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EXHIBIT 2.2
AMENDMENT NO. 1 TO AGREEMENT AND PLAN OF REORGANIZATION
This Amendment No. 1 (this "Amendment") to the AGREEMENT AND PLAN OF
REORGANIZATION dated as of December 22, 1997 (the "Merger Agreement"), by and
among Giga-tronics Incorporated, a California corporation ("GIGA-TRONICS"), Giga
Micro Corp., a Delaware corporation and a wholly owned subsidiary of
Giga-tronics ("MERGER SUB") and Microsource, Inc., a California corporation
("MICROSOURCE") is entered into as of the 17th day of March, 1998 among
Giga-tronics, Merger Sub and Microsource. As used herein, "Agreement" shall mean
the Merger Agreement, as amended by this Amendment and as may be further
amended.
RECITALS
A. The Boards of Directors of Giga-tronics, Merger Sub and Microsource
each have determined to revise the terms of the transactions contemplated by the
Merger Agreement, to reflect the following: (i) Merger Sub will merge (the
"Merger") with and into Microsource, (ii) each share of common stock, no par
value, of Microsource ("Microsource Common Stock") and preferred stock, no par
value, of Microsource ("Microsource Preferred Stock," and collectively with
Microsource Common Stock, "Microsource Stock"), except for shares of Microsource
Stock as to which dissenters' rights, if available, will have been perfected,
will be converted into the right to receive cash consideration, in the manner
and amount herein described, and (iii) the capital stock of Merger Sub will be
converted into shares of Microsource Common Stock, all upon the terms and
subject to the conditions set forth herein.
B. The Board of Directors of Microsource has approved, and has resolved
to recommend that the shareholders of Microsource approve the Merger and the
Agreement.
C. The respective Boards of Directors of Giga-tronics and Merger Sub
have approved the Merger and the Agreement. Giga-tronics, as the sole
shareholder of Merger Sub, has approved the Merger and this Agreement.
D. The parties do not intend for the transactions contemplated by the
Agreement to qualify as a tax-free reorganization in accordance with the
provisions of Section 368(a) of the Internal Revenue Code of 1986, as amended
(the "Code").
NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements set forth herein, the
parties agree as follows:
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ARTICLE I
AMENDMENTS TO MERGER AGREEMENT
1.01. Section 1.01. Exhibit 1.01 to the Merger Agreement is deleted and
replaced with Exhibit 1.01 attached hereto.
1.02. Section 1.02. is amended and restated in its entirety as follows:
SECTION 1.02. CONVERSION OF SHARES.
(a) The total purchase price (the "Merger Consideration") payable by
Giga-tronics for all of the shares of Microsource Stock shall consist of:
(i) One Million Five Hundred Thousand Dollars ($1,500,000)
payable as soon as practicable after the Effective Time in accordance with
Section 1.03 (the "Initial Purchase Price"), plus
(ii) An additional amount equal to Seventy-Five Percent (75%) of
Net Income before income taxes earned by post-Merger Microsource for the first
fiscal year ending March 1999 after the Effective Time (the "First Post-Merger
Payment"), plus
(iii) An additional amount equal to Sixty Percent (60%) of Net
Income before income taxes earned by post-Merger Microsource for the second
fiscal year ending March 2000 after the Effective Time (the "Second Post-Merger
Payment," and collectively with the First Post-Merger Payment, the "Post-Merger
Payments").
For purposes of this Section 1.02, "Net Income" means net income as
defined in accordance with generally accepted accounting principles, as applied
to Giga-tronics.
The Post-Merger Payments shall be payable by Giga-tronics as soon as
practicable after preparation and audit of financial statements with respect to
post-Merger Microsource for the respective fiscal years for which such
Post-Merger Payment is earned. Each Post-Merger Payment shall be accompanied by
a statement setting forth the Net Income for the relevant period and the
calculation of the relevant Post-Merger Payment.
(b) At the Effective Time:
(i) Each share of Microsource Common Stock and Microsource
Preferred Stock issued and outstanding immediately prior to the Effective Time,
other than Dissenting Microsource Shares as defined in Section 1.04 hereof, will
automatically, by virtue of the Merger and without any action on the part of the
holder thereof, be converted into a right to receive from Giga-tronics the Per
Share Price (as defined below) and Per Share Post-Merger Payment (as defined
below) in the amounts as determined pursuant to this Section 1.02.
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(ii) Each share of Microsource Stock issued and outstanding
immediately prior to the Merger and owned directly or indirectly by Microsource
as treasury stock will be canceled, and no consideration will be delivered in
exchange therefor.
(iii) The Agreement of Merger to be filed will contain the
initial price per share of Microsource Common Stock (the "Per Share Price"), and
will be equal to (a) One Million Five Hundred Thousand Dollars ($1,500,000) less
the Directed Payments (as defined below) divided by (b) the aggregate of the
number of shares Microsource Common Stock outstanding plus shares of Microsource
Common Stock into which outstanding shares of Microsource Preferred Stock are
convertible (including Microsource Dissenting Shares) at the Effective Time (the
"Microsource Outstanding Equivalent Number"). All shares of Microsource Stock
will be exchangeable into the same Per Share Price as follows:
(a) each share of Common Stock of Microsource (the
"Microsource Common Shares") will be entitled to receive the Per Share Price;
(b) each share of Series A Preferred Stock of
Microsource (the "Microsource Series A Shares") will be entitled to receive the
Per Share Price multiplied by the number of shares of Microsource Common Stock
into which each Microsource Series A Share is convertible;
(c) each share of Series B Preferred Stock of
Microsource (the "Microsource Series B Shares") will be entitled to receive the
Per Share Price multiplied by the number of shares of Microsource Common Stock
into which each Microsource Series B Share is convertible;
(d) each share of Series C Preferred Stock of
Microsource (the "Microsource Series C Shares") will be entitled to receive the
Per Share Price multiplied by the number of shares of Microsource Common Stock
into which each Microsource Series C Share is convertible;
(e) each share of Series D Preferred Stock of
Microsource (the "Microsource Series D Shares") will be entitled to receive the
Per Share Price multiplied by the number of shares of Microsource Common Stock
into which each Microsource Series D Share is convertible.
(f) each share of Series E Preferred Stock of
Microsource (the "Microsource Series E Shares") will be entitled to receive the
Per Share Price multiplied by the number of shares of Microsource Common Stock
into which each Microsource Series E Share is convertible;
(g) each share of Series F Preferred Stock of
Microsource (the "Microsource Series F Shares") will be entitled to receive the
Per Share Price multiplied by the number of shares of Microsource Common Stock
into which each Microsource Series F Share is convertible.
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The Microsource Series A Shares, the Microsource Series B Shares, the
Microsource Series C Shares, the Microsource Series D Shares, the Microsource
Series E Shares, and the Microsource Series F Shares are herein referred to as
the "Microsource Preferred Shares."
(iv) Each share of Microsource Common Stock shall be entitled to
receive an additional contingent amount equal to (i) the First Post-Merger
Payment divided by the Microsource Outstanding Equivalent Number (the "Per Share
First Post-Merger Payment") and (ii) the Second Post-Merger Payment divided by
the Microsource Outstanding Equivalent Number (the "Second Per Share Post-Merger
Payments" and collectively, the "Per Share Post-Merger Payments"). Each of the
Microsource Preferred Shares will be entitled to the applicable Per Share
Post-Merger Payment determined in the manner set forth in 1.02(b)(iii).
(c) From the Initial Purchase Price, Giga-tronics will make certain
payments (the "Directed Payments"), including:
(i) payments due to the Microsource Advisor;
(ii) payments reflecting the aggregate principal amount due to a
Microsource shareholder pursuant to such shareholder's dissent and appraisal
rights relating to Microsource's 1994 reorganization;
(iii) payments in the aggregate of $25,581.71 due to certain
employees of Microsource; and
(iv) payments to Xxxxxx Xxxxxx White & XxXxxxxxx for accrued and
unpaid legal fees and expenses to the extent such fees and expenses exceed
$100,000.
The Microsource Advisor shall also be entitled to its allocable portion (3%) of
the Post-Merger Payments.
(d) Each share of Microsource Stock held by Giga-tronics prior to
consummation of the Merger shall be included in the Microsource Equivalent
Outstanding Number but canceled upon consummation of the Merger and Per Share
Price and Per Share Post-Merger Payments paid in exchange therefor.
(e) If between the date of this Agreement and the Effective Time, the
number of outstanding shares of Microsource Stock will have been changed into a
different number of shares or a different class, by reason of any stock
dividend, subdivision, reclassification, recapitalization, split-up,
combination, exchange of shares or the like, the Per Share Price will be
correspondingly adjusted.
1.03. Section 1.03. shall be amended and restated in its entirety as
follows:
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SECTION 1.03. SURRENDER OF CERTIFICATES.
(a) Giga-tronics (or such third party as Giga-tronics will appoint) will
act as Transmittal Agent (the "Transmittal Agent") for delivery of the Merger
Consideration to the holders of Microsource Stock (the "Microsource
Shareholders").
(b) As soon as practicable after the Effective Time, the Transmittal
Agent will promptly mail to each holder of record (other than Giga-tronics or
Merger Sub or any other subsidiary of Giga-tronics) of a certificate or
certificates which immediately prior to the Effective Time represented issued
and outstanding shares of Microsource Stock (individually a "Certificate" and
collectively the "Certificates"), a letter of transmittal for return to the
Transmittal Agent which will specify that delivery will be effected, and risk of
loss and the title to the Certificates will pass, only upon receipt of the
Certificates in exchange for the Merger Consideration. Upon surrender of a
Certificate for cancellation to the Transmittal Agent, together with and in
accordance with such letter of transmittal, the holder of such Certificate will
be entitled to receive in exchange therefor the portion of the Initial Purchase
Price that such holder is entitled to receive pursuant to Section 1.02 hereof.
Upon such surrender the Transmittal Agent will promptly deliver such portion of
the Initial Purchase Price.
(c) As soon as practicable after the preparation and audit of the
financial statements for post-Merger Microsource for the first and second fiscal
year ending March of such year following the Effective Time, respectively, the
Transmittal Agent will promptly mail to each former holder of shares of
Microsource Stock who has surrendered a Certificate for cancellation, together
with the letter of transmittal in accordance with Section 1.02(b) above, the
applicable Per Share Post-Merger Payment.
(d) Until surrendered, each Certificate will be deemed for all purposes
to evidence only the right to receive the Merger Consideration into which shares
of Microsource Stock formerly represented thereby will have been converted
pursuant to Section 1.02(a) hereof.
(e) After the Effective Time there will be no transfers on the stock
transfer books of either Microsource (the stock transfer books of which will be
closed) or the Surviving Corporation of shares of Microsource Stock which were
outstanding immediately prior to the Effective Time. If after the Effective Time
Certificates are presented for transfer to the Transmittal Agent, together and
in accordance with the letter of transmittal from the Transmittal Agent, they
will be canceled and exchanged for the Merger Consideration.
(f) Except as expressly provided herein, the Surviving Corporation will
pay all charges and expenses, including those of the Transmittal Agent (if such
Transmittal Agent is not Giga-tronics) in connection with the exchange of
Certificates for the Merger Consideration. Any Merger Consideration deposited
with the Transmittal Agent which remain unclaimed by the former Microsource
Shareholders after six (6) months following the Effective Time will be delivered
to Giga-tronics, and any former Microsource Shareholders who have not then
complied with the instructions for exchanging their Certificates will thereafter
look only to Giga-tronics for exchange of Certificates for the Merger
Consideration.
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(g) If any Certificate will have been lost, stolen, or destroyed, upon
the making of an affidavit of that fact by the person claiming such Certificate
to be lost, stolen or destroyed, the Transmittal Agent will issue in exchange
for such lost, stolen or destroyed Certificate the Merger Consideration
deliverable in respect thereof as determined in accordance with the terms of
this Agreement. When authorizing such payment in exchange for any lost, stolen
or destroyed Certificate, the person to whom the Merger Consideration is to be
issued, as a condition precedent to the issuance thereof, if so requested by
Giga-tronics, will give Giga-tronics a bond satisfactory to Giga-tronics against
any claim that may be made against Giga-tronics with respect to the Certificate
alleged to have been lost, stolen or destroyed.
(h) Neither Giga-tronics, the Merger Sub nor the Transmittal Agent will
be liable to any former shareholder of Microsource for any amount properly
delivered to a public official pursuant to any applicable abandoned property,
escheat or similar laws. To the extent permitted by applicable law, any portion
of the Merger Consideration that remains unclaimed by any Microsource
Shareholder (at such time as such portion of the Merger Consideration would
otherwise escheat to or become property of any governmental authority) will
become the property of Giga-tronics, free and clear of any Liens (as defined
below), claims or other interest of any other person previously entitled
thereto.
1.04. Section 1.05. is deleted in its entirety.
1.05. Section 1.06. is amended and restated in its entirety as follows:
SECTION 1.06. MICROSOURCE OPTIONS. All of the outstanding options to
purchase shares of Microsource Common Stock granted pursuant to the 1982 Stock
Option Plan, 1983 Stock Option Plan, 1985 Stock Option Plan, 1988 Stock Option
Plan and 1992 Employee Stock Option Plan of Microsource and pursuant to Section
5.10 that are not exercised prior the Effective Time shall be canceled.
1.06. Section 1.07. is deleted in its entirety, including without
limitation, Exhibit 1.07.
1.07 Section 1.08(c) is amended and restated in its entirety as follows:
(c) A Microsource Warrant shall be deemed to be "in the money" if
the per share exercise price of such Microsource Warrant equals or exceeds the
Per Share Price multiplied by the number of shares of Microsource Common Stock
into which one share of the Microsource Stock for which such Microsource Warrant
is exercisable (if such Microsource Warrant is exercisable for Microsource
Preferred Stock). For purposes of calculating the Per Share Price, it shall be
assumed that all Microsource Warrants will be exercised prior to Closing except
those Microsource Warrants with an exercise price of fifty cents ($.50) per
share which will be canceled prior to Closing.
Section 1.08(d) is deleted in its entirety.
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1.08. Section 5.02. is amended to (i) replace the reference to "Joint
Proxy Statement/Prospectus" with the phrase "an information statement complying
with applicable law (the "Information Statement") and (ii) to add to the end of
clause (b), "or such written consent."
1.09. Section 5.09. is deleted in its entirety, including, without
limitation, Exhibit 5.09.
1.10. Section 5.10 is deleted in its entirety.
1.11. Section 5.11 is deleted in its entirety.
1.12. Section 6.02. is deleted in its entirety.
1.13. Section 6.08. is deleted in its entirety, including, without
limitation, Exhibit 6.08.
1.14. Section 6.09. is deleted in its entirety.
1.15. Section 7.02. is deleted in its entirety
1.16. Section 7.04. is deleted in its entirety.
1.17. Section 7.06. is amended and restated in its entirety as follows:
SECTION 7.06. COMMUNICATIONS. Between the date hereof and the Effective
Time, no party will furnish any written communication to its shareholders or to
the public generally or otherwise communicate with any news media if the subject
matter thereof relates to the transactions contemplated by this Agreement
without the prior approval of Microsource and Giga-tronics as to the content
thereof, which approval will not be unreasonably withheld; provided that the
foregoing will not be deemed to prohibit dissemination of the Information
Statement by Microsource to the Microsource Shareholders or any other disclosure
by any party required by any applicable law or by any competent governmental
authority.
1.18. Section 8.01.(d) is deleted in its entirety.
1.19. Section 8.01.(e) Exhibit 8.01 of the Merger Agreement is deleted
and replaced with Exhibit 8.01 attached hereto.
1.20. Section 8.02.(d). is deleted in its entirety.
1.21. Section 8.02.(e). Exhibit 8.02 is deleted and replaced with
Exhibit 8.02 attached hereto.
1.22. Section 8.02.(f) is deleted in its entirety.
1.23. Section 8.02.(g) is deleted in its entirety.
1.24. Section 8.03.(a) is deleted in its entirety.
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1.25. Section 8.03.(b) is amended and restated as follows:
(b) Shareholder approval. Microsource's shareholders will have duly
approved this Agreement, the Agreement of Merger in the form attached as Exhibit
1.01 hereto, and the Merger, all in accordance with applicable laws and
regulatory requirements."
1.26. Article IX. is deleted in its entirety and restated as follows:
SECTION 9.01. INDEMNIFICATION OBLIGATION.
(a) Giga-tronics, each of its Affiliates (including Merger Sub), and
each of their respective officers, directors, employees, agents and
representatives (collectively, the "Giga-tronics Indemnitees") shall be
indemnified and held harmless by Microsource (provided that, upon the Closing,
Microsource shall cease to have any indemnity obligations under this Section
9.01, Microsource shall thereafter be a Giga-tronics Indemnitee, and no
Microsource Shareholder shall have any right to seek reimbursement or
contribution from Microsource for any amounts paid by such Microsource
Shareholder under this Article IX), and each Microsource Shareholder in respect
of any and all Damages incurred by any Giga-tronics Indemnitee as a result of
any breach of any representation, warranty, covenant or agreement made by
Microsource in this Agreement. Microsource (subject to the parenthetical in the
preceding sentence) shall be liable in full with respect to any such breach, and
each Microsource Shareholder shall be liable with respect to any such breach on
a pro rata basis. Nothing set forth in this Section 9.01 shall be deemed to
prohibit or limit any Giga-tronics Indemnitee's right at any time before, on or
after the Closing Date to seek injunctive or other equitable relief, in lieu of
or in addition to Damages, for the failure of Microsource to perform any
covenant or agreement contained herein. After the Effective Time, all Damages to
which any Giga-tronics Indemnitee may be entitled shall be payable from the
Post-Merger Payments. The Microsource Shareholders shall have no obligations
under this Article IX prior to the Effective Time. After the Effective Time, the
obligations of the Microsource Shareholders under this Article IX shall be
limited to the Post-Merger Payments.
(b) Microsource, each Microsource Shareholder, and each of Microsource's
and the Microsource Shareholders' respective Affiliates, and each of their
respective officers, directors, employees, agents and representatives
(collectively, the "Shareholder Indemnitees") shall be indemnified and held
harmless by Giga-tronics in respect of any and all Damages incurred by any
Shareholder Indemnitee as a result of any misrepresentation and/or breach of any
representation, warranty, covenant or agreement made by Giga-tronics in this
Agreement; provided, however, that Microsource and its Subsidiaries shall cease
to be Shareholder Indemnitees after the Closing. Nothing set forth in this
Section 9.01(b) shall be deemed to prohibit or limit any Shareholder
Indemnitee's right at any time before, on or after the Closing Date to seek
injunctive or other equitable relief, in lieu of or in addition to Damages, for
the failure of Giga-tronics to perform any covenant or agreement contained
herein.
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SECTION 9.02. TERM OF INDEMNIFICATION OBLIGATION.
(a) All representations, warranties, covenants, agreements and
obligations of Microsource contained herein, and all claims of any Giga-tronics
Indemnitee in respect of any breach of any such representation, warranty,
covenant, agreement or obligation, shall terminate and be of no further force
and effect twenty-four (24) months after the Effective Time. Notwithstanding the
foregoing, in the event that any Giga-tronics Indemnitee shall provide written
notice of a specifically identified claim for indemnification in accordance with
the first sentence of Section 9.03 prior to the expiration of any applicable
time period described in the prior sentences of this Section 9.02, such claim
shall have been timely made even if such claim shall not be finally resolved
until after the expiration of the applicable time period.
(b) All representations, warranties, covenants, agreements and
obligations of Giga-tronics and Merger Sub contained herein, and all claims of
any Shareholder Indemnitee in respect of any breach of any such representation,
warranty, covenant, agreement or obligation of Giga-tronics, shall terminate and
be of no further force and effect twenty-four (24) months after the Effective
Time. Notwithstanding the foregoing, in the event that any Shareholder
Indemnitee shall provide written notice of a specifically identified claim for
indemnification in accordance with the first sentence of Section 9.03 prior to
the expiration of any applicable time period described in the prior sentences of
this Section 9.02(b), such claim shall have been timely made even if such claim
shall not be finally resolved until after the expiration of the applicable time
period.
SECTION 9.03. NOTICE AND DETERMINATION OF CLAIMS. If any Giga-tronics
Indemnitee or Shareholder Indemnitee (each, an "Indemnitee") shall believe that
such Indemnitee is entitled to indemnification pursuant to Section 9.01 from any
Microsource Shareholder (or prior to the Closing, Microsource), with respect to
a Giga-tronics Indemnitee, or from Giga-tronics, with respect to a Shareholder
Indemnitee, as the case may be (the "Indemnitors"), in respect of any Damages,
such Indemnitee shall give all potential Indemnitors prompt written notice
thereof. Any such notice shall set forth in reasonable detail and, if and to the
extent then known, the amount of Damages (or a good faith estimate thereof)
arising from such claim and the basis for such claim for indemnification. The
failure of such Indemnitee to give notice of any claim for indemnification
promptly shall not adversely affect such Indemnitee's right to indemnity
hereunder except to the extent that such failure adversely affects the rights of
the Indemnitor to assert any reasonable defense to such claim. The Indemnitors
shall have fifteen (15) business days following their receipt of such notice
either (i) to acquiesce in such claim by giving such Indemnitee written notice
of such acquiescence or (ii) to object to the claim by giving such Indemnitee
written notice of the objection. If any Indemnitor acquiesces in such claim,
such Indemnitee shall be entitled to be indemnified by the acquiescing
Indemnitor for such Indemnitor's share (which may be the entire amount if so
provided in this Agreement) of the Damages incurred by such Indemnitee in
respect of such claim. If one (1) or more of the Indemnitors object to such
claim in the manner required above by the expiration of such fifteen (15)
business day period, representatives of the Indemnitor and Indemnitee (in the
event the Indemnitor or Indemnitee is a corporation or other business entity,
such representative shall be a member of senior management) shall meet to
attempt to resolve such dispute. If the dispute
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cannot be resolved by such representatives within twenty (20) business days
either party may make a written demand for formal dispute resolution and specify
therein the scope of the dispute. Within thirty (30) calendar days after such
written notification, the Indemnitor and Indemnitee shall meet for one (1) day
with an impartial mediator (such mediator to be chosen by the mutual agreement
of such Indemnitor and Indemnitee) and consider dispute resolution alternatives
other than litigation. If an alternative method of dispute resolution is not
agreed upon within thirty (30) days after the one (1) day mediation, either
party may begin litigation Proceedings. Nothing in this section shall be deemed
to require arbitration.
SECTION 9.04. THIRD PARTY CLAIMS. In connection with any claim that may
give rise to indemnity under this Article IX resulting from or arising out of
any claim or Proceeding against an Indemnitee by a person that is not a party
hereto, the Indemnitors may, upon notice to the relevant Indemnitee, assume the
defense of any such claim or Proceeding if the Indemnitors jointly acknowledge
in writing to the relevant Indemnitee the right of such Indemnitee to indemnity
pursuant hereto in respect of the entirety of such claim and provide written
evidence reasonably satisfactory to such Indemnitee that such Indemnitors have
the financial wherewithal to defend and pay such claim in full. If the
Indemnitors assume the defense of any such claim or Proceeding, the Indemnitors
shall select counsel reasonably acceptable to such Indemnitee to conduct the
defense of such claim or Proceeding, shall take all steps necessary in the
defense or settlement thereof and shall at all times diligently and promptly
pursue the resolution thereof. If the Indemnitors shall have assumed the defense
of any claim or Proceeding in accordance with this Section 9.04, the Indemnitors
shall be authorized to consent to a settlement of, or the entry of any judgment
arising from, any such claim or Proceeding, without the prior written consent of
such Indemnitee; provided, however, that the Indemnitors shall have paid or
caused to be paid all amounts arising out of such settlement or judgment
concurrently with the effectiveness thereof; provided further, that the
Indemnitors shall not be authorized to encumber any of the assets of any
Indemnitee or to agree to any restriction that would apply to any Indemnitee or
to the conduct of such Indemnitee's business; and provided further, that a
condition to any such settlement shall be a complete release of such Indemnitee
with respect to such claim. Such Indemnitee shall be entitled to participate in
(but not control) the defense of any such action, with its own counsel and at
its own expense. Each Indemnitee shall, and shall cause each of its Affiliates
and representatives to, cooperate fully with the Indemnitors in the defense of
any claim or Proceeding being defended by the Indemnitors pursuant to this
Section 9.04. If the Indemnitors do not assume the defense of any claim or
Proceeding resulting therefrom in accordance with the terms of this Section
9.04, such Indemnitee may defend against such claim or Proceeding in such manner
as it may deem appropriate, including settling such claim or Proceeding after
giving notice of the same to the Indemnitors, on such terms as such Indemnitee
may deem appropriate. If the Indemnitors seek to question the manner in which
such Indemnitee defended such claim or Proceeding or the amount of or nature of
any such settlement, the Indemnitors shall have the burden to prove by a
preponderance of the evidence that such Indemnitee did not defend such claim or
Proceeding in a reasonably prudent manner.
SECTION 9.05. POST-MERGER PAYMENTS In the event of any claims under
Section 9.01 in which it is determined in accordance with this Article IX that
any Giga-tronics Indemnitee is entitled to indemnification, Giga-tronics shall
be entitled to offset such claims against the Post-
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Merger Payments. If a balance remains of the Post-Merger Payments after the
termination of the indemnification period set forth in 9.02(a), the Transmittal
Agent shall distribute on a pro rata basis such balance to the Microsource
Shareholders entitled thereto; provided, however, that the Transmittal Agent
shall retain the portion of the balance of the Post-Merger Payment necessary to
cover any claims for which a notice has been delivered by a Giga-tronics
Indemnitee in accordance with Section 9.03, but such claim has not been finally
resolved in accordance with Section 9.03 or 9.04; provided, however, that once
such claim has been finally resolved in accordance with this Agreement, the
Transmittal Agent shall distribute the portion of such balance of the
Post-Merger Payments relating to the claim to the Microsource Shareholders or
the Giga-tronics Indemnitees entitled thereto, as the case may be.
SECTION 9.06. LIMITATION ON DAMAGES. The aggregate amount of all Damages
pursuant to, or arising out of, this Agreement and the transactions contemplated
hereby, including any breach of the covenants, representations, warranties and
other provisions set forth in this Agreement, for which Microsource (in the
event the Effective Time shall not occur) shall be obligated to indemnify all
Giga-tronics Indemnitees shall not exceed the Merger Consideration, and after
the Effective Time, shall not exceed the Post-Merger Payments. Neither party
shall be liable for Damages under this Article IX unless the aggregate amount of
all such Damages exceeds Thirty-Five Thousand Dollars ($35,000) in which case
the liability for indemnification under this Article IX shall include all
amounts including such Thirty-Five Thousand Dollars ($35,000).
SECTION 9.07. EXCLUSIVE REMEDY. The remedies provided for in this
Article IX are exclusive and shall be in lieu of all other remedies for breach
of this Agreement; provided, however, that the foregoing clause of this sentence
shall not be deemed a waiver by any party of any right to specific performance
or injunctive relief, or any remedy arising by reason of any claim of fraud or a
knowing or willful breach of this Agreement.
SECTION 9.08. INDEMNIFICATION DEFINITIONS.
(a) For purposes of this Agreement, "Damages" means all demands, claims,
actions or causes of action, assessments, losses, damages, costs, expenses,
liabilities, judgments, awards, fines, sanctions, penalties, charges and amounts
paid in settlement, in each case resulting in actual out-of-pocket, lost
"benefit of the bargain or other monetary loss, including (y) interest on cash
disbursements in respect of any of the foregoing at a rate per annum equal to
the prime rate as published by Bank of America, NT&SA, compounded quarterly,
from the date each such cash disbursement is made until the person incurring the
same shall have been indemnified in respect thereof and (z) reasonable costs,
fees and expenses of attorneys, experts, accountants, appraisers, consultants,
witnesses, investigators and any other agents of such person. Without limiting
the generality of the foregoing, effective after the Closing, any Damages to
Microsource arising out of any such breach by Microsource (where such breach
occurs before the Closing), shall be deemed to be Damages to Giga-tronics, and
Giga-tronics shall be entitled to assert a claim under Article IX with respect
thereto.
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(b) For purposes of this Agreement, "Proceeding" means any action, suit,
hearing or arbitration or governmental investigation (whether public or
private). 1.27. Section 10.01. Clause (b) is amended to delete the phrase "or
Giga-tronics."
Clause (e) is deleted in its entirety.
1.28. Section 11.09. is hereby amended and restated as follows:
SECTION 11.09. AMENDMENT AND WAIVERS. Any term or provision of this
Agreement may be amended, and the observance of any term of this Agreement may
be waived (either generally or in a particular instance and either retroactively
or prospectively) only by a writing signed by the party to be bound thereby. The
waiver by a party of any breach hereof or default in the performance hereof will
not be deemed to constitute a waiver of any other default or any succeeding
breach or default. At any time before or after approval of this Agreement and
the Merger by the shareholders of Microsource and prior to the Effective Time,
this Agreement may be amended or supplemented by Microsource or Giga-tronics
with respect to any of the terms contained in this Agreement, except that
following approval by the shareholders of Microsource there will be no amendment
or change to the provisions hereof with respect to the Merger Consideration
without further approval by the shareholders of Microsource, and no other
amendment will be made which by law requires further approval by such
shareholders without such further approval.
1.29. Section 11.12. is amended to delete the reference to Section 7.02.
ARTICLE II
MISCELLANEOUS
2.01. GIGA-TRONICS COVENANT. Subject to the fiduciary duties of the
Board of Directors and duties of management, during the two fiscal years
following the Effective Time, Giga-tronics shall not make any material transfers
of assets or operation of post-Merger Microsource to detrimentally affect
Microsource's Net Income and will conduct the operations of post-Merger
Microsource in good faith.
2.02. AFFIRMATION. All terms of the Merger Agreement not expressly
amended in this Amendment remain in full force and effect.
2.03 ENTIRE AGREEMENT. The Merger Agreement, as amended by this
Amendment, together with exhibits and schedules hereto and any side letter
agreements executed substantially contemporaneously herewith, represents the
entire agreement of the parties with respect to the subject matter hereof and
supersedes all prior agreements, discussions, negotiations and understandings of
any kind. No binding representations have been made with respect to the levels
of post-Merger Microsource's Net Income or the Post-Merger Payments.
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2.04. GOVERNING LAW. The laws of the State of California (irrespective
of its choice of law principles) will govern all issues concerning this
Amendment, the construction of its terms, and the interpretation and enforcement
of the rights and duties of the parties.
2.05. COUNTERPARTS. This Amendment may be executed in any number of
counterparts, each of which will be an original as against any party whose
signature appears thereon and all of which together will constitute one and the
same instrument. This Amendment will become binding when one or more
counterparts hereof, individually or taken together, will bear the signatures of
all of the parties reflected hereon as signatories.
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IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
of the date first above written.
GIGA-TRONICS INCORPORATED
By: /s/Xxxxxx X. Xxxxx, Xx.
Name: Xxxxxx X. Xxxxx, Xx.
Title: Chief Executive Officer
GIGA MICRO CORP.
By: /s/Xxxxxx X. Xxxxx, Xx.
Name: Xxxxxx X. Xxxxx, Xx.
Title: Chief Executive Officer
MICROSOURCE, INC.
By:/s/ Xxxx Xxxxxxxxxx
Name: Xxxx Xxxxxxxxxx
Title: President
