) neither the Company nor any such current or former
officer, director, stockholder, Affiliate or Associate provides or causes to be
provided any assets, services or facilities to the Company and (iv) the Company
does not beneficially own, directly or indirectly, any Investment Assets of any
such current or former officer, director, stockholder, Affiliate or Associate.
(b) Except as disclosed in Section 2.20(b) of the Disclosure Schedule,
------------------------------------------
each of the Contracts and Liabilities listed in Section 2.20(a) of the
----------------------
Disclosure Schedule were entered into or incurred, as the case may be, on terms
-------------------
no less favorable to the Company (in the reasonable judgment of the Company)
than if such Contract or Liability was entered into or incurred on an arm's-
length basis on competitive terms. Any Contract to which the Company is a party
and any director of the Company has a financial interest in such Contract was
approved by a majority of the disinterested board of directors of the Company
and/or stockholders of the Company, as the case may be, in accordance with
Section 144 of Delaware Law.
2.21 Employees; Labor Relations.
--------------------------
(a) Section 2.21(a) of the Disclosure Schedule contains a list of the name
------------------------------------------
of each officer, employee and consultant of the Company, together with such
person's position or function, annual base salary or wages and any incentives or
bonus arrangement with respect to such person. The Company has not received any
information that would lead it to believe that any such person will or may cease
to be engaged by the Company, or will refuse offers of engagement by the
Company, for any reason, including because of the consummation of the
transactions contemplated by this Agreement.
(b) Except as disclosed in Section 2.21(b) of the Disclosure Schedule, (i)
------------------------------------------
there are no material controversies between the Company and any current or
former employee or consultant of the Company, (ii) no employee of the Company is
presently a member of a collective bargaining unit and, to the knowledge of the
Company, there are no threatened or contemplated attempts to organize for
collective bargaining purposes any of the employees of the Company and (iii) no
unfair labor practice complaint or sex or age discrimination claim has been
brought against the Company before the National Labor Relations Board or any
other Governmental or Regulatory Authority and there are no facts or
circumstances known to the Company that could reasonably be expected to give
rise to such complaint or claim. There has been no work stoppage, strike or
other concerted action by employees of the Company. The Company has complied in
all material respects with all applicable Laws relating to the employment of
labor, including, those relating to wages, hours and collective bargaining.
(c) To the knowledge of the Company after due inquiry, no officer,
employee or consultant of the Company is obligated under any Contract or other
agreement or subject to any Order or Law that would interfere with such person's
efforts to promote the interests of the Company or that would interfere with the
Company's business as currently conducted or as presently proposed to be
conducted. Neither the execution nor delivery of this Agreement, nor the
carrying on of the Company's business as presently conducted or as presently
proposed to be
-22-
EXECUTION VERSION
conducted nor any activity of such officers, employees or consultants in
connection with the carrying on of the Company's business as presently conducted
or as presently proposed to be conducted, will conflict with or result in a
breach of the terms, conditions or provisions of, constitute a default under, or
trigger a condition precedent to any rights under any Contract or other
agreement under which any of such officer's, employees or consultants is now
bound.
(d) Each employee, officer and consultant of the Company has executed a
Proprietary Information and Inventions Agreement. No current employee, officer
or consultant of the Company has excluded works or inventions with the Company
from his or her assignment of inventions pursuant to such employee, officer or
consultant's Proprietary Information and Inventions Agreement.
2.22 Environmental Matters. Except as set forth in Section 2.22 of the
--------------------- -------------------
Disclosure Schedule,
-------------------
(a) The Company has obtained all applicable Environmental Permits.
(b) The Company is in all material respects in compliance with, and for
the past three (3) years, has been in compliance with all terms, conditions and
provisions of all applicable (i) Environmental Permits and (ii) Environmental
Laws. All past noncompliance with Environmental Laws or Environmental Permits
has been resolved in all material respects without any pending, ongoing or
future obligation, cost or liability.
(c) There are no past, pending or threatened Environmental Claims against
the Company and the Company does not know of any facts or circumstances that
could reasonably be expected to form the basis for any Environmental Claim
against the Company.
(d) No Releases of Hazardous Materials have occurred at, from, in, to, on,
or under any Site and no Hazardous Materials are present in, on, about or
migrating to or, to the Company's knowledge, from any Site that could give rise
to an Environmental Claim against the Company.
(e) Neither the Company, nor any predecessor of the Company, nor any
entity previously owned by the Company, has transported or arranged for the
treatment, storage, handling, disposal or transportation of any Hazardous
Material to any off-Site location which could result in an Environmental Claim
against the Company.
(f) No Site is a former, current or proposed Environmental Clean-up Site,
or, to the Company's knowledge, adjoins any other property that is a current or
proposed Environmental Clean-up Site.
(g) There are no Liens arising under or pursuant to any Environmental Law
on any Site and there are no facts, circumstances or conditions that could
reasonably be expected to restrict, encumber, or result in the imposition of
special conditions under any Environmental Law with respect to the ownership,
occupancy, development, use or transferability of any Site.
-23-
EXECUTION VERSION
(h) To the Company's knowledge, there are no (i) underground storage
tanks, active or abandoned, in which Hazardous Material has been stored; (ii)
polychlorinated biphenyl containing equipment; or (iii) asbestos containing
material at any Site.
(i) There have been no environmental investigations, studies, audits,
tests, reviews or other analyses conducted by, on behalf of, or which are in the
possession of the Company with respect to any Site which have not been delivered
to Parent prior to execution of this Agreement.
(j) There are no wetlands or any areas subject to any legal requirement or
restriction in any way related to wetlands (including, without limitation,
requirements or restrictions related to buffer or transition areas or open
waters) at or affecting any Site.
(k) The Company can maintain present production levels, or any planned
expansion of production levels upon which financial projections provided to
Parent have been based, in compliance with applicable Environmental Laws without
a material increase in capital or operating expenditures and without modifying
any Environmental Permits or obtaining any additional Environmental Permits.
2.23 Substantial Customers and Suppliers. Section 2.23(a) of the
----------------------------------- ----------------------
Disclosure Schedule lists the 15 largest customers of the Company, collectively,
-------------------
on the basis of revenues collected or accrued for the most recent complete
fiscal year. Section 2.23(b) of the Disclosure Schedule lists the 15 largest
------------------------------------------
suppliers of the Company on the basis of cost of goods or services purchased for
the most recent fiscal year. Except as disclosed in Section 2.23(c) of the
----------------------
Disclosure Schedule, no such customer or supplier has ceased or materially
-------------------
reduced its purchases from or sales or provision of services to the Company
since January 1, 2000 or, to the knowledge of the Company, has threatened to
cease or materially reduce such purchases or sales or provision of services
after the date hereof. Except as disclosed in Section 2.23(d) of the Disclosure
---------------------------------
Schedule, to the knowledge of the Company, no such customer or supplier is
--------
threatened with bankruptcy or insolvency.
2.24 Accounts Receivable. Except as set forth in Section 2.24 of the
------------------- -------------------
Disclosure Schedule, the accounts and notes receivable of the Company reflected
-------------------
on the Company Financials, and all accounts and notes receivable arising
subsequent to the Audited Financial Statement Date, (a) arose from bona fide
sales transactions in the ordinary course of business, consistent with past
practice, and are payable on ordinary trade terms, (b) are legal, valid and
binding obligations of the respective debtors enforceable in accordance with
their respective terms, (c) are not subject to any valid set-off or counterclaim
and (d) do not represent obligations for goods sold on consignment, on approval
or on a sale-or-return basis or subject to any other repurchase or return
arrangement.
2.25 Inventory. All inventory of the Company reflected on the balance
---------
sheet included in the Company Financials consisted, and all such inventory
acquired since the Audited Financial Statement Date consists, of a quality and
quantity usable and salable in the ordinary course of business. Except as
disclosed in the notes to the Audited Financial Statements, all items included
in the inventory of the Company are the property of the Company free and clear
of any Lien, have not been pledged as collateral, are not held by the Company on
consignment from
-24-
EXECUTION VERSION
others and conform in all material respects to all standards applicable to such
inventory or its use or sale imposed by Governmental or Regulatory Authorities.
2.26 Other Negotiations; Brokers; Third Party Expenses. Neither the
-------------------------------------------------
Company nor, to the knowledge of the Company, any of its Affiliates (nor any
investment banker, financial advisor, attorney, accountant or other Person
retained by or acting for or on behalf of the Company or any such Affiliate) (a)
has entered into any Contract that conflicts with any of the transactions
contemplated by this Agreement or (b) has entered into any Contract or had any
discussions with any Person regarding any transaction involving the Company
which could result in Parent, the Company or any general partner, limited
partner, manager, officer, director, employee, agent or Affiliate of any of them
being subject to any claim for liability to said Person as a result of entering
into this Agreement or consummating the transactions contemplated hereby.
Section 2.26 of the Disclosure Schedule sets forth the principal terms and
---------------------------------------
conditions of any Contract with respect to, and a reasonable estimate of, all
Third Party Expenses expected to be incurred by the Company in connection with
the negotiation and effectuation of the terms and conditions of this Agreement
and the transactions contemplated hereby.
2.27 Banks and Brokerage Accounts. Section 2.27 of the Disclosure
---------------------------- ------------------------------
Schedule sets forth (a) a true and complete list of the names and locations of
--------
all banks, trust companies, securities brokers and other financial institutions
at which the Company has an account or safe deposit box or maintains a banking,
custodial, trading or other similar relationship, (b) a true and complete list
and description of each such account, box and relationship, indicating in each
case the account number and the names of the respective officers, employees,
agents or other similar representatives of the Company having signatory power
with respect thereto and (c) a list of each Investment Asset, the name of the
record and beneficial owner thereof, the location of the certificates, if any,
therefor, the maturity date, if any, and any stock or bond powers or other
authority for transfer granted with respect thereto.
2.28 Warranty Obligations. Section 2.28 of the Disclosure Schedule sets
-------------------- ---------------------------------------
forth (a) a list of all forms of written warranties, guarantees and written
warranty policies of the Company in respect of any of the Company's products and
services, which are currently in effect (the "Warranty Obligations"), and the
--------------------
duration of each such Warranty Obligation, (b) a list of each of the Warranty
Obligations which is subject to any dispute or, to the knowledge of the Company,
threatened dispute and (c) the experience of the Company during the past two (2)
years with respect to warranties, guarantees and warranty policies of or
relating to the Company's products and services. True and correct copies of the
Warranty Obligations have been delivered to Parent prior to the execution of
this Agreement. Except as disclosed in Section 2.28 of the Disclosure Schedule,
---------------------------------------
(i) there have not been any material deviations from the Warranty Obligations,
and salespersons, employees and agents of the Company are not authorized to
undertake obligations to any customer or other Person in excess of such Warranty
Obligations and (ii) each balance sheet included in the Company Financials
reflects adequate reserves for Warranty Obligations. All products manufactured,
designed, licensed, leased, rented or sold by the Company (x) are and were free
from material defects in construction and design and (y) satisfy any and all
Contract or other specifications related thereto to the extent stated in writing
in such Contracts or specifications, in each case, in all material respects.
-25-
EXECUTION VERSION
2.29 Foreign Corrupt Practices Act. Neither the Company, nor to the
-----------------------------
knowledge of the Company, any agent, employee or other Person associated with or
acting on behalf of the Company has, directly or indirectly, used any corporate
funds for unlawful contributions, gifts, entertainment or other unlawful
expenses relating to political activity, made any unlawful payment to foreign or
domestic government officials or employees or to foreign or domestic political
parties or campaigns from corporate funds, violated any provision of the Foreign
Corrupt Practices Act of 1977, as amended, or made any bribe, rebate, payoff,
influence payment, kickback or other similar unlawful payment.
2.30 Pooling of Interests. Neither the Company nor any of its directors,
--------------------
officers or stockholders has taken any action which would reasonably be expected
to preclude Parent's ability to account for the Merger as a Pooling of
Interests.
2.31 Real Property Holding Corporation. The Company is not a "United
---------------------------------
States real property holding corporation" within the meaning of Code section
897(c)(2) and any regulations promulgated thereunder.
2.32 Financial Projections. The Company has provided or made available to
---------------------
Parent certain financial projections with respect to the Company's business. The
Company makes no representation or warranty regarding the accuracy of such
projections or as to whether such projections will be achieved, except that the
Company represents and warrants that such projections were prepared in good
faith and are based on assumptions believed by it to be reasonable.
2.33 Disclosure. To the Company's knowledge, no representation or warranty
----------
contained in this Agreement, and no statement contained in the Disclosure
Schedule or in any certificate, list or other writing furnished to Parent
pursuant to any provision of this Agreement (including the Company Financials
and the notes thereto) contains any untrue statement of a material fact or omits
to state a material fact necessary in order to make the statements herein or
therein, in the light of the circumstances under which they were made, not
misleading.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub represent and warrant to the Company, subject to such
exceptions as are specifically disclosed in the Parent Disclosure Schedule
delivered herewith and dated as of the date hereof, as follows:
3.1 Organization and Qualification. Each of Parent and Merger Sub is a
------------------------------
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Delaware and has all requisite corporate power and
authority to own, lease and operate its properties and to carry on its business
as contemplated to be conducted. Each of Parent and Merger Sub is duly qualified
and in good standing to conduct business in each jurisdiction in which the
business it is conducting, or the operation, ownership or leasing of its
properties, makes such qualification necessary, except where the failure to be
so qualified would not result in a material adverse effect on it.
-26-
EXECUTION VERSION
3.2 Authority Relative to this Agreement. Subject only to the requisite
------------------------------------
approval of the Amended and Restated Certificate of Incorporation of Parent by
the stockholders of Parent, each of Parent and Merger Sub have full corporate
power and authority to execute and deliver this Agreement, to perform their
obligations hereunder and to consummate the transactions contemplated hereby.
The execution and delivery by Parent and Merger Sub of this Agreement and the
consummation by Parent and Merger Sub of the transactions contemplated hereby
have been duly and validly authorized by all necessary action by the Board of
Directors of each of Parent and Merger Sub, and no other action on the part of
the Board of Directors of either Parent or Merger Sub is required to authorize
the execution, delivery and performance of this Agreement and the consummation
by Parent and Merger Sub of the transactions contemplated hereby. This Agreement
has been duly and validly executed and delivered by Parent and Merger Sub and,
assuming the due authorization, execution and delivery hereof by the Company,
constitutes a legal, valid and binding obligation of Parent and Merger Sub
enforceable against Parent and Merger Sub in accordance with its respective
terms, except as the enforceability thereof may be limited by bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium or other similar
Laws relating to the enforcement of creditors' rights generally and by general
principles of equity.
3.3 Issuance of Parent Common Stock. The shares of Parent Common Stock
-------------------------------
and New Preferred Stock to be issued pursuant to the Merger, when issued, will
be duly authorized, validly issued, fully paid, non-assessable, free of liens,
encumbrances and restrictions on transfer other than restrictions on transfer
under this Agreement, the Amended and Restated Investors' Rights Agreement
attached hereto as Exhibit I and under applicable federal and state securities
---------
laws, and will be issued in compliance with applicable federal and state
securities laws, subject to (a) obtaining the California Permit and obtaining
the requisite approvals of the Fairness Hearing or (b) the truth and accuracy of
the representations made by the stockholders of the Company in the Stockholder
Certificates. Such Common Stock and New Preferred Stock will also be free of any
liens, encumbrances and preemptive or similar rights contained in the Amended
and Restated Certificate of Incorporation of Parent attached hereto as Exhibit J
---------
or the bylaws of Parent or in any agreement to which Parent is a party, except
as specifically provided herein.
3.4 Parent Financial Statements. Parent's unaudited balance sheet as of
---------------------------
March 31, 2000 (the "Parent Balance Sheet Date") and the unaudited statement of
-------------------------
operations for the period from April 1, 1999 to March 31, 2000 (collectively,
the "Parent Financial Statements"), fairly present the financial condition and
---------------------------
operating results of Parent. These Parent Financial Statements have been
prepared in accordance with GAAP. Except as set forth in the balance sheet,
Parent has no material Liabilities, other than (a) Liabilities incurred in the
ordinary course of business subsequent to the Parent Balance Sheet Date and (b)
obligations under contracts and commitments incurred in the ordinary course of
business and not required under GAAP to be reflected in the balance sheet,
which, in both cases, individually or in the aggregate, would not have a
material adverse effect on Parent.
3.5 Absence of Changes Since Parent Balance Sheet Date. Since the Parent
--------------------------------------------------
Balance Sheet Date, there has not been any material adverse change, or any event
or development which, individually or together with other such events, could
reasonably be expected to result in a material adverse change in the Business or
Condition of Parent. Specifically, there has not been:
-27-
EXECUTION VERSION
(a) any damage, destruction or loss, whether or not covered by insurance,
materially and adversely affecting the assets, properties, financial condition,
operating results, or business of Parent;
(b) material change or amendment to a material contract by which Parent
or any of its Assets or Properties is bound, except for changes or amendments
which are expressly provided for or disclosed in this Agreement;
(c) any loans or guarantees made by Parent to or for the benefit of its
employees, officers or directors, or any members of their immediate families,
other than travel advances or other advances made in the ordinary course of
business;
(d) any dividend declaration, setting aside or payment or other
distribution in respect of any of Parent's capital stock, or any direct or
indirect redemption, purchase or other acquisition of any such stock by Parent;
(e) any incurrence of indebtedness for money borrowed or any other
liabilities individually in excess of $50,000 or in excess of $100,000 in the
aggregate, other than in the ordinary course of business;
(f) any material sale, exchange or disposition of any of Parent's Assets
or Properties other than in the ordinary course of business;
(g) any material change in any compensation arrangement or agreement with
any employee;
(h) any sale, assignment or transfer of any patents, trademarks,
copyrights, trade secrets or other intangible assets other than pursuant to
license agreements entered into in the ordinary course of business of Parent;
(i) any resignation or termination of employment of any key officer of
Parent; and
(j) to Parent's knowledge, any other event or condition of any character
which would be reasonably likely to materially and adversely affect the
financial condition, operating results or business of Parent;
3.6 No Conflicts. The execution and delivery by Parent and Merger Sub of
------------
this Agreement does not, and the performance by the Parent and Merger Sub of its
obligations under this Agreement and the consummation of the transactions
contemplated hereby do not and will not:
(a) conflict with or result in a violation or breach of any of the terms,
conditions or provisions of the certificate of incorporation or bylaws of Parent
or Merger Sub;
(b) conflict with or result in a violation or breach of any term or
provision of any Law or Order applicable to Parent or Merger Sub or their
respective Assets or Properties;
-28-
EXECUTION VERSION
(c) except as would not have a material adverse effect on the Business or
Condition of Parent, (i) conflict with or result in a violation or breach of,
(ii) constitute (with or without notice or laps of time or both) a default
under, (iii) require the Parent to obtain any consent, approval or action of,
make any filing with or give any notice to any Person as a result of the terms
of, (iv) result or give to any Person any right of termination, cancellation,
acceleration or modification in or with respect to, (v) result in or give to any
person any additional rights or entitlement to increased, additional,
accelerated or guaranteed payments under or (vi) result in the creation or
imposition of any Lien upon the Parent or Merger Sub or any of their respective
Assets or Properties under any Contract or License to which the Parent or Merger
Sub is a party or by which any of their Assets and Properties are bound.
3.7 Pooling of Interests. Neither Parent nor any of its directors,
--------------------
officers or stockholders has taken any action which would reasonably be expected
to preclude Parent's ability to account for the Merger as a Pooling of
Interests.
3.8 Information to be Supplied by Parent. The written information that
------------------------------------
Parent will supply to the Company expressly for inclusion by the Company in the
information or proxy statement the Company will send to its stockholders, in
connection with the Company's solicitation of written consents or proxies for a
stockholders meeting to be held to vote upon the Merger and the transactions
contemplated by this Agreement, will not contain any untrue statement of
material fact or omit any material facts 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.
3.9 Litigation. There is no Action or Proceeding pending or, to the
----------
knowledge of Parent, threatened that relates in any way to the business of
Parent or that questions the validity of this Agreement, the right of Parent to
enter into this Agreement, that questions the validity of any action taken or to
be taken by Parent in connection with the consummation of the transactions
contemplated hereby and thereby, or that might result, either individually or in
the aggregate, in any material adverse change in the assets, business,
properties, prospects or financial condition of Parent, or in any material
change in the current equity ownership of Parent. There is no Action or
Proceeding by Parent currently pending or that Parent currently intends to
initiate.
3.10 Capitalization. As of the date hereof, the authorized capital stock
--------------
of Parent consists solely of (a) 56,500,000 shares of Parent Common Stock, of
which 14,898,778 shares are issued and outstanding as of the date hereof, and
(b) 25,900,000 shares of Parent Preferred Stock. 8,624,000 shares of Parent
Preferred Stock are designated as Series A Preferred Stock, 8,600,000 of which
are issued and outstanding, 3,225,806 shares of Parent Preferred Stock are
designated as Series B Preferred Stock, all of which are issued and outstanding,
5,430,000 shares of Parent Preferred Stock are designated as Series C Preferred
Stock, 5,330,824 of which are issued and outstanding, 5,200,000 shares of Parent
Preferred Stock are designated as Series D Preferred Stock, 4,667,567 of which
are issued and outstanding, 1,250,000 shares of Parent Preferred Stock are
designated as Series E-1 Preferred Stock, 1,249,950 of which are issued and
outstanding, 931,246 shares of Parent Preferred Stock are designated as Series
E-2 Preferred Stock, 913,246 of which are issued and outstanding, 400,000 shares
of Parent Preferred Stock are designated as Series E-3 Preferred Stock, 218,692
of which are issued and outstanding, and
-29-
EXECUTION VERSION
100,000 shares of Parent Preferred Stock are designated as Series E-4 Preferred
Stock, 22,784 of which are issued and outstanding. Immediately prior to the
consummation of the transactions contemplated in this Agreement, upon the filing
of the Amended and Restated Certificate of Incorporation of Parent attached
hereto as Exhibit J, the authorized capital stock of Parent will consist solely
---------
of (a) 61,500,000 shares of Parent Common Stock and (b) 30,000,000 shares of
Parent Preferred Stock. In the Amended and Restated Certificate of Incorporation
of Parent, 8,624,000 shares of Parent Preferred Stock will be designated as
Series A Preferred Stock, 3,225,806 shares of Parent Preferred Stock will be
designated as Series B Preferred Stock, 5,430,000 shares of Parent Preferred
Stock will be designated as Series C Preferred Stock, 7,500,000 shares of Parent
Preferred Stock will be designated as Series D Preferred Stock, 1,250,000 shares
of Parent Preferred Stock will be designated as Series E-1 Preferred Stock,
931,246 shares of Parent Preferred Stock will be designated as Series E-2
Preferred Stock, 222,000 shares of Parent Preferred Stock will be designated as
Series E-3 Preferred Stock, 100,000 shares of Parent Preferred Stock will be
designated as Series E-4 Preferred Stock, 465,000 shares of Parent Preferred
Stock will be designated as Series F-1 Preferred Stock and 955,000 shares of
Parent Preferred Stock will be designated as Series F-2 Preferred Stock. None of
the New Preferred Stock will be issued and outstanding immediately prior to the
consummation of the transactions contemplated hereby. As of the date hereof,
other than outstanding options to purchase 3,275,420 shares of Parent Common
Stock and warrants to purchase 24,000 shares of Series A Preferred Stock, 94,074
shares of Series C Preferred Stock and 385,544 shares of Series D Preferred
Stock, and the rights provided in Section 2 of the Amended and Restated
Investors' Rights Agreement, there are no outstanding securities convertible
into, exchangeable for, or carrying the right to acquire, equity securities of
Parent, or subscriptions, warrants, options, rights, calls, agreements, demands
or other arrangements or commitments of any character obligating Parent to
issue, offer or dispose of any of its equity securities or any ownership
interest therein or otherwise relating to the capital stock of Parent. Parent
has a total of 553,134 shares of Parent Common Stock remaining available for
issuance pursuant to its 1997 Incentive Plan and 1998 Stock Incentive Plan (the
"Parent Plans"). After the date hereof and before the Closing hereunder, Parent
------------
may grant additional options to purchase Parent Common Stock under the Parent
Plans, and optionholders under the Parent Plans may exercise their options to
purchase shares of Parent Common Stock. The outstanding shares of Parent Common
Stock and Parent Preferred Stock have been duly authorized and validly issued,
are fully paid and are non-assessable. Except for the voting agreement
provisions of the Founder's Stock Purchase Agreements and the voting proxies
related thereto, and the voting proxies relating to shares of Common Stock
issued pursuant to the Parent Plans, Parent is not a party or subject to any
agreement or understanding between any persons that affects or relates to the
voting or giving of written consents with respect to any security or the voting
by a director of Parent.
3.11 Related-Party Transactions. No employee, officer or director of
--------------------------
Parent or member of his or her immediate family is indebted to Parent, nor is
Parent indebted (or committed to make loans or extend or guarantee credit) to
any of them. To the best of Parent's knowledge, none of such persons has any
direct or indirect ownership in any firm or corporation with which Parent is
affiliated or with which Parent has a business relationship, or any firm or
corporation that competes with Parent, except that employees, officers or
directors of Parent and members of their immediate families may own stock in
publicly traded companies that may compete with Parent. To the best of Parent's
knowledge, no officer or director or any member of their immediate families is,
directly or indirectly, interested in any material contract with Parent.
-30-
EXECUTION VERSION
3.12 Tax Returns and Payments. Parent has timely filed all Tax Returns and
------------------------
reports as required by Law, and Parent has never been audited by any state or
federal taxing authority. These Tax Returns and reports, if applicable, are true
and correct in all material respects. Parent has paid all taxes and other
assessments due, except those contested by it in good faith. Parent has not
elected pursuant to the Code to be treated as an S corporation pursuant to
Section 1362(a) of the Code or a consenting corporation pursuant to Section
341(f) of the Code, nor has it made any other elections pursuant to the Code
(other than elections that relate solely to methods of accounting, depreciation
or amortization) that would have a material adverse effect on Parent.
3.13 Environmental and Safety Laws. To the best of its knowledge, Parent
-----------------------------
is not in violation of any applicable Environmental Law, and to the best of its
knowledge, no material expenditures are or will be required in order to comply
with any such existing Environmental Law.
3.14 Permits. Parent has all franchises, permits, licenses and any similar
-------
authority necessary for the conduct of its business as now being conducted by
it, the lack of which would or could have a material adverse effect on the
business, properties, prospects or financial condition of Parent. Parent
believes it can obtain, without undue burden or expense, any similar authority
for the conduct of its business as planned to be conducted. Parent is not in
default in any material respect under any of such franchises, permits, licenses
or other similar authority.
3.15 Governmental Consents. No consent, approval, qualification, order or
---------------------
authorization of, or filing with, any local, state or federal governmental
authority is required on the part of Parent in connection with Parent's valid
execution, delivery or performance of this Agreement, the issuance of the Parent
Common Stock and New Preferred Stock, assumption of the Company Options and
exchange of the Company Warrants for Parent Warrants, as contemplated by this
Agreement, except (a) the filing of the Certificate of Merger with the Secretary
of State of the State of Delaware, (b) the filing of the Amended and Restated
Certificate of Incorporation of Parent with the Secretary of State of the State
of Delaware to authorize additional shares of Parent Common Stock and create the
New Preferred Stock, (c) a Fairness Hearing before the California Department of
Corporations, and (d) such consents, approvals, orders, authorizations,
registrations, declarations and filings as may be required under applicable
state and federal securities laws.
3.16 Registration Rights. Except as provided in the Amended and Restated
-------------------
Investors' Rights Agreement, Parent is not obligated, and has not granted any
rights, to register under the Securities Act any of its presently outstanding
securities or any of its securities that may be issued hereafter.
3.17 Intellectual Property. To the best of its knowledge, but without
---------------------
having conducted any special research or patent search, Parent owns or possesses
sufficient legal rights to all patents, trademarks, service marks, trade names,
copyrights, trade secrets, licenses, information, and proprietary rights and
processes necessary for its business as now conducted and as proposed to be
conducted without any conflict with, or infringement of the rights of, others.
Parent has not received any communications alleging that it has violated any of
the patents, trademarks, service marks, trade names, copyrights or trade secrets
or other proprietary rights or processes of any other person or entity, nor is
Parent aware of any basis for the forgoing. Section 3.18 of the
-------------------
-31-
EXECUTION VERSION
Parent Disclosure Schedule contains a complete list of patents and pending
--------------------------
patent applications of Parent. Except for agreements with its own employees or
consultants, there are no outstanding options, licenses or agreements of any
kind relating to the foregoing, nor is Parent bound by or a party to any
options, licenses or agreements of any kind with respect to the patents,
trademarks, service marks, trade names, copyrights, trade secrets, licenses,
information and proprietary rights and processes of any other person or entity.
Parent is not aware that any of its employees is obligated under any contract
(including licenses, covenants or commitments of any nature) or other agreement,
or subject to any judgment, decree or order of any court or administrative
agency, that would interfere with the use of such employee's best efforts to
promote the interests of Parent or that would conflict with Parent's business as
proposed to be conducted. Neither the execution nor the delivery of this
Agreement, nor the carrying on of Parent's business by the employees of Parent,
nor the conduct of Parent's business as proposed, will, to the best of Parent's
knowledge, conflict with or result in a breach of the terms, conditions or
provisions of, or constitute a default under, any contract, covenant or
instrument under which any of such employees is now obligated. Parent does not
believe it is or will be necessary to use any inventions of any of its employees
(or persons it currently intends to hire) made prior to their employment by
Parent, other than those which have been assigned to Parent. There are no
agreements, understandings, instruments, contracts, judgments, orders or writs
of decrees to which Parent is a party or by which it is bound which involve
indemnification by Parent with respect to infringements of proprietary rights.
3.18 Proprietary Information and Inventions Agreements. Each employee and
-------------------------------------------------
officer of Parent has executed a Proprietary Information and Inventions
Agreement. No current employee, officer or consultant of Parent has excluded
works or inventions with Parent from his or her assignment of inventions
pursuant to such employee, officer or consultant's Proprietary Information and
Inventions Agreement.
3.19 Employees; Employee Compensation. There is no strike or labor dispute
--------------------------------
or union organization activities pending or, to the best of Parent's knowledge,
threatened between Parent and its employees. None of Parent's employees belongs
to any union or collective bargaining unit. To the best of its knowledge, Parent
has complied in all material respects with all applicable state and federal
equal opportunity and other laws related to employment. To the best of Parent's
knowledge, no employee of Parent is or will be in violation of any judgment,
decree or order, or any term of any employment contract, patent disclosure
agreement, or other contract or agreement relating to the relationship of any
such employee with Parent or any other party because of the nature of the
business conducted or to be conducted by Parent or to the use by the employee of
his or her best efforts with respect to such business. Parent is not a party to,
or bound by, any currently effective employment contract, deferred compensation
agreement, bonus plan, incentive plan, profit sharing plan, retirement
agreement, or other employee compensation agreement. Parent is not aware that
any officer or key employee, or any group of key employees, intends to terminate
their employment with Parent, nor does Parent have a present intention to
terminate the employment of any of the foregoing. Subject to general principles
related to wrongful termination of employees, the employment of each officer and
employee of Parent is terminable at the will of Parent.
3.20 Insurance. Parent has in full force and effect such insurance
---------
policies in amounts customary for similarly situated companies.
-32-
EXECUTION VERSION
3.21 Material Contracts and Other Commitments. Parent does not have and is
----------------------------------------
not bound by any Contract, other than (a) the lease of Parent's principal place
of business, (b) Contracts for the purchase of supplies and services that were
entered into in the ordinary course of business and that do not individually or
in the aggregate involve more than $50,000, or do not extend for more than one
(1) year beyond the date hereof; (c) sales Contracts entered into in the
ordinary course of business, and (d) Contracts terminable at will by Parent on
no more than thirty (30) days' notice without cost or liability to Parent, and
that do not involve any employment or consulting arrangement and are not
material to the conduct of Parent's business.
3.22 Title to Property and Assets; Leases. Except (a) as reflected in the
------------------------------------
Parent Financial Statements, (b) for Liens for current Taxes not yet delinquent,
(c) for Liens imposed by law and incurred in the ordinary course of business for
obligations not past due to carriers, warehousemen, laborers, materialmen and
the like, or (d) for minor defects in title, none of which, individually or in
the aggregate, materially interferes with the use of such property, Parent has
good and marketable title to its property and assets free and clear of all
mortgages, liens, claims and encumbrances. With respect to the property and
assets it leases, Parent is in compliance with such leases and, to the best of
its knowledge, holds a valid leasehold interest free of any Liens, subject to
clauses (a)-(d) above.
3.23 Subsidiaries. Section 3.23 of the Parent Disclosure Schedule contains
------------ ----------------------------------------------
a complete list of all Subsidiaries of Parent. Except as set forth on Section
-------
3.23 of the Parent Disclosure Schedule, Parent has no Subsidiaries. Parent is
--------------------------------------
not a participant in any joint venture, partnership or similar arrangement.
3.24 Ownership of Merger Sub; No Prior Activities. As of the date hereof
--------------------------------------------
and the Effective Time, except for obligations or Liabilities incurred in
connection with its incorporation or organization and the transactions
contemplated by this Agreement, and except for this Agreement and any other
agreements or arrangements contemplated by this Agreement, Merger Sub has not
and will not have incurred, directly or indirectly, through any subsidiary or
affiliate, any obligations or liabilities or engaged in any business activities
of any type or kind whatsoever or entered into any agreements or arrangements
with any Person.
3.25 Directors and Officers. The name of each director and officer of
----------------------
Parent on the date hereof, and his or her position with Parent, are listed in
Section 3.25 of the Parent Disclosure Schedule.
----------------------------------------------
3.26 Books and Records; Organizational Documents. The minute books and
-------------------------------------------
stock record books and other similar records of Parent that have been provided
or made available to he Company or its counsel prior to the execution of this
Agreement, are complete and correct in all respects and have been maintained in
accordance with sound business practices. Such minute books contain a true and
complete record of all action taken at all meetings and by all written consents
in lieu of meetings of the directors, stockholders and committees of the board
of directors of Parent through the date hereof. Parent has prior to the
execution of this Agreement delivered to the Company true and complete copies of
its certificate of incorporation and bylaws, both as amended through the date
hereof.
-33-
EXECUTION VERSION
3.27 Compliance With Laws and Orders. Except as disclosed in Section 3.27
------------------------------- ------------
of the Parent Disclosure Schedule, Parent is not nor has it been at any time in
---------------------------------
violation of or in default under, any Law or Order applicable to Parent or any
of its Assets and Properties.
3.28 Foreign Corrupt Practices Act. Neither Parent, nor to the knowledge
-----------------------------
of Parent, any agent, employee or other Person associated with or acting on
behalf of Parent has, directly or indirectly, used any corporate funds for
unlawful contributions, gifts, entertainment or other unlawful expenses relating
to political activity, made any unlawful payment to foreign or domestic
government officials or employees or to foreign or domestic political parties or
campaigns from corporate funds, violated any provision of the Foreign Corrupt
Practices Act of 1977, as amended, or made any bribe, rebate, payoff, influence
payment, kickback or other similar unlawful payment.
3.29 Disclosure. To Parent's knowledge, no representation or warranty
----------
contained in this Agreement, and no statement contained in the Parent Disclosure
Schedule or in any certificate, list or other writing furnished to the Company
pursuant to any provision of this Agreement (including the Parent Financial
Statements and the notes thereto) contains any untrue statement of a material
fact or omits to state a material fact necessary in order to make the statements
herein or therein, in the light of the circumstances under which they were made,
not misleading.
ARTICLE 4
CONDUCT PRIOR TO THE EFFECTIVE TIME
4.1 Conduct of Business of the Company.
----------------------------------
(a) Company Conduct. During the period from the date of this Agreement
---------------
and continuing until the earlier of the termination of this Agreement and the
Effective Time, the Company agrees (unless Parent shall give its prior consent
in writing) to carry on its business in the usual, regular and ordinary course
consistent with past practice, to pay its Liabilities and Taxes when due, to pay
or perform other obligations when due, subject to any good faith disputes over
such Liabilities, Taxes and other obligations and, to the extent consistent with
such business, to use reasonable efforts and institute all policies to preserve
intact its present business organization, keep available the services of its
present officers and key employees and preserve its relationships with
customers, suppliers, distributors, licensors, licensees and other Persons
having business dealings with it, all with the express purpose and intent of
preserving unimpaired its goodwill and ongoing businesses at the Effective Time.
Except as expressly contemplated by this Agreement, the Company shall not,
without the prior written consent of Parent:
(i) Enter into any Contract, commitment, activity or transaction or
incur any Liabilities outside of the ordinary course of business consistent
with past practice (it being understood that interoperability agreements
with other electronic design automation vendors shall be in the ordinary
course of business);
-34-
EXECUTION VERSION
(ii) Transfer (by way of a License or otherwise) to any Person
rights to any Company Intellectual Property;
(iii) Enter into or amend any Contract pursuant to which any other
Person is granted manufacturing, marketing, distribution or similar rights
of any type or scope with respect to any products of the Company or Company
Intellectual Property;
(iv) Amend or otherwise modify (or agree to do so), except in the
ordinary course of business consistent with past practice, or violate the
terms of, any of the Contracts set forth or described in the Disclosure
Schedule;
(v) Commence any Action or Proceeding;
(vi) Declare, set aside or pay any dividends on or make any other
distributions (whether in cash, stock or property) in respect of any
capital stock of the Company or Equity Equivalents, 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 its Capital Stock (or
Options exercisable, convertible or exchangeable therefor);
(vii) Except for the issuance of shares of Company Capital Stock
upon (A) the exercise or conversion of presently outstanding Company
Options listed in Section 2.3 of the Disclosure Schedule or (B) the
--------------------------------------
conversion of outstanding shares of Company Series A Preferred Stock
immediately prior to the consummation of the transactions contemplated
hereby, issue, grant, deliver, sell or authorize or propose the issuance,
grant, delivery or sale of, or purchase or propose the purchase of, any
shares of Company Capital Stock, Equity Equivalents or Options to purchase
any other securities of the Company (except in compliance with the
guidelines of Parent previously provided to the Company by Parent (which
compliance will take into account the Exchange Ratios));
(viii) Cause or permit any amendments to its certificate of
incorporation or bylaws (other than the contemplated amendments to such
documents disclosed in Section 2.3 of the Disclosure Schedule);
--------------------------------------
(ix) Enter into any Contract in connection with any transaction
involving a Business Combination;
(x) Sell, lease, license or otherwise dispose (or agree to do so)
of any of its Assets and Properties, except in the ordinary course of
business consistent with past practice;
(xi) Incur any Indebtedness or guarantee any such Indebtedness in
an aggregate amount exceeding $15,000, or issue or sell any debt securities
of the Company or guarantee any debt securities of others;
-35-
EXECUTION VERSION
(xii) Grant any severance or termination pay to any director,
officer employee or consultant, except payments made pursuant to standard
written agreements outstanding on the date hereof, the terms of which are
disclosed in the Disclosure Schedule;
(xiii) Adopt or amend any Plan or Contract respecting employment or
equity compensation, extend any employment offer (except pursuant to the
Company's written hiring plan previously provided to Parent by the
Company), pay or agree to pay any special bonus or special remuneration to
any director, officer, employee or consultant, or increase the salaries or
wage rates of its directors, officers, employees or consultants;
(xiv) Revalue any of its Assets and Properties, including without
limitation writing down the value of inventory or writing off notes or
accounts receivable other than in the ordinary course of business
consistent with past practice;
(xv) Take any action, including the acceleration of vesting of any
Company Options or unvested Company Capital Stock, or other rights to
acquire shares of Capital Stock of the Company which would be reasonably
likely to interfere with Parent's ability to account for the Merger as a
Pooling of Interests, or any action that could jeopardize the tax-free
reorganization hereunder;
(xvi) Pay, discharge or satisfy, in an amount in excess of $15,000,
in any one case, or $25,000 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 Company Financial Statements;
(xvii) Make or change any material election in respect of Taxes,
adopt or change any accounting method in respect of Taxes, enter into any
tax allocation agreement, tax sharing agreement, tax indemnity agreement or
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 with any Taxing Authority or
otherwise;
(xviii) Enter into any strategic alliance, joint development or joint
marketing Contract other than joint marketing efforts with its
customers;
(xix) Fail to pay or otherwise satisfy its Liabilities as they
become due, except such as are being contested in good faith;
(xx) Waive or commit to waive any rights with a value in excess of
$15,000, in any one case, or $25,000, in the aggregate;
(xxi) Cancel, materially amend or renew any insurance policy other
than in the ordinary course of business consistent with past practice;
-36-
EXECUTION VERSION
(xxii) Alter, or enter into any Contract or other commitment to
alter, its interest in any corporation, association, joint venture,
partnership or business entity in which the Company directly or indirectly
holds any interest on the date hereof; or
(xxiii) Take, or agree in writing or otherwise to take, any of the
actions described in Sections 4.1(a)(i) through 4.1(a)(xxii) above, or any
other action that would prevent the Company from performing or cause the
Company not to perform its agreements and covenants hereunder.
4.2 No Solicitation. Until the earlier of the Effective Time and the date
---------------
of termination of this Agreement pursuant to the provisions of Section 8.1
hereof, the Company will not (nor will the Company permit any of the Company's
officers, directors, stockholders, attorneys, investment advisors, agents,
representatives, Affiliates or Associates (the "Company Representatives") to)
-----------------------
directly or indirectly, take any of the following actions with any Person other
than Parent and its designees: (a) solicit, initiate, entertain, accept receipt
of, review, or encourage any proposals or offers from, or participate in or
conduct discussions with or engage in negotiations with, any Person relating to
any possible Business Combination with the Company or any of its Subsidiaries
(whether such Subsidiaries are in existence on the date hereof or are hereafter
organized), (b) provide information with respect to the Company to any Person,
other than Parent and its designees, relating to (or which the Company believes
would be used for the purpose of formulating and offer or proposal with respect
to), or otherwise assist, cooperate with, facilitate or encourage any effort or
attempt by any such Person with regard to, any possible Business Combination
with the Company or any Subsidiary of the Company (whether such Subsidiaries are
in existence on the date hereof or are hereafter organized), (c) agree to or
enter into a Contract with any Person, other than Parent, providing for a
Business Combination with the Company or any Subsidiary (whether such
Subsidiaries are in existence on the date hereof or are hereafter organized),
(d) make or authorize any statement, recommendation or solicitation in support
of any possible Business Combination with the Company or any Subsidiary (whether
such Subsidiary is in existence on the date hereof or are hereafter organized)
other than by Parent or (e) authorize or permit any of the Company
Representatives to take any such action. The Company shall immediately cease and
cause to be terminated any such Contacts or negotiations with any Person
relating to any such transaction or Business Combination in existence on the
date hereof. In addition to the foregoing, if the Company receives prior to the
Effective Time or the termination of this Agreement any offer or proposal
(formal or informal) 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 and such other information related thereto as Parent may
reasonably request. Each of the Company and Parent acknowledge that this Section
4.2 was a significant inducement for Parent to enter into this Agreement and the
absence of such provision would have resulted in either (i) a material reduction
in the merger consideration to be paid to the stockholders of the Company, or
(ii) a failure to induce Parent to enter into this Agreement.
-37-
EXECUTION VERSION
ARTICLE 5
ADDITIONAL AGREEMENTS
5.1 Information Statement; Permit Application.
-----------------------------------------
(a) As soon as practicable after the execution of this Agreement, the
Company shall prepare, with the cooperation of Parent, the Information Statement
for the stockholders of the Company to approve this Agreement, the Certificate
of Merger and the transactions contemplated hereby and thereby. Parent and the
Company shall each use commercially reasonable efforts to cause the Information
Statement to comply with applicable federal and state securities laws
requirements. Each of Parent and the Company agrees to provide promptly to the
other such information concerning its business and financial statements and
affairs as, in the reasonable judgment of the providing party or its counsel,
may be required or appropriate for inclusion in the Information Statement, or in
any amendments or supplements thereto, and to cause its counsel and auditors to
cooperate with the other's counsel and auditors in the preparation of the
Information Statement. The Company will promptly advise Parent, and Parent will
promptly advise the Company, in writing, if, at any time prior to the Effective
Time, either the Company or Parent, as applicable, shall obtain knowledge of any
facts that might make it necessary or appropriate to amend or supplement the
Information Statement in order to (i) make the statements contained or
incorporated by reference therein not misleading or (ii) comply with applicable
law. The Information Statement shall contain the unanimous recommendation of the
Board of Directors of the Company that the Company's stockholders approve the
Merger and this Agreement, and the conclusion of the Board of Directors that the
terms and conditions of the Merger are advisable and fair and reasonable to, and
in the best interests of, the stockholders of the Company. Anything to the
contrary contained herein notwithstanding, the Company shall not include in the
Information Statement any information with respect to Parent or its Affiliates
or Associates, the form and content of which information shall not have been
approved by Parent prior to such inclusion.
(b) As soon as practicable after the execution of this Agreement, Parent
shall prepare, with the cooperation of the Company, the Permit Application.
Parent and the Company shall each use commercially reasonable efforts to cause
the Permit Application to comply with the requirements of applicable federal and
state laws. Each of Parent and the Company agrees to provide promptly to the
other such information concerning its business and financial statements and
affairs as, in the reasonable judgment of the providing party or its counsel,
may be required or appropriate for inclusion in the Permit Application, or in
any amendments or supplements thereto, and to cause its counsel and auditors to
cooperate with the other's counsel and auditors in the preparation of the Permit
Application. The Company will promptly advise Parent, and Parent will promptly
advise the Company, in writing, if, at any time prior to the Effective Time,
either the Company or Parent, as applicable, shall obtain knowledge of any facts
that might make it necessary or appropriate to amend or supplement the Permit
Application in order to (i) make the statements contained or incorporated by
reference therein not misleading or (ii) comply with applicable law. Anything to
the contrary contained herein notwithstanding, Parent shall not include in the
Permit Application any information with respect to the Company or its Affiliates
or Associates, the form and content of which information shall not have been
approved by the Company prior to such inclusion.
-38-
(c) In the event that the California Permit cannot be obtained in time to
permit the Closing to occur on or before July 31, 2000, then Parent and the
Company shall consult with each other to decide whether or not to proceed with
the Fairness Hearing and/or the California Permit. In the event that Parent and
the Company decide not to proceed with the Fairness Hearing and/or the
California Permit, Parent and the Company shall use commercially reasonable
efforts to effect the issuance of the shares of Parent Common Stock and New
Preferred Stock to be issued pursuant to Section 1.6 hereof in a private
placement pursuant to Section 4(2) of the Securities Act on terms and conditions
that are reasonably satisfactory to Parent. The parties hereto acknowledge and
agree that in such event: (i) as a condition to effecting such issuance as a
private placement pursuant to Section 4(2) of the Securities Act, Parent shall
be entitled to obtain from each stockholder of the Company a Stockholder
Certificate in the form attached hereto as Exhibit B (or such other form as
---------
shall be reasonably satisfactory to Parent) (the "Stockholder Certificate") and
-----------------------
that Parent will be relying upon the representations made by each stockholder of
the Company in the applicable Stockholder Certificate in connection with the
issuance of Parent Common Stock and New Preferred Stock to such stockholder;
(ii) the shares of Parent Common Stock and New Preferred Stock so issued
pursuant to Section 1.6 hereof will not be registered under the Securities Act
and will constitute "restricted securities" within the meaning of the Securities
Act; and (iii) the certificates representing the shares of Parent Common Stock
and New Preferred Stock shall bear appropriate legends to identify such
privately placed shares as being restricted under the Securities Act, to comply
with applicable state securities laws and, if applicable, to notice the
restrictions on transfer of such shares.
5.2 Information to be Provided by the Company. The Company covenants to
-----------------------------------------
Parent that the information to be supplied by the Company for inclusion in the
application for issuance of a California Permit pursuant to which the shares
of Parent Common Stock and New Preferred Stock to be issued in the Merger, the
Company Options to be assumed in the Merger and the Company Warrants to be
exchanged for Parent Warrants will be qualified under the California Code
(including supplements, amendments and updates thereto, the "Permit
------
Application") shall not at the time the Fairness Hearing is held pursuant to
-----------
Section 25142 of the California Code and the time the qualification of such
securities is effective under Section 25122 of the California Code contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading. The
Company further covenants to Parent that the information to be supplied by the
Company for inclusion in the information statement to be sent to the
stockholders of the Company in connection with the Company stockholders'
consideration of the Merger (the "Company Stockholders Action") (such
---------------------------
information statement as amended or supplemented is referred to herein as the
"Information Statement") shall not, on the date the Information Statement is
---------------------
first mailed to the Company's stockholders, at the time of the Company
Stockholders Action and at the Effective Time, contain any statement which, at
such time, is false and misleading with respect to any material fact, or omit to
state any material fact necessary in order to make the statements made therein,
in light of the circumstances under which they are made, not false or
misleading; or omit to state any material fact necessary to correct any
statement in any earlier communication with respect to the solicitation of
proxies for the Company Stockholders Action which has become false or
misleading. Notwithstanding the foregoing, the Company makes no representation,
warranty or covenant with respect to any information supplied by Parent which is
contained in the Permit Application or the Information Statement.
-39-
EXECUTION VERSION
5.3 Information to be Supplied by Parent. Parent covenants to the Company
------------------------------------
that the information supplied by Parent for inclusion in the Permit Application
shall not, at the time the Fairness Hearing is held pursuant to Section 25142 of
the California Code and the time the qualification of such securities is
effective under Section 25122 of the California Code, contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. Parent further covenants to the Company that the
information to be supplied by Parent for inclusion in the Information Statement
shall not, on the date that Information Statement is first mailed to the
Company's stockholders, at the time of the Company Stockholders Meeting and at
the Effective Time, contain any statement which, at such time, is false or
misleading with respect to any material fact, or omit to state any material fact
necessary in order to make the statements therein, in light of the circumstances
under which they are made, not false or misleading; or omit to state any
material fact necessary to correct any statement in any earlier communication
with respect to the solicitation of proxies for the Company Stockholders Action
which has become false or misleading. Notwithstanding the foregoing, Parent
makes no representation, warranty or covenant with respect to any information
supplied by the Company which is contained in any of the foregoing documents.
5.4 Stockholder Approval.
--------------------
(a) After receipt of the California Permit, the Company shall promptly
submit the Information Statement, this Agreement and the transactions
contemplated hereby to its stockholders for approval and adoption as provided by
Delaware Law, its certificate of incorporation and bylaws. The Company shall use
its best efforts to obtain the consent of its stockholders sufficient to approve
the Merger and this Agreement and the transactions contemplated hereby, and the
conversion of all outstanding shares of Company Series A Preferred Stock into
Company Common Stock immediately prior to the consummation of the transactions
contemplated hereby, and to enable the Closing to occur as promptly as
practicable.
(b) After receipt of the California Permit, Parent shall promptly submit
the Amended and Restated Certificate of Incorporation of Parent to its
stockholders for approval and adoption as provided by Delaware Law in connection
with the authorization of additional shares of Parent Common Stock and the
creation of the New Preferred Stock to be issued pursuant to this Agreement.
Parent shall use commercially reasonable efforts to obtain the consent of its
stockholders sufficient to approve its Amended and Restated Certificate of
Incorporation and to enable the Closing to occur as promptly as practicable.
5.5 Access to Information. Each party shall afford the other and its
---------------------
accountants, counsel, investment advisors and other representatives, reasonable
access during normal business hours during the period prior to the earlier of
the termination of this Agreement pursuant to its terms and the Effective Time
to (a) all of its Books and Records, and (b) all other information concerning
the business, Assets and Properties, and personnel (subject to restrictions
imposed by applicable Law) of it as the others may reasonably request, subject,
in the case of Parent, to such reasonable limits on access to its technical and
other nonpublic information as counsel to Parent may reasonably advise are
necessary to comply with applicable Law. No information or knowledge obtained in
any investigation pursuant to this Section 5.5 shall affect or be deemed to
-40-
EXECUTION VERSION
modify any representation or warranty contained herein or the conditions to the
obligations of the parties to consummate the Merger.
5.6 Confidentiality. The parties acknowledge that Parent and the Company
---------------
have previously executed a nondisclosure agreement, dated May 3, 2000, which
shall remain in full effect in accordance with its terms. Without limiting the
foregoing, each of the parties hereto hereby agrees to keep the terms of this
Agreement (except to the extent contemplated hereby) and such information or
knowledge obtained in any investigation pursuant to Section 5.5, or pursuant to
the negotiation and execution of this Agreement or the effectuation of the
transactions contemplated hereby, confidential; provided, however, that the
foregoing shall not apply to information or knowledge which (a) a party can
demonstrate was already lawfully in its possession prior to the disclosure
thereof by the other party, (b) is generally known to the public and did not
become so known through any violation of Law, (c) became known to the public
through no fault of such party, (d) is later lawfully acquired by such party
without confidentiality restrictions from other sources not bound by applicable
confidentiality restrictions, (e) is required to be disclosed by order of court
or Governmental or Regulatory Authority with subpoena powers (provided that such
party shall have provided the other party with prior notice of such order and an
opportunity to object or seek a protective order and take any other available
action) or (f) which is disclosed in the course of any Action or Proceeding
between any of the parties hereto.
5.7 Expenses. Whether or not the Merger is consummated, all fees and
--------
expenses incurred in connection with the Merger including all legal, accounting,
financial advisory, consulting and all other fees and expenses of third parties
("Third Party Expenses") incurred by a party in connection with the negotiation
--------------------
and effectuation of the terms and conditions of this Agreement and the
transactions contemplated hereby, shall be the obligation of the respective
party incurring such fees and expenses; provided that, if the Merger is
consummated, Parent shall assume up to $205,000 ($230,000 if the Fairness
Hearing is held) for Third Party Expenses incurred by the Company in connection
with the Merger (including, but not limited to, accountant's fees in connection
with delivery of a Pooling of Interests letter by Deloitte & Touche).
Notwithstanding anything to the contrary in this Agreement, including the
provisions of Article 7, in the event that the Company's Third Party Expenses
shall exceed $205,000 in the aggregate ($230,000 if the Fairness Hearing is
held), such excess shall be deemed a Loss for the purposes of Article 7, and
such excess shall be immediately reimbursable to Parent as a Loss in accordance
with the provisions of Article 7 (but without regard to the Deductible and
without counting towards the Deductible). For the purposes of this Section 5.7,
any legal fees incurred by the Company and owed to Pillsbury Madison & Sutro LLP
for general corporate matters shall be excluded for the purpose of determining
whether the threshold amounts set forth in this Section 5.7 have been reached.
5.8 Public Disclosure. Unless otherwise required by Law (including
-----------------
federal and state securities laws) prior to the Effective Time, no disclosure
(whether or not in response to any inquiry) of the existence of any subject
matter of, or the terms and conditions of, this Agreement shall be made by any
party hereto unless approved by Parent and the Company prior to release,
provided that such approval shall not be unreasonably withheld.
-41-
EXECUTION VERSION
5.9 Consents. The Company shall use its commercially reasonable efforts
--------
to obtain the consents, waivers and approvals under any of the Contracts or
other agreements as may be required in connection with the Merger (all of such
consents, waivers and approvals are set forth in the Disclosure Schedule), so as
to preserve all rights of and benefits to the Company thereunder, and Parent
shall provide the Company with such assistance and information as is reasonably
required to obtain such consents.
5.10 FIRPTA Compliance. On or prior to 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).
5.11 Notification of Certain Matters. The Company shall give prompt notice
-------------------------------
to Parent, and Parent shall give prompt notice to the Company, of (i) the
occurrence or non-occurrence of any event, the occurrence or non-occurrence of
which is likely to cause any representation or warranty of the Company, Parent
or Merger Sub, respectively, contained in this Agreement to be untrue or
inaccurate at or prior to the Closing Date, and (ii) any failure of the Company,
Parent or Merger Sub, as the case may be, to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it
hereunder; provided, however, that the delivery of any notice pursuant to this
Section 5.11 shall not limit or otherwise affect any remedies available to the
party receiving such notice.
5.12 Pooling of Interests Accounting. The Company, Parent and Merger Sub
-------------------------------
shall each use their commercially reasonable efforts to cause the business
combination to be effected by the Merger to be accounted for as a Pooling of
Interests. The Company and Parent shall each use their commercially reasonable
efforts to cause their respective employees, directors, stockholders, Affiliates
and Associates 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.
5.13 Company 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 the SEC's Accounting Releases Nos. 130 and 135
(the "Company Affiliates"). The Company shall provide Parent such information
------------------
and documents as Parent shall reasonably request for purposes of reviewing such
list. The Company shall use its best efforts to deliver or cause to be delivered
to Parent prior to the Closing from each of the Company Affiliates, an executed
Affiliate Agreement in the form attached hereto as Exhibit C ("Company Affiliate
--------- -----------------
Agreement").
---------
5.14 Parent Affiliate Agreements. Schedule 5.14 sets forth those persons
---------------------------
who, in Parent's reasonable judgment, are or may be "affiliates" of Parent
within the meaning of the SEC's Accounting Releases Nos. 130 and 135 (the
"Parent Affiliates"). Parent shall use its best efforts to deliver or cause to
-----------------
be delivered to the Company prior to the Closing from each of the Parent
Affiliates, an executed Parent Affiliate Agreement in the form attached hereto
as Exhibit D ("Parent Affiliate Agreement").
--------- --------------------------
5.15 Additional Documents and Further Assurances. Each party hereto, at
-------------------------------------------
the request of the other party hereto, shall execute and deliver such other
instruments and do and perform
-42-
EXECUTION VERSION
such other acts and things as may be necessary or desirable for effecting
completely the consummation of this Agreement and the transactions contemplated
hereby.
5.16 Company's Auditors. The Company will use its best efforts to cause
its management and its independent auditors to facilitate on a timely basis (a)
the preparation of financial statements (including pro forma financial
statements if required) as required by Parent, (b) the review of any Company
audit or review work papers for up to the past three (3) complete fiscal years,
including the examination of selected interim financial statements and data, and
(c) the delivery of such representations from the Company's independent
accountants as may be reasonably requested by Parent or its accountants.
ARTICLE 6
CONDITIONS TO THE MERGER
6.1 Conditions to Obligations of Each Party to Effect the Merger. The
------------------------------------------------------------
respective obligations of each party to this Agreement to effect the Merger
shall be subject to the satisfaction at or prior to the Closing of the following
conditions:
(a) Governmental and Regulatory Approvals. Approvals from any
-------------------------------------
Governmental or Regulatory Authority (if any) deemed appropriate or necessary by
any party to this Agreement shall have been timely obtained.
(b) No Injunctions or Regulatory Restraints; Illegality. No temporary
---------------------------------------------------
restraining order, preliminary or permanent injunction or other Order issued by
any court of competent jurisdiction or Governmental or Regulatory Authority or
other legal or regulatory restraint or prohibition preventing the consummation
of the Merger shall be in effect; nor shall there be any action taken, or any
Law or Order enacted, entered, enforced or deemed applicable to the Merger or
the other transactions contemplated by the terms of this Agreement.
(c) Affiliate Agreements. If the Merger will be accounted for as a
--------------------
Pooling of Interests, each Company Affiliate and Parent Affiliate shall have
executed and delivered to the Company and to Parent a Company Affiliate
Agreement and a Parent Affiliate Agreement, respectively, and such agreements
shall be in full force and effect.
6.2 Additional Conditions to Obligations of the Company. The obligations
---------------------------------------------------
of the Company to consummate the Merger and the transactions contemplated by
this Agreement shall be subject to the satisfaction at or prior to the Closing
of each of the following conditions, any of which may be waived, in writing,
exclusively by the Company:
(a) Representations and Warranties. Each of the representations and
------------------------------
warranties made by Parent and Merger Sub in this Agreement shall be true and
correct in all material respects (if not qualified by materiality) and in all
respects (if qualified by materiality) on and as of the Closing Date as though
such representation or warranty was made on and as of the Closing Date, and any
representation or warranty made as of a specified date earlier than the Closing
Date shall also have been true and correct in all material respects (if not
qualified by materiality) and in all respects (if qualified by materiality) on
and as of such earlier date.
-43-
EXECUTION VERSION
(b) Performance. Parent and Merger Sub shall have performed and complied
-----------
with in all material respects each agreement, covenant and obligation required
by this Agreement to be so performed or complied with by the Parent or Merger
Sub at or before the Closing.
(c) Officers' Certificates. Parent and Merger Sub shall have delivered to
----------------------
the Company certificates, dated the Closing Date and executed by their
respective Presidents and Chief Executive Officers certifying that the
conditions specified in Sections 6.2(a), 6.2(b) and 6.2(e) have been fulfilled.
(d) Legal Opinion. The Company shall have received a legal opinion from
-------------
Pillsbury Madison & Sutro LLP, counsel to Parent, in substantially the form
attached hereto as Exhibit E.
---------
(e) Material Adverse Change. There shall have occurred no material
-----------------------
adverse change in the Business or Condition of Parent since the date hereof.
6.3 Additional Conditions to the Obligations of Parent and Merger Sub. The
-----------------------------------------------------------------
obligations of Parent and Merger Sub to consummate the Merger and the
transactions contemplated by this Agreement shall be subject to the satisfaction
at or prior to the Closing of each of the following conditions, any of which may
be waived, in writing, exclusively by Parent:
(a) Representations and Warranties. Each of the representations and
------------------------------
warranties made by the Company in this Agreement shall be true and correct in
all material respects (if not qualified by materiality) and in all respects (if
qualified by materiality) on and as of the Closing Date as though such
representation or warranty was made on and as of the Closing Date, and any
representation or warranty made as of a specified date earlier than the Closing
Date shall also have been true and correct in all material respects (if not
qualified by materiality) and in all respects (if qualified by materiality) on
and as of such earlier date.
(b) Performance. The Company shall have performed and complied with in
-----------
all material respects each agreement, covenant and obligation required by this
Agreement to be so performed or complied with by the Company on or before the
Closing Date.
(c) Officers' Certificate. The Company shall have delivered to Parent a
---------------------
certificate, dated the Closing Date and executed by the President and Chief
Executive Officer of the Company, certifying that the conditions specified in
Sections 6.3(a), 6.3(b), 6.3(d), 6.3(h), 6.3(i), 6.3(j) and 6.3(k) have been
fulfilled. (d) Third Party Consents. Parent shall have been furnished with
evidence satisfactory to it that the Company has obtained the consents,
approvals and waivers listed in Schedule 2.6 of the Disclosure Schedule.
(e) Stockholder Certificates. If the California Permit is not obtained,
------------------------
each of the stockholders of the Company shall have delivered executed copies of
the Stockholder Certificate in substantially the form attached as Exhibit B (the
---------
"Stockholder Certificates").
------------------------
(f) Support Agreements. Each of the stockholders of the Company listed in
------------------
Schedule 6.3(f) shall have delivered to Parent an executed Support Agreement in
substantially the form attached as Exhibit G, and all of such Support Agreements
---------
shall be in full force and effect.
-44-
EXECUTION VERSION
(g) Noncompetition Agreements. Each of ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇▇
-------------------------
▇▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇▇ shall have delivered to Parent an executed
Noncompetition Agreement in substantially the form attached as Exhibit F.
---------
(h) Company Indebtedness. All outstanding Indebtedness of the Company
--------------------
that is convertible or exchangeable into shares of Company Capital Stock shall
have been converted or exchanged into shares of Company Capital Stock
immediately prior to the Effective Time. As of the Effective Time, the Company
shall have less than $25,000 of non-convertible Indebtedness.
(i) Stockholder Approval. This Agreement and the Merger shall have been
--------------------
approved by at least ninety percent (90%) of the outstanding shares of Company
Capital Stock.
(j) Limitation on Dissent. Holders of no more than ten percent (10%) of
---------------------
the outstanding shares of Company Capital Stock shall have exercised, nor shall
they have any continued right to exercise, appraisal, dissenters' or similar
rights under applicable law with respect to their shares by virtue of the
Merger.
(k) No Adverse Change. There shall have occurred no material adverse
-----------------
change in the Business or Condition of the Company since the date hereof;
provided, however, that for the purposes of this Section 6.3(k), the termination
-------- -------
by LSI Logic Corporation of its agreement with the Company, dated September 8,
1999, shall not be considered to be a material adverse change in the Business or
Condition of the Company.
(l) Acceptance of Parent Employment Offers. A minimum of eighty percent
--------------------------------------
(80%) of the total number of employees of the Company as of the date hereof and
(ii) five (5) out of six (6) employees on the key employee list provided to
Parent prior to the date hereof, shall have accepted continuing employment with
the Parent. For the purposes of the calculation in Section 6.3(l)(i), new hires
by the Company after the date hereof but prior to the Effective Time shall be
included in the numerator (but not the denominator) for such calculation.
(m) Fairness Hearing and California Permit; Private Placement Alternative.
---------------------------------------------------------------------
The Fairness Hearing shall have been held by the Commissioner of Corporations of
the State of California, and the California Permit shall have been issued by the
State of California. In the alternative, the parties shall be reasonably
satisfied that the shares of Parent Common Stock and the New Preferred Stock to
be issued, the Company Options to be assumed and the Company Warrants to be
exchanged in connection with the Merger pursuant to Section 1.6 hereof are
issuable, assumable or exchangeable, as applicable, without registration
pursuant to Section 4(2) of the Securities Act.
ARTICLE 7
SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS; ESCROW
PROVISIONS
7.1 Survival of Representations, Warranties, Covenants and Agreements.
-----------------------------------------------------------------
Notwithstanding any right of Parent, Merger Sub or the Company (whether or not
exercised) to investigate the affairs of Parent, Merger Sub or the Company
(whether pursuant to Section 5.5 or otherwise), or a waiver by Parent or the
Company of any condition to Closing set forth in
-45-
EXECUTION VERSION
Article 6, each party shall have the right to rely fully upon the
representations, warranties, covenants and agreements of the other party
contained in this Agreement or in any instrument delivered pursuant to this
Agreement. All of the representations, warranties, covenants and agreements of
the Company, Parent and Merger Sub contained in this Agreement or in any
instrument delivered pursuant to this Agreement shall survive the Merger and
continue until the earlier of (a) the first anniversary of the Closing Date, (b)
the date on which Parent publishes the combined audited financial statements of
the Company and Parent for the fiscal year which includes the Closing Date and
(c) the date that is the termination date of the lock-up period in connection
with the initial public offering of stock of Parent (the earlier to occur of
(a), (b) and (c) is referred to herein as the "Expiration Date").
---------------
7.2 Escrow Provisions.
-----------------
(a) Establishment of the Escrow Fund. As soon as practicable after the
--------------------------------
Effective Time, the Escrow Amount, without any act of any stockholder, will be
deposited with the Escrow Agent (plus a proportionate share of any additional
shares of Parent Common Stock and New Preferred Stock as may be issued upon any
stock splits, stock dividends or recapitalizations effected by Parent following
the Effective Time), such deposit to constitute the Escrow Fund to be governed
by the terms set forth herein and at Parent's sole cost and expense. The portion
of the Escrow Amount contributed on behalf of each stockholder of the Company
shall be in proportion to the aggregate number of shares of Parent Common Stock
or New Preferred Stock, as applicable, to which such holder would otherwise be
entitled under Section 1.6.
(b) Recourse to the Escrow Fund. The holders of Company Capital Stock
---------------------------
jointly and severally agree to indemnify, defend and hold harmless Parent and
Merger Sub, and their respective officers, directors, employees, agents,
Affiliates and Associates (including the Surviving Corporation) for any and all
Losses, on a Grossed-Up Basis (whether or not involving a Third Party Claim),
incurred or sustained by Parent and Merger Sub, and their respective officers,
directors, employees, agents, Affiliates and Associates (including the Surviving
Corporation) directly or indirectly as a result of (i) any inaccuracy in, or
breach of, a representation or warranty of the Company contained herein (or in
any certificate, instrument, schedule or document attached to this Agreement and
delivered by the Company in connection with the Merger); (ii) any claim that the
manufacture, use or sale of the products, technology or services of the Company
infringes any third-party patents; (iii) any failure by the Company to perform
or comply with any covenant or agreement contained herein; or (iv) (A) any
Hazardous Material at, on, under, migrating to or from, or transported to or
from the Sites on or prior to the Closing; (B) any Environmental Claim arising
at any time that relates to the Company on or prior to the Closing; or (C) any
noncompliance with any applicable Environmental Law or Environmental Permit
relating in any way to the Company on or prior to the Closing. The Escrow Fund
shall be available to compensate Parent and Merger Sub, and their respective
officers, directors, employees, agents, Affiliates and Associates (including the
Surviving Corporation) for any and all Losses, on a Grossed-Up Basis (whether or
not involving a Third Party Claim) under this Section 7.2(b). Nothing herein
shall limit the liability of the Company for any breach of any representation,
warranty, agreement or covenant contained herein for fraudulent
misrepresentation or fraud. The holders of Company Capital Stock shall not be
liable to Parent or its Affiliates and Associates (including the Surviving
Corporation) under Article 7 unless and until the aggregate amount of Losses
exceeds the Deductible, at which time Parent and its Affiliates and
-46-
EXECUTION VERSION
Associates (including the Surviving Corporation) under Article 7 unless and
until the aggregate amount of Losses exceeds the Deductible, at which time
Parent and its Affiliates and Associates (including the Surviving Corporation)
may recover all amounts of such Losses (including any amounts of Losses
considered in determining whether the Deductible has been exceeded). The Escrow
Fund shall be the sole and exclusive remedy available to Parent and its
Affiliates and Associates (including the Surviving Corporation) for any Losses
under this Agreement. In the event that the Merger is not accounted for as a
Pooling of Interests, the parties agree to work together in good faith to amend
this Agreement to provide the holders of Company Capital Stock with the option
to pay any claims for indemnification under this Section 7.2 in cash, rather
than shares of Parent Capital Stock.
(c) Escrow Period; Distribution of Escrow Fund upon Termination of Escrow
---------------------------------------------------------------------
Period. 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., California Time, on the Expiration Date (the period of time from the
Effective Time through and including the Expiration Date is referred to herein
as the "Escrow Period"); provided, however, if prior to the Expiration Date,
------------- -------- -------
Parent has delivered to the Stockholder Agent an Officer's Certificate
containing a claim relating to facts and circumstances existing at the Closing
which has not been resolved prior to the Expiration Date in accordance with the
provisions of Section 7.2 the Escrow Agent shall retain in the Escrow Fund after
the Expiration Date shares of Parent Common Stock and New Preferred Stock having
a value (based on the Average Price of such shares) equal to one hundred percent
(100%) of the amount of the claim set forth in such Officer's Certificate, with
respect to all unsatisfied claims which have not then been resolved. As soon as
all such claims have been resolved (or at the Expiration Date, if earlier)
pursuant to the provisions of this Section 7.2 (including Section 7.2(g)), the
Escrow Agent shall deliver to the stockholders of the Company the remaining
portion of the Escrow Fund not required to satisfy such claims. Deliveries of
shares of Parent Common Stock and New Preferred Stock remaining in the Escrow
Fund to the stockholders of the Company pursuant to this Section 7.2(c) shall be
made ratably in proportion to their respective contributions to the Escrow Fund.
(d) 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 New Preferred Stock or other
Equity Equivalents securities issued or distributed by Parent ("New
---
Shares") in respect of Parent Common Stock or New Preferred Stock in the
------
Escrow Fund which have not been released from the Escrow Fund shall be
added to the Escrow Fund. New Shares issued in respect of shares of Parent
Common Stock or New Preferred Stock which have been released from the
Escrow Fund shall not be added to the Escrow Fund but shall be distributed
to the recordholders thereof. Cash dividends on Parent Common Stock and New
Preferred Stock shall not be added to the Escrow Fund but shall be
distributed to the recordholders of Parent Common Stock and New Preferred
Stock on the record date set for any such dividend.
-47-
EXECUTION VERSION
(e) Claims Upon Escrow Fund.
-----------------------
(i) Subject to the provisions of this Section 7.2, any claim for
indemnification under Section 7.2 must be asserted on or before 5:00 p.m.
(California time) on the Expiration Date. Parent shall provide notice to
the Stockholder Agent within thirty (30) days of Parent becoming aware of
any claims for Losses if such claims are reasonably identifiable and
determinable; provided, however, that no delay or failure on the part of
-------- -------
Parent in notifying the Stockholder Agent shall relieve the Stockholder
Agent or the holders of Company Capital Stock from any obligation unless
they are materially prejudiced thereby (and then only to the extent of such
prejudice). 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 "Estimated Claim Amount"),
----------------------
the date each such item was paid or properly accrued, or the basis for such
anticipated liability, and the nature of the misrepresentation, breach of
warranty, agreement or covenant to which such item is related, the Escrow
Agent shall, subject to the provisions of Section 7.2(f) hereof, deliver to
Parent out of the Escrow Fund, as promptly as practicable, shares of Parent
Common Stock or New Preferred 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 or New Preferred Stock to be delivered to Parent out of the
Escrow Fund pursuant to Section 7.2(e)(i), the shares of Parent Common
Stock and New Preferred Stock shall be valued at the Average Price, and
such shares shall be delivered to Parent out of the Escrow Fund on a pro
rata basis applied to all shares of Parent Common Stock and New Preferred
Stock in the Escrow Fund.
(f) 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 Stockholder Agent, and for a period of thirty (30) days after
such delivery, the Escrow Agent shall make no delivery to Parent of any shares
out of the Escrow Fund pursuant to Section 7.2(e) hereof unless the Escrow Agent
shall have received written authorization from the Stockholder 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 and New Preferred
Stock from the Escrow Fund in accordance with Section 7.2(e) hereof, provided
that no such payment or delivery may be made if the Stockholder 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.
(g) Resolution of Conflicts; Arbitration.
------------------------------------
(i) In case the Stockholder Agent shall object in writing to any
claim or claims made in any Officer's Certificate, the Stockholder Agent
and Parent shall attempt in good faith to agree upon the rights of the
respective parties with
-48-
EXECUTION VERSION
respect to each of such claims. If the Stockholder 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 and New Preferred Stock from the
Escrow Fund in accordance with the terms thereof and Section 7.2(e) hereof.
(ii) If no such agreement can be reached after good faith
negotiation, either Parent or the Stockholder Agent may demand arbitration
of the dispute unless the amount of the damage or loss is at issue in a
pending Action or Proceeding involving a Third Party Claim, in which event
arbitration shall not be commenced until such amount is ascertained or both
parties agree to arbitration; and in either event the matter shall be
settled by arbitration conducted by three (3) arbitrators, one (1) selected
by Parent and one (1) selected by the Stockholder Agent, and the two (2)
arbitrators selected by Parent and Stockholder Agent shall select a third
arbitrator. The arbitrators shall set a limited time period and establish
procedures designed to reduce the cost and time for discovery of
information relating to any dispute while allowing the parties an
opportunity, adequate as determined in the sole judgment of the
arbitrators, to discover relevant information from the opposing parties
about the subject matter of the dispute. The arbitrators shall rule upon
motions to compel, limit or allow discovery as they shall deem appropriate
given the nature and extent of the disputed claim. The arbitrators shall
also have the authority to impose sanctions, including attorneys' fees and
other costs incurred by the parties, to the same extent as a court of law
or equity, should the arbitrators determine that discovery was sought
without substantial justification or that discovery was refused or objected
to by a party without substantial justification. The decision of a majority
of the three (3) arbitrators as to the validity and amount of any claim in
such Officer's Certificate shall be binding and conclusive upon the parties
to this Agreement, and notwithstanding anything in Section 7.2(f) hereof,
the 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 regarding the dispute which shall set
forth the award, judgment, decree or order awarded by the arbitrators.
(iii) Judgment upon any award rendered by the arbitrators may be
entered in any court having competent jurisdiction. Any such arbitration
shall be held in Santa ▇▇▇▇▇ County, California under the rules then in
effect of the American Arbitration Association. For purposes of this
Section 7.2(g), in any arbitration hereunder in which any claim or the
amount thereof stated in the Officer's Certificate is at issue, Parent
shall be deemed to be the Non-Prevailing Party in the event that the
arbitrators award Parent less than the sum of one-half (1/2) of the
disputed amount of any Losses plus any amounts not in dispute; otherwise,
the stockholders of the Company as represented by the Stockholder Agent
shall be deemed to be the Non-Prevailing Party. The Non-Prevailing Party to
an arbitration shall pay its own expenses, the fees of each arbitrator, the
admini-
-49-
EXECUTION VERSION
trative costs of the arbitration and the expenses, including without
limitation, reasonable attorneys' fees and costs incurred by the other
party to the arbitration.
(h) Stockholder Agent of the Stockholders; Power of Attorney.
--------------------------------------------------------
(i) In the event that the Merger is approved by the stockholders of
the Company, effective upon such vote, and without further act of any
stockholder, ▇▇▇▇ ▇▇▇▇ shall be appointed as agent and attorney-in-fact
(the "Stockholder Agent") for each stockholder of the Company (except such
-----------------
stockholders, if any, as shall have perfected their appraisal or
dissenters' rights under Delaware Law), for and on behalf of stockholders
of the Company, to give and receive notices and communications, to
authorize delivery to Parent of shares of Parent Common Stock and New
Preferred 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 Stockholder
Agent for the accomplishment of the foregoing. Such agency may be changed
by the stockholders of the Company from time to time upon not less than
thirty (30) days prior written notice to Parent; provided that the
-------------
Stockholder Agent may not be removed unless holders of a two-thirds
interest in the Escrow Fund (on a share number basis) agree to such removal
and to the identity of the substituted stockholder agent. Any vacancy in
the position of Stockholder Agent may be filled by approval of the holders
of a majority in interest of the Escrow Fund (on a share number basis). No
bond shall be required of the Stockholder Agent, and the Stockholder Agent
shall not receive compensation for his/her services. Notices or
communications to or from the Stockholder Agent shall constitute notice to
or from each of the stockholders of the Company.
(ii) The Stockholder Agent shall not be liable for any act done or
omitted hereunder as Stockholder Agent while acting in good faith and in
the exercise of reasonable judgment.
(i) Actions of the Stockholder Agent. A decision, act, consent or
--------------------------------
instruction of the Stockholder Agent shall constitute a decision of all the
stockholders 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 stockholders, and the Escrow Agent and Parent may rely upon any
such decision, act, consent or instruction of the Stockholder Agent as being the
decision, act, consent or instruction of each every such stockholder of the
Company. 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 Stockholder Agent.
(j) Third-Party Claims. In the event Parent becomes aware of a third-party
------------------
claim (a "Third Party Claim") which Parent reasonably expects may result in a
-----------------
demand against the Escrow Fund, Parent shall notify the Stockholder Agent of
such claim, and the Stockholder Agent, as representative for the stockholders of
the Company, shall be entitled, at their expense, to participate in any defense
of such claim. Parent shall have the right in its sole discretion to
-50-
EXECUTION VERSION
settle any Third Party Claim; provided, however, that except with the consent of
-------- -------
the Stockholder Agent, no settlement of any such claim with third-party
claimants shall alone be determinative of the amount of any claim against the
Escrow Fund. In the event that the Stockholder Agent has consented to any such
settlement, the Stockholder Agent shall have no power or authority to object
under any provision of this Article 7 to the amount of any claim by Parent
against the Escrow Fund with respect to the amount of Losses incurred by Parent
in such settlement.
(k) 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 Stockholder 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 comply with
and obey Orders of any court of law or Governmental or Regulatory
Authority, notwithstanding any notices, warnings or other communications
from any party or any other person to the contrary. In case the Escrow
Agent obeys or complies with any such Order, 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 being subsequently
reversed, modified, annulled, set aside, vacated or found to have been
entered without jurisdiction or proper authority.
(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 gross 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 or
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
-51-
EXECUTION VERSION
Agent may consult with 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 New
Preferred 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 any damages. 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 and New Preferred Stock held in escrow, except all
costs, expenses, charges and reasonable attorneys' 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) The parties and their respective successors and assigns agree
jointly and severally to indemnify and hold Escrow Agent harmless against
any and all Losses 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.
(viii) The Escrow Agent may resign at any time upon giving at least
thirty (30) days written notice to the parties; 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 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.
(l) Fees. All fees of the Escrow Agent for performance of its duties
----
hereunder shall be paid by Parent in accordance with the fee schedule attached
as Exhibit H. In the event that the conditions of this Agreement are not
---------
promptly fulfilled, or if the Escrow Agent renders any
-52-
EXECUTION VERSION
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 Action or Proceeding
pertaining to this escrow or its subject matter, the Escrow Agent shall be
reasonably compensated for such extraordinary services and reimbursed for all
costs, attorney's fees, and expenses occasioned by such default, delay,
controversy or Action or Proceeding. Parent agrees to pay these sums upon
demand.
7.3 Indemnification by Parent. Parent hereby agrees to indemnify, defend
-------------------------
and hold harmless the Company, and its officers, directors, employees and
stockholders, for any and all Losses, on a Grossed-Up Basis (whether or not
involving a Third Party Claim), incurred or sustained by the Company, and its
officers, directors, employees and stockholders, directly or indirectly prior to
the Expiration Date as a result of (i) any inaccuracy in, or breach of, a
representation or warranty of Parent or Merger Sub contained herein (or in any
certificate, instrument, schedule or document attached to this Agreement and
delivered by Parent or Merger Sub in connection with the Merger); (ii) any
failure by Parent or Merger Sub to perform or comply with any covenant or
agreement contained herein, or (iii) (A) any Hazardous Material at, on, under,
migrating to or from, or transported to or from any of Parent's real properties
on or prior to the Closing; (B) any Environmental Claim arising at any time that
relates to Parent on or prior to the Closing; or (C) any noncompliance with any
applicable Environmental Law or Environmental Permit relating in any way to
Parent on or prior to the Closing, up to a maximum of ten percent (10%) of the
aggregate Merger consideration paid to holders of Company Capital Stock pursuant
to the terms of this Agreement, which indemnification obligation (x) will be
paid in shares of Parent capital stock and (y) shall be the sole and exclusive
remedy available to the Company and its stockholders for any Losses under this
Agreement or otherwise. Parent shall not be liable to the Company and its
officers, directors, employees and stockholders under this Section 7.3 or
otherwise unless and until the aggregate amount of Losses exceeds the
Deductible, at which time the holders of Company Capital Stock may recover all
amounts of such Losses (including any amounts of Losses considered in
determining whether the Deductible has been exceeded).
ARTICLE 8
TERMINATION, AMENDMENT AND WAIVER
8.1 Termination. Except as provided in Section 8.2 below, this Agreement
-----------
may be terminated and the Merger abandoned at any time prior to the Effective
Time:
(a) by mutual agreement of the Company, Parent and Merger Sub;
(b) by Parent, Merger Sub or the Company if: (i) the Effective Time
has not occurred before 5:00 p.m. (Pacific Standard Time) on August 31, 2000
(provided that the right to terminate this Agreement under this clause 8.1(b)(i)
shall not be available to any party whose willful failure to fulfill any
obligation hereunder has been the cause of, or resulted in, the failure of the
Effective Time to occur on or before such date); (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
-53-
EXECUTION VERSION
Merger by any Governmental or Regulatory Authority that would make consummation
of the Merger illegal;
(c) by Parent and Merger Sub if there shall be any action taken, or any
Law or Order enacted, promulgated or issued or deemed applicable to the Merger,
by any Governmental or Regulatory Authority, which would: (i) prohibit Parent's
or the Merger Sub's ownership or operation of all or any portion of the business
of the Company or (ii) compel Parent or Merger Sub to dispose of or hold
separate all or a portion of the Assets and Properties of the Company as a
result of the Merger;
(d) by Parent if it and Merger Sub are not in material breach of their
obligations under this Agreement, and there has been a material breach of any
representation, warranty, covenant or agreement contained in this Agreement on
the part of the Company, and (i) the Company has not cured and is not using its
reasonable efforts to cure such breach after notice of such breach to the
Company (provided that no cure period shall be required for a breach which by
its nature cannot be cured) and (ii) as a result of such breach, the conditions
set forth in Section 6.3(a) or 6.3(b), as the case may be, would not then be
satisfied; or
(e) by the Company if it is not in material breach of its obligations
under this Agreement, and there has been a material breach of any
representation, warranty, covenant or agreement contained in this Agreement on
the part of Parent or Merger Sub, and (i) Parent has not cured and is not using
its reasonable efforts to cure such breach after notice of such breach to Parent
(provided that no cure period shall be required for a breach which by its nature
cannot be cured), and (ii) as a result of such breach, the conditions set forth
in Section 6.2(a)or 6.2(b), as the case may be, would not then be satisfied.
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 of the party taking such action.
8.2 Effect of Termination. In the event of a valid termination of this
---------------------
Agreement as provided in Section 8.1, this Agreement shall forthwith become void
and there shall be no liability or obligation on the part of Parent or the
Company, or their respective officers, directors or stockholders or Affiliates
or Associates, provided that each party shall remain liable for any breaches of
this Agreement prior to its termination; and provided further that, the
provisions of Sections 5.6, 5.7, 5.8, Article 8 and Article 9 of this Agreement
shall remain in full force and effect and survive any termination of this
Agreement.
8.3 Amendment. Except as is otherwise required by applicable law after the
---------
stockholders of the Company approve the Merger and this Agreement, this
Agreement may be amended by the parties hereto at any time by execution of an
instrument in writing signed on behalf of each of the parties hereto.
8.4 Extension; Waiver. At any time prior to the Effective Time, Parent,
--------- ------
Merger Sub and the Company may, to the extent legally allowed, (a) extend the
time for the performance of any of the obligations of the other party hereto,
(b) waive any inaccuracies in the representations and warranties made to such
party contained herein or in any document delivered pursuant hereto, and (c)
waive compliance with any of the agreements, covenants or conditions for the
-54-
EXECUTION VERSION
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.
ARTICLE 9
MISCELLANEOUS PROVISIONS
9.1 Notices. All notices, requests and other communications hereunder must
-------
be in writing and will be deemed to have been duly given only if delivered
personally against written receipt or by facsimile transmission against
facsimile confirmation or mailed by prepaid first class certified mail, return
receipt requested, or mailed by overnight courier prepaid, to the parties at the
following addresses or facsimile numbers:
If to Parent to: Magma Design Automation, Inc.
▇ ▇▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: Vice President and General Counsel
with a copy to: Pillsbury Madison & Sutro LLP
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Esq.
If to the Company to: Moscape, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: President and Chief Executive Officer
with a copy to: ▇▇▇▇▇▇ ▇▇▇▇ & Priest LLP
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Esq.
All such notices, requests and other communications will (i) if delivered
personally to the address as provided in this Section, be deemed given upon
delivery, (ii) if delivered by facsimile transmission to the facsimile number as
provided in this Section, be deemed given upon facsimile confirmation, (iii) if
delivered by mail in the manner described above to the address as provided in
this Section, be deemed given on the earlier of the third Business Day following
mailing or upon receipt and (iv) if delivered by overnight courier to the
address as provided in this Section, be deemed given on the earlier of the first
Business Day following the date sent by such overnight courier or upon receipt
(in each case regardless of whether such notice, request or other communication
is received by any other Person to whom a copy of such notice is to be
-55-
EXECUTION VERSION
delivered pursuant to this Section). Any party from time to time may change its
address, facsimile number or other information for the purpose of notices to
that party by giving notice specifying such change to the other party hereto.
9.2 Entire Agreement. This Agreement supersedes all prior discussions and
----------------
agreements between the parties with respect to the subject matter hereof and
thereof and contains the sole and entire agreement between the parties hereto
with respect to the subject matter hereof and thereof.
9.3 Further Assurances; Post-Closing Cooperation. At any time or from time
------------------ ------------------------
to time after the Closing, the Company shall execute and deliver to Parent such
other documents and instruments, provide such materials and information and take
such other actions as Parent may reasonably request to consummate the
transactions contemplated by this Agreement and otherwise to cause the Company
to fulfill its obligations under this Agreement and the transactions
contemplated hereby.
9.4 Waiver. Any term or condition of this Agreement may be waived at any
------
time by the party that is entitled to the benefit thereof, but no such waiver
shall be effective unless set forth in a written instrument duly executed by or
on behalf of the party waiving such term or condition. No waiver by any party of
any term or condition of this Agreement, in any one or more instances, shall be
deemed to be or construed as a waiver of the same or any other term or condition
of this Agreement on any future occasion. All remedies, either under this
Agreement or by Law or otherwise afforded, will be cumulative and not
alternative.
9.5 Third Party Beneficiaries. The terms and provisions of this Agreement
-------------------------
are intended solely for the benefit of each party hereto and their respective
successors or permitted assigns, and it is not the intention of the parties to
confer third-party beneficiary rights, and this Agreement does not confer any
such rights, upon any other Person other than any Person entitled to indemnity
under Article 7.
9.6 No Assignment; Binding Effect. Neither this Agreement nor any right,
-----------------------------
interest or obligation hereunder may be assigned (by operation of Law or
otherwise) by any party without the prior written consent of the other party and
any attempt to do so will be void. Subject to the preceding sentence, this
Agreement is binding upon, inures to the benefit of and is enforceable by the
parties hereto and their respective successors and assigns.
9.7 Headings. The headings used in this Agreement have been inserted for
--------
convenience of reference only and do not define or limit the provisions hereof.
9.8 Invalid Provisions. If any provision of this Agreement is held to be
------------------
illegal, invalid or unenforceable under any present or future Law, and if the
rights or obligations of any party hereto under this Agreement will not be
materially and adversely affected thereby, (a) such provision will be fully
severable, (b) this Agreement will be construed and enforced as if such illegal,
invalid or unenforceable provision had never comprised a part hereof, (c) the
remaining provisions of this Agreement will remain in full force and effect and
will not be affected by the illegal, invalid or unenforceable provision or by
its severance herefrom and (d) in lieu of such illegal, invalid or unenforceable
provision, there will be added automatically as a part of this
-56-
EXECUTION VERSION
Agreement a legal, valid and enforceable provision as similar in terms to such
illegal, invalid or unenforceable provision as may be possible.
9.9 Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the domestic laws of the State of California, without giving
effect to any choice of law or conflict of law provision or rule (whether of the
State of California or any other jurisdiction) that would cause the application
of the laws of any jurisdiction other than the State of California.
9.10 Consent to Jurisdiction and Service of Process. EACH OF PARENT AND
-------
THE COMPANY CONSENTS TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED
WITHIN THE STATE OF CALIFORNIA AND IRREVOCABLY AGREES THAT ALL ACTIONS OR
PROCEEDINGS RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY
MAY BE LITIGATED IN SUCH COURTS. EACH OF THE COMPANY AND PARENT ACCEPTS FOR
ITSELF AND IN CONNECTION WITH ITS RESPECTIVE PROPERTIES, GENERALLY AND
UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND
WAIVES ANY DEFENSE OF FORUM NON CONVENIENS, AND IRREVOCABLY AGREES TO BE BOUND
BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY. EACH OF PARENT AND THE COMPANY FURTHER
IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED
COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY
REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO THE PARTY AT THE ADDRESS
SPECIFIED IN THIS AGREEMENT, SUCH SERVICE TO BECOME EFFECTIVE FIFTEEN (15) DAYS
AFTER SUCH MAILING. NOTHING HEREIN SHALL IN ANY WAY BE DEEMED TO LIMIT THE
ABILITY OF ANY PARTY HERETO TO SERVE ANY SUCH LEGAL PROCESS, SUMMONS, NOTICES
AND DOCUMENTS IN ANY OTHER MANNER PERMITTED BY APPLICABLE LAW OR TO OBTAIN
JURISDICTION OVER OR TO BRING ACTIONS, SUITS OR PROCEEDINGS AGAINST ANY OF THE
OTHER PARTIES HERETO IN SUCH OTHER JURISDICTIONS, AND IN SUCH MANNER, AS MAY BE
PERMITTED BY ANY APPLICABLE LAW.
9.11 Construction. The parties hereto agree that this Agreement is the
------------
product of negotiation between sophisticated parties and individuals, all of
whom were represented by counsel, and each of whom had an opportunity to
participate in and did participate in, the drafting of each provision hereof.
Accordingly, ambiguities in this Agreement, if any, shall not be construed
strictly or in favor of or against any party hereto but rather shall be given a
fair and reasonable construction without regard to the rule of contra
preferentum. 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.
9.12 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
9.13 Covenant Not to Solicit. Parent agrees that it will not solicit any
-----------------------
Company employees until the earlier of (a) the Closing Date and (b) September
30, 2000; provided,
--------
-57-
EXECUTION VERSION
however, that the providing of an offer letter by Parent to the Company's
-------
employees asking such employees to accept continuing employment with Parent
after the Closing Date shall not be deemed to violate the terms of this Section
9.13.
9.14 Remedies. Except as otherwise provided herein (including as set forth
--------
in Article 7), 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.
9.15 Specific Performance. The parties hereto agree that irreparable
--------------------
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof in any court of the United States
or any state having jurisdiction, this being in addition to any other remedy to
which they are entitled at law or in equity.
ARTICLE 10
DEFINITIONS
10.1 Definitions.
-----------
(a) As used in this Agreement, the following defined terms shall have the
meanings indicated below:
"Actions or Proceedings" means any action, suit, proceeding,
----------------------
arbitration or Governmental or Regulatory Authority investigation or audit,
whether at law or in equity.
"Affiliate" means, as applied to any Person, (a) any other Person
---------
directly or indirectly controlling, controlled by or under common control with,
that Person, (b) any other Person that owns or controls (i) five percent (5%) or
more of any class of equity securities of that Person or any of its Affiliates
or (ii) five percent (5%) or more of any class of equity securities (including
any equity securities issuable upon the exercise of any option or convertible
security) of that Person or any of its Affiliates, or (c) any director, partner,
officer, manager, agent, employee or relative of such Person. For the purposes
of this definition, "control" (including with correlative meanings, the terms
"controlling", "controlled by", and "under common control with") as applied to
any Person, means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of that Person, whether
through ownership of voting securities or by contract or otherwise.
"Aggregate Common Number" means the aggregate number of shares of
-----------------------
Company Common Stock outstanding immediately prior to the Effective Time
(including all shares of Company Common Stock issued or issuable upon conversion
of all shares of Company Preferred Stock and upon exercise, conversion or
exchange of all unvested and vested Company Options which are not exercised,
converted, exchanged or expired as of the Effective Time).
-58-
EXECUTION VERSION
"Aggregate Share Number" means 4,504,017 shares of Parent Common Stock
----------------------
(which is the result of (a) the quotient obtained by dividing the Parent
Aggregate Common Number by 0.905 less (b) the Parent Aggregate Common Number)
(as appropriately adjusted to reflect the effect of any stock split, stock
dividend, stock combination, reorganization, reclassification or similar change
in Parent Capital Stock occurring after the date of this Agreement and prior to
the Effective Time).
"Agreement" means this Agreement and Plan of Reorganization, the
---------
Exhibits and the Disclosure Schedule and the certificates and instruments
delivered in connection herewith, as the same may be amended from time to time
in accordance with the terms hereof.
"Assets and Properties" of any Person means all assets and properties
---------------------
of every kind, nature, character and description (whether real, personal or
mixed, whether tangible or intangible, whether absolute, accrued, contingent,
fixed or otherwise and wherever situated), including the goodwill related
thereto, operated, owned or leased by such Person, including cash, cash
equivalents, Investment Assets, accounts and notes receivable, chattel paper,
documents, instruments, general intangibles, real estate, equipment, inventory,
goods and Intellectual Property.
"Associate" means, with respect to any Person, any corporation or
---------
other business organization of which such Person is an officer or partner or is
the beneficial owner, directly or indirectly, of ten percent (10%) or more of
any class of equity securities, any trust or estate in which such Person has a
substantial beneficial interest or as to which such Person serves as a trustee
or in a similar capacity and any relative or spouse of such Person, or any
relative of such spouse, who has the same home as such Person.
"Audited Financial Statement Date" means December 31, 1999.
--------------------------------
"Audited Financial Statements" means the audited consolidated balance
----------------------------
sheets of the Company for the year ended December 31, 1999, December 31, 1998
and December 31, 1997, and the related audited statements of operations,
stockholders' equity and cash flows for the fiscal year then ended, in each
case, including the notes thereto.
"Average Price" means for the Parent Common Stock, $4.50 (as
-------------
appropriately adjusted to reflect the effect of any stock split, stock dividend,
stock combination, reorganization, reclassification or similar change in Parent
Capital Stock occurring after the date of this Agreement and prior to the
Effective Time), and for the New Preferred Stock, $6.23 (as appropriately
adjusted to reflect the effect of any stock split, stock dividend, stock
combination, reorganization, reclassification or similar change in Parent
Capital Stock occurring after the date of this Agreement and prior to the
Effective Time).
"Benefit Plan" means any Plan maintained, established or to which
------------
contributions have at any time been made, by the Company or any predecessor or
Affiliate of the Company existing at the Closing Date or prior thereto, to which
the Company contributes or has contributed, or under which any employee, former
employee or director of the Company or any beneficiary thereof is covered, is
eligible for coverage or has benefit rights.
-59-
EXECUTION VERSION
"Books and Records" means all files, documents, instruments, papers,
-----------------
books and records relating to the Business or Condition of a Person, including
financial statements, Tax Returns and related work papers and letters from
accountants, budgets, pricing guidelines, ledgers, journals, deeds, title
policies, minute books, stock certificates and books, stock transfer ledgers,
Contracts, Licenses, customer lists, computer files and programs, retrieval
programs, operating data and plans and environmental studies and plans.
"Business Combination" means, with respect to any Person, any (i) any
--------------------
merger, consolidation or combination to which such Person is a party, (ii) any
sale, dividend, split or other disposition of any capital stock or other equity
interests of such Person, (iii) any tender offer (including a self tender),
exchange offer, recapitalization, liquidation, dissolution or similar
transaction, (iv) any sale, dividend or other disposition of all or a material
portion of the Assets and Properties of such Person or (v) the entering into of
any agreement or understanding, or the granting of any rights or options, with
respect to any of the foregoing.
"Business Day" means a day other than Saturday, Sunday or any day on
------------
which banks located in the State of California are authorized or obligated to
close.
"Business or Condition of Parent" means the business, condition
-------------------------------
(financial or otherwise), results of operations, Assets and Properties and
prospects of the Parent.
"Business or Condition of the Company" means the business, condition
------------------------------------
(financial or otherwise), results of operations, Assets and Properties and
prospects of the Company.
"California Code" means the California Corporations Code and all
---------------
amendments and additions thereto.
"California Permit" has the meaning ascribed to it in Section 1.12.
-----------------
"Certificate of Merger" has the meaning ascribed to it in Section 1.2.
---------------------
"Certificates" has the meaning ascribed to them in Section 1.8(b).
------------
"Closing" means the closing of the transactions contemplated by
-------
Section 1.2.
"Closing Date" has the meaning ascribed to it in Section 1.2.
------------
"Code" means the Internal Revenue Code of 1986, as amended, and the
----
rules and regulations promulgated thereunder.
"Common Stock Exchange Ratio" means the quotient obtained by dividing
---------------------------
(i) 3,098,217 by (ii) the sum of (a) the number of shares of the Company's
Common Stock outstanding (which for this purpose shall be deemed to include any
shares of the Company's Common Stock, if any, subject to unexpired and
unexercised Company Options or Company Warrants for Company Common Stock) as of
the Effective Time and (b) the number of shares of the Company's Series A
Preferred Stock outstanding (which for this purpose shall be deemed to include
any shares of the Company's Series A Preferred Stock, if any, subject to
unexpired and
-60-
EXECUTION VERSION
unexercised Company Options or Company Warrants for the Company's Series A
Preferred Stock) as of the Effective Time.
"Company" has the meaning ascribed to it in the forepart of this
-------
Agreement.
"Company Affiliates" has the meaning ascribed to it in Section 5.13.
------------------
"Company Affiliate Agreement" has the meaning ascribed to it in
---------------------------
Section 5.13.
"Company Capital Stock" means the Company Common Stock and Company
---------------------
Preferred Stock.
"Company Common Stock" has the meaning ascribed to it in Section 2.3.
--------------------
"Company Financials" means the Audited Financial Statements, Unaudited
------------------
Financial Statements and the Interim Financial Statements.
"Company Intellectual Property" shall mean any Intellectual Property
-----------------------------
that is (i) owned by; (ii) licensed to; or (iii) was developed or created by or
for the Company.
"Company Option(s)" means any Option to purchase Company Capital
-----------------
Stock, excluding the Company Warrants.
"Company Preferred Stock" has the meaning ascribed to it in Section
-----------------------
2.3.
"Company Registered Intellectual Property" means all Registered
----------------------------------------
Intellectual Property owned by, or filed in the name of, the Company.
"Company Representatives" has the meaning ascribed to it in Section
-----------------------
4.2.
"Company Stockholders Action" has the meaning ascribed to it in
---------------------------
Section 5.2.
"Company Warrants" means all of the warrants to purchase Company
----------------
Capital Stock listed on Section 2.3 of the Disclosure Schedule.
"Contract" means any legally binding agreement, lease, evidence of
--------
Indebtedness, mortgage, indenture, security agreement or other contract or
business arrangement (whether written or oral).
"Conversion" has the meaning ascribed to it in Section 2.3.
----------
"Deductible" shall mean that dollar amount which equals Three Hundred
----------
Thousand Dollars ($300,000.00).
"Defined Benefit Plan" means each Plan which is subject to Part 3 of
--------------------
Title 1 of ERISA, Section 412 of the Code or Title IV of ERISA.
"Delaware Law" means the Delaware General Corporation Law and all
------------
amendments and additions thereto.
-61-
EXECUTION VERSION
"Disclosure Schedule" means the schedules delivered to Parent and
-------------------
Merger Sub by or on behalf of the Company, containing all lists, descriptions,
exceptions and other information and materials as are required to be included
therein in connection with the representations and warranties made by the
Company in Article 2 of this Agreement.
"Dissenting Shares" has the meaning ascribed to it in Section 1.7(a) .
-----------------
"Effective Time" has the meaning ascribed to it in Section 1.2.
--------------
"Environment" means all air, space, surface water, groundwater, or
-----------
land, including land or water surface or subsurface, including all fish,
wildlife, flora, biota and all other natural resources.
"Environmental Claim" means any and all administrative or judicial
-------------------
actions, suits, orders, claims, liens, notices, notices of violations,
investigations, complaints, requests for information, proceedings, or other
communication (written or oral), whether criminal or civil, pursuant to or
relating to any Environmental Law, any Environmental Permit or any Hazardous
Material by any Person (including any Governmental or Regulatory Authority,
private person and citizens' group)
"Environmental Clean-up Site" means any location which is listed or
---------------------------
proposed for listing on the National Priorities List, the Comprehensive
Environmental Response, Compensation and Liability Information System, or on any
similar state list of sites requiring investigation or cleanup, or which is the
subject of any pending or threatened action, suit, proceeding, or investigation
related to or arising from any alleged violation of any Environmental Law, or at
which there has been a Release, threatened Release or suspected Release of a
Hazardous Material.
"Environmental Law" means any Law, now or hereafter in effect and as
-----------------
amended, and any judicial or administrative interpretation thereof, including
any judicial or administrative order, consent decree or judgment, relating to
pollution or protection of the environment, health, safety or natural resources,
including without limitation, those relating to emissions, discharges, Releases
or threatened Releases of Hazardous Materials, pollutants, contaminants,
chemicals, or industrial, toxic or hazardous substances or wastes into the
environment or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of Hazardous Materials,
pollutants, contaminants, chemicals, or industrial, solid, toxic or hazardous
substances or wastes.
"Environmental Permit" means any permits, licenses, approvals,
--------------------
consents or authorizations required under, in connection with, or issued
pursuant to any applicable Environmental Law.
"Equity Equivalents" means securities (including Options to purchase
------------------
any shares of Company Capital Stock) which, by their terms, are or may be
exercisable, convertible or exchangeable for or into common stock, preferred
stock or other securities at the election of the holder thereof.
-62-
EXECUTION VERSION
"ERISA" means the Employee Retirement Income Security Act of 1974, as
-----
amended, and the rules and regulations promulgated thereunder.
"Escrow Agent" means U.S. Bank Trust, National Association (or other
------------
entity acceptable to Parent and the Stockholder Agent).
"Escrow Amount" means the number of shares of Parent Common Stock and
-------------
New Preferred Stock obtained by multiplying (x) the aggregate number of shares
of Parent Common Stock or New Preferred Stock, as applicable, issuable by Parent
at the Effective Time to holders of Company Capital Stock in accordance with
Section 1.6(a) by (y) 0.10.
"Escrow Fund" means that number of shares of Parent Common Stock and
-----------
New Preferred Stock equal to the Escrow Amount.
"Escrow Period" has the meaning ascribed to it in Section 7.2(c).
-------------
"Estimated Claim Amount" has the meaning ascribed to it in Section
----------------------
7.2(e).
"Exchange Agent" means Pillsbury Madison & Sutro LLP.
--------------
"Exchange Ratios" means the Common Stock Exchange Ratio, the Series B
---------------
Exchange Ratio and the Series C Exchange Ratio. All of the Exchange Ratios shall
be rounded to six decimal places after zero.
"Expiration Date" has the meaning ascribed to it in Section 7.1.
---------------
"Fairness Hearing" has the meaning ascribed to it in Section 1.12.
----------------
"GAAP" means United States generally accepted accounting principles,
----
consistently applied.
"Governmental or Regulatory Authority" means any court, tribunal,
------------------------------------
arbitrator, authority, agency, commission, official, regulatory or
administrative authority or other instrumentality of the United States, any
foreign country or any domestic or foreign state, county, city or other
political subdivision, and shall include any stock exchange, quotation service
and the National Association of Securities Dealers.
"Grossed-Up Basis" means, when used to describe the basis on which the
----------------
payment of a specified sum is to be made, a basis such that the amount of such
payment, after being reduced by the amount of all Taxes imposed on the recipient
of such payment as a result of the receipt or accrual of such payment, will
equal the specified sum.
"Hazardous Material" means (a) any petroleum or petroleum products,
------------------
by-products or breakdown products, radioactive materials, asbestos-containing
material in any form that is or could become friable, urea formaldehyde foam
insulation and transformers or other equipment that contain polychlorinated
biphenyls (PCBs); (b) any other chemicals, materials, substances or wastes which
are now defined as or included in the definition of "hazardous substances,"
"hazardous wastes," "hazardous materials," "extremely hazardous wastes,"
"restricted
-63-
EXECUTION VERSION
hazardous wastes," "toxic substances," "toxic pollutants" or words of similar
import, under any Environmental Law; and (c) any other chemical, material,
substance or waste, exposure to which is now or hereafter prohibited, limited or
regulated by any Governmental or Regulatory Authority.
"Indebtedness" of any Person means all obligations of such Person (a)
------------
for borrowed money, (b) evidenced by notes, bonds, debentures or similar
instruments, (c) for the deferred purchase price of goods or services (other
than trade payables or accruals incurred in the ordinary course of business),
(d) under capital leases and (e) in the nature of guarantees of the obligations
described in clauses (a) through (d) above of any other Person.
"Information Statement" has the meaning ascribed to it in Section 5.2.
---------------------
"Intellectual Property" means all trademarks and trademark rights,
---------------------
trade names and trade name rights, service marks and service ▇▇▇▇ rights,
service names and service name rights, patents and patent rights, utility models
and utility model rights, domain names, key words, meta-tags or other internet
indicia, mask works, copyrights, brand names, trade dress, product designs,
product packaging, business and product names, logos, slogans, rights of
publicity, trade secrets, inventions, processes, formulae, industrial models,
processes, designs, specifications, data, technology, methodologies, computer
programs (including all source codes), any other confidential and proprietary
right or information, whether or not subject to statutory registration, and all
related technical information, manufacturing, engineering and technical
drawings, know-how and all pending applications for and registrations of
patents, utility models, trademarks, service marks, internet indicia, mask works
and copyrights, and the right to ▇▇▇ for past infringement, if any, in
connection with any of the foregoing, and all documents, disks and other media
on which any of the foregoing is stored.
"Investment Assets" means all debentures, notes and other evidences of
-----------------
Indebtedness, stocks, securities (including rights to purchase and securities
convertible into or exchangeable for other securities), interests in joint
ventures and general and limited partnerships, mortgage loans and other
investment or portfolio assets owned of record or beneficially by such Person.
"Interim Financial Statements" means the unaudited balance sheet of
----------------------------
the Company as of March 31, 2000, and the related unaudited statement of
operations and statement of cash flows for the three (3) month period ended as
of such date.
"IRS" means the United States Internal Revenue Service.
---
"Law" or "Laws" means all laws, statutes, rules, regulations,
--- ----
ordinances and other pronouncements having the effect of law of the United
States, any foreign country or any domestic or foreign state, county, city or
other political subdivision or of any Governmental or Regulatory Authority.
"Leased Real Property(ies)" has the meaning ascribed to it in Section
-------------------------
2.15(a).
"Liabilities" means all Indebtedness, obligations and other
-----------
liabilities (or contingencies that have not yet become liabilities) of a Person,
whether absolute, accrued, contingent
-64-
EXECUTION VERSION
(or based upon any contingency), known or unknown, fixed or otherwise, or
whether due or to become due as determined in accordance with GAAP.
"License" means any Contract that grants a Person the right to use or
-------
otherwise enjoy the benefits of any Intellectual Property (including without
limitation any covenants not to ▇▇▇ with respect to any Intellectual Property).
"Liens" means any mortgage, pledge, assessment, security interest,
-----
lease, lien, adverse claim, levy, charge or other encumbrance of any kind, or
any conditional sale Contract, title retention contract or other Contract to
give any of the foregoing.
"Loss(es)" means any and all damages, fines, fees, Taxes, penalties,
--------
deficiencies, losses and expenses, including interest, reasonable expenses of
investigation, court costs, reasonable fees and expenses of attorneys,
accountants and other experts or other expenses of litigation or other
proceedings or of any claim, default or assessment (such fees and expenses to
include all fees and expenses, including fees and expenses of attorneys,
incurred in connection with (i) the investigation or defense of any Third Party
Claims or (ii) asserting or disputing any rights under this Agreement against
any party hereto or otherwise), other than Losses to the extent recoverable by
the relevant party under any applicable insurance policy, computed on an after-
Tax basis; provided, however, that if the payment on such insurance policy
subsequently (within three (3) months of the date of payment) results in an
increase in the applicable insurance premium, such increase in the premium shall
be added to the calculation of the amount of the Loss.
"Merger" has the meaning ascribed to it in the recitals to this
------
Agreement.
"Merger Sub" has the meaning ascribed to it in the forepart of this
----------
Agreement.
"New Preferred Stock" has the meaning ascribed to it in the recitals
-------------------
to this Agreement.
"New Shares" has the meaning ascribed to it in Section 7.2(d)(ii).
----------
"Officer's Certificate" has the meaning ascribed to it in Section
---------------------
7.2(e)(i).
"Option" with respect to any Person means any security, right,
------
subscription, warrant, option, "phantom" stock right or other Contract that
gives the right to (i) purchase or otherwise receive or be issued any shares of
capital stock or other equity interests of such Person or any security of any
kind convertible into or exchangeable or exercisable for any shares of capital
stock or other equity interests of such Person or (ii) receive any benefits or
rights similar to any rights enjoyed by or accruing to the holder of shares of
capital stock or other equity interests of such Person, including any rights to
participate in the equity, income or election of directors or officers of such
Person.
"Order" means any writ, judgment, decree, injunction or similar order
-----
of any Governmental or Regulatory Authority (in each such case whether
preliminary or final).
"Parent" has the meaning ascribed to it in the forepart of this
------
Agreement.
-65-
EXECUTION VERSION
"Parent Affiliate" has the meaning ascribed to it in Section 5.14.
----------------
"Parent Affiliate Agreement" has the meaning ascribed to it in Section
--------------------------
5.14.
"Parent Aggregate Common Number" means 42,906,685 shares (which is
------------------------------
equal to the aggregate number of shares of Parent Common Stock outstanding as of
the date hereof (including all shares of Parent Common Stock issued or issuable
upon conversion of all shares of Parent Preferred Stock and upon exercise,
conversion or exchange of all unvested and vested Parent Options which are not
exercised, converted, exchanged or expired as of the date hereof)).
"Parent Balance Sheet Date" has the meaning ascribed to it in Section
-------------------------
3.4.
"Parent Capital Stock" means Parent Common Stock and Parent Preferred
--------------------
Stock.
"Parent Common Stock" has the meaning ascribed to it in the recitals
-------------------
to this Agreement.
"Parent Disclosure Schedule" means the schedules delivered to the
--------------------------
Company by or on behalf of Parent and Merger Sub, containing all lists,
descriptions, exceptions and other information and materials as are required to
be included therein in connection with the representations and warranties made
by Parent and Merger Sub in Article 3 of this Agreement.
"Parent Option" means any Option to purchase Parent Common Stock or
-------------
Parent Preferred Stock.
"Parent Preferred Stock" has the meaning ascribed to it in Section
----------------------
3.8.
"Parent Financial Statements" has the meaning ascribed to it in
---------------------------
Section 3.4.
"Parent Warrants" shall mean the Series F-1 Warrants and the Series F-
---------------
2 Warrants.
"PBGC" means the Pension Benefit Guaranty Corporation established
----
under ERISA.
"Permit" means any license, permit, franchise or authorization.
------
"Permit Application" has the meaning ascribed to it in Section 5.2.
------------------
"Person" means any natural person, corporation, general partnership,
------
limited partnership, limited liability company or partnership, proprietorship,
other business organization, trust, union, association or Governmental or
Regulatory Authority.
"Plan" means any bonus, incentive compensation, deferred compensation,
----
pension, profit sharing, retirement, stock purchase, stock option, stock
ownership, stock appreciation rights, phantom stock, leave of absence, layoff,
vacation, day or dependent care, legal services, cafeteria, life, health,
accident, disability, workmen's compensation or other insurance, severance,
separation or other employee benefit plan, practice, policy or arrangement of
any kind,
-66-
EXECUTION VERSION
whether written or oral, including any "employee benefit plan" within the
meaning of Section 3(3) of ERISA.
"Pooling of Interests" shall mean pooling of interests accounting
--------------------
treatment under Accounting Principles Board Opinion No. 16.
"PTO" means the United States Patent and Trademark Office.
---
"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
to trademarks; (iii) registered copyrights and applications for copyright
registration; (iv) any mask work registrations and applications to register mask
works; (v) domain names, key words, meta-tags or other internet indicia that are
registered or recorded with any private or public agency; and (vi) any other
Intellectual Property that is the subject of an application, certificate,
filing, registration or other document issued by, filed with, or recorded by,
any state, government or other public legal authority.
"Release" means any spilling, leaking, pumping, pouring, emitting,
-------
emptying, discharging, injecting, escaping, leaching, dumping or disposing of a
Hazardous Material into the Environment.
"Relevant Group" has the meaning ascribed to it in Section 2.11(a).
--------------
"SEC" means the Securities and Exchange Commission.
---
"Securities Act" means the Securities Act of 1933, as amended, and the
--------------
rules and regulations promulgated thereunder.
"Series B Exchange Ratio" shall mean the quotient obtained by dividing
-----------------------
(i) 456,050 by (ii) the number of shares of the Company's Series B Preferred
Stock outstanding (which for this purpose shall be deemed to include any shares
of the Company's Series B Preferred Stock, if any, subject to unexpired and
unexercised Company Options or Company Warrants for the Company's Series B
Preferred Stock) as of the Effective Time.
"Series C Exchange Ratio" shall mean the quotient obtained by dividing
-----------------------
(i) 949,750 by (ii) the number of shares of the Company's Series C Preferred
Stock outstanding (which for this purpose shall be deemed to include any shares
of the Company's Series C Preferred Stock, if any, subject to unexpired and
unexercised Company Options or Company Warrants for the Company's Series C
Preferred Stock) as of the Effective Time.
"Series F-1 Warrant" shall mean a warrant to purchase shares of
------------------
Parent's Series F-1 Preferred Stock that is exchanged for a Company Warrant to
purchase shares of the Company's Series B Preferred Stock.
"Series F-2 Warrant" shall mean a warrant to purchase shares of
------------------
Parent's Series F-2 Preferred Stock that is exchanged for a Company Warrant to
purchase shares of the Company's Series C Preferred Stock.
-67-
EXECUTION VERSION
"Site" means any of the real properties currently or previously owned,
----
leased or operated by the Company, any predecessors of the Company, or any
entities previously owned by the Company, including all soil, subsoil, surface
waters and groundwater.
"Stockholder Agent" has the meaning ascribed to it in Section
-----------------
7.2(h)(i).
"Stockholder Certificates" has the meaning ascribed to it in Section
------------------------
5.1(c).
"Subsidiary" means any Person in which the Company, directly or
----------
indirectly through Subsidiaries or otherwise, beneficially owns at least twenty
percent (20%) of either the equity interest in, or the voting control of, such
Person, whether or not existing on the date hereof.
"Surviving Corporation" has the meaning ascribed to it in Section 1.1.
---------------------
"Tax" or "Taxes" means all federal, state, local or foreign net or
--- -----
gross income, gross receipts, net proceeds, sales, use, ad valorem, value added,
----------
franchise, bank shares, withholding, payroll, employment, excise, property,
alternative or add-on minimum, environmental or other taxes, assessments,
duties, fees, levies or other governmental charges of any nature whatever,
whether disputed or not, together with any interest, penalties, additions to tax
or additional amounts with respect thereto.
"Tax Returns" means any returns, reports or statements (including any
-----------
information returns) required to be filed for purposes of a particular Tax.
"Taxing Authority" means any governmental agency, board, bureau, body,
----------------
department or authority of any United States federal, state or local
jurisdiction or any foreign jurisdiction, having or purporting to exercise
jurisdiction with respect to any Tax.
"Third Party Claim" has the meaning ascribed to it in Section 7.2(j).
-----------------
"Third Party Expenses" has the meaning ascribed to it in Section 5.7.
--------------------
"Unaudited Financial Statements" means the unaudited balance sheet of
------------------------------
the Company as of April 30, 2000, and the related unaudited statements of
operations and statement of cash flows for the period ended as of such date,
including the notes thereto.
"Warranty Obligations" has the meaning ascribed to it in Section 2.28.
--------------------
(b) Unless the context of this Agreement otherwise requires, (i) words of
any gender include each other gender, (ii) words using the singular or plural
number also include the plural or singular number, respectively, (iii) the terms
"hereof," "herein," "hereby" and derivative or similar words refer to this
entire Agreement, (iv) the terms "Article" or "Section" refer to the specified
Article or Section of this Agreement, (v) the phrases "ordinary course of
business" and "ordinary course of business consistent with past practice" refer
to the business and practice of the Company, (vi) the words "include,"
"includes" and "including" shall be deemed to be followed by the phrase "without
limitation," and (vii) when a reference is made in this Agreement to Exhibits,
such reference shall be to an Exhibit to this Agreement unless otherwise
-68-
EXECUTION VERSION
indicated. All accounting terms used herein and not expressly defined herein
shall have the meanings given to them under GAAP.
(c) When used herein, the phrase "to the knowledge of" any Person, "to the
best knowledge of" any Person, "known to" any Person or any similar phrase,
means (i) with respect to any Person who is an individual, the actual knowledge
of such Person, (ii) with respect to any other Person, the actual knowledge of
the directors and officers of such Person and other individuals that have a
similar position or have similar powers and duties as the officers and directors
of such Person, and (iii) in the case of each of (i) and (ii), the knowledge of
facts that such individuals should have after reasonable inquiry.
[Signature Page Follows]
-69-
EXECUTION VERSION
IN WITNESS WHEREOF, Parent, Merger Sub and Company, and with respect to
Article 7 only, the Stockholder Agent and Escrow Agent, have caused this
Agreement to be signed by their duly authorized representatives, all as of the
date first written above.
MOSCAPE, INC. MAGMA DESIGN AUTOMATION, INC.
By /s/ ▇▇▇▇ ▇. ▇▇▇▇ By /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
--------------------------------- ------------------------------------
Name ▇▇▇▇ ▇. ▇▇▇▇ Name
------------------------------- -----------------------------------
Title President and CEO
------------------------------ --------------------------------------------
MAGMA ACQUISITION CORP. STOCKHOLDER AGENT
-----------------
By /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ By /s/ ▇▇▇▇ ▇▇▇▇
--------------------------------- ------------------------------------------------
▇▇▇▇ ▇▇▇▇
Name
--------------------------------
Title
------------------------------
ESCROW AGENT
------------
U.S. BANK TRUST, NATIONAL ASSOCIATION
By /s/ ▇▇▇ ▇▇▇▇▇▇
----------------------------------------
Name ▇▇▇ ▇▇▇▇▇▇
--------------------------------------
Title Vice President
-------------------------------------
-70-