EXHIBIT 10.27
MERGER AGREEMENT
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THIS AGREEMENT is made and entered into this 16 day of July, 2000 (the
"Effective Date") (the "Agreement") by and between ZiLOG, Inc., a Delaware
corporation ("ZiLOG"); and CALIBRE, INC., a California corporation ("Calibre"),
and is made with reference to the following facts and objectives:
R E C I T A L S
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A. ZiLOG's board of directors has determined that it is in the best
interests of ZiLOG, and in the best interests of its shareholders, to enter into
a merger transaction (the "Merger") whereby Calibre will be merged into ZiLOG
pursuant to the terms hereof.
B. Calibre's board of directors has determined that it is in the best
interests of Calibre, and in the best interest of Calibre's shareholders, to
consummate the Merger whereby Calibre will be merged into ZiLOG pursuant hereto,
and has resolved to recommend to its shareholders that the Merger be approved.
C. The parties intend for this transaction to qualify as a reorganization
under the provisions of Section 368(a) of the Internal Revenue Code of 1986, as
amended (the "Code").
NOW, THEREFORE, in consideration of the mutual covenants, agreements,
representations, and warranties contained in this agreement, the parties agree
as follows:
1. Merger: Effective as of the Closing Date, as defined in Paragraph 9,
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below, and subject to the terms of the Certificate of Merger attached
hereto as Exhibit "A" (the "Certificate of Merger"), and the Agreement of
Merger attached hereto as Exhibit "B" (the "Agreement of Merger"), and
subject to the applicable terms of Delaware law and of California law,
Calibre shall be merged with and into ZiLOG, the separate corporate
existence of Calibre shall cease, and ZiLOG shall continue as the surviving
corporation after the Merger. Following the Closing Date, ZiLOG shall file
the Agreement of Merger with the related officers' certificates with the
Secretary of State of the State of California, and ZiLOG shall file the
Certificate of Merger with the Secretary of State of the State of Delaware.
2. Effect on Capital Stock: The parties acknowledge that the current capital
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structure of Calibre consists of One Million Nine Hundred Sixty-four
Thousand Two Hundred Seventy-four (1,964,274) shares of Series B Preferred
Stock which are issued and outstanding (the "Calibre Series B Preferred
Stock"); One Million Eight Hundred Nine Thousand Four Hundred Fifty
(1,809,450) shares of Series A Preferred Stock which are issued and
outstanding (the "Calibre Series A Preferred Stock"); and Four Million Nine
Hundred Thirty-three Thousand Six Hundred Thirty-five (4,933,635) shares of
Common Stock which are issued and outstanding (the "Calibre Common Stock").
Effective as of the Closing Date, the following shall occur:
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a. Concurrent with the execution of this Agreement, ZiLOG and Calibre
shall enter into a loan agreement (the "Loan Agreement") pursuant to
which ZiLOG will issue a loan to Calibre in the amount of Five Hundred
Thousand Dollars ($500,000), which shall be subject to the terms and
conditions set forth in the Loan Agreement.
b. ZiLOG shall issue a total of Six Hundred Twenty-five Thousand
(625,000) of its One Cent ($0.01) par value common stock (the "ZiLOG
Common Stock") to the shareholders of all outstanding shares of
Calibre Common Stock, Series A Preferred Stock and Series B Preferred
Stock (collectively, "Calibre Capital Stock" and each shareholder a
"Calibre Shareholder") as of the date hereof in exchange for all
outstanding shares of Calibre Capital Stock, after which Calibre shall
become merged into ZiLOG, all shares of Calibre Capital Stock shall be
canceled, and Calibre shall cease its corporate existence. Each
Calibre Shareholder shall receive a quantity of ZiLOG Common Stock
computed by multiplying Six Hundred Twenty-five Thousand (625,000) by
a fraction, the numerator of which is the number of shares of Calibre
Capital Stock (calculated on an as-converted basis) held by such
Calibre Shareholder, and the denominator of which is the total number
of Calibre Capital Stock issued and outstanding as of the date hereof.
The above fraction is hereinafter referred to as the "Calibre
Shareholder's Proportionate Share".
c. The parties acknowledge that Calibre currently maintains a employee
stock option plan (the "Employee Stock Option Plan") pursuant to which
employees of Calibre have been issued options (the "Employee Stock
Options") to acquire Calibre stock at prices set forth in each
employee's stock option agreement (the "Stock Option Agreement").
Immediately prior to the Closing Date, Calibre shall terminate the
Employee Stock Option Plan. In the event ZiLOG elects this option,
then ZiLOG will assume the obligation under all vested options, and
all Employee Stock Options which have vested as of the Closing Date
shall be converted into options to acquire ZiLOG stock. Each Employee
Stock Option to purchase Calibre stock shall be converted, as of the
Closing Date, into an option to purchase Eleven Thousand Four Hundred
Eighty-five One Hundred Thousandths (.11485) of a share of ZiLOG
common stock (the "Option Conversion Ratio"). The exercise price,
exercise provisions, term and all other provisions of the vested
options assumed by ZiLOG shall continue to be governed by the terms of
the former Calibre Employee Stock Option Plan.
d. If, at any time after the expiration of a lock-up period (if any)
imposed upon ZiLOG shareholders by the underwriters of an initial
public offering of ZiLOG shares of stock ("ZiLOG's IPO") ZiLOG intends
to file a registration statement under the Securities Act of 1933 (the
"Securities Act") pursuant to which additional common stock of ZiLOG
will be registered for offering to the public, ZiLOG will notify any
Calibre Shareholder who receives ZiLOG shares hereunder of ZiLOG's
intent to file such registration statement at least thirty (30) days
prior to the date ZiLOG intends to file such registration statement.
Each Calibre Shareholder who acquired ZiLOG common stock pursuant to
this
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Agreement may elect, by giving written notice to ZiLOG within fifteen
(15) days of receipt of the above-referenced notice, to include some
or all of such shareholder's shares of ZiLOG common stock received
pursuant hereto in such registration statement. If a Calibre
Shareholder does not include all of its shares of ZiLOG common stock
in any such registration, that Calibre Shareholder shall continue to
have the right to include any ZiLOG common stock which the Calibre
Shareholder received pursuant hereto in any subsequent registration
statement filed by ZiLOG subsequent thereto. Notwithstanding the
foregoing, however, each Calibre Shareholder desiring to have its
shares registered pursuant hereto shall execute such agreements and
comply with such terms and conditions as may be requested by the
underwriter of the offering including, without limitation, the
execution of such lock-up agreements as may be requested by such
underwriter.
e. If ZiLOG does not offer any Calibre employee a position within ZiLOG
post merger, then ZiLOG will pay that employee severance equal to
three (3) months of salary.
3. Contingent Issuance of Shares: Attached hereto as Exhibit "C" is a
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financial plan (the "Plan") for the Calibre business line (the "Calibre
Business") for the twelve (12) month period commencing on the Closing Date
and ending on the day immediately preceding the first anniversary of the
Closing Date (the "Earnout Period"). In the event that Calibre achieves (i)
at least eighty percent (80%) of the Gross Margin Dollars set forth on the
Plan for the Earnout Period, and (ii) Gross Margin Percentage of at least
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thirty percent (30%) for all revenue generated during the Earnout Period,
then, in addition to the ZiLOG Common Stock issued pursuant to subparagraph
2(c), above, the following ZiLOG Common Stock shall be issued:
a. For each full one percent (1%) above eighty percent (80%) of Gross
Margin Dollars which is achieved by the Calibre Business during the
Earnout Period, an additional Eighteen Thousand Seven Hundred Fifty
(18,750) shares of ZiLOG Common Stock shall be issued, up to a maximum
of Three Hundred Seventy-five Thousand (375,000) additional shares of
ZiLOG Common Stock being issued pursuant hereto if the Calibre
Business achieves at least one hundred percent (100%) of the Gross
Margin Dollars set forth in the Plan for the Earnout Period.
b. In the event ZiLOG is required to issue the full Three Hundred
Seventy-five Thousand (375,000) shares of ZiLOG Common Stock, as
provided in subparagraph (a), above, and the Calibre Business achieves
in excess of one hundred percent (100%) of the Gross Margin Dollars
set forth in the Plan during the Earnout Period, then for each full
one percent (1%) in excess of one hundred percent (100%) of Gross
Margin Dollars set forth in the Plan achieved by the Calibre Business
during the Earnout Period, ZiLOG shall issue Ten Thousand (10,000)
shares of ZiLOG Common Stock, up to a maximum of One Hundred Fifty
Thousand (150,000) additional shares of ZiLOG Common Stock being
issued pursuant hereto if the Calibre Business achieves at least one
hundred fifteen percent (115%) of the Gross Margin Dollars set forth
in the Plan for the Earnout Period.
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c. Each Calibre Shareholder who receives ZiLOG Common Stock pursuant to
Paragraph 2, above, shall be entitled to that Calibre Shareholder's
Proportionate Share of any additional ZiLOG Common Stock to be issued
pursuant to subparagraph (a) and (b), above. The Calibre Business'
performance against the Plan shall be determined by ZiLOG as soon as
reasonably practical following the close of the Earnout Period. Any
shares required to be issued pursuant to this Paragraph 3 shall be
issued within thirty (30) days after the Calibre Business' performance
against the Plan is finally determined.
d. In no event shall any Calibre Shareholder be entitled to assign any
rights to receive ZiLOG Common Stock pursuant to this Paragraph 3 to
any person or entity; provided however, that the provisions of this
subparagraph (d) shall not apply to those ZiLOG shares already
received or held by a Calibre Shareholder.
e. For purposes of this Agreement, the following terms shall have the
following meanings:
i. The term "Gross Margin Dollars" shall mean the total gross
revenue generated by the Calibre Business during the Earnout
Period ("Revenue"), computed in accordance with ZiLOG's
accounting methods in existence at the time of computation, minus
the sum of the following:
(1) returns and credits;
(2) costs of goods sold, as determined under generally accepted
accounting principles shall equal the variable cost of goods
associated with the Calibre Business without any addition
for any manufacturing overhead;
(3) any Material Liabilities attributable to the Calibre
Business which are accrued during the Plan year, using
generally accepted accounting methods, which are
attributable to acts, omissions or events occurring prior to
the Closing Date and which were not disclosed as of the
Closing Date or otherwise disclosed in writing by Calibre to
ZiLOG prior to the Closing Date; and
(4) Any Material Liabilities, costs, damages or expenses
(collectively, "Material Offsets") not previously accounted
for under subparagraphs (1) through (3), above, which are
incurred by ZiLOG and/or the Calibre Business and which are
related to any representation or warranty of Calibre
contained hereunder being inaccurate.
(5) For purposes of subparagraphs (3) and (4), above, the term
"Material Liabilities" means a liability which,
individually, exceeds fifty thousand dollars ($50,000), and
includes all liabilities
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if all liabilities which, individually, are less than fifty
thousand dollars ($50,000), when aggregated, sum to more
than two hundred thousand dollars ($200,000).
ii. The term "Gross Margin Percentage" is a percentage determined by
dividing the Gross Margin Dollars for the Earnout Period by the
Revenue for the Earnout Period.
f. ZiLOG acknowledges and agrees that in the event that ZiLOG takes any
of the following actions during the Earnout Period, and after any
former shareholder of Calibre provides ZiLOG with due written notice
and a reasonable opportunity to cure and ZiLOG fails to cure, each as
specified below, it shall be required to issue the 375,000 shares of
ZiLOG Common Stock specified in subparagraph (a), above, to the
shareholders of Calibre at the end of the Earnout Period, regardless
whether Calibre attains the financial results set forth in
subparagraph (a), above:
i. ZiLOG materially and without cause alters the, management,
engineering or sales personnel of Calibre (whether by number or
position) or prohibits Calibre from hiring the additional
personnel specified in the Plan and at the expense budget amounts
in the Plan, and such actions directly and materially impact
Calibre's ability to achieve the Gross Margin Dollars required to
obtain the additional shares set forth in subparagraph 3(a),
above; provided, however, that the parties agree that an
alteration to the management personnel which provides for the
termination of the Chief Financial Officer or the President of
Japan Operations shall not be deemed a material change pursuant
hereto;
ii. ZiLOG fails to offer funding of Calibre's business to the extent
contemplated by the expense budgets in the Plan such that the
failure to offer funding directly and materially impacts
Calibre's ability to achieve the Gross Margin Dollars required to
obtain the additional shares set forth in subparagraph 3(a),
above;
iii. ZiLOG materially alters the business practices unique to the
Calibre Business in a manner that directly, materially and
adversely impacts Calibre's ability to achieve the Gross Margin
Dollars required to obtain the additional shares set forth in
subparagraph 3(a), above.
iv. ZiLOG does not use reasonable efforts to get the Calibre Business
access to the AMI facility or other manufacturing facility for
semiconductor parts at reasonably competitive prices.
If any former shareholder of Calibre believes that ZiLOG has committed
any of the actions specified in subparagraphs 3(f)(i), (ii) (iii) or
(iv), above, such former shareholder shall immediately inform ZiLOG of
this belief by written notice within ten (10) days of the occurrence
of the action by ZiLOG. ZiLOG shall thereafter be given twenty (20)
days to analyze the written notice provided by
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such former shareholder of Calibre and take action to cure the alleged
item. If ZiLOG cures the alleged item within said twenty (20) day
period, then the Earnout Period shall be extended by the same number
of days that it took ZiLOG to cure the alleged item in which to
achieve the financial results under its Plan. Any alleged item that is
either cured by ZiLOG within the twenty (20) day period specified or
that is not brought to ZiLOG's attention by any former Calibre
shareholder in writing within ten (10) days of when any former
shareholder had notice of the alleged item or reasonably should have
had notice of the alleged item shall be forever waived and shall not
thereafter be asserted by any former Calibre shareholder as grounds to
seek collection of the Three Hundred Seventy-five Thousand (375,000)
shares specified in subparagraph 3(a) of this Agreement. In addition,
in no event shall any of the provisions set forth herein trigger any
obligation by ZiLOG to issue the One Hundred Fifty Thousand (150,000)
shares specified in subparagraph 3(b), above.
Notwithstanding the foregoing, in the event that, at the end of the
first six (6) months of the Earnout Period, or at the end of any
subsequent three (3) month period during the Earnout Period, Calibre
is not achieving at least fifty percent (50%) of the Gross Margin
Dollars set forth on the Plan on a cumulative basis, then ZiLOG shall
have no obligations whatsoever to continue funding to the extent set
forth in the Plan, and the provisions of this subparagraph 3(f) shall
be null, void and of no force or effect whatsoever.
4. Representations and Covenants of Calibre: Calibre hereby make the
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following covenants, agreements, representations and warranties, which are
subject to exceptions specifically disclosed in the disclosure schedule
(referencing the appropriate section and paragraph numbers except where it
is reasonably clear that the disclosure is intended to apply to another
Section) attached hereto as Exhibit "D" (the "Disclosure Schedule"):
a. Attached hereto as Exhibit "E" is a shareholder list setting forth all
Series A Shareholders, all Series B Shareholders and all Calibre
Common Stock shareholders, together with the number of shares of each
respective class of stock issued to such shareholders; the Calibre
Series B Preferred Stock, the Calibre Series A Preferred Stock and the
Calibre Common Stock in the quantities set forth on Exhibit "E"
represents all of the issued and outstanding stock of Calibre. Except
as set forth in Section 4(a) of the Disclosure Schedule and except for
Employee Stock Options issued under the Employee Stock Option Plan to
the persons and in the quantities set forth on Exhibit "F" attached
hereto, there are no other equity interests which are outstanding in
Calibre; and, except for the Employee Stock Options, there are no
other options, warrants or rights of any kind or character to acquire
any equity interest in Calibre.
b. Calibre shall not issue any additional shares of stock, preferred or
common, or any other equity interests in either of them, or issue any
options, warrants or other rights to acquire any of the foregoing, or
incur any debts or liabilities other than those incurred in the normal
course of business, without the prior written consent of ZiLOG at any
time prior to the Final Closing Date.
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c. At least ninety percent (90%) of the holders of each class and each
series of the outstanding shares of Calibre stock shall deliver to
ZiLOG on the Closing Date any instruments of assignment as may be
necessary or appropriate to allow cancellation of all shares of stock
held by such Calibre Shareholder, which shall be delivered on the
Closing Date upon issuance and delivery by ZiLOG of the shares of
ZiLOG Common Stock required to be issued to each respective Calibre
Shareholder pursuant to Paragraph 2 hereof.
d. There has been no transfer of any significant asset of Calibre over
the past twelve (12) months, and there shall be no such transfer prior
to the Closing Date, except as may have occurred or occurs in the
ordinary course of Calibre's business.
e. Calibre has performed and shall continue to perform all obligations it
is required to perform under material agreements which are currently
outstanding with any third parties; and Calibre is not, nor will it
be, in material default under the terms and conditions of any material
agreements it may, at any time, have with any third parties.
f. Calibre is a corporation duly organized, validly existing, and in good
standing under the laws of California, and has all necessary corporate
powers to own its properties and to operate its business as now owned
and operated by it. Neither the ownership of its properties nor the
nature of its business requires Calibre to be qualified to do business
in any jurisdiction other than California.
g. Calibre owns or possesses sufficient legal rights to all patents,
patent applications, trademarks, service marks, trade names,
copyrights, trade secrets, information and other proprietary rights
and processes necessary for its business as now conducted
(collectively, the "Intellectual Property"), without any infringement
of the rights of others. Except as set forth in the Disclosure
Schedule, there are no outstanding options, licenses or agreements of
any kind relating to the foregoing, nor is Calibre 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 other proprietary rights and
processes of any other person or entity other than such licenses or
agreements arising from the purchase of "off the shelf" or standard
products. Calibre has not received any communications alleging that it
has violated any of the patents, trademarks, service marks, trade
names, copyrights, trade secrets or other proprietary or intellectual
property rights of any other person or entity. Calibre is not aware
that any of its employees are 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 their duties to
Calibre or that would conflict with Calibre's business. Neither the
execution nor delivery of this Agreement, nor the carrying on of the
business of Calibre by the employees of Calibre, will conflict with or
result in a breach of the terms, conditions or provisions of, or
constitute a default under, any material contract, covenant or
instrument under which any employee is
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now obligated. It is not currently, nor will it be in the future,
necessary to utilize any inventions, trade secrets or proprietary
information of any employees of Calibre made prior to their employment
by Calibre, except for inventions, trade secrets or proprietary
information that have been assigned to Calibre.
h. Calibre has supplied copies of all material agreements which are
currently outstanding (the "Contracts"), and such Contracts are full
and complete copies of all such agreements. Attached hereto as Exhibit
"G" is a complete list of the Contracts as well as all contracts
entered into by the Company since its inception.
i. Attached hereto as Exhibit "H" are copies of tax returns or tax
filings from Calibre for 1998 as well as financial statements for
fiscal years 1998, 1999, first quarter of fiscal year 2000 and for the
period ending May 30, 2000 (the "Financial Statements"). All Financial
Statements supplied hereunder are true and correct, fully and
accurately report all financial transactions of the respective entity
to which it relates; and such Financial Statements, together with
disclosures made in the Disclosure Schedule, do not fail to state any
material fact which would cause such Financial Statements not to be
misleading as presented.
j. All technology, know-how and other intellectual property owned by,
used by or delivered or made available to third parties by Calibre
were developed by or for Calibre; do not make use of or incorporate in
any way any intellectual property rights belonging to any third party.
k. Calibre is the sole and exclusive owners of all technology, know-how
and other intellectual property used by any of them in their
respective businesses; and no transfer of any of the foregoing has
been made by it within the past twelve (12) months.
l. Attached hereto as Exhibit "I" is a listing of all employees of
Calibre who devote substantially all of their time to the business
affairs of Calibre. All of such employees have been paid all
compensation due to them as a result of their employment with Calibre
including, without limitation, wages, benefits, bonuses and profit-
sharing, and all requirements of law concerning benefit plans
including, without limitation, the requirements imposed by any United
States or state laws including, without limitation, the Employee
Retirement and Income Security Act ("ERISA"), have been complied with.
There are no collective bargaining agreements in force or effect
concerning such employees, there are no threatened labor disputes by
such employees, and there are no unfunded vested benefits under any
retirement plan maintained by Calibre.
m. Calibre shall continue to maintain in full force and effect through
the Closing Date all existing insurance policies currently being
maintained by Calibre including, without limitation, any insurance
policies covering any assets owned by any of them, any comprehensive
general liability policies, and any worker's compensation insurance.
Calibre shall, at all times prior to the Closing Date, pay
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all premiums which become due prior to the latest date on which
failure to pay such premiums would result in cancellation of such
policies.
n. The consummation of the transactions contemplated by this Agreement
will not result in or constitute a default or an event that, with
notice or lapse of time or both, would be a default, breach or
violation of the articles of incorporation or bylaws of Calibre, or
any material lease, license, promissory note, conditional sales
contract, commitment, employee plan, indenture, mortgage, deed of
trust or other agreement, instrument or arrangement to which Calibre
is a party or by which any of them, or the property of any of them, is
bound, or which may result in the creation or imposition of any
material lien, charge or encumbrance on any of the properties of any
of them.
o. Calibre has the right, power, legal capacity, and authority to enter
into and perform its obligations under this Agreement, and no
approvals or consents of any persons are necessary in connection with
it. The execution and delivery of this Agreement by Calibre has been
duly authorized by all necessary corporate action on the part of the
respective party.
p. From the date hereof until the Closing Date, Calibre shall use its
best efforts to preserve its business organization intact, to keep
available to it all of its present officers and employees, and to
preserve its present relationships with suppliers, customers, clients
and others having business relationships with them.
q. All tax returns of any kind or character which are required to be
filed by Calibre have been accurately prepared and filed, as required
by law, and all taxes of any kind or character including, without
limitation, all federal, state and local employment taxes, sales
taxes, excise taxes, and income taxes, together with any taxes
required to be withheld from employees and/or customers and required
to be remitted to the relevant taxing authorities, have been withheld
and paid as required. Calibre further agrees that it will accurately
prepare and file all tax returns of any kind or character required to
be filed following the date hereof, and will pay all taxes of any kind
or character required to be paid by it following the date hereof.
r. None of the representations and warranties made by Calibre contains or
will contain any untrue statement of a material fact, or omits to
state a material fact necessary to make the statements made, in light
of the circumstances under which they were made, not misleading. If
Calibre becomes aware of any information prior to the Closing Date
which may cause any representation or warranty hereunder to be
materially inaccurate, either singularly or in the aggregate, Calibre
shall immediately make such information available to ZiLOG.
s. The authorized number of shares of common stock of Calibre are Fifteen
Million (15,000,000) shares, and the authorized number of preferred
stock of Calibre are Five Million Two Hundred Thousand (5,200,000)
shares, and no other authorized equity exists in Calibre. The total
number of Calibre Common Stock issued and
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outstanding are Four Million Nine Hundred Thirty-three Thousand Six
Hundred Thirty-five (4,933,635); the total number of shares of Calibre
Class A Preferred Stock issued and outstanding are One Million Eight
Hundred Nine Thousand Four Hundred Fifty (1,809,450); and the total
number of shares of Calibre Class B Preferred Stock issued and
outstanding are One Million Nine Hundred Sixty-four Thousand Two
Hundred Seventy-four (1,964,274), plus there are Employee Options
issued and outstanding for a total of Two Million Thirty-two Thousand
Seven Hundred Twenty-nine (2,032,729) shares of Calibre Common Stock.
No other equity shares are issued or outstanding. All issued and
outstanding shares of stock in Calibre (i) have been duly authorized
and validly issued to the shareholders set forth on Exhibit "E"
attached hereto; (ii) are fully paid and nonassessable, and (iii) were
issued in compliance with all applicable state and federal laws
concerning the issuance of securities. Attached hereto as Exhibit "J"
is a full and complete copy of the Articles of Incorporation and other
organizational documents of Calibre; and attached hereto as Exhibit
"K" is a full and complete copy of the Bylaws of Calibre. The rights,
preferences, privileges and restrictions of the shares are as stated
in the Articles of Incorporation and/or Bylaws of Calibre. Except for
Employee Options and any conversion rights of the Series A Preferred
Shares and the Series B Preferred Shares, as stated in Calibre's
Articles of Incorporation, there are no outstanding options, warrants,
rights (including conversion or preemptive rights and rights of first
refusal), proxy or shareholder agreements, or agreements of any kind
for the purchase or acquisition of equity interests from Calibre.
t. There is no action, suit, proceeding or investigation pending or
currently threatened against Calibre for any claim whatsoever; or that
questions the validity of this Agreement or the right of the parties
to enter into any of the agreements contemplated hereby; or to
consummate the transactions contemplated hereby; or which might
result, either individually or in the aggregate, in any material
adverse change in the assets, condition, affairs or prospects of
Calibre, financially or otherwise, or any change in the current equity
ownership of Calibre; nor is there any basis for any such claims. The
foregoing includes, without limitation, actions pending or threatened
(or any basis therefor) involving the prior employment of any
employees or officers of Calibre, their use in connection with their
respective employer's business of any information or techniques
allegedly proprietary to any of their former employers, or their
obligations under any agreements with prior employers. None of the
parties hereto is a party or subject to the provisions of any order,
writ, injunction, judgment or decree of any court or government agency
or instrumentality. Except as disclosed to ZiLOG in writing, there is
no action, suit, proceeding or investigation by or against Calibre
currently pending, or which Calibre intends to initiate, or Calibre
contemplates initiating.
u. Calibre is not in violation of any applicable statute, rule,
regulation, order or restriction of any domestic or foreign government
or any instrumentality or agency thereof in respect of the conduct of
its business or the ownership of its properties. No governmental
orders, permissions, consents, approvals or authorizations are
required to be obtained and no registrations or declarations are
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required to be filed in connection with the execution and delivery of
this Agreement, except such as has been duly and validly obtained or
filed, or with respect to any filings that must be made after the
Closing Date, as will be filed in a timely manner. Calibre has all
franchises, permits, licenses and any similar authority necessary for
the conduct of their respective businesses as now being conducted by
them, and believes it can obtain, without undue burden or expense, any
similar authority for the conduct of its business as planned to be
conducted.
v. Calibre is not in violation of any applicable statute, law or
regulation relating to the environment or occupational health and
safety, and no material expenditures are or will be required in order
to comply with any existing statute, law or regulation.
w. This Agreement, the Exhibits hereto, and all other documents delivered
to ZiLOG or its attorneys or agents in connection herewith or with the
transactions contemplated hereby are complete and, except as
specifically stated thereon, have not been amended, rescinded or
modified in any manner; and do not contain any untrue statement of a
material fact nor omit to state a material fact necessary in order to
make the statements contained herein or therein not misleading.
x. There are no Material Liabilities (as defined in paragraph 4(e)(i)(5))
of any kind or character, whether contingent or liquid, known which
exist and which are not fully disclosed on the Financial Statements or
in the Disclosure Schedule.
y. All representations and warranties of Calibre set forth herein fully
apply to any predecessor in interest to Calibre, and shall be true and
correct on the date hereof and on the Closing Date as if made on each
such date.
5. Representations and Warranties of ZiLOG:
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a. ZiLOG hereby represents and warrants that it is a corporation duly
organized, validly existing, and in good standing under the laws of
Delaware, and has all necessary corporate powers to own its properties
and to operate its business as now owned and operated by it; that it
has the right, power, legal capacity, and authority to enter into and
perform its obligations under this Agreement, and no approvals or
consents of any persons other than ZiLOG and its board of directors
are necessary in connection with it. ZiLOG further represents and
warrants that it will maintain sufficient ZiLOG Common Stock reserves
to accomplish the issuance of the ZiLOG Common Stock required to be
issued by it pursuant hereto The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby
and thereby have been duly authorized by all necessary corporate
action on the part of ZiLOG. ZiLOG acknowledges that this Agreement
shall constitute the valid and binding obligations of ZiLOG,
enforceable in accordance with their terms, except as such
enforceability may be limited by principles of public policy and
subject to the laws of general application relating to bankruptcy,
insolvency and the relief of debtors and rules
-11-
of law governing specific performance, injunctive relief or other
equitable remedies.
b. All shares of ZiLOG stock to be issued pursuant to this Agreement have
been or shall upon issuance be duly authorized, fully paid and
nonassessable, free of any liens or encumbrances other than any liens
or encumbrances created by or imposed upon the holders thereof, are
not or shall not be subject to preemptive rights created by statute,
the charter documents or Bylaws of ZiLOG as currently in effect or any
agreement to which ZiLOG is a party or by which it is bound, and shall
have been issued in compliance with federal and state securities laws.
c. ZiLOG has made available to Calibre a true and complete copy of each
annual, quarterly and other reports filed by ZiLOG with the Securities
and Exchange Commission (the "SEC") since January 1, 1999 (the "ZiLOG
SEC Documents"). To the best of ZiLOG's knowledge, as of their
respective filing dates, the ZiLOG SEC Documents complied in all
material respects with the requirements of the Securities Act and the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), as
the case may be, and the rules and regulations of the SEC promulgated
thereunder applicable to such ZiLOG SEC Documents, and, to the best of
ZiLOG's knowledge, none of the ZiLOG SEC Documents contained on their
filing dates any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which
they were made, not misleading, except to the extent corrected by a
subsequently filed ZiLOG SEC Document. To the best of ZiLOG's
knowledge, the financial statements of ZiLOG included in the ZiLOG SEC
Documents (the "ZiLOG Financial Statements") complied as to form in
all material respects with the published rules and regulations of the
SEC with respect thereto, were prepared in accordance with generally
accepted accounting principles applied on a consistent basis
throughout the periods indicated (except as may be indicated in the
notes thereto or, in the case of unaudited financial statements, as
permitted under Form 10-Q under the Exchange Act) and fairly presented
the consolidated financial position of ZiLOG and its consolidated
subsidiaries as of the respective dates thereof and the consolidated
results of ZiLOG operations and cash flows for the periods indicated
(subject to, in the case of unaudited statements, to normal and
recurring year-end audit adjustments.
6. ZiLOG's Contingencies: The closing of the Initial Stock Acquisition, and
---------------------
all of ZiLOG's other obligations under and pursuant to this Agreement
including, without limitation, any obligations arising on the Closing Date,
are contingent upon all of the following contingencies being satisfied or
waived in writing by ZiLOG within the time periods set forth below:
a. Calibre shall have entered into a settlement agreement with Novalog in
form and substance satisfactory to ZiLOG, in ZiLOG's sole and absolute
discretion. In the event ZiLOG does not give written notice to Calibre
of the failure of this
-12-
contingency by July 21, 2000, then this contingency shall conclusively
be considered satisfied or waived by ZiLOG.
b. ZiLOG shall have had the opportunity to discuss with Citizen
Electronics and other customers and/or suppliers located in Asia such
matters as ZiLOG deems appropriate. Calibre agrees to cooperate with
ZiLOG in conducting its investigations hereunder. The determination of
whether of not this contingency is satisfied shall be made by ZiLOG in
its sole and absolute discretion. In the event ZiLOG does not give
written notice to Calibre of the failure of this contingency by July
21, 2000, then this contingency shall conclusively be considered
satisfied or waived by ZiLOG.
c. There shall not have occurred any event or condition of any character
that has had or is reasonably likely to have a material adverse effect
on Calibre and/or its business from the date of this Agreement until
the Closing Date.
d. The key shareholder/employees of Calibre, whose names are set forth in
Exhibit "L", shall have delivered to ZiLOG an executed Covenant Not to
Compete in the form attached hereto as Exhibit "M".
e. Each employee of Calibre who ZiLOG desires to retain as an employee
shall have delivered to ZiLOG executed employment agreements in a form
approved by ZiLOG. Thesalaries, bonuses and option grants to be
offered to each of those employees have been agreed to by the parties
hereto.
f. At least ninety percent (90%) of all outstanding shares each class and
each series of Calibre stock as of the date hereof shall have executed
an approval of this Merger in the form attached hereto as Exhibit "O."
g. ZiLOG shall have received an opinion from the attorney for Calibre in
the form attached hereto as Exhibit "P".
h. At least ninety percent (90%) of all outstanding shares each class and
each series of Calibre stock as of the date hereof shall consent to
enter into Lock-Up Agreements which shall be incorporated into the
approval of this Merger in the form attached hereto as Exhibit "O".
i. It is anticipated that ZiLOG shall issue its shares of ZiLOG Common
Stock to Calibre Shareholders under the exemption from registration
provided under Regulation D of the Securities Act of 1933 (the
"Securities Act"). In the event ZiLOG determines that the issuance
hereunder does not qualify for the exemption provided under Regulation
D of the Securities Act, then ZiLOG may, in its discretion, elect to
request a hearing before the California Commissioner of Corporations
pursuant to Sections 25121 and 25142 of the California Corporations
Code in order to perfect the exemption from registration provided
under Section 3(a)(10) of the Securities Act. If ZiLOG makes this
election, the
-13-
Closing Date, as provided under Paragraph 9, below, shall be extended
to a date after the holding of such hearing, as determined by ZiLOG;
provided, however, that in no event shall the Closing Date be extended
for more than ninety (90) days without the prior approval of Calibre.
ZiLOG's obligations hereunder are conditioned upon ZiLOG determining
that the issuance of ZiLOG Common Stock is exempt from registration
under Regulation D of the Securities Act, or on ZiLOG otherwise
obtaining an exemption from registration under the Securities Act
prior to the Closing Date.
j. Except as set forth in the Disclosure Schedule, all representations
and warranties of Calibre shall be true, correct and complete in all
material respects as of the Closing Date except for those which, by
their nature, shall change over time, and with respect to those which
change over time, any change (either singularly or in the aggregate)
does not materially adversely affect Calibre or any of its assets.
7. Calibre's Contingencies: The closing of the transactions contemplated by
-----------------------
this Agreement, and Calibre's obligations under and pursuant to this
Agreement, are contingent upon all of the following contingencies being
satisfied or waived in writing by Calibre prior to the Closing Date:
a. All representations and warranties made by ZiLOG hereunder shall be
true, correct and complete in all material respects as of the Closing
Date;
b. ZiLOG shall deliver to each Calibre Shareholder and/or to a transfer
agent mutually agreed upon by ZiLOG and Calibre the ZiLOG Common Stock
which such Calibre Shareholder is entitled under and pursuant to this
Agreement upon such Calibre Shareholder's surrender of its Calibre
Common Stock.
c. The receipt by Calibre of a signed consent to the Merger from at least
ninety-five percent (95%) of all outstanding shares of Calibre stock
as of the date hereof in the form attached hereto as Exhibit "O".
d. Shareholders of Calibre stock holding sufficient shares as to
constitute a majority of the outstanding Calibre Common Stock shall
have executed a voting agreement ("Voting Agreement") substantially in
the form attached hereto as Exhibit "Q" and such Voting Agreements
shall be in full force and effect.
e. Notwithstanding the execution of the Voting Agreement pursuant to
subparagraph (d), above, if (1) this Agreement is terminated because
Calibre fails to obtain the vote of a sufficient number of shares to
approve the Merger, (2) Calibre received a Takeover Proposal prior to
the termination of this Agreement, or prior to the termination of this
Agreement Calibre received either notice that any person was
considering making a Takeover Proposal or a request from any person
for information relating to Calibre and (3), within the six (6) month
period following the date hereof, such notice or request from such
person leads to Calibre and/or the Calibre Shareholders entering into
any agreement in which: (i) a majority of the outstanding Calibre
shares will be sold to a third party; or (ii) a merger,
-14-
consolidation, recapitalization or similar type of transaction will
occur whereby a controlling interest in Calibre will transfer; or
(iii) an equity investment will be made in Calibre which will result
in the new equity investment having direct or indirect control of
Calibre, then, upon Calibre entering into such an agreement, Calibre
shall pay to ZiLOG a termination fee equal to One Million Dollars
($1,000,000) to compensate ZiLOG for the time and expenses incurred by
ZiLOG in conducting its due diligence of the potential Merger
hereunder, and in documenting the terms and conditions of the Merger
and related transactions contemplated hereby. The termination fee due
hereunder shall be paid to ZiLOG within thirty (30) days of the date
Calibre enters into the agreement referenced herein.
8. Costs of Sale: Each party shall be responsible for its own attorneys'
-------------
fees, accounting fees, consulting fees and all other costs incurred by such
party in connection with this Agreement and the implementation hereof.
9. Closing Date: The closing date shall be July 28, 2000, or such other date
------------
as the parties hereto may mutually agree (the "Closing Date").
10. Public Announcements: This Agreement is to be maintained in strict
--------------------
confidence, and neither party shall issue any public announcement
concerning this transaction without the approval of the other until after
the Closing Date. Notwithstanding the foregoing, however, in the event a
disclosure of this transaction is required under securities or other laws
of the United States of America or any state thereof, then the terms of
this Agreement may be announced to the extent required to comply with any
such disclosure or other requirements.
11. Legends: The shares of ZiLOG Common Stock issued in the Merger shall be
-------
characterized as "restricted securities" for purposes of Rule 144 under the
Securities Act, and each certificate representing any of such shares shall
bear a legend identical or similar in effect to the following legend
(together with any other legend or legends required by applicable state
securities laws or otherwise):
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAW, AND MAY
NOT BE OFFERED, SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND ANY APPLICABLE
STATE SECURITIES LAWS, OR AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE.
12. Solicitation: Until the earlier of the Closing Date or the termination of
------------
this Agreement, Calibre and the officers, directors, employees or other
agents of Calibre will not, directly or indirectly, take any action to
solicit, initiate or encourage any Takeover Proposal. Upon execution of
this Agreement, Calibre will immediately cease any existing activities,
discussions or negotiations with any parties conducted heretofore with
respect to any of the foregoing. Calibre will promptly notify ZiLOG after
receipt of any Takeover Proposal or any notice that any person is
considering making a Takeover Proposal or any request
-15-
for nonpublic information relating to Calibre or for access to the
properties, books or records of Calibre by any person that has advised
Calibre that it may be considering making, or that has made, a Takeover
Proposal and will keep ZiLOG timely informed of the status and details of
any such Takeover Proposal notice, request or any correspondence or
communications related thereto and shall provide ZiLOG with a true and
complete copy of such Takeover Proposal notice or request or correspondence
or communications related thereto, if it is in writing, or a written
summary thereof, if it is not in writing. Calibre will promptly provide to
ZiLOG any non-public information concerning Calibre provided to any other
party which was not previously provided to ZiLOG. Neither Calibre's Board
of Directors, nor any committee thereof, shall (i) withdraw or modify, or
propose to withdraw or modify, in a manner adverse to ZiLOG, the approval
or recommendation by the Calibre Board of Directors or any such committee
of this Agreement or the Merger, or (ii) approve or recommend or propose to
approve or recommend, any Takeover Proposal or (iii) enter into any
agreement with respect to any Takeover Proposal; provided, however,
-------- -------
that nothing contained in this Agreement shall prohibit the Calibre Board
of Directors from (A) furnishing information to, or engaging in discussions
or negotiations with any person or entity in response to an unsolicited
bona fide written Takeover Proposal; or (B) recommending such an
unsolicited bona fide written Takeover Proposal to the shareholders of
Calibre, if (i) the Calibre Board of Directors concludes that such Takeover
Proposal would constitute a Superior Proposal, and (ii) the Calibre Board
of Directors determines in good faith that the failure to take such action
would result in a breach by the Calibre Board of Directors of its fiduciary
duties to the Calibre Shareholders, and (iii) prior to furnishing such
information to such person or entity, Calibre provides written notice to
ZiLOG that Calibre is furnishing information to, or entering into
discussions or negotiations with, such person or entity.
For purposes of this Agreement, "Takeover Proposal" means any offer or
-----------------
proposal for, or any indication of interest in, a merger or other business
combination involving Calibre or the acquisition of more than 50% of the
outstanding shares of capital stock of Calibre, or a significant portion of
the assets of Calibre, other than the transactions contemplated by this
Agreement.
For purposes of this Agreement, "Superior Proposal" means (i) a bona fide
-----------------
Takeover Proposal made by a third party that the Calibre Board of Directors
determines in its good faith judgment to be more favorable to the Calibre
Shareholders than the Merger and for which financing, to the extent
required, is then committed or which, in the good faith judgment of
Calibre's Board of Directors is reasonably capable of being obtained by
such third party.
13. Notices: All notices, requests, demands and other communications under
-------
this Agreement shall be in writing and shall be deemed to have been duly
given on the date of service, if served personally on the party to whom
notice is to be given, or on the second day after mailing, if mailed to the
party to whom notice is to be given, by first class mail, registered or
certified, postage prepaid, or by express courier such as Federal Express,
DHL, United Parcel Service or similar types of carrier, and properly
addressed as follows:
-16-
ZiLOG 000 X. Xxxxxxxx Xxx., Xxxxx 000
Xxxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxx,
Senior Vice President and General Counsel
Calibre 0000 Xxxxxxxxxx Xxxxx #000
Xxx Xxxx, XX 00000-0000
Attention: T. Xxxxx Xxxxxxxx
With copy to Xxxx Xxxx Xxxx & Freidenrich LLP
000 Xxxxxxxx Xxxxxx, Xxxx Xxxx, XX 00000-0000
Attention: Xxxxx X. Xxxxxxxx
Any party may change its address for purposes of this paragraph by giving
the other parties written notice of the new address in the manner set forth
above.
14. Arbitration of Disputes: Any dispute, claim or controversy arising between
-----------------------
ZiLOG, Calibre or any Calibre Shareholder regarding this Agreement or any
ancillary agreement executed concurrently herewith shall be settled by
arbitration in accordance with the rules of the American Arbitration
Association. Proper service of process for such arbitration shall be by
U.S. Postal Service or by Federal Express, DHL, United Parcel Service or
similar types of carriers. The arbitration shall be held in Santa Xxxxx
County, California before one arbitrator who shall follow the substantive
law of California in deciding the arbitration. Pre-hearing discovery shall
be allowed of all evidence and testimony to be presented at the hearing.
The arbitrators' decision shall be final and binding upon the parties. The
arbitrators shall render their decision in writing, explaining the legal
and factual basis for decision as to each of the principal controverted
issues. An award shall be deemed in excess of the powers granted to the
arbitrators if it (1) does not contain the legal grounds therefor; or (2)
if it contains an error of law on the face of the award that causes
substantial injustice. In any petition to confirm or vacate the
arbitrator's decision, an error of law appearing on the face of the award
that causes substantial injustice shall constitute grounds to vacate the
award. A judgment upon any award may be entered in a court of competent
jurisdiction.
15. Confidentiality Obligations: ZiLOG acknowledges that, in the course of
---------------------------
conducting its due diligence, it has or will receive certain information
about Calibre which is the confidential information of Calibre. In
addition, Calibre acknowledges that, in the course of conducting its due
diligence, it has or will receive certain information about ZiLOG which is
the confidential information of Calibre. For purposes of this Agreement,
the term "Confidential Information" means any financial information,
technical information or employment information given by one party (a
"Discloser") to the other (a "Recipient") other than: (i) any information
which the Recipient had in its possession through lawful means prior to
disclosure by Discloser; (ii) any information which is or becomes publicly
known through no breach of this Agreement by Recipient; (iii) any
information which is furnished to others by Discloser without restriction
on disclosure; (iv) any information which is hereafter furnished to
Recipient by a third party without
-17-
restriction on disclosure; or (v) information which is independently
developed by Recipient. For a period of five (5) years following the
execution date hereof, Recipient agrees that it shall not disclose
Confidential Information to any person, or use any Confidential Information
except as contemplated by this Agreement. Notwithstanding the foregoing,
however, the restrictions hereunder shall lapse upon completion of the
Merger in accordance herewith.
16. Termination:
-----------
This Agreement may be terminated and the contemplated merger abandoned at
any time prior to the Closing Date:(a) by mutual agreement of ZiLOG and
Calibre or (b) by ZiLOG or Calibre if the Closing Date shall not have
occurred by the earlier of (i) August 31, 2000 or (ii) the initial filing
by ZiLOG of a registration statement on Form S-1 for the sale of shares of
ZiLOG stock to the public; provided, however, that the right to terminate
this Agreement under this Section 16 shall not be available to any party
whose action or failure to act has been a principal cause of or resulted in
the failure of the merger to occur on or before such date and such action
or failure to act constitutes a breach of this Agreement.
17. Miscellaneous Provisions:
------------------------
a. Time of Essence: Time is of the essence of each provision of this
---------------
Agreement.
b. Successors and Assigns: This Agreement shall be binding on and
----------------------
inure to the benefit of the parties and their respective successors
and assigns.
c. Exhibits: All Exhibits referred to are attached hereto and
--------
incorporated herein by this reference.
d. Governing Law: This Agreement shall be construed and interpreted in
-------------
accordance with the laws of the State of California.
e. Integrated Agreement; Modification: This instrument contains the
----------------------------------
entire agreement of the parties and cannot be amended or modified
except by a written Agreement, executed by each of the parties hereto.
f. Captions: The captions of this Agreement are for convenience purposes
--------
only, and shall have no effect on its construction or interpretation.
g. Singular and Plural; Gender: When required by the context of this
---------------------------
Agreement, the singular shall include the plural, and the masculine
shall include the feminine, and the impersonal pronoun "it" shall
refer to either of the above, a corporation, partnership, joint
venture, or other entity, regardless of number or gender.
h. Severability: The unenforceability, invalidity, or illegality of any
------------
provision shall not render the other provisions unenforceable,
invalid, or illegal.
-18-
i. Waiver: No consent or waiver, express or implied, by either party
------
to this Contract of any breach or default by the other in the
performance of any obligation hereunder shall be deemed or construed
to be a consent to or waiver of any other breach or default by such
party hereunder. Failure on the part of any party hereto to complain
of any act or failure to act of the other party or to declare the
other party in default hereunder, irrespective of how long such
failure continues, shall not constitute a waiver of the rights of such
party hereunder.
j. Execution of Documents: The parties hereto hereby agree to execute
----------------------
and deliver such further instruments, agreements, contracts and
documents, as may be reasonably required to effectuate the stated and
intended purposes of this Agreement.
k. Counterparts: This Agreement may be executed simultaneously in one
------------
(1) or more counterparts, each of which shall be deemed an original,
but all of which together shall constitute one and the same
instrument.
l. Neutral Construction: The parties hereto agree that this Agreement
--------------------
will be interpreted neutrally, and that it should not be construed for
or against any party deemed to be the drafter thereof.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement on
the day and year first above written.
ZiLOG, Inc., a Delaware corporation Calibre, Inc., a California corporation
By: ^^ signature illegible By: ^^ signature illegible
------------------------------ ---------------------------
Title: Chief Strategy Officer Title: President
------------------------------ ---------------------------
-19-
EXHIBIT LIST
Exhibit A - Certificate of Merger
Exhibit B - Agreement of Merger
Exhibit C - Calibre Plan
Exhibit D - Disclosure Schedule
Exhibit E - Shareholder List
Exhibit F - Employee Stock Options
Exhibit G - Listing of Contracts
Exhibit H - Financial Statements
Exhibit I - List of Employees
Exhibit J - Calibre Articles of Incorporation
Exhibit K - Calibre Bylaws
Exhibit L - Shareholder/Employees Executing Covenant Not to Compete
Exhibit M - Covenant Not to Compete
Exhibit N - Employees Requiring Employment Contract
Exhibit O - Calibre Shareholder Approval of Merger
Exhibit P - Calibre Attorney Opinion Letter
Exhibit Q - Voting Agreement
