EXHIBIT 2.01
AGREEMENT AND PLAN
OF MERGER AND REORGANIZATION
THIS AGREEMENT AND PLAN OF MERGER AND REORGANIZATION ("Agreement") is made
and entered into as of March 24, 2000, by and among Vitesse Semiconductor
Corporation, a Delaware corporation ("Parent"), Holiday Acquisition Corp., a
Delaware corporation and a wholly owned subsidiary of Parent ("Merger Sub");
and OROLOGIC, INC., a Delaware corporation (the "Company"). Certain other
capitalized terms used in this Agreement are defined in Exhibit A.
RECITALS
A. Parent, Merger Sub and the Company intend to effect a merger of Merger
Sub into the Company (the "Merger") in accordance with this Agreement and the
Delaware General Corporation Law (the "DGCL"). Upon consummation of the Merger,
Merger Sub will cease to exist, and the Company will become a wholly owned
subsidiary of Parent.
B. It is intended that the Merger qualify as a tax-free reorganization
within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as
amended (the "Code"). For accounting purposes, it is intended that the Merger
be treated as a "purchase."
C. This Agreement has been approved by the boards of directors of each of
Parent, Merger Sub and the Company and has been adopted by Parent, as the sole
stockholder of Merger Sub.
D. In connection with the execution and delivery of this Agreement,
certain stockholders of the Company are executing and delivering to Parent a
Stockholder Agreement of even date herewith pursuant to which, among other
things, they are agreeing to vote all of their shares of the Company's stock in
favor of the Merger.
AGREEMENT
The parties to this Agreement agree as follows:
SECTION 1. DESCRIPTION OF TRANSACTION
1.1 Merger of Merger Sub into the Company. Upon the terms and subject to
the conditions set forth in this Agreement, at the Effective Time (as defined
in Section 1.3), Merger Sub shall be merged with and into the Company, and the
separate existence of Merger Sub shall cease. The Company will continue as the
surviving corporation in the Merger (the "Surviving Corporation").
1.2 Effect of the Merger. The Merger shall have the effects set forth in
this Agreement and in the applicable provisions of the DGCL.
1.3 Closing; Effective Time. The consummation of the transactions
contemplated by this Agreement (the "Closing") shall take place at the offices
of Xxxxx Xxxx & Xxxxxxxx, 0000 Xx Xxxxxx Xxxx, Xxxxx Xxxx, Xxxxxxxxxx 00000, at
8:00 a.m. (local time) on a date to be designated by Parent which shall not be
more than two (2) business days after the date on which the conditions set
forth in Section 6 and 7 are satisfied or waived. (The time and date as of
which the Closing is required to take place pursuant to this Section 1.3, is
referred to in this Agreement as the "Closing Date.") Contemporaneously with or
as promptly as practicable after the Closing, a properly executed certificate
of merger conforming to the requirements of the DGCL shall be filed with the
Secretary of State of the State of Delaware. The Merger shall become effective
at the time such certificate of merger is filed with the Secretary of State of
the State of Delaware (the "Effective Time").
1.4 Certificate of Incorporation and Bylaws; Directors and Officers.
Unless otherwise determined by Parent prior to the Effective Time:
(a) the Certificate of Incorporation of the Surviving Corporation
shall be amended and restated as of the Effective Time to conform to Exhibit B;
(b) the Bylaws of the Surviving Corporation shall be amended and
restated as of the Effective Time to conform to the Bylaws of Merger Sub as in
effect immediately prior to the Effective Time; and
(c) the directors and officers of the Surviving Corporation
immediately the Effective Time shall be the individuals identified on Exhibit C.
1.5 Conversion of Shares.
(a) Subject to Sections 1.8(a), 1.9 and 1.10, at the Effective Time,
by of the Merger and without any further action on the part of Parent, Merger
Sub, the Company or any stockholder of the Company:
(i) each share of Company Common Stock outstanding immediately
prior to the Effective Time shall be converted into the right to receive that
fraction of a share of the common stock of Parent ("Parent Common Stock") equal
to the "Applicable Fraction" (as defined in Section 1.5(b)(i)), it being
understood that certain of the shares of Parent Common Stock issuable pursuant
to this Section 1.5(a)(i) shall be held in escrow in accordance with Section
1.10;
(ii) each share of Series A Preferred Stock of the Company
outstanding immediately prior to the Effective Time shall be converted into the
right to receive that fraction of a share of Parent Common Stock equal to (A)
$1.25 divided by the Special Average Closing Price, plus (B)(I) that number of
shares of Company Common Stock into which one share of Series A Preferred Stock
of the Company is convertible immediately prior to the Effective Time,
multiplied by (II) the Applicable Fraction, it being understood that certain of
the shares of Parent Common Stock issuable pursuant to this Section 1.5(a)(ii)
shall be held in escrow in accordance with Section 1.10; and
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(iii) each share of the common stock of Merger Sub outstanding
immediately prior to the Effective Time shall be converted into one share of
common stock of the Surviving Corporation.
(b) For purposes of this Agreement:
(i) The "Applicable Fraction" shall be the fraction: (A) having
a numerator equal to (I) the Merger Share Amount minus (II) $3,789,502.50
divided by the Special Average Closing Price, and (B) having a denominator
equal to the Fully Diluted Company Share Amount (as defined in Section
1.5(b)(ii)). If, between the date of this Agreement and the Effective Time, the
outstanding shares of Parent Common Stock shall have been changed into a
different number of shares or a different class by reason of any
reclassification, stock split, reverse stock split, stock dividend,
recapitalization or other similar transaction, then the Applicable Fraction
shall be correspondingly adjusted.
(ii) The "Fully Diluted Company Share Amount" shall be the sum
of (A) the aggregate number of shares of Company Common Stock outstanding
immediately prior to the Effective Time (including any such shares that are
subject to a repurchase option or risk of forfeiture under any restricted stock
purchase agreement or other agreement), (B) the aggregate number of shares of
Company Common Stock issuable pursuant to all Company Options outstanding
immediately prior to the Effective Time, (C) the aggregate number of shares of
Company Common Stock into which the shares of Series A Preferred Stock of the
Company outstanding immediately prior to the Effective Time would be
convertible, and (D) the aggregate number of shares of Company Common Stock
issuable pursuant to warrants, convertible securities and any other rights to
acquire shares of Company Common Stock outstanding immediately prior to the
Effective Time.
(iii) The "Merger Consideration" receivable by a holder of
capital stock of the Company shall consist of (i) the shares of Parent Common
Stock (other than Escrow Shares) issuable to such holder in accordance with
Section 1.5(a) upon the surrender of the certificate or certificates
representing capital stock of the Company held by such holder, (ii) the rights
of such holder with respect to the Escrow Shares held by the Escrow Agent on
behalf of such holder, and (iii) the right of such holder to receive cash in
lieu of fractional shares of Parent Common Stock in accordance with Section
1.8(a).
(iv) The "Merger Share Amount" shall mean the number of shares
of Parent Common Stock equal to $435,000,000 divided by $85.45.
(v) The "Special Average Closing Price" shall mean the average
closing sales prices of one share of Parent Common Stock as quoted on the
Nasdaq on the 30 trading days ending three business days prior to the date of
the Company's notice to the holders of the Company Common Stock and Series A
Preferred Stock of the Company given pursuant to Section 2(e) of Article IV of
the Company's Certificate of Incorporation.
(c) If any shares of Company Common Stock outstanding prior to the
Effective Time are unvested or are subject to a option, risk of forfeiture or
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other condition under any applicable restricted stock purchase agreement or
other agreement with the Company, then the shares of Parent Common Stock issued
in exchange for such shares of Company Common Stock will also be unvested and
subject to the same repurchase option, risk of forfeiture or other condition,
and the certificates representing such shares of Parent Common Stock may
accordingly be marked with appropriate legends. The Company shall take all
action that may be necessary to ensure that, from and after the Effective Time,
Parent is entitled to exercise any such repurchase option or other right set
forth in any such restricted stock purchase agreement or other agreement.
1.6 Employee Stock Options. At the Effective Time, each then outstanding
Company Option (as defined in Section 2.3(b)) and each other outstanding option
to purchase Common Stock of the Company issued in accordance with the terms of
this Agreement, whether vested or unvested, shall be assumed by Parent in
accordance with the terms (as in effect as of the date of this Agreement) of
such Company Stock Option Plan under which such Company Option was issued and
the stock option agreement by which such Company Option is evidenced. All
rights with respect to Company Common Stock under outstanding Company Options
shall thereupon be converted into rights with respect to Parent Common Stock.
Accordingly, from and after the Effective Time, (a) each Company Option assumed
by Parent may be exercised solely for shares of Parent Common Stock, (b) the
number of shares of Parent Common Stock subject to each such assumed Company
Option shall be equal to the number of shares of Company Common Stock that were
subject to such Company Option immediately prior to the Effective Time
multiplied by the Applicable Fraction, rounded down, to the nearest whole
number of shares of Parent Common Stock, (c) the per share exercise price for
the Parent Common Stock issuable upon exercise of each such assumed Company
Option shall be determined by dividing the exercise price per share of Company
Common Stock subject to such Company Option, as in effect immediately prior to
the Effective Time, by the Applicable Fraction, and rounding the resulting
exercise price up to the nearest whole cent, and (d) all restrictions on the
exercise of each such assumed Company Option shall continue in full force and
effect, and the term, exercisability, vesting schedule and other provisions of
such Company Option shall otherwise remain unchanged; provided however, that
each such assumed Company Option shall, in accordance with its terms, be
subject to further adjustment as appropriate to reflect any stock split,
reverse stock split, stock dividend, recapitalization or other similar
transaction effected by Parent after the Effective Time. The Company and Parent
shall take all action that may be necessary (under all Company Stock Option
Plans and otherwise) to effectuate the provisions of this Section 1.6.
1.7 Closing of the Company's Transfer Books. At the Effective Time,
holders of certificates representing shares of capital stock of the Company
that were outstanding immediately prior to the Effective Time shall cease to
have any rights as stockholders of the Company, and the stock transfer books of
the Company shall be closed with respect to all shares of such capital stock of
the Company outstanding immediately prior to the Effective Time. No further
transfer of any such shares of capital stock of the Company shall be made on
such stock transfer books after the Effective Time. If, after the Effective
Time, a valid certificate previously representing any shares of capital stock
of the Company (a "Company Stock Certificate") is presented to the Surviving
Corporation or Parent, such Company Stock Certificate shall be canceled and
shall be exchanged as provided in Section 1.8.
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1.8 Exchange of Certificates.
(a) As soon as practicable after the Effective Time, Parent will send
to each of the registered holders of Company Stock Certificates a letter of
transmittal in customary form and containing such provisions as Parent may
reasonably specify and instructions for use in effecting the surrender of
Company Stock Certificates in exchange for the Merger Consideration. Upon
surrender of a Company Stock Certificate to Parent for exchange, together with
a duly executed letter of transmittal and such other documents as may be
reasonably required by Parent, Parent shall (i) deliver to the holder of such
Company Stock Certificate a certificate representing 88.79% of the number of
shares of Parent Common Stock that such holder has the right to receive
pursuant to Section 1.5, and (ii) deliver to the Escrow Agent under the Escrow
Agreement (as defined below) on behalf of such holder a certificate in the name
of the Escrow Agent representing 11.21% of the number of shares of Parent
Common Stock that such holder has the right to receive pursuant to Section 1.5,
provided that the certificates representing Parent Common Stock to be delivered
to the holder of a Company Stock Certificate under clause (i) above and to the
Escrow Agent under clause (ii) above shall, in each case, represent only whole
shares of Parent Common Stock and in lieu of any fractional shares to which
such holder would otherwise be entitled, after combining any fractional
interests of such holder into as many whole shares as is possible, and the
holder of such Company Stock Certificate shall be paid in cash an amount equal
to the sum of (1) the dollar amount (rounded to the nearest whole cent)
determined by multiplying the Closing Sales Price (as defined below) by the
fraction of a share of Parent Common Stock that would otherwise be deliverable
to such holder under clause (i) above and (2) the dollar amount (rounded to the
nearest whole cent) determined by multiplying the Closing Sales Price by the
fraction of a share of Parent Common Stock that would otherwise be deliverable
to the Escrow Agent under clause (ii) above. Notwithstanding the foregoing,
Parent may deliver to the Escrow Agent one certificate representing the total
number of shares of Parent Common Stock to be held in escrow pursuant to this
Section 1.8(a) in lieu of issuing separate certificates representing 11.21% of
the total shares of Parent Common Stock issuable to each holder of Company
capital stock pursuant to Section 1.5(a). As used in this Agreement, the
"Closing Sales Price" shall mean the closing sales price of one share of Parent
Common Stock as quoted on the Nasdaq on the last trading day immediately
preceding the Closing Date. All Company Stock Certificates so surrendered shall
be canceled. Until surrendered as contemplated by this Section 1.8, each
Company Stock Certificate shall be deemed, from and after the Effective Time,
to represent only the right to receive the Merger Consideration in accordance
with this Agreement. If any Company Stock Certificate shall have been lost,
stolen or destroyed, Parent may, in its discretion and as a condition precedent
to the issuance of any certificate representing Parent Common Stock or the
payment of cash in lieu of fractional shares, require the owner of such lost,
stolen or destroyed Company Stock Certificate to provide an appropriate
affidavit and to deliver a bond (in such sum as Parent may reasonably direct)
as indemnity against any claim that may be made against Parent or the Surviving
Corporation with respect to such Company Stock Certificate.
(b) No dividends or other distributions declared or made with respect
to Parent Common Stock with a record date after the Effective Time shall be
paid to
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the holder of any unsurrendered Company Stock Certificate with respect to the
shares of Parent Common Stock represented thereby, and no cash payment in lieu
of any fractional share shall be paid to any such holder, until such holder
surrenders such Company Stock Certificate in accordance with this Section 1.8
(at which time such holder shall be entitled to receive all such dividends and
distributions and such cash payment).
(c) Parent and the Surviving Corporation shall be entitled to deduct
and withhold from any consideration payable or otherwise deliverable to any
holder or former holder of capital stock of the Company pursuant to this
Agreement such amounts as Parent or the Surviving Corporation may be required
to deduct or withhold therefrom under the Code or under any provision of state,
local or foreign tax law. To the extent such amounts are so deducted or
withheld, such amounts shall be treated for all purposes under this Agreement
as having been paid to the Person to whom such amounts would otherwise have
been paid.
(d) Neither Parent nor the Surviving Corporation shall be liable to
any holder or former holder of capital stock of the Company for any shares of
Parent Common Stock (or dividends or distributions with respect thereto), or
for any cash amounts, delivered to any public official pursuant to any
applicable abandoned property, escheat or similar law.
1.9 Appraisal Rights. Notwithstanding anything in this Agreement to the
contrary, shares of capital stock of the Company held by a holder who, pursuant
to Section 262 of the DGCL or any successor provision, has the right to demand
and properly demands an appraisal of such shares of capital stock of the
Company ("Dissenting Shares"), shall not be converted into the right to receive
Parent Common Stock as set forth in Section 1.5, unless such holder fails to
perfect or otherwise loses such holder's right to such appraisal, if any. If,
after the Effective Time, such holder fails to perfect or loses any such right
to appraisal, such holder's Dissenting Shares shall be treated as having been
converted as of the Effective Time into the right to receive the Merger
Consideration. At the Effective Time, any holder of Dissenting Shares shall
cease to have any rights with respect thereto, except the rights provided in
Section 262 of the DGCL or any successor provision and as provided in the
immediately preceding sentence. The Company shall give prompt notice to Parent
of any demands received by the Company for appraisal of shares of capital stock
of the Company and the opportunity to participate in all negotiations and
proceedings with respect to any such demand. Except to the extent otherwise
required by the DGCL, the Company shall not make any payment or settlement
offer prior to the Effective Time with respect to any such demand unless Parent
shall have consented in writing to such payment or settlement offer.
1.10 Escrow of Parent Common Stock. Upon the Closing, Parent shall
withhold the shares of Parent Common Stock to be delivered to the Escrow Agent
pursuant to Section 1.8(a)(ii) (the "Escrow Shares") and deliver such shares to
Xxxxxx Trust Company of California, as escrow agent (the "Escrow Agent"), to be
held by the Escrow Agent as collateral to secure the rights of the Indemnitees
under Section 9 hereof. The Escrow Shares shall be held pursuant to the
provisions of an escrow agreement substantially in the form of Exhibit D (the
"Escrow Agreement"). The Escrow Shares will be represented by a certificate or
certificates issued in the name of the Escrow Agent and will be held by the
Escrow Agent for a period of one year from the Closing Date (the "Escrow
Period"); provided however that in the event any Indemnitee has made a claim
under Section 9 prior to the end of the Escrow Period, then the Escrow Period
shall continue until such claim is fully and finally resolved. In the event
that this
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Agreement is adopted by the Company's stockholders, then all such stockholders
shall, without any further act of any Company stockholder, be deemed to have
consented to and approved (i) the use of the Escrow Shares as collateral to
secure the rights of the Indemnitees under Section 9 in the manner set forth
herein and in the Escrow Agreement, and (ii) the appointment of the Company
Stockholders' Representative (as defined in Section 10.1) as the representative
under the Escrow Agreement of the Persons receiving Merger Consideration under
this Agreement and as the attorney-in-fact and agent for and on behalf of each
such Person (other than holders of Dissenting Shares).
1.11 Tax Consequences. For federal income tax purposes, the Merger is
intended to constitute a reorganization within the meaning of Section 368 of
the Code. The parties to this Agreement hereby adopt this Agreement as a "plan
of reorganization" within the meaning of Sections 1.368-2(g) and 1.368-3(a) of
the United States Treasury Regulations.
1.12 Accounting Treatment. For accounting purposes, the Merger is intended
to be treated as a "purchase."
1.13 Further Action. If, at any time after the Effective Time, any further
action is determined by Parent to be necessary or desirable to carry out the
purposes of this Agreement or to vest the Surviving Corporation or Parent with
full right, title and possession of and to all rights and property of Merger
Sub and the Company, the officers and directors of the Surviving Corporation
and Parent shall be fully authorized (in the name of Merger Sub, in the name of
the Company and otherwise) to take such action.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants, to and for the benefit of the
Indemnitees, as follows:
2.1 Due Organization; No Subsidiaries; Etc.
(a) The Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware and has all necessary
power and authority: (i) to conduct its business in the manner in which its
business is currently being conducted; (ii) to own and use its assets in the
manner in which its assets are currently owned and used; and (iii) to perform
its obligations under all Company Contracts.
(b) Except as set forth in Part 2.1(b) of the Company Disclosure
Schedule, the Company has not conducted any business under or otherwise used,
for any purpose or in any jurisdiction, any fictitious name, assumed name,
trade name or other name, other than the name "Orologic, Inc."
(c) The Company is not and has not been required to be qualified,
authorized, registered or licensed to do business as a foreign corporation in
any jurisdiction other than the jurisdictions identified in Part 2.1(c)(i) of
the Company Disclosure Schedule, except where the failure to be so qualified,
authorized, registered or licensed has not had and will not have a Material
Adverse Effect on the Company. The Company is in good standing as a foreign
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corporation in each of the jurisdictions identified in Part 2.1(c)(ii) of the
Company Disclosure Schedule.
(d) Part 2.1(d) of the Company Disclosure Schedule accurately sets
forth (i) the names of the members of the Company's board of directors, (ii)
the names of the members of each committee of the Company's board of directors,
and (iii) the names and titles of the Company's officers.
(e) The Company does not own any controlling interest in any Entity
and the Company has never owned, beneficially or otherwise, any shares or other
securities of, or any direct or indirect equity interest in, any Entity. The
Company has not agreed and is not obligated to make any future investment in or
capital contribution to any Entity. The Company has not guaranteed and is not
responsible or liable for any obligation of any of the Entities in which it
owns or has owned any equity interest.
2.2 Certificate of Incorporation and Bylaws; Records. The Company has
delivered to Parent accurate and complete copies of: (1) the Company's
certificate of incorporation and bylaws, including all amendments thereto; (2)
the stock records of the Company; and (3) except as set forth in Part 2.2 of
the Company Disclosure Schedule, the minutes and other records of the meetings
and other proceedings (including any actions taken by written consent or
otherwise without a meeting) of the stockholders of the Company, the board of
directors of the Company and all committees of the board of directors of the
Company. There have been no formal meetings or other proceedings of the
stockholders of the Company, the board of directors of the Company or any
committee of the board of directors of the Company that are not fully reflected
in such minutes or other records. There has not been any violation of any of
the provisions of the Company's certificate of incorporation or bylaws, and the
Company has not taken any action that is inconsistent in any material respect
with any resolution adopted by the Company's stockholders, the Company's board
of directors or any committee of the Company's board of directors. The books of
account, stock records, minute books and other records of the Company are
accurate, up-to-date and complete in all material respects, and have been
maintained in accordance with prudent business practices.
2.3 Capitalization, Etc.
(a) The authorized capital stock of the Company consists of: (i)
12,000,000 shares of Common Stock ($.001 par value per share), of which
2,329,441 shares have been issued and are outstanding as of the date of this
Agreement; and (ii) 4,031,602 shares of Series A Preferred Stock ($.001 par
value per share), of which 3,031,602 have been issued and are outstanding as of
the date of this Agreement. As of the date hereof and as of the Effective Time,
each outstanding share of Series A Preferred Stock of the Company is and shall
be convertible into one share of Company Common Stock. All of the outstanding
shares of Company Common Stock, and Series A Preferred Stock of the Company
have been duly authorized and validly issued, and are fully paid and
non-assessable. All outstanding shares of Company Common Stock, and Series A
Preferred Stock of the Company, and all outstanding Company Options, have been
issued and granted in compliance with (i) all applicable securities laws and
other applicable Legal Requirements, and (ii) all requirements set forth in
applicable Contracts. The
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only repurchase options are those set forth in certain restricted stock
purchase agreements, accurate and complete copies of which have been provided
to Parent. Except as set forth in Part 2.3(a) of the Company Disclosure
Schedule, there are no agreements relating to the voting of any of the
Company's securities or any other contractual rights of holders of the
Company's securities to which the Company is a party or of which the Company is
aware.
(b) The Company has reserved 1,800,000 shares of Company Common Stock
for issuance under the Company Stock Option Plans, of which options to purchase
649,159 shares are outstanding as of the date of this Agreement. Part 2.3(b) of
the Company Disclosure Schedule accurately sets forth, with respect to each
option to purchase Common Stock of the Company outstanding as of the date
hereof (whether vested or unvested) (the "Company Options"): (i) the name of
the holder of such Company Option; (ii) the total number of shares of Company
Common Stock that are subject to such Company Option and the number of shares
of Company Common Stock with respect to which such Company Option is
immediately exercisable; (iii) the date on which such Company Option was
granted and the term of such Company Option; (iv) the vesting schedule for such
Company Option; and (v) the exercise price per share. An accurate and complete
copy of each Company Stock Option Plan and each agreement pertaining to any
Company Options has been provided to Parent. Except as set forth in this
Section 2.3 or Part 2.3(b) of the Company Disclosure Schedule, there is no: (i)
outstanding subscription, option, call, warrant or right (whether or not
currently exercisable) to acquire any shares of capital stock or other
securities of the Company; (ii) outstanding security, instrument or obligation
that is or may become convertible into or exchangeable for any shares of
capital stock or other securities of the Company; (iii) Contract under which
the Company is or may become obligated to sell or otherwise issue any shares of
its capital stock or any other securities of the Company; (iv) any stock
appreciation rights, phantom stock options or similar agreements or securities
outstanding; or (v) to the knowledge of the Company, condition or circumstance
that may give rise to or provide a basis for the assertion of a claim by any
Person to the effect that such Person is entitled to acquire or receive any
shares of capital stock or other securities of the Company. The entry into this
Agreement and the consummation of the transactions contemplated hereby will not
cause the acceleration of vesting of any unvested shares or options to purchase
shares of capital stock of the Company.
(c) The Company has no Subsidiaries.
(d) Except as set forth in Part 2.3(d) of the Company Disclosure
Schedule, the Company has never repurchased, redeemed or otherwise reacquired
any shares of capital stock or other securities of the Company. All securities
so reacquired by the Company were reacquired in compliance with (i) the
applicable provisions of the DGCL and all other applicable Legal Requirements,
and (ii) all requirements set forth in applicable restricted stock purchase
agreements and other applicable Contracts.
2.4 Financial Statements.
(a) The Company has delivered to Parent the following financial
statements and notes (collectively, the "Company Financial Statements"):
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(i) The audited balance sheets of the Company as of December 31,
1999 and 1998, and the related audited income statements of the Company for the
years then ended, together with the notes thereto, and the unaudited balance
sheet of the Company as of December 31, 1997, and related unaudited income
statement of the Company for the year then ended, together with the notes
thereto; and
(ii) the unaudited balance sheet of the Company as of February
29, 2000 (the "Unaudited Interim Balance Sheet"), and the related unaudited
income statement of the Company for the two months then ended.
(b) Except as set forth in Part 2.4 of the Company Disclosure
Schedule, the Company Financial Statements are accurate and complete in all
material respects and present fairly the financial position of the Company as
of the respective dates thereof and the results of operations and (in the case
of the financial statements referred to in Section 2.4(a)(i)) cash flows of the
Company for the periods covered thereby. The Company Financial Statements have
been prepared in accordance with generally accepted accounting principles
("GAAP") applied on a consistent basis throughout the periods covered (except
that the unaudited financial statements may not contain all of the footnotes
that would be required by GAAP with respect to audited financial statements and
are subject to normal and recurring year-end audit adjustments, which will not,
individually or in the aggregate, be material in magnitude).
2.5 Absence of Changes. Except as set forth in Part 2.5 of the Company
Disclosure Schedule, since December 31, 1999:
(a) there has not been any material adverse change in the Company's
business, condition, assets, liabilities, operations, financial performance or
prospects, and, to the knowledge of the Company, no event has occurred that
will, or could reasonably be expected to, have a Material Adverse Effect on the
Company;
(b) there has not been any material loss, damage or destruction to,
or any material interruption in the use of, any of the Company's assets
(whether or not covered by insurance);
(c) the Company has not declared, accrued, set aside or paid any
dividend or made any other distribution in respect of any shares of capital
stock of the Company, and has not repurchased, redeemed or otherwise reacquired
any shares of capital stock or other securities of the Company;
(d) the Company has not sold, issued or authorized the issuance of
(i) any capital stock or other securities of the Company (except for Company
Common Stock issued upon the exercise of outstanding Company Options), (ii) any
option or right to acquire any capital stock or any other securities of the
Company (except for Company Options described in Part 2.3 of the Company
Disclosure Schedule), or (iii) any instrument convertible into or exchangeable
for any capital stock or other securities of the Company;
(e) the Company has not amended or waived any of its rights under, or
permitted the acceleration of vesting under, (i) any provision of any Company
Stock Option
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Plan, (ii) any provision of any agreement evidencing any outstanding Company
Option, or (iii) any restricted stock purchase agreement;
(f) there has been no amendment to the Company's certificate of
incorporation or bylaws, and the Company has not effected or been a party to
any Acquisition Transaction, recapitalization, reclassification of shares,
stock split, reverse stock split or similar transaction;
(g) the Company has not formed any subsidiary or acquired any equity
interest or other interest in any other Entity;
(h) the Company has not made any capital expenditure which, when
added to all other capital expenditures made on behalf of the Company since
December 31, 1999, exceeds $50,000;
(i) the Company has not (i) entered into or permitted any of the
assets owned or used by it to become bound by any Contract that is or would
constitute a Material Contract (as defined in Section 2.10(a)), or (ii) amended
or prematurely terminated, or waived any material right or remedy under, any
such Contract;
(j) the Company has not (i) acquired, leased or licensed any right or
other asset from any other Person, (ii) sold or otherwise disposed of, or
leased or licensed, any right or other asset to any other Person, or (iii)
waived or relinquished any right, except for immaterial rights or other
immaterial assets acquired, leased, licensed or disposed of in the ordinary
course of business and consistent with the Company's past practices;
(k) the Company has not written off as uncollectible, or established
any extraordinary reserve with respect to, any account receivable or other
indebtedness;
(l) the Company has not made any pledge of any of its assets or
otherwise permitted any of its assets to become subject to any Encumbrance,
except for pledges of immaterial assets made in the ordinary course of business
and consistent with the Company's past practices;
(m) the Company has not (i) lent money to any Person (other than
pursuant to routine travel advances made to employees in the ordinary course of
business), or (ii) incurred or guaranteed any indebtedness for borrowed money;
(n) the Company has not (i) established or adopted any Employee
Benefit Plan, (ii) paid any bonus or made any profit-sharing or similar payment
to, or increased the amount of the wages, salary, commissions, fringe benefits
or other compensation or remuneration payable to, any of its directors,
officers or employees, or (iii) hired any new employee;
(o) the Company has not revalued any of its assets or changed any of
its methods of accounting or accounting practices in any respect;
11
(p) the Company has not made any Tax election;
(q) the Company has not commenced or settled any Legal Proceeding;
(r) the Company has not entered into any material transaction or
taken any other material action outside the ordinary course of business or
inconsistent with its past practices, other than entering into this Agreement
and the agreements and transactions contemplated hereby; and
(s) the Company has not agreed or committed to take any of the
actions referred to in clauses "(c)" through "(r)" above.
2.6 Title to Assets.
(a) The Company owns, and has good, valid and marketable title to,
all assets purported to be owned by it, including: (i) all assets reflected on
the Unaudited Interim Balance Sheet; (ii) all assets referred to in Parts 2.1,
2.7 and 2.9 of the Company Disclosure Schedule and all of the Company's rights
under the Material Contracts; and (iii) all other assets reflected in the
Company's books and records as being owned by the Company. Except as set forth
in Part 2.6(a) of the Company Disclosure Schedule, all of said assets are owned
by the Company free and clear of any liens or other Encumbrances, except for
(x) any lien for current taxes not yet due and payable, and (y) minor liens
that have arisen in the ordinary course of business and that do not (in any
case or in the aggregate) materially detract from the value of the assets
subject thereto or materially impair the operations of the Company.
(b) Part 2.6(b) of the Company Disclosure Schedule identifies all
assets that are material to the business of the Company and that are being
leased or licensed to or by the Company. All such leases and licenses are valid
and enforceable against the Company and, to the Company's knowledge, the other
parties thereto, and any rights thereunder will not be affected by the Company
entering into this Agreement and the agreements and transactions contemplated
hereby.
2.7 Bank Accounts; Receivables.
(a) Part 2.7(a) of the Company Disclosure Schedule provides accurate
information with respect to each account maintained by or for the benefit of
the Company at any bank or other financial institution including the name of
the bank or financial institution, the account number and the balance as of
February 29, 2000.
(b) Part 2.7(b) of the Company Disclosure Schedule provides an
accurate and complete breakdown and aging of all accounts receivable, notes
receivable and other receivables of the Company as of February 29, 2000. Except
as set forth in Part 2.7(b) of the Company Disclosure Schedule, all existing
accounts receivable of the Company (including those accounts receivable
reflected on the Unaudited Interim Balance Sheet that have not yet been
collected and those accounts receivable that have arisen since February 29,
2000 and have not yet been collected) represent valid obligations of customers
of the Company arising from bona fide transactions entered into in the ordinary
course of business, and the Company knows of no
12
reason why such obligations will not be collected in full when due, without any
counterclaim or set off (net of an allowance for doubtful accounts not to
exceed $50,000 in the aggregate).
2.8 Equipment; Leasehold.
(a) All material items of equipment and other tangible assets owned
by or leased to the Company are adequate for the uses to which they are being
put, are in good condition and repair (ordinary wear and tear excepted) and are
adequate for the conduct of the Company's business in the manner in which such
business is currently being conducted.
(b) The Company does not own any real property or any interest in
real property, except for the leasehold created under the real property lease
identified in Part 2.10 of the Company Disclosure Schedule.
2.9 Proprietary Assets.
(a) Part 2.9(a)(i) of the Company Disclosure Schedule sets forth,
with respect to each Proprietary Asset owned by the Company and registered with
any Governmental Body or for which an application has been filed with any
Governmental Body ("Registered Proprietary Assets"), (i) a brief description of
such Proprietary Asset, and (ii) the names of the jurisdictions covered by the
applicable registration or application. Part 2.9(a)(ii) of the Company
Disclosure Schedule identifies and provides a brief description of all other
Proprietary Assets owned by the Company that are material to the business of
the Company. Part 2.9(a)(iii) of the Company Disclosure Schedule identifies and
provides a brief description of, and identifies any ongoing royalty or payment
obligations in excess of $50,000 with respect to, each Proprietary Asset that
is licensed or otherwise made available to the Company by any Person ("Licensed
Assets") or is material to the business of the Company, and identifies the
Contract under which such Proprietary Asset is being licensed or otherwise made
available to the Company. The Company has good, valid and marketable title to
and exclusive rights to use all of the Company Proprietary Assets other than
Licensed Assets, free and clear of all Encumbrances, except for (x) any lien
for current taxes not yet due and payable, and (y) minor liens that have arisen
in the ordinary course of business and that do not (individually or in the
aggregate) materially detract from the value of the assets subject thereto or
materially impair the operations of the Company. The Company has a valid right
to use, license and otherwise exploit all Licensed Assets and any rights
thereunder will not be affected by the Company entering into this Agreement and
the agreements and transactions contemplated hereby. No person who has licensed
Licensed Assets to the Company has ownership rights or license rights to
improvements made by the Company to such Licensed Assets. Except as set forth
in Part 2.9(a)(iv) of the Company Disclosure Schedule, the Company has not
developed jointly with any other Person any Company Proprietary Asset that is
material to the business of the Company with respect to which such other Person
has any rights. Except as set forth in Part 2.9(a)(v) of the Company Disclosure
Schedule, there is no Company Contract (with the exception of end user license
agreements in the form previously delivered by the Company to Parent) pursuant
to which any Person has any right (whether or not currently exercisable) to use
(for any purpose other than discussion and evaluation pursuant to customary
forms of nondisclosure agreements), license or otherwise exploit any Company
Proprietary Asset.
13
(b) The Company has taken reasonable measures and precautions to
protect and maintain the confidentiality, secrecy and value of all material
Company Proprietary Assets (except Company Proprietary Assets whose value would
be unimpaired by disclosure). Without limiting the generality of the foregoing,
except as set forth in Part 2.9(b) of the Company Disclosure Schedule, (i) all
current and former employees of the Company who are or were involved in, or who
have contributed to, the creation or development of any material Company
Proprietary Asset have executed and delivered to the Company an agreement
(containing no exceptions to or exclusions from the scope of its coverage) that
is in substance the same as the form of Confidential Information and Invention
Assignment Agreement previously delivered by the Company to Parent, and (ii)
all current and former consultants and independent contractors to the Company
who are or were involved in, or who have contributed to, the creation or
development of any material Company Proprietary Asset have executed and
delivered to the Company an agreement (containing no exceptions to or
exclusions from the scope of its coverage) that is in substance the same as the
form of Consultant Confidential Information and Invention Assignment Agreement
previously delivered to Parent. No current or former employee, officer,
director, stockholder, consultant or independent contractor of or to the
Company has any right, claim or interest in or with respect to any Company
Proprietary Asset.
(c) All patents, trademarks, service marks and copyrights held by the
Company are valid, enforceable and subsisting. To the knowledge of the Company,
none of the Company Proprietary Assets and no Proprietary Asset that is
currently being developed by the Company (either by itself or with any other
Person) infringes, misappropriates or conflicts with any Proprietary Asset
owned or used by any other Person. None of the products that are or have been
designed, created, developed, assembled, manufactured or sold by the Company is
infringing, misappropriating or making any unlawful or unauthorized use of any
Proprietary Asset owned or used by any other Person, and none of such products
has at any time infringed, misappropriated or made any unlawful or unauthorized
use of, and the Company has not received any notice or other communication (in
writing or otherwise) of any actual, alleged, possible or potential
infringement, misappropriation or unlawful or unauthorized use of, any
Proprietary Asset owned or used by any other Person and the Company has all
rights and licenses reasonably necessary in order to make, have made, use or
sell these products to an unlimited number of third parties. To the knowledge
of the Company, no other Person is infringing, misappropriating or making any
unlawful or unauthorized use of, and no Proprietary Asset owned or used by any
other Person infringes or conflicts with, any material Company Proprietary
Asset.
(d) The Company Proprietary Assets constitute all the Proprietary
Assets necessary to enable the Company to conduct its business in the manner in
which such business has been and is being conducted. The Company has not (i)
licensed any of the material Company Proprietary Assets to any Person on an
exclusive basis, or (ii) entered into any covenant not to compete or Contract
limiting its ability to exploit fully any material Company Proprietary Assets
or to transact business in any market or geographical area or with any Person.
(e) Except as set forth in Part 2.9(e)(i) of the Company Disclosure
Schedule, the Company has not disclosed or delivered to any Person, or
permitted the disclosure or delivery to any escrow agent or other Person, of
any Company Source Code. No event has occurred, and
14
no circumstance or condition exists, that (with or without notice or lapse of
time) will, or could reasonably be expected to, result in the disclosure or
delivery to any Person of any Company Source Code. Part 2.9(e)(ii) of the
Company Disclosure Schedule identifies each Contract pursuant to which the
Company has deposited or is required to deposit with an escrowholder or any
other Person any Company Source Code, and further describes whether the
execution of this Agreement or the consummation of any of the transactions
contemplated hereby could reasonably be expected to result in the release or
disclosure of any Company Source Code.
(f) To the knowledge of the Company, except as set forth in Part
2.9(f)(i) of the Company Disclosure Schedule, each computer, computer program
and other item of software (whether installed on a computer or on any other
piece of equipment, including firmware) that is owned, licensed or used by the
Company for its internal business operations is Year 2000 Compliant. Except as
set forth in Part 2.9(f)(ii) of the Company Disclosure Schedule, each computer
program and other item of software that has been designed, developed, sold,
licensed or otherwise made available to any Person by the Company is Year 2000
Compliant. Except as set forth in Part 2.9(f)(iii) of the Company Disclosure
Schedule, the Company has conducted sufficient Year 2000 compliance testing for
each computer, computer program and item of software referred to in the
preceding two sentences to be able to determine whether such computer, computer
program and item of software is Year 2000 Compliant, and has obtained
warranties or other written assurances from each of its suppliers to the effect
that the products and services provided by such suppliers to the Company is
Year 2000 Compliant. As used in this Section 2.9, "Year 2000 Compliant" means,
with respect to a computer, computer program or other item of software (i) the
functions, calculations, and other computing processes of the computer, program
or software (collectively, "Processes") perform in a consistent and correct
manner without interruption regardless of the date on which the Processes are
actually performed and regardless of the date input to the applicable computer
system, whether before, on, or after January 1, 2000; (ii) the computer,
program or software accepts, calculates, compares, sorts, extracts, sequences,
and otherwise processes date inputs and date values, and returns and displays
date values, in a consistent and correct manner regardless of the dates used
whether before, on, or after January 1, 2000; (iii) the computer, program or
software accepts and responds to year input, if any, in a manner that resolves
any ambiguities as to century in a defined, predetermined, and appropriate
manner; (iv) the computer, program or software stores and displays date
information in ways that are unambiguous as to the determination of the
century; and (v) leap years will be determined by the following standard (A) if
dividing the year by 4 yields an integer, it is a leap year, except for years
ending in 00, but (B) a year ending in 00 is a leap year if dividing it by 400
yields an integer.
(g) Except with respect to demonstration or trial copies, no product,
system, program or software module designed, developed, sold, licensed or
otherwise made available by the Company to any Person contains any "back door,"
"time bomb," "Trojan horse," "worm," "drop dead device," "virus" or other
software routines or hardware components designed to permit unauthorized access
or to disable or erase software, hardware or data without the consent of the
user.
(h) Part 2.13(h) of the Company Disclosure Schedule lists all
contracts, licenses and agreements between the Company and any other Person
wherein or whereby the
15
Company has agreed to, or assumed, any obligation or duty to warrant,
indemnify, reimburse, hold harmless, guaranty or otherwise assume or incur any
obligation or liability or provide a right of rescission with respect to the
infringement or misappropriation by the Company or such other person of the
Proprietary Assets of any Person other than the Company.
(i) Each item of Company Registered Proprietary Assets is valid and
subsisting, all necessary registration, maintenance and renewal fees in
connection with such Registered Proprietary Assets have been paid and all
necessary documents and certificates in connection with such Company Registered
Proprietary Assets have been filed with the relevant patent, copyright,
trademark or other authorities in the United States or foreign jurisdictions,
as the case may be, for the purposes of maintaining such Registered Proprietary
Assets. There are no actions that must be taken by the Company within ninety
(90) days of the Closing Date, including the payment of any registration,
maintenance or renewal fees or the filing of any documents, applications or
certificates for the purposes of maintaining, perfecting or preserving or
renewing any Registered Proprietary Assets. In each case in which the Company
has acquired any Proprietary Assets, other than Licensed Assets, from any
person, the Company has obtained a valid and enforceable assignment sufficient
to irrevocably transfer all rights in such Proprietary Assets (including the
right to seek past and future damages with respect to such Proprietary Assets)
to the Company and, to the maximum extent provided for by, and in accordance
with, applicable laws and regulations, the Company has recorded each such
assignment with the relevant governmental authorities, including the Patent and
Trademark Office, the U.S. Copyright Office, or their equivalents in any
relevant foreign jurisdiction, as the case may be.
2.10 Contracts.
(a) Part 2.10(a) of the Company Disclosure Schedule identifies:
(i) each Company Contract relating to the employment of, or the
performance of services by, any employee, consultant or independent contractor;
(ii) each Company Contract relating to the acquisition,
transfer, use, development, sharing or license of any technology or any
Proprietary Asset;
(iii) each Company Contract imposing any restriction on the
Company's right or ability (A) to compete with any other Person, (B) to acquire
any product or other asset or any services from any other Person, to sell any
product or other asset to or perform any services for any other Person or to
transact business or deal in any other manner with any other Person, or (C)
develop or distribute any technology;
(iv) each Company Contract creating or involving any agency
relationship, distribution arrangement or franchise relationship;
(v) each Company Contract relating to the acquisition, issuance
or transfer of any securities;
(vi) each Company Contract relating to the creation of any
Encumbrance with respect to any asset of the Company;
16
(vii) each Company Contract involving or incorporating any
guaranty, any pledge, any performance or completion bond, any indemnity or any
surety arrangement;
(viii) each Company Contract creating or relating to any
partnership or joint venture or any sharing of revenues, profits, losses, costs
or liabilities;
(ix) each Company Contract relating to the purchase or sale of
any product or other asset by or to, or the performance of any services by or
for, any Related Party (as defined in Section 2.18);
(x) each Company Contract constituting or relating to a
Government Contract or Government Bid;
(xi) any other Company Contract that was entered into outside
the ordinary course of business or was inconsistent with the Company's past
practices;
(xii) any other Company Contract that has a term of more than 60
days and that may not be terminated by the Company (without penalty) within 60
days after the delivery of a termination notice by the Company;
(xiii) any other Company Contract that contemplates or involves
(A) the payment or delivery of cash or other consideration in an amount or
having a value in excess of $50,000 in the aggregate, or (B) the purchase or
sale of any product, or performance of services, by or to the Company having a
value in excess of $50,000 in the aggregate;
(xiv) each Company Contract constituting a commitment of any
Person to purchase products (including products in development) of the Company;
(xv) each Company Contract relating to the acquisition or
disposition by the Company of any material business, product, technology or
other material assets; and
(xvi) any Company Contract, including, without limitation, any
stock option plan, stock appreciation rights plan or stock purchase plan, any
of the benefits of which will be increased, or the vesting of benefits of which
will be accelerated, by the occurrence of any of the transaction contemplated
by this Agreement or the value of any of the benefits of which will be
calculated on the basis of any of the transactions contemplated by this
Agreement.
(Company Contracts in the respective categories described in clauses "(i)"
through "(xvi)" above are referred to in this Agreement as "Material
Contracts.")
(b) The Company has delivered to Parent accurate and complete
copies of all written Material Contracts, including all amendments thereto.
Part 2.10(b) of the Company Disclosure Schedule provides an accurate
description of the terms of each Material Contract that is not in written form.
Each Contract identified in Part 2.10(a) and Part 2.10(b) of the Company
Disclosure Schedule is valid and in full force and effect, and, to the
knowledge of the Company, is enforceable by the Company in accordance with its
terms.
17
(c) Except as set forth in Part 2.10(c) of the Company
Disclosure Schedule:
(i) the Company has not violated or breached, or committed any
default under, any Company Contract, and, to the knowledge of the Company, no
other Person has violated or breached, or committed any default under, any
Company Contract;
(ii) to the knowledge of the Company, no event has occurred, and
no circumstance or condition exists, that (with or without notice or lapse of
time) will, or could reasonably be expected to, (A) result in a violation or
breach of any of the provisions of any Company Contract, (B) give any Person
the right to declare a default or exercise any remedy under any Company
Contract, (C) give any Person the right to accelerate the maturity or
performance of any Company Contract, or (D) give any Person the right to
cancel, terminate or modify any Company Contract;
(iii) since the Company's inception, the Company has not
received any notice or other communication regarding any actual or possible
violation or breach of, or default under, any Company Contract; and
(iv) the Company has not waived any of its material rights under
any Material Contract.
(d) No Person is renegotiating, or has a right pursuant to the terms
of any Company Contract to renegotiate, any amount paid or payable to the
Company under any Material Contract or any other material term or provision of
any Material Contract.
(e) The Material Contracts collectively constitute all of the
Contracts necessary to enable the Company to conduct its business in the manner
in which its business is currently being conducted.
(f) There are no material revenue generating Contracts that have not
already been provided to Parent.
2.11 Liabilities; Fees, Costs and Expenses.
(a) The Company has no accrued, contingent or other material
liabilities of any nature, either matured or unmatured (whether or not required
to be reflected in financial statements in accordance with GAAP, and whether
due or to become due), except for: (i) liabilities identified as such in the
"liabilities" column of the Unaudited Interim Balance Sheet; (ii) accounts
payable or accrued salaries that have been incurred by the Company since
February 29, 2000 in the ordinary course of business and consistent with the
Company's past practices, which, in the aggregate, do not exceed $50,000; (iii)
liabilities under the Material Contracts, to the extent the nature and
magnitude of such liabilities can be specifically ascertained by reference to
the text of such Company Contracts, which in the aggregate do not exceed
$500,000; and (iv) the liabilities identified in Part 2.11(a) of the Company
Disclosure Schedule.
(b) The total amount of all fees, costs and expenses incurred by or
for the benefit of the Company in connection with (a) the due diligence
conducted by the Company with
18
respect to the Merger, (b) the negotiation, preparation and review of this
Agreement (including the Company Disclosure Schedule) and all agreements,
certificates, opinions and other instruments and documents delivered or to be
delivered in connection with the transactions contemplated by this Agreement,
(c) the preparation and submission of any filing or notice required to be made
or given in connection with any of the transactions contemplated by this
Agreement and the obtaining of any Consent required to be obtained in
connection with any transactions contemplated hereby, will not in the aggregate
exceed $300,000, except for the Company's obligations to its financial advisor,
Xxxxxx Xxxxxx Partners, LLC.
2.12 Compliance with Legal Requirements. The Company is, and has at all
times since its inception been, in compliance with all applicable Legal
Requirements, except where the failure to comply with such Legal Requirements,
taken together, has not had and will not have a Material Adverse Effect on the
Company. Except as set forth in Part 2.12 of the Company Disclosure Schedule,
since its inception the Company has not received any notice or other
communication from any Governmental Body regarding any actual or possible
violation of, or failure to comply with, any Legal Requirement.
2.13 Governmental Authorizations. Part 2.13 of the Company Disclosure
Schedule identifies each material Governmental Authorization held by the
Company, and the Company has delivered to Parent accurate and complete copies
of all Governmental Authorizations identified in Part 2.13 of the Company
Disclosure Schedule. The Governmental Authorizations identified in Part 2.13 of
the Company Disclosure Schedule are valid and in full force and effect, and
collectively constitute all Governmental Authorizations necessary to enable the
Company to conduct its business in the manner in which its business is
currently being conducted. The Company is, and at all times since its inception
has been, in substantial compliance with the terms and requirements of the
respective Governmental Authorizations identified in Part 2.13 of the Company
Disclosure Schedule. Since the date of its inception, the Company has not
received any notice or other communication from any Governmental Body regarding
(a) any actual or possible violation of or failure to comply with any term or
requirement of any Governmental Authorization, or (b) any actual or possible
revocation, withdrawal, suspension, cancellation, termination or modification
of any Governmental Authorization.
2.14 Tax Matters.
(a) All Tax Returns required to be filed by or on behalf of the
Company with any Governmental Body with respect to any taxable period ending on
or before the Closing Date (the "Company Returns") (i) have been or will be
filed on or before the applicable due date (including any extensions of such
due date), and (ii) have been, or will be when filed, accurately and completely
prepared in all material respects in compliance with all applicable Legal
Requirements. All amounts shown on the Company Returns to be due on or before
the Closing Date have been or will be paid on or before the Closing Date. The
Company has delivered to Parent accurate and complete copies of all Company
Returns filed since December 31, 1996 which have been requested by Parent.
(b) The Company Financial Statements fully accrue all actual and
contingent liabilities for unpaid Taxes that individually or in the aggregate
are material, with respect to all
19
periods through the dates thereof, in accordance with generally accepted
accounting principles. The Company will establish, in the ordinary course of
business and consistent with its past practices, reserves adequate for the
payment of all unpaid Taxes for the period from February 29, 2000 through the
Closing Date, and the Company will disclose the dollar amount of such reserves
to Parent on or prior to the Closing Date.
(c) Except as set forth in Part 2.14(c) the Company Disclosure
Schedule, there have been no examinations or audits of any Company Return and
the Company has received no notice of any Governmental Body of its intent to
conduct such an examination or audit. The Company has delivered to Parent
accurate and complete copies of all audit reports and similar documents (to
which the Company has access) relating to the Company Returns. Except as set
forth in Part 2.14(c) of the Company Disclosure Schedule, no extension or
waiver of the limitation period applicable to any of the Company Returns has
been granted (by the Company or any other Person), and no such extension or
waiver has been requested from the Company.
(d) Except as set forth in Part 2.14(d) of the Company Disclosure
Schedule, no claim or Proceeding is pending or, to the Company's knowledge, has
been threatened against or with respect to the Company in respect of any Tax.
There are no unsatisfied liabilities for Taxes (including liabilities for
interest, additions to tax and penalties thereon and related expenses) with
respect to which any notice of deficiency or similar document has been received
by the Company (other than liabilities for Taxes asserted under any such notice
of deficiency or similar document which are being contested in good faith by
the Company and with respect to which adequate reserves for payment have been
established). There are no liens for Taxes upon any of the assets of the
Company except liens for current Taxes not yet due and payable. The Company has
not entered into or become bound by any agreement or consent pursuant to
Section 341(f) of the Code. The Company has not been, and the Company
reasonably believes it will not be, required to include any adjustment in
taxable income for any tax period (or portion thereof) pursuant to Section 481
or 263A of the Code or any comparable provision under state or foreign Tax laws
that individually or in the aggregate would be material, as a result of
transactions or events occurring, or accounting methods employed, prior to the
Closing.
(e) There is no agreement, plan, arrangement or other Contract
covering any employee or independent contractor or former employee or
independent contractor of the Company that, considered individually or
considered collectively with any other such Contracts, will, or could
reasonably be expected to, give rise directly or indirectly to the payment of
any material amount that would not be deductible pursuant to Section 280G or
Section 162 of the Code. The Company is not, and has never been, a party to or
bound by any tax indemnity agreement, tax sharing agreement, tax allocation
agreement or similar Contract.
(f) The Company has not been a member of an affiliated, consolidated,
combined or unitary group, or made any election or participated in any
arrangement whereby any Tax liability or any Tax asset of the Company was
determined or taken into account for Tax purposes with reference to or in
conjunction with any Tax liability or any Tax asset of any other person.
(g) The Company has withheld and paid all Taxes required to have been
20
withheld and paid in connection with amounts paid or owing to any employee,
independent contractor, shareholder or other third party.
(h) The Company has not requested or received a ruling or
determination from any Governmental Body or signed a closing or other agreement
with any Governmental Body with regard to the Company affecting any Tax period
for which the applicable statute of limitations, after giving effect to
extensions or waivers, has not expired.
(i) The Company (i) has not received a tax opinion with respect to
any transaction relating to the Company other than a transaction in the
ordinary course of business, (ii) is not a direct or indirect beneficiary of a
guarantee of tax benefits or any other arrangement that has the same economic
effect (including an indemnity from a seller or lessee of property, or other
insurance) with respect to any transaction or tax opinion relating to the
Company and (iii) is not a party to any understanding or arrangement described
in Section 6111(d) or Section 6662(d)(2)(C)(iii) of the Code.
(j) During the five-year period ending on the date hereof, the
Company was not a distributing corporation or a controlled corporation in a
transaction intended to be governed by Section 355 of the Code.
(k) The Company does not own an interest in real property in any
jurisdiction in which a Tax is imposed, or the value of the interest is
reassessed, on the transfer of an interest in real property and which treats
the transfer of an interest in an entity that owns an interest in real property
as a transfer of the interest in real property.
2.15 Employee and Labor Matters; Benefit Plans.
(a) Part 2.15(a) of the Company Disclosure Schedule identifies each
salary, bonus, deferred compensation, incentive compensation, stock purchase,
stock option, severance pay, termination pay, hospitalization, medical, life or
other insurance, supplemental unemployment benefits, profit-sharing, pension or
retirement plan, program or agreement (collectively, the "Plans") sponsored,
maintained, contributed to or required to be contributed to by the Company for
the benefit of any employee of the Company ("Employee"), except for Plans which
would not require the Company to make payments or provide benefits having a
value in excess of $50,000 in the aggregate. Part 2.15(a) of the Company
Disclosure Schedule sets forth the citizenship status of every employee of the
Company (whether such employee is a United States citizen or otherwise) and,
with respect to non-United States citizens, identifies the visa or other
similar permit under which such employee is working for the Company and the
dates of issuance and expiration of such visa or other similar permit.
(b) Except as set forth in Part 2.15(b) of the Company Disclosure
Schedule, the Company does not maintain, sponsor or contribute to, and, to the
knowledge of the Company, has not at any time in the past maintained, sponsored
or contributed to, any employee pension benefit plan (as defined in Section
3(2) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), whether or not excluded from coverage under specific
21
Titles or Merger Subtitles of ERISA) for the benefit of Employees or former
Employees (a "Pension Plan").
(c) The Company maintains, sponsors or contributes only to those
employee welfare benefit plans (as defined in Section 3(1) of ERISA, whether or
not excluded from coverage under specific Titles or Merger Subtitles of ERISA)
for the benefit of Employees or former Employees which are described in Part
2.15(c) of the Company Disclosure Schedule (the "Welfare Plans"), none of which
is a multiemployer plan (within the meaning of Section 3(37) of ERISA).
(d) With respect to each Plan, the Company has delivered to Parent:
(i) an accurate and complete copy of such Plan (including all
amendments thereto);
(ii) an accurate and complete copy of the annual report, if
required under ERISA, with respect to such Plan for the last two years;
(iii) an accurate and complete copy of the most recent summary
plan description, together with each Summary of Material Modifications, if
required under ERISA, with respect to such Plan, and all material written
employee communications relating to such Plan;
(iv) if such Plan is funded through a trust or any third party
funding vehicle, an accurate and complete copy of the trust or other funding
agreement (including all amendments thereto) and accurate and complete copies
of the most recent financial statements thereof;
(v) accurate and complete copies of all Contracts relating to
such Plan, including service provider agreements, insurance contracts, minimum
premium contracts, stop-loss agreements, investment management agreements,
subscription and participation agreements and recordkeeping agreements; and
(vi) an accurate and complete copy of the most recent
determination letter received from the Internal Revenue Service with respect to
such Plan (if such Plan is intended to be qualified under Section 401(a) of the
Code).
(e) The Company is not required to be, and, to the knowledge of the
Company, has never been required to be, treated as a single employer with any
other Person under Section 4001(b)(1) of ERISA or Section 414(b), (c), (m) or
(o) of the Code. The Company has never been a member of an "affiliated service
group" within the meaning of Section 414(m) of the Code. To the knowledge of
the Company, the Company has never made a complete or partial withdrawal from a
multiemployer plan, as such term is defined in Section 3(37) of ERISA,
resulting in "withdrawal liability," as such term is defined in Section 4201 of
ERISA (without regard to subsequent reduction or waiver of such liability under
either Section 4207 or 4208 of ERISA).
22
(f) The Company does not have any plan or commitment to create any
additional Welfare Plan or any Pension Plan, or to modify or change any
existing Welfare Plan or Pension Plan (other than to comply with applicable
law) in a manner that would materially affect any Employee.
(g) Except as set forth in Part 2.15(g) of the Company Disclosure
Schedule, no Welfare Plan provides death, medical or health benefits (whether
or not insured) with respect to any current or former Employee after any such
Employee's termination of service (other than (i) benefit coverage mandated by
applicable law, including coverage provided pursuant to Section 4980B of the
Code, (ii) deferred compensation benefits accrued as liabilities on the
Unaudited Interim Balance Sheet, and (iii) benefits the full cost of which are
borne by current or former Employees (or the Employees' beneficiaries)).
(h) With respect to each of the Welfare Plans constituting a group
health plan within the meaning of Section 4980B(g)(2) of the Code, the
provisions of Section 4980B of the Code ("COBRA") have been complied with in
all material respects.
(i) Each of the Plans has been operated and administered in all
material respects in accordance with applicable Legal Requirements, including
but not limited to ERISA and the Code.
(j) Each of the Plans intended to be qualified under Section 401(a)
of the Code has received a favorable determination from the Internal Revenue
Service or constitutes a prototype plan in respect of which a favorable
determination letter has been issued to the prototype sponsor thereof, and the
Company is not aware of any reason why any such determination letter should be
revoked.
(k) Except as set forth in Part 2.15(k) of the Company Disclosure
Schedule, neither the execution, delivery or performance of this Agreement, nor
the consummation of the Merger or any of the other transactions contemplated by
this Agreement, will result in any payment (including any bonus, golden
parachute or severance payment) to any current or former Employee or director
of the Company (whether or not under any Plan), or materially increase the
benefits payable under any Plan, or result in any acceleration of the time of
payment or vesting of any such benefits.
(l) The Company has provided to Parent under separate cover a list of
all salaried Employees as of the date of this Agreement, which list correctly
reflects, in all material respects, their salaries, any other compensation
payable to them (including compensation payable pursuant to bonus, deferred
compensation or commission arrangements), their dates of employment and their
positions. The Company is not a party to any collective bargaining contract or
other Contract with a labor union involving any of its Employees. Except as set
forth in Part 2.15(l) of the Company Disclosure Schedule, all of the Employees
are "at will" employees.
23
(m) Part 2.15(m) of the Company Disclosure Schedule identifies each
Employee who is not fully available to perform work because of disability or
other leave and sets forth the basis of such leave and the anticipated date of
return to full service.
(n) The Company is in compliance in all material respects with all
applicable Legal Requirements and Contracts relating to employment, employment
practices, wages, bonuses and terms and conditions of employment, including
employee compensation matters.
(o) Except as set forth in Part 2.15(o) of the Company Disclosure
Schedule, the Company reasonably believes that it has good labor relations, and
has no reason to believe that (i) the consummation of the Merger or any of the
other transactions contemplated by this Agreement will have a material adverse
effect on the Company's labor relations, or (ii) any of the Employees intends
to terminate his or her employment with the Company.
2.16 Environmental Matters. The Company is in compliance in all material
respects with all applicable Environmental Laws, which compliance includes the
possession by the Company of all permits and other Governmental Authorizations
required under applicable Environmental Laws, and compliance with the terms and
conditions thereof. The Company has not received any notice or other
communication (in writing or otherwise), whether from a Governmental Body,
citizens group, employee or otherwise, that alleges that the Company is not in
compliance with, or may have any liability under, any Environmental Law, and,
to the knowledge of the Company, there are no facts, conditions or
circumstances that may prevent or interfere with the Company's compliance with
any Environmental Law in the future. To the knowledge of the Company, no
current or prior owner of any property leased or controlled by the Company has
received any notice or other communication (in writing or otherwise), whether
from a Governmental Body, citizens group, employee or otherwise, that alleges
that such current or prior owner or the Company is not in compliance with or
may have any liability under any Environmental Law. To the Company's knowledge,
no Materials of Environmental Concern have been discharged, disposed of,
dumped, spilled, leaked, emitted or released at any property now or previously
owned, leased or operated by the Company. There has been no environmental
investigation, study, audit, test, review or other analysis conducted of which
the Company has knowledge in relation to any property now or previously owned,
leased or operated by the Company that has not been delivered to Parent. All
material Governmental Authorizations currently held by the Company pursuant to
Environmental Laws are identified in Part 2.16 of the Company Disclosure
Schedule. (For purposes of this Section 2.16: (i) "Environmental Law" means any
federal, state, local or foreign Legal Requirement relating to pollution or
protection of human health or the environment (including ambient air, surface
water, ground water, land surface or subsurface strata), including any law or
regulation relating to emissions, discharges, releases or threatened releases
of Materials of Environmental Concern, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Materials of Environmental Concern; and (ii)
"Materials of Environmental Concern" include chemicals, pollutants,
contaminants, wastes, toxic substances, petroleum and petroleum products and
any other substance that is now or hereafter regulated by any Environmental Law
or that is otherwise a danger to health, reproduction or the environment.)
24
2.17 Insurance. Part 2.17 of the Company Disclosure Schedule identifies all
insurance policies maintained by, at the expense of or for the benefit of the
Company and identifies any material claims made thereunder, and the Company has
delivered to Parent accurate and complete copies of the insurance policies
identified in Part 2.17 of the Company Disclosure Schedule. Each of the
insurance policies identified in Part 2.17 of the Company Disclosure Schedule
is in full force and effect. Since the Company's inception, the Company has not
received any notice or other communication regarding any actual or possible (a)
cancellation or invalidation of any insurance policy, (b) refusal of any
coverage or rejection of any claim under any insurance policy, or (c) material
adjustment in the amount of the premiums payable with respect to any insurance
policy.
2.18 Related Party Transactions. Except as set forth in Part 2.18 of the
Company Disclosure Schedule: (a) no Related Party has, and no Related Party has
at any time since the Company's inception had, any direct or indirect interest
in any material asset used in or otherwise relating to the business of the
Company; (b) no Related Party is, or has at any time since the Company's
inception been, indebted to the Company, nor has the Company been indebted to
any Related Party, except for ordinary course obligations to pay employees and
consultants for services rendered; (c) since the Company's inception, no
Related Party has entered into, or has had any direct or indirect financial
interest in, any material Contract, transaction or business dealing involving
the Company; (d) no Related Party is competing, or has at any time since the
Company's inception competed, directly or indirectly, with the Company; and (e)
no Related Party has any claim or right against the Company (other than rights
under Company Options and rights to receive compensation for services performed
as an employee of the Company). (For purposes of this Section 2.18 each of the
following shall be deemed to be a "Related Party": (i) each individual who is,
or who has at any time since the Company's inception been, an officer or
director of the Company; (ii) each member of the immediate family of each of
the individuals referred to in clause "(i)" above; and (iii) any trust or other
Entity (other than the Company) in which any one of the individuals referred to
in clauses "(i)" and "(ii)" above holds (or in which more than one of such
individuals collectively hold), beneficially or otherwise, a material voting,
proprietary or equity interest.)
2.19 Legal Proceedings; Orders.
(a) There is no pending Legal Proceeding, and to the knowledge of the
Company, no Person has threatened to commence any Legal Proceeding or has any
reasonable basis to commence any Legal Proceeding: (i) that involves the
Company or any of the assets owned or used by the Company or any Person whose
liability the Company has or may have retained or assumed, either contractually
or by operation of law; or (ii) that challenges, or that may have the effect of
preventing, delaying, making illegal or otherwise interfering with, the Merger
or any of the other transactions contemplated by this Agreement. To the
knowledge of the Company, no event has occurred, and no claim, dispute or other
condition or circumstance exists, that will, or that could reasonably be
expected to, give rise to or serve as a basis for the commencement of any such
Legal Proceeding.
(b) No Legal Proceeding has ever been commenced by or has ever been
pending by or against the Company.
25
(c) There is no order, writ, injunction, judgment or decree to which
the Company, or any of the assets owned or used by the Company, is subject. To
the knowledge of the Company, no officer or other employee of the Company is
subject to any order, writ, injunction, judgment or decree that prohibits such
officer or other employee from engaging in or continuing any conduct, activity
or practice relating to the Company's business.
2.20 Authority; Binding Nature of Agreement. The Company has the absolute
and unrestricted right, power and authority to enter into and to perform its
obligations under this Agreement; and the execution, delivery and performance
by the Company of this Agreement have been duly authorized by all necessary
action on the part of the Company and its board of directors and this Agreement
and the Merger have been unanimously approved by the board of directors of the
Company, subject to stockholder approval as provided in the following sentence.
The affirmative vote of (i) a majority of the shares of Company Common Stock
and Series A Preferred Stock of the Company, voting together as a single class
(on an as-converted-basis), that are outstanding on the first date on which a
signed written consent of a Company stockholder approving this Agreement is
received by the Company, and (ii) a majority of the shares of Series A
Preferred Stock of the Company, voting as a separate class (on an
as-converted-basis), that are outstanding on the first date on which a signed
written consent of a Company stockholder approving this Agreement is received
by the Company, is the only vote of the stockholders of the Company needed to
approve and adopt this Agreement and approve the Merger and the transactions
contemplated hereby (the "Required Company Stockholder Vote"). This Agreement
constitutes the legal, valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms, subject to (i) laws of
general application relating to bankruptcy, insolvency and the relief of
debtors, and (ii) rules of law governing specific performance, injunctive
relief and other equitable remedies.
2.21 Non-Contravention; Consents. Except as set forth in Part 2.21 of the
Company Disclosure Schedule, neither (1) the execution, delivery or performance
of this Agreement or any of the other agreements referred to in this Agreement,
nor (2) the consummation of the Merger or any of the other transactions
contemplated by this Agreement, will directly or indirectly (with or without
notice or lapse of time):
(a) contravene, conflict with or result in a violation of (i) any of
the provisions of the Company's certificate of incorporation or bylaws, or (ii)
any resolution adopted by the Company's stockholders, the Company's board of
directors or any committee of the Company's board of directors;
(b) contravene, conflict with or result in a violation of, or give
any Governmental Body or other Person the right to challenge any of the
transactions contemplated by this Agreement or to exercise any remedy or obtain
any relief under, any Legal Requirement or any order, writ, injunction,
judgment or decree to which the Company, or any of the assets owned or used by
the Company, is subject;
(c) contravene, conflict with or result in a violation of any of the
terms or requirements of, or give any Governmental Body the right to revoke,
withdraw, suspend, cancel, terminate or modify, any Governmental Authorization
that is held by the Company or that
26
otherwise relates to the Company's business or to any of the assets owned or
used by the Company;
(d) contravene, conflict with or result in a violation or breach of,
or result in a default under, any provision of any Company Contract that is or
would constitute a Material Contract, or give any Person the right to (i)
declare a default or exercise any remedy under any such Company Contract, (ii)
accelerate the maturity or performance of any such Company Contract, or (iii)
cancel, terminate or modify any such Company Contract; or
(e) result in the imposition or creation of any lien or other
Encumbrance upon or with respect to any asset owned or used by the Company
(except for minor liens that will not, in any case or in the aggregate,
materially detract from the value of the assets subject thereto or materially
impair the operations of the Company).
Except as set forth in Part 2.21 of the Company Disclosure Schedule, the
Company is not and will not be required to make any filing with or give any
notice to, or to obtain any Consent from, any Person in connection with (x) the
execution, delivery or performance of this Agreement or any of the other
agreements referred to in this Agreement, or (y) the consummation of the Merger
or any of the other transactions contemplated by this Agreement.
2.22 Customers. Part 2.22 of the Company Disclosure Schedule identifies
each Person that has committed (whether oral or written and whether pursuant to
an agreement or purchase order or otherwise) to purchase existing products or
services or products or services being developed by the Company (the "Purchase
Commitments"), and whether such commitment is oral or written. The Company has
provided to Parent true and complete copies of all documents evidencing such
Purchase Commitments. All such Purchase Commitments are in full force and
effect, have not been withdrawn, amended, modified or terminated and are
enforceable by the Company and, upon consummation of the Merger, will be
enforceable by Parent, against the other party to such Purchase Commitments. To
the knowledge of the Company, no fact, condition or circumstance exists that
would give any party the right to withdraw, amend, modify or terminate any
Purchase Commitment, and no Person has given any notice to the Company, and the
Company has no reason to believe, that any Person intends to withdraw, amend,
modify or terminate any Purchase Commitment.
2.23 Product Development. Part 2.23 of the Company Disclosure Schedule sets
forth for each product or service being developed by or on behalf of the
Company a true and correct development status, including the dates on which the
development of each such product or service currently is scheduled to be
completed. To the knowledge of the Company, no fact, condition or circumstance
exists that would materially impair or delay the development of any such
products or services. The Company has not entered into any agreement which
restricts its right to make, have made, use or sell to an unlimited number of
third parties any products currently contemplated by, designed by or designed
on behalf of the Company.
2.24 Noncompetition and No-Hire Agreements. Each of the Persons identified
on Exhibit E have executed and delivered to the Company and Parent a
Noncompetition and No-Hire Agreement in the form of Exhibit F.
27
2.25 Full Disclosure. This Agreement (including the Disclosure Schedule)
does not, (i) contain any representation, warranty or information that is false
or misleading with respect to any material fact, or (ii) omit to state any
material fact necessary in order to make the representations, warranties and
information contained and to be contained herein and therein (in the light of
the circumstances under which such representations, warranties and information
were or will be made or provided) not false or misleading.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub represent and warrant to the Company as follows:
3.1 Corporate Existence and Power. Each of Parent and Merger Sub is a
corporation duly incorporated, validly existing and in good standing under the
laws of its state of incorporation, and has all corporate power required to
conduct its business as now conducted, and is duly qualified to do business and
is in good standing in each jurisdiction in which the conduct of its business
or the ownership or leasing of its properties requires such qualification,
except where the failure to be so qualified would not have a material adverse
effect on Parent's business, financial condition or results of operations.
3.2 Authority; Binding Nature of Agreement. Parent and Merger Sub have the
absolute and unrestricted right, power and authority to perform their
obligations under this Agreement; and the execution, delivery and performance
by Parent and Merger Sub of this Agreement (including the contemplated issuance
of Parent Common Stock in the Merger in accordance with this Agreement) have
been duly authorized by all necessary action on the part of Parent and Merger
Sub and their respective boards of directors. No vote of Parent's stockholders
is needed to adopt this Agreement or approve the Merger. This Agreement
constitutes the legal, valid and binding obligation of Parent and Merger Sub,
enforceable against them in accordance with its terms, subject to (i) laws of
general application relating to bankruptcy, insolvency and the relief of
debtors, and (ii) rules of law governing specific performance, injunctive
relief and other equitable remedies.
3.3 SEC Filings; Financial Statements.
(a) Parent has delivered to the Company accurate and complete copies
(excluding copies of exhibits) of each report and definitive proxy statement
filed by Parent with the SEC between October 1, 1999 and the date of this
Agreement (the "Parent SEC Documents"). As of the time it was filed with the
SEC (or, if amended or superseded by a filing prior to the date of this
Agreement, then on the date of such filing): (i) each of the Parent SEC
Documents complied in all material respects with the applicable requirements of
the Securities Act or the Exchange Act (as the case may be); and (ii) none of
the Parent SEC Documents contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading.
(b) The consolidated financial statements contained in the Parent SEC
Documents: (i) complied as to form in all material respects with the published
rules and
28
regulations of the SEC applicable thereto; (ii) were prepared in accordance
with generally accepted accounting principles applied on a consistent basis
throughout the periods covered, except as may be indicated in the notes to such
consolidated financial statements and (in the case of unaudited statements) as
permitted by Form 10-Q of the SEC, and except that unaudited financial
statements may not contain footnotes and are subject to year-end audit
adjustments; and (iii) fairly present the consolidated financial position of
Parent as of the respective dates thereof and the consolidated results of
operations of Parent for the periods covered thereby.
3.4 No Conflict. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby by Parent and Merger Sub
are not prohibited by, and will not violate or conflict with, any provision of
the certificate of incorporation or bylaws of Parent or Merger Sub.
3.5 Valid Issuance. The shares of Parent Common Stock to be issued
pursuant to Section 1.5(a) will, when issued in accordance with the provisions
of this Agreement, be validly issued, fully paid and nonassessable.
SECTION 4. CERTAIN COVENANTS OF THE COMPANY
4.1 Access and Investigation. During the period from the date of this
Agreement through the Effective Time (the "Pre-Closing Period"), the Company
shall, and shall cause its Representatives to: (a) provide Parent and Parent's
Representatives with reasonable access to the Company's Representatives,
personnel and assets and to all existing books, properties, records, Tax
Returns, work papers and other documents and information relating to the
Company; and (b) provide Parent and Parent's Representatives with copies of
such existing books, records, Tax Returns, work papers and other documents and
information relating to the Company, and with such additional financial,
operating and other data and information regarding the Company, as Parent may
reasonably request.
4.2 Operation of the Company's Business. During the Pre-Closing
Period:
(a) the Company shall conduct its business and operations in the
ordinary course and in substantially the same manner as such business and
operations have been conducted prior to the date of this Agreement, except for
activities necessary or appropriate for the consummation of the transactions
contemplated by this Agreement;
(b) the Company shall use its best efforts to preserve intact its
current business organization, keep available the services of its current
officers and employees and maintain its relations and good will with all
suppliers, customers, landlords, creditors, employees and other Persons having
business relationships with the Company;
(c) the Company shall keep in full force and effect all insurance
policies identified in Part 2.17 of the Company Disclosure Schedule;
(d) the Company shall cause its officers to report regularly (but in
no event less frequently than weekly) to Parent concerning the status of the
Company's business;
29
(e) the Company shall not declare, accrue, set aside or pay any
dividend or make any other distribution in respect of any shares of capital
stock of the Company, and shall not repurchase, redeem or otherwise reacquire
any shares of capital stock or other securities of the Company (except that the
Company may repurchase Company Common Stock from former employees at cost
pursuant to the terms of existing restricted stock purchase agreements);
(f) Except as provided for in the SVB Agreement (as defined below),
the Company shall not sell, issue or authorize the issuance of (i) any capital
stock or other securities of the Company, (ii) any option or right to acquire
any capital stock or other securities of the Company, or (iii) any instrument
convertible into or exchangeable for any capital stock or other securities of
the Company (except that the Company shall be permitted to issue shares of
Company Common Stock (x) to employees and directors upon the exercise of
Company Options, and (y) to issue shares of Company Common Stock upon the
conversion of shares of Series A Preferred Stock of the Company outstanding as
of the date of this Agreement);
(g) the Company shall not amend or waive any of its rights under, or
permit the acceleration of vesting under, (i) any provision of any Company
Stock Option Plan, (ii) any provision of any agreement evidencing any
outstanding Company Option, or (iii) any provision of any restricted stock
purchase agreement (unless acceleration of vesting is required under any
Company Stock Option Plan, Company Option or other agreement); except that the
Restricted Stock Purchase Agreements between the Company and each of Xxxx
Xxxxxxx, Xxxxxxx Xxxxxxxx and Xxxx Xxxx Jan shall be amended to provide that
any shares that still remain subject to the Company's repurchase options
thereunder as of the Effective Time (the "Unvested Shares") shall remain
subject to such repurchase options after the Effective Time and shall be
released from such repurchase options at the rate of 1/36 of such Unvested
Shares on each monthly anniversary of the Effective Time, with the form and
substance of such amendments (the "Vesting Amendments") to be acceptable to
Parent, in its reasonable discretion;
(h) the Company shall not amend or permit the adoption of any
amendment to the Company's certificate of incorporation or bylaws, or effect or
permit the Company to become a party to any Acquisition Transaction,
recapitalization, reclassification of shares, stock split, reverse stock split
or similar transaction (except that the Company may issue shares of Company
Common Stock upon the conversion of shares of outstanding Series A Preferred of
the Company Stock);
(i) the Company shall not form any subsidiary or acquire any equity
interest or other interest in any other Entity;
(j) the Company shall not make any capital expenditure, except for
capital expenditures that, when added to all other capital expenditures made on
behalf of the Company during the Pre-Closing Period, do not exceed $50,000 per
month;
(k) the Company shall not (i) enter into, or permit any of the assets
owned or used by it to become bound by, any Contract that is or would
constitute a Material Contract, or (ii) amend or prematurely terminate, or
waive any material right or remedy under, any such Contract;
30
(l) the Company shall not (i) acquire, lease or license any right or
other asset from any other Person, (ii) sell or otherwise dispose of, or lease
or license, any right or other asset to any other Person, or (iii) waive or
relinquish any right, except for assets acquired, leased, licensed or disposed
of by the Company pursuant to Contracts that are not Material Contracts;
(m) the Company shall not (i) lend money to any Person (except that
the Company may make routine travel advances to employees in the ordinary
course of business), or (ii) incur or guarantee any indebtedness for borrowed
money;
(n) the Company shall not (i) establish, adopt or amend any Employee
Benefit Plan, (ii) pay any bonus or make any profit-sharing payment, cash
incentive payment or similar payment to, or increase the amount of the wages,
salary, commissions, fringe benefits or other compensation or remuneration
payable to, any of its directors, officers or employees, or (iii) hire any new
employee whose aggregate annual compensation exceeds $100,000;
(o) the Company shall not revalue any of its assets or change any of
its methods of accounting or accounting practices in any material respect
(including any method of accounting for tax purposes);
(p) the Company shall not make any Tax election;
(q) the Company shall not commence or settle any material Legal
Proceeding;
(r) the Company shall not agree or commit to take any of the actions
described in clauses "(e)" through "(q)" above.
Notwithstanding the foregoing, the Company may take any action described in
clauses "(e)" through "(r)" above if Parent gives its prior written consent to
the taking of such action by the Company, which consent will not be
unreasonably withheld (it being understood that Parent's withholding of consent
to any action will not be deemed unreasonable if Parent determines in good
faith that the taking of such action would not be in the best interests of
Parent or would not be in the best interests of the Company).
4.3 Notification; Updates to Disclosure Schedule.
(a) During the Pre-Closing Period, the Company shall promptly notify
Parent in writing of:
(i) the discovery by the Company of any event, condition, fact or
circumstance that occurred or existed on or prior to the date of this Agreement
and that caused or constitutes a material inaccuracy in or breach of any
representation or warranty made by the Company in this Agreement;
(ii) any event, condition, fact or circumstance that occurs,
arises or exists after the date of this Agreement and that would cause or
constitute a material inaccuracy in or breach of any representation or warranty
made by the Company in this Agreement if (A) such representation or warranty
had been made as of the time of the occurrence, existence or
31
discovery of such event, condition, fact or circumstance, or (B) such event,
condition, fact or circumstance had occurred, arisen or existed on or prior to
the date of this Agreement;
(iii) any material breach of any covenant or obligation of the
Company; and
(iv) any event, condition, fact or circumstance that would make
the timely satisfaction of any condition set forth in Section 6 or Section 7
impossible or unlikely.
(b) If any event, condition, fact or circumstance that is required to
be disclosed pursuant to Section 4.3(a) requires any change in the Company
Disclosure Schedule, or if any such event, condition, fact or circumstance
would require such a change assuming the Company Disclosure Schedule were dated
as of the date of the occurrence, existence or discovery of such event,
condition, fact or circumstance, then the Company shall promptly deliver to
Parent an update to the Company Disclosure Schedule specifying such change. No
such update shall be deemed to supplement or amend the Company Disclosure
Schedule for the purpose of (i) determining the accuracy of any of the
representations and warranties made by the Company in this Agreement until the
Closing (if applicable), at which time the Company's representations and
warranties shall be deemed updated in all respects with those (and only those)
additional disclosures that reflect changes in the Company's affairs since the
date of this Agreement, or (ii) determining whether any condition set forth in
Section 6 has been satisfied for purposes of determining the obligations of
Parent and Merger Sub to complete the Closing.
4.4 No Negotiation. During the Pre-Closing Period the Company will not (nor
will the Company permit any of its Representatives to), directly or indirectly,
take any of the following actions with any party other than Parent and its
designees: (a) solicit, encourage, initiate or participate in any negotiations
or discussions with respect to any offer or proposal to acquire all,
substantially all or a significant portion of the Company's business,
properties or technologies or any portion of the Company's capital stock
(whether or not outstanding) whether by merger, purchase of assets, tender
offer or otherwise, or effect any such transaction, (b) disclose any
information not customarily disclosed to any person concerning the Company's
business, technologies or properties or afford to any person or entity access
to its properties, technologies, books or records, (c) assist or cooperate with
any person to make any proposal to purchase all or any part of the Company's
capital stock or assets, or (d) enter into any agreement with any person
providing for the acquisition of all or any significant portion of the Company
(whether by way of merger, purchase of assets, tender offer or otherwise). In
addition to the foregoing, if the Company or any of its Representatives
receives during the Pre-Closing Period any offer, proposal, or request relating
to any of the above, the Company shall immediately notify Parent thereof,
including information as to the identity of the offeror or the party making any
such offer or proposal and the specific terms of such offer or proposal, as the
case may be, and such other information related thereto as Parent may
reasonably request. The parties hereto agree that irreparable damage would
occur in the event that the provisions of this Section 4.4 were not performed
in accordance with their specific terms or were otherwise breached. It is
accordingly agreed by the parties that Parent shall be entitled to seek an
injunction or injunctions to prevent breaches of the provisions of this Section
4.4 and to enforce specifically the terms and
33
provisions hereof in any court of the United States or any state having
jurisdiction, this being in addition to any other remedy to which Parent may be
entitled at law or in equity.
SECTION 5. ADDITIONAL COVENANTS OF THE PARTIES
5.1 Filings and Consents. As promptly as practicable after the
execution of this Agreement, each party to this Agreement (a) shall make all
filings (if any) and give all notices (if any) required to be made and given by
such party in connection with the Merger and the other transactions
contemplated by this Agreement, and (b) shall use all commercially reasonable
efforts to obtain all Consents (if any) required to be obtained (pursuant to
any applicable Legal Requirement or Contract, or otherwise) by such party in
connection with the Merger and the other transactions contemplated by this
Agreement. The Company shall (upon request) promptly deliver to Parent a copy
of each such filing made, each such notice given and each such Consent obtained
by the Company during the Pre-Closing Period.
5.2 Registration Statement; Information Statement.
(a) The Company shall take all action necessary under all applicable
Legal Requirements to solicit the written consent of the stockholders of the
Company entitled to vote upon the adoption and approval of this Agreement and
the approval of the Merger and will, as promptly as practicable, mail to each
holder of capital stock of the Company a copy of the Information Statement, a
form of written consent and such other documents as Parent deems are necessary
to comply with applicable law or are otherwise reasonably appropriate all of
which shall be in form reasonably acceptable to Parent. The Company shall use
its best efforts to ensure that the Required Company Stockholder Vote will be
obtained as promptly as practicable (and in any event within ten (10) business
days) after the Information Statement is first sent to the stockholders of the
Company. The Company shall ensure that the Required Company Stockholder Vote is
solicited in compliance with all applicable Legal Requirements.
(b) The board of directors of the Company has unanimously recommended
that the Company's stockholders adopt and approve this Agreement and approve
the Merger. The Information Statement shall include a statement to the effect
that the board of directors of the Company has unanimously recommended that the
Company's stockholders adopt and approve this Agreement and approve the Merger.
Neither the board of directors of the Company nor any committee thereof shall
withdraw, amend or modify, or propose or resolve to withdraw, amend or modify,
in a manner adverse to Parent, the unanimous recommendation of the board of
directors of the Company that the Company's stockholders adopt and approve this
Agreement and approve the Merger. For purposes of this Agreement, said
recommendation of the board of directors of the Company shall be deemed to have
been modified in a manner adverse to Parent if said recommendation shall no
longer be unanimous. Notwithstanding the foregoing, but without limiting the
Company's liability to Parent for any breach of this Section 5.2(b), no
director of the Company shall be held accountable or have any liability,
directly or indirectly, for any breach of this covenant to the extent of any
contrary recommendation by such director made in reliance on the advice of
counsel that the director's fiduciary duties require a contrary recommendation.
33
(c) The holders of a majority in interest of the total Parent Common
Stock issued in the Merger shall be entitled to demand that Parent file a
"shelf" registration statement under Rule 415 under the Securities Act (the
"Resale Registration Statement") with the SEC, for the resale of all of the
shares of Parent Common Stock issued in the Merger (collectively, the
"Registrable Securities").
(d) Parent shall use its best efforts to comply with such demand as
promptly as possible, with the Resale Registration Statement to be filed no
later than thirty (30) business days after the Closing. Parent will use its
best efforts to cause the Resale Registration Statement to become effective
under the Securities Act, provided, that the Company Stockholders shall not be
entitled to resell more than 10% of the Merger Share Amount pursuant to the
Resale Registration Statement prior to June 5, 2000. Parent represents and
warrants that on the date the Resale Registration Statement becomes effective,
the Resale Registration Statement will comply in all material respects with the
applicable requirements of the Securities Act and the rules thereunder; on the
date of its effectiveness the Resale Registration Statement (including any
documents incorporated by reference therein) will not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements made therein not misleading,
provided, however, that no representation is made by Parent with respect to
written information furnished to Parent by or on behalf of any Company
stockholder specifically for inclusion in the Resale Registration Statement;
and the final prospectus contained in the Resale Registration Statement, if not
filed pursuant to Rule 424(b), will not, and on the date of any filing pursuant
to Rule 424(b), such final prospectus (together with any supplement thereto)
will not, include any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein, in light of
the circumstances in which they were made, not misleading, provided, however,
that no representation is made by Parent with respect to written information
furnished to Parent by or on behalf of any Company stockholder specifically for
inclusion in such prospectus, provided, further, that no representation is made
by Parent to any Company stockholder with respect to any untrue statement or
omission if such statement or omission was corrected in an amended prospectus
or prospectus supplement that was provided to such Company stockholder and such
Company stockholder failed to deliver such amended prospectus or prospectus
supplement to the purchaser of the registered Registrable Securities. Parent
will promptly: (A) notify all Company stockholders when the Resale Registration
Statement is declared effective; and (B) notify all Company stockholders of any
stop-order or similar proceeding by the SEC or any state securities authority.
(e) Each Person including Registrable Securities in the registration
covered by the Resale Registration Statement shall, as a condition to their
inclusion, provide such information concerning such Person and its Registrable
Securities and other holders of Parent Common Stock as Parent reasonably
requires and shall agree in writing to be subject to the same trading
restrictions applicable to the directors and officers of Parent under Parent's
xxxxxxx xxxxxxx policy. In addition, in no case shall a stockholder be
permitted to sell any shares of Parent Common Stock under the Resale
Registration Statement that are subject to repurchase rights in favor of
Parent.
34
(f) Parent shall promptly prepare and file with the SEC such
amendments and supplements to the Resale Registration Statement and the
prospectus used in connection therewith as may be necessary to comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such Resale Registration Statement and keep the Resale
Registration Statement effective until the earlier of (A) all the Registrable
Securities have been sold pursuant thereto, (B) with respect to any Person who
has included Registrable Securities in such registration, when such Person is
able to dispose of its entire remaining ownership interest in the Registrable
Securities in the United States public markets in a single transaction under
Rule 144 or (C) one year from the Closing Date. Parent shall provide a transfer
agent, registrar and CUSIP number with respect to all securities registered by
such Resale Registration Statement. Notwithstanding the foregoing, if Parent
furnishes to the Company stockholders a certificate signed by the President or
Chief Financial Officer of Parent stating that, in the good faith judgment of
the Board of Directors of Parent, it would be seriously detrimental to Parent
for registration to be effected, or for the Company's stock to be traded
thereunder due to (A) the existence of a material development or potential
material development involving Parent that Parent would be obligated to
disclose in the prospectus contained in the Resale Registration Statement,
which disclosure would in the good faith judgment of the Board of Directors be
premature or otherwise inadvisable, (B) the existence of other facts or
circumstances as a result of which the prospectus contained or to be contained
in the Resale Registration Statement includes or would include an untrue
statement of a material fact or omits or would omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances under which they were made or then
existing or (C) Parent's bona fide intention to effect the filing of a
registration statement with the Securities and Exchange Commission within sixty
(60) days of such notice from Parent, Parent may defer the filing of the Resale
Registration Statement or suspend trading under an effective Resale
Registration Statement, as the case may be. Parent may elect to so defer, delay
or terminate under clause (A) above only to the extent that the event described
in clause (A) also gives rise to a black-out period applicable to all of
Parent's executive officers and directors under Parent's xxxxxxx xxxxxxx
policy. If Parent elects to so defer, delay or terminate under clause (B)
above, Parent shall use its commercially reasonable efforts to amend the
registration statement or take such other action as may be necessary to
eliminate the situation described in clause (B) as soon as practicable. Any
Company stockholder receiving any notice from Parent with respect to the
matters covered by this Section 5.2(f) shall keep the fact and content of such
notice, and the event or circumstances giving rise to such notice,
confidential.
(g) Parent shall furnish to each Company stockholder with respect to
the Registrable Securities registered under the Resale Registration Statement
such number of copies of prospectuses and preliminary prospectuses and
supplements in conformity with the requirements of the Securities Act and such
other documents as such person may reasonably request, in order to facilitate
the public sale or other disposition of all or any of the Registrable
Securities by such person.
(h) Subject to the limitations on Parent's obligation to maintain the
effectiveness of the Resale Registration Statement set forth in Section 5.2(f),
Parent shall use its best efforts to register or qualify the Registrable
Securities covered by such Resale Registration Statement under such other
securities or blue sky laws of such jurisdictions in the United States
35
as a majority in interest of the Registrable Securities shall reasonably
request and do any and all other acts or things which may be reasonably
necessary or desirable to enable each Person who holds Registrable Securities
to consummate the public sale or other disposition in such jurisdictions,
provided that Parent shall not be required in connection therewith or as a
condition thereto to qualify to do business or file a general consent to
service of process in any such jurisdictions.
(i) Parent shall bear all expenses in connection with the procedures
set forth in this Section 5.2 and the registration of the Registrable
Securities pursuant to the Resale Registration Statement, including without
limitation the fees and expenses of one legal counsel to represent all the
selling stockholders, which fees and expenses shall not exceed $25,000, except
that Parent shall not be required to bear any broker's commissions or
discounts, transfer taxes, fees or expenses, if any, of any counsel (other than
the single counsel for all selling stockholders as aforesaid) or other advisors
to any Person who holds Registrable Securities.
(j) As a condition to such registration, Parent and each Person who
holds Registrable Securities who is having its Parent Common Stock issued in
the Merger included in the Registration Statement shall agree in writing to
reasonable and customary cross-indemnification for securities laws
misrepresentations.
5.3 (a) Public Announcements. During the Pre-Closing Period, (a) the
Company shall not (and the Company shall not permit any of its Representatives
to) issue any press release or make any public statement regarding this
Agreement or the Merger, or regarding any of the other transactions
contemplated by this Agreement, without Parent's prior written consent, and (b)
Parent will not (and Parent shall not permit any of its Representatives to)
issue any press release or make any public statement regarding the Merger, or
regarding any of the other transactions contemplated by this Agreement, without
the Company's prior written consent, provided that nothing herein shall be
deemed to prohibit Parent from making any public disclosure to the extent that
Parent is advised by counsel that such disclosure is necessary under applicable
laws.
(b) Confidentiality. Each of the parties hereto hereby agrees that
the information obtained in any investigation pursuant to Section 4.1, or
pursuant to the negotiation and execution of this Agreement or the effectuation
of the transaction contemplated hereby shall be governed by the terms of the
[Confidentiality Agreement] dated __________, 2000 between the Company and
Parent.
5.4 Best Efforts. During the Pre-Closing Period, (a) the Company shall use
its best efforts to cause the conditions set forth in Section 6 to be satisfied
on a timely basis, and (b) Parent and Merger Sub shall use their best efforts
to cause the conditions set forth in Section 7 to be satisfied on a timely
basis.
5.5 Tax Matters. At or prior to the Closing, Parent and the Company
shall deliver to Xxxxx Xxxx & Xxxxxxxx and to Xxxxxx Xxxxxxx Xxxxx & Xxxxxx
LLP, tax representation letters in substantially the form of Exhibit G hereto.
Parent and the Company shall use all reasonable efforts prior to the Effective
Time to cause the Merger to qualify as a tax-free reorganization
36
under Section 368(a) of the Code. Following delivery of the tax representations
letters pursuant to the first sentence of this Section 5.5, each of Parent and
the Company shall use its reasonable efforts to cause Xxxxx Xxxx & Xxxxxxxx and
Xxxxxx Xxxxxxx Xxxxx & Xxxxxx LLP, respectively, to deliver to it the tax
opinion contemplated by Sections 6.5(f) and 7.3(b), respectively, and each of
such counsel shall be entitled to rely on the tax representation letters
described in this Section 5.5.
5.6 Termination of Agreements. Prior to the Closing, the Company and the
Company stockholders who are parties to that certain Amended and Restated
Investor Rights Agreement dated July 20, 1999, among the Company and certain
holders of its capital stock, and that certain Amended and Restated
Stockholders Agreement dated July 20, 1999, among the Company and certain
holders of its capital stock, shall enter into an agreement, reasonably
satisfactory in form and content to Parent (and conditioned and effective upon
the Closing), terminating all of such stockholders' rights under such
agreements.
5.7 Employee Retention Program. Unless Parent receives any contrary
recommendations from existing management of the Company, Parent expects that
the current employees of the Company will continue to be employees of the
Company immediately after the Effective Time. Accordingly, Parent and the
Company shall consult with each other with respect to the disclosure of the
Merger to the employees of the Company.
5.8 Release. At the Closing, each of the Company stockholders identified
on Exhibit H-1 shall execute and deliver to the Company a Release in the form
of Exhibit H-2.
5.9 Termination of Employee Plans. At the Closing, the Company shall
terminate all employee benefit plans of the Company other than the Company
Stock Option Plans and shall ensure that no employee or former employee of the
Company has any rights under any of such plans (other than rights assumed by
Parent pursuant to Section 1.6 hereof) and that any liabilities of the Company
under such plans (including any such liabilities relating to services performed
prior to the Closing) are fully extinguished at no cost to the Company.
5.10 FIRPTA Matters. At the Closing, (a) the Company shall deliver to
Parent a statement (in such form as may be reasonably requested by counsel to
Parent) conforming to the requirements of Section 1.897 - 2(h)(1)(i) of the
United States Treasury Regulations, and (b) the Company shall deliver to the
Internal Revenue Service the notification required under Xxxxxxx 0.000 - 0(x)(0)
xx xxx Xxxxxx Xxxxxx Treasury Regulations.
5.11 Investor Loans. At the Closing, Parent and/or Merger Sub shall
cause to be repaid all amounts outstanding under the Company's promissory notes
issued February 18, 2000, to the North Carolina Enterprise Fund, L.P., and
Alliance Semiconductor Corporation (the "Investor Loans"); provided, however,
that Parent shall not be required to pay any prepayment or similar penalties on
such Investor Loans.
5.12 Listing of Common Stock. Parent shall promptly take action to
cause the Parent Common Stock issued in the Merger to be listed on the Nasdaq.
37
SECTION 6. CONDITIONS PRECEDENT TO OBLIGATIONS OF PARENT AND MERGER SUB
The obligations of Parent and Merger Sub to effect the Merger and
otherwise consummate the transactions contemplated by this Agreement are
subject to the satisfaction or waiver, at or prior to the Closing, of each of
the following conditions:
6.1 Accuracy of Representations. Each of the representations and
warranties made by the Company as set forth in this Agreement and in each of
the other agreements and instruments delivered to Parent on the date hereof in
connection with the transactions contemplated by this Agreement shall have been
accurate in all material respects as of the date of this Agreement and shall be
accurate in all material respects as of the Closing Date as if made on the
Closing Date, notwithstanding any notifications provided to Parent pursuant to
Section 4.3(b).
6.2 Performance of Covenants. All of the covenants and obligations that
the Company is required to comply with or to perform at or prior to the Closing
shall have been complied with and performed in all material respects.
6.3 Stockholder Approval. This Agreement shall have been duly adopted by
the Required Company Stockholder Vote. The holders of shares of Company capital
stock equivalent to no more than 5% of the Company Common Stock outstanding
immediately prior to the Effective Time (assuming the conversion of all Series
A Preferred Stock outstanding immediately prior to the Effective Time) shall be
entitled to have such shares treated as Dissenting Shares.
6.4 Consents. All Consents required to be obtained in connection with the
Merger and the other transactions contemplated by this Agreement (including the
Consents identified in Part 2.21 of the Company Disclosure Schedule) shall have
been obtained and shall be in full force and effect.
6.5 Agreements and Documents. Parent shall have received the following
agreements and documents, each of which shall be in full force and effect:
(a) Noncompetition and No-Hire Agreements in the form of Exhibit F,
executed by the Persons identified on Exhibit E;
(b) a Release in the form of Exhibit H-2, executed by the Company
stockholders identified on Exhibit H-1;
(c) confidential invention and assignment agreements, reasonably
satisfactory in form and content to Parent, executed by all employees of the
Company and by all consultants and independent contractors to the Company
(including the individuals identified in Part 2.9(f) of the Company Disclosure
Schedule);
(d) an estoppel certificate, dated as of a date not more than five
days prior to the Closing Date and reasonably satisfactory in form and content
to Parent, executed by Duke-Weeks Realty Corporation;
38
(e) a legal opinion of Xxxxxx Xxxxxxx Xxxxx & Xxxxxx LLP, dated as of
the Closing Date, in the form of Exhibit I;
(f) a legal opinion of Xxxxx Xxxx & Xxxxxxxx, dated as of the Closing
Date, to the effect that the Merger will constitute a reorganization within the
meaning of Section 368 of the Code (it being understood that, in rendering such
opinion, such counsel may rely upon the tax representation letters referred to
in Section 5.5);
(g) written resignations of all directors of the Company, effective
as of the Effective Time;
(h) an Escrow Agreement in the form of Exhibit D, executed by the
Company Stockholders' Representative and the Escrow Agent;
(i) a certificate signed on behalf of the Company by the Chief
Executive Officer of the Company representing and warranting that the
conditions set forth in Sections 6.1 and 6.2 have been duly satisfied (the
"Company Compliance Certificate");
(j) employment agreements, reasonably satisfactory in form and
content to Parent, executed by the Persons identified on Exhibit J; and
(k) the Vesting Amendments referred to in Section 4.2(g).
6.6 No Restraints. No temporary restraining order, preliminary or
permanent injunction or other order preventing the consummation of the Merger
shall have been issued by any court of competent jurisdiction and remain in
effect, and there shall not be any Legal Requirement enacted or deemed
applicable to the Merger that makes consummation of the Merger illegal.
6.7 No Governmental Litigation. There shall not be pending or threatened
any Legal Proceeding in which a Governmental Body is or is threatened to become
a party or is otherwise involved, and neither Parent nor the Company shall have
received any communication from any Governmental Body in which such
Governmental Body indicates the possibility of commencing any Legal Proceeding
or taking any other action: (a) challenging or seeking to restrain or prohibit
the consummation of the Merger or any of the other transactions contemplated by
this Agreement; (b) relating to the Merger and seeking to obtain from Parent or
any of its Subsidiaries, or the Company or any of its Subsidiaries, any damages
or other relief that may be material to Parent; (c) seeking to prohibit or
limit in any material respect Parent's ability to vote, receive dividends with
respect to or otherwise exercise ownership rights with respect to the stock of
the Company or any of its Subsidiaries; or (d) which would materially and
adversely affect the right of Parent or the Company or any of its Subsidiaries
to own the assets or operate the business of the Company or any of its
Subsidiaries.
6.8 No Other Litigation. There shall not be pending any Legal Proceeding in
which, in the reasonable judgment of Parent, there is a reasonable possibility
of an outcome that could have a Material Adverse Effect on the Company or any
of its Subsidiaries or a material adverse effect on Parent: (a) challenging or
seeking to restrain or prohibit the consummation of the
39
Merger or any of the other transactions contemplated by this Agreement; (b)
relating to the Merger and seeking to obtain from Parent or any of its
Subsidiaries, or any of the Company or any of its Subsidiaries, any damages or
other relief that may be material to Parent; (c) seeking to prohibit or limit
in any material respect Parent's ability to vote, receive dividends with
respect to or otherwise exercise ownership rights with respect to the stock of
the Company or any of its Subsidiaries; or (d) which would affect adversely the
right of Parent or the Company or any of its Subsidiaries to own the assets or
operate the business of the Company or any of its Subsidiaries.
6.9 Termination of Employee Plans. The Company shall have provided Parent
with evidence, reasonably satisfactory to Parent, as to the termination of the
benefit plans referred to in Section 5.9.
6.10 FIRPTA Compliance. Parent shall have received the statement, and
the Company shall have filed with the Internal Revenue Service the
notification, referred to in Section 5.10.
6.11 Employees. The Employees listed on Exhibit K attached hereto
shall continue to be employed by the Company.
6.12 Assignments. Company shall have obtained assignments to Parent
of all intellectual property rights under Company Contracts as requested by
Parent.
6.13 Silicon Valley Bank Warrant. The Company shall have obtained an
agreement exercising the warrant issued by the Company to Silicon Valley Bank
for Common Stock of the Company, in form and content reasonably satisfactory to
Parent, executed by Silicon Valley Bank (the "SVB Agreement").
SECTION 7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY
The obligations of the Company to effect the Merger and otherwise
consummate the transactions contemplated by this Agreement are subject to the
satisfaction or waiver, at or prior to the Closing, of the following
conditions:
7.1 Accuracy of Representations. Each of the representations and
warranties made by Parent and Merger Sub in this Agreement shall have been
accurate in all material respects as of the date of this Agreement and shall be
accurate in all material respects as of the Closing Date as if made on the
Closing Date.
7.2 Performance of Covenants. All of the covenants and obligations that
Parent and Merger Sub are required to comply with or to perform at or prior to
the Closing shall have been complied with and performed in all material
respects.
7.3 Documents. The Company shall have received the following documents:
(a) a legal opinion of Xxxxx Xxxx & Xxxxxxxx, dated as of the Closing
Date, in the form of Exhibit L;
40
(b) a legal opinion of Xxxxxx Xxxxxxx Xxxxx & Xxxxxx LLP, dated as of
the Closing Date, to the effect that the Merger will constitute a
reorganization within the meaning of Section 368 of the Code (it being
understood that, in rendering such opinion, such counsel may rely upon the tax
representation letters referred to in Section 5.5);
(c) an Escrow Agreement in the form of Exhibit D, executed by Parent
and the Escrow Agent; and
(d) a certificate signed on behalf of Parent by the Chief Executive
Officer and the Chief Financial Officer of Parent representing and warranting
that the conditions set forth in Sections 7.1 and 7.2 have been duly satisfied.
7.4 Stockholder Approval. This Agreement shall have been duly adopted
and approved and the Merger shall have been duly approved by the Required
Company Stockholder Vote.
7.5 No Restraints. No temporary restraining order, preliminary or
permanent injunction or other order preventing the consummation of the Merger
shall have been issued by any court of competent jurisdiction and remain in
effect, and there shall not be any Legal Requirement enacted or deemed
applicable to the Merger that makes consummation of the Merger illegal.
7.6 Repayment of Investor Loans. At the Closing, Parent and/or Merger Sub
shall have repaid the Investor Loans.
SECTION 8. TERMINATION
8.1 Termination Events. This Agreement may be terminated prior to the
Closing:
(a) by Parent if Parent reasonably determines that the timely
satisfaction of any condition set forth in Section 6 has become impossible
(other than as a result of any failure on the part of Parent or Merger Sub to
comply with or perform any covenant or obligation of Parent or Merger Sub set
forth in this Agreement);
(b) by the Company if the Company reasonably determines that the
timely satisfaction of any condition set forth in Section 7 has become
impossible (other than as a result of any failure on the part of the Company to
comply with or perform any covenant or obligation set forth in this Agreement
or in any other agreement or instrument delivered to Parent);
(c) by Parent if any of the Company's representations and warranties
contained in this Agreement shall have been materially inaccurate as of the
date of this Agreement or shall have become materially inaccurate as of any
subsequent date (as if made on such subsequent date), or if any of the
Company's covenants contained in this Agreement shall have been breached in any
material respect; provided, however, that Parent may not terminate this
Agreement under this Section 8.1(c) on account of an inaccuracy in the
Company's representations and warranties that is waived by Parent or that is
curable by the Company or on account of a breach of a covenant by the Company
that is waived by Parent or that is curable by
41
the Company unless the Company fails to cure such inaccuracy or breach within
15 days after receiving written notice from Parent of such inaccuracy or
breach;
(d) by the Company if any of Parent's representations and warranties
contained in this Agreement shall have been materially inaccurate as of the
date of this Agreement or shall have become materially inaccurate as of any
subsequent date (as if made on such subsequent date), or if any of Parent's
covenants contained in this Agreement shall have been breached in any material
respect; provided, however, that the Company may not terminate this Agreement
under this Section 8.1(d) on account of an inaccuracy in Parent's
representations and warranties that is waived by the Company or that is curable
by Parent or on account of a breach of a covenant by Parent that is waived by
the Company or that is curable by Parent unless Parent fails to cure such
inaccuracy or breach within 15 days after receiving written notice from the
Company of such inaccuracy or breach;
(e) by Parent if the Closing has not taken place on or before April
30, 2000 (other than as a result of any failure on the part of Parent to comply
with or perform any covenant or obligation of Parent set forth in this
Agreement);
(f) by the Company if the Closing has not taken place on or before
April 30, 2000 (other than as a result of the failure on the part of the
Company to comply with or perform any covenant or obligation set forth in this
Agreement or in any other agreement or instrument delivered to Parent); or
(g) by the mutual consent of Parent and the Company.
8.2 Termination Procedures. If Parent wishes to terminate this Agreement
pursuant to Section 8.1(a), Section 8.1(c) or Section 8.1(e), Parent shall
deliver to the Company a written notice stating that Parent is terminating this
Agreement and setting forth a brief description of the basis on which Parent is
terminating this Agreement. If the Company wishes to terminate this Agreement
pursuant to Section 8.1(b), Section 8.1(d) or Section 8.1(f), the Company shall
deliver to Parent a written notice stating that the Company is terminating this
Agreement and setting forth a brief description of the basis on which the
Company is terminating this Agreement.
8.3 Effect of Termination. If this Agreement is terminated pursuant to
Section 8.1, all further obligations of the parties under this Agreement shall
terminate; provided, however, that: (a) neither the Company nor Parent shall be
relieved of any obligation or liability arising from any inaccuracy or prior
breach by such party of any representation, warranty, covenant or other
provision of this Agreement; (b) the parties shall, in all events, remain bound
by and continue to be subject to the provisions set forth in Section 10; and
(c) the parties shall, in all events, remain bound by and continue to be
subject to Section 5.3.
SECTION 9. INDEMNIFICATION, ETC.
9.1 Survival of Representations, Etc.
42
(a) The representations and warranties made by the Company (including
the representations and warranties set forth in Section 2 and the
representations set forth in the Company Compliance Certificate) shall survive
the Closing and shall expire on the first anniversary of the Closing Date;
provided, however, that if, at any time prior to the first anniversary of the
Closing Date, any Indemnitee (acting in good faith) delivers to the Company
Stockholders' Representative a written notice alleging the existence of an
inaccuracy in or a breach of any of the representations and warranties made by
the Company (and setting forth in reasonable detail the basis for such
Indemnitee's belief that such an inaccuracy or breach may exist) and asserting
a claim for recovery under Section 9.2 based on such alleged inaccuracy or
breach, then the claim asserted in such notice shall survive the first
anniversary of the Closing until such time as such claim is fully and finally
resolved. All representations and warranties made by Parent and Merger Sub
shall terminate and expire as of the Effective Time, and any liability of
Parent or Merger Sub with respect to such representations and warranties shall
thereupon cease.
(b) The representations, warranties, covenants and obligations of the
Company, and the rights and remedies that may be exercised by the Indemnitees,
shall not be limited or otherwise affected by or as a result of any information
furnished to, or any investigation made by or knowledge of, any of the
Indemnitees or any of their Representatives.
(c) For purposes of this Agreement, each statement or other item of
information set forth in the Company Disclosure Schedule or in any update to
the Company Disclosure Schedule shall be deemed to be a representation and
warranty made by the Company in this Agreement.
9.2 Indemnification.
(a) From and after the Closing Date (but subject to Section 9.1(a)),
the holders of the Company Common Stock and Series A Preferred Stock
outstanding immediately prior to the Effective Time shall hold harmless and
indemnify each Indemnitee from and against, and shall compensate, reimburse and
pay for, any Damages which are directly or indirectly suffered or incurred by
any Indemnitee or to which any Indemnitee may otherwise become subject
(regardless of whether or not such Damages relate to any third-party claim) and
which arise from or as a result of, or are directly or indirectly connected
with: (i) any inaccuracy in or breach of any representation or warranty of the
Company set forth in this Agreement (without giving effect to any "Material
Adverse Effect" or other materiality qualification or any similar qualification
contained or incorporated directly or indirectly in such representation or
warranty, and without giving effect to any update to the Company Disclosure
Schedule delivered by the Company to Parent prior to the Closing) or in the
Company Compliance Certificate; (ii) any inaccuracy in or breach of any
representation or warranty made by the Company in this Agreement (without
giving effect to any "Material Adverse Effect" or other materiality
qualification or any similar qualification contained or incorporated directly
or indirectly in such representation or warranty, and without giving effect to
any update to the Company Disclosure Schedule delivered by the Company to
Parent prior to the Closing) or in the Company Compliance Certificate as if
such representation or warranty were made on and as of the Closing Date,
provided that such representations and warranties shall be deemed updated in
all respects with those (and only
43
those) additional disclosures delivered by the Company to the Parent prior to
Closing that reflect changes in the Company's affairs since the execution of
this Agreement, (iii) any breach of any covenant or obligation of the Company
(including the covenants set forth in Sections 4 and 5); or (iv) any Legal
Proceeding relating to any inaccuracy or breach of the type referred to in
clauses "(i)" "(ii)" or "(iii)" above (including any Legal Proceeding commenced
by any Indemnitee for the purpose of enforcing any of its rights under this
Section 9).
(b) In the event the Surviving Corporation suffers, incurs or
otherwise becomes subject to any Damages as a result of or in connection with
any inaccuracy in or breach of any representation, warranty, covenant or
obligation, then (without limiting any of the rights of the Surviving
Corporation as an Indemnitee) Parent shall also be deemed, by virtue of its
ownership of the stock of the Surviving Corporation, to have incurred Damages
as a result of and in connection with such inaccuracy or breach.
9.3 Threshold. No Indemnitee shall be entitled to indemnification pursuant
to Section 9.2(a) for any inaccuracy in or breach of any of the Company's
representations and warranties set forth in this Agreement or the Company
Compliance Certificate except to the extent that the total amount of all
Damages (including the Damages arising from such inaccuracy or breach and all
other Damages arising from any other inaccuracies in or breaches of any
representations or warranties) that have been directly or indirectly suffered
or incurred by any one or more of the Indemnitees, or to which any one or more
of the Indemnitees has or have otherwise become subject, exceeds $250,000 in
the aggregate.
9.4 Limited Recourse; Limit on Liability. Subject to Section 9.3, in the
event any Indemnitee shall suffer any Damages for which such Indemnitee is
entitled to indemnification under this Section 9, such Indemnitee shall be
entitled to recover such Damages solely by obtaining that number of Escrow
Shares equal in value (as determined in accordance with the terms and
conditions of the Escrow Agreement) to the aggregate amount of such Damages,
and such recovery shall be made from the Escrow Shares on a basis proportional
to the Escrow Shares contributed under the Escrow Agreement by or on behalf of
each Company stockholder. The Company stockholders shall have no liability for
Damages in excess of the number of Escrow Shares held under the Escrow
Agreement.
9.5 No Contribution. The Company stockholders shall not have and shall not
exercise or assert (or attempt to exercise or assert), any right of
contribution, right of indemnity or other right or remedy against the Surviving
Corporation in connection with any indemnification obligation or any other
liability to which such stockholders may become subject under or in connection
with this Agreement or the Escrow Agreement.
9.6 Defense of Third Party Claims.
(a) In the event of the assertion or commencement by any Person of
any claim or Legal Proceeding (whether against the Surviving Corporation,
against Parent or against any other Person) with respect to which any of the
Indemnitees may be entitled to indemnification or any other remedy pursuant to
this Section 9, Parent shall promptly give the Company Stockholders'
Representative and the Escrow Agent written notice of such claim or Legal
44
Proceeding (a "Claim") provided, however, that any failure on the part of
Parent to so notify the Company Stockholders' Representative shall not limit
any of the Indemnitees' rights to indemnification under this Section 9 (except
to the extent such failure materially prejudices the defense of such Legal
Proceeding).
(b) Within ten days of delivery of such written notice, the Company
Stockholders' Representative may elect (by written notice delivered to Parent)
to take all necessary steps properly to contest any Claim involving third
parties or to prosecute such Claim to conclusion or settlement using counsel
reasonably acceptable to Parent. If the Company Stockholders' Representative
makes the foregoing election, an Indemnitee will have the right to participate
at its own expense in all proceedings. If the Company Stockholders'
Representative does not make such election within such period or fails to
diligently contest such Claim after such election, then the Indemnitee shall be
free to handle the prosecution or defense of any such Claim, and will take all
necessary steps to contest the Claim involving third parties or to prosecute
such Claim to conclusion or settlement, and will notify the Company
Stockholders' Representative of the progress of any such Claim, will permit the
Company Stockholders' Representative, at the sole cost of the Company
Stockholders' Representative, to participate in such prosecution or defense and
will provide the Company Stockholders' Representative with reasonable access to
all relevant information and documentation relating to the Claim and the
prosecution or defense thereof.
(c) Notwithstanding the foregoing, if a Claim includes Damages equal
to an amount in excess of the value of the Escrow Shares on the date of the
Claim, or relates to any Proprietary Assets or other intellectual property
issues, or seeks any remedy other than cash damages, or in the reasonable
judgment of Parent, the settlement or resolution of such claim poses a
substantial risk of establishing a materially adverse precedent with regard to
future claims, Parent shall have the right, at its election, to proceed with
the defense of such claim or Legal Proceeding on its own. In any case, the
party not in control of the Claim will cooperate with the other party in the
conduct of the prosecution or defense of such Claim.
(d) Neither party will compromise or settle any such Claim without
the written consent of either Parent (if the Company Stockholders'
Representative defends the Claim) or the Company Stockholders' Representative
(if Parent or other Indemnitees defend the Claim), such consent not to be
unreasonably withheld.
(e) If Parent proceeds with the defense of any such claim or Legal
Proceeding all reasonable expenses relating to the defense of such claim or
Legal Proceeding shall be satisfied out of the Escrow Shares in the manner set
forth in the Escrow Agreement.
9.7 Exercise of Remedies by Indemnitees Other Than Parent. No Indemnitee
(other than Parent or any successor thereto or assign thereof) shall be
permitted to assert any indemnification claim or exercise any other remedy
under this Agreement or under the Escrow Agreement unless Parent (or any
successor thereto or assign thereof) shall have consented to the assertion of
such indemnification claim or the exercise of such other remedy.
45
9.8 Fraud. Notwithstanding any provision in this Agreement to the contrary,
the liability of a stockholder for fraud shall not be limited as set forth
above, and any claim with respect to such liability need not be presented
within the time limits set forth in Section 9.1(a) and shall be subject only to
applicable statutes of limitation.
SECTION 10. MISCELLANEOUS PROVISIONS
10.1 Company Stockholders' Representative.
(a) The stockholders of the Company (other than holders of Dissenting
Shares), by adopting this Agreement and the transactions contemplated hereby,
hereby irrevocably appoint Xxxxxx X. Xxxx as their agent and attorney-in-fact
for purposes of Section 9 and the Escrow Agreement (the "Company Stockholders'
Representative"), and consent to the taking by the Company Stockholders'
Representative of any and all actions and the making of any decisions required
or permitted to be taken by him under the Escrow Agreement (including, without
limitation, the exercise of the power to authorize delivery to Parent of the
Escrow Shares in satisfaction of claims by Parent, agree to, negotiate, enter
into settlements and compromises of and demand arbitration, and comply with
orders of courts and awards of arbitrators with respect to such claims, resolve
any claim made pursuant to Section 9; and take all actions necessary in the
judgment of the Company Stockholders' Representative for the accomplishment of
the foregoing, and Xxxxxx X. Xxxx hereby accepts his appointment as the Company
Stockholders' Representative for purposes of Section 9 and the Escrow
Agreement. Parent shall be entitled to deal exclusively with the Company
Stockholders' Representative on all matters relating to Section 9 and the
Escrow Agreement, and shall be entitled to rely conclusively (without further
evidence of any kind whatsoever) on any document executed or purported to be
executed on behalf of any Company stockholder by the Company Stockholders'
Representative, and on any other action taken or purported to be taken on
behalf of any Company stockholder by the Company Stockholders' Representative,
as fully binding upon such Company stockholder.
(b) If the Company Stockholders' Representative shall die, become
disabled or otherwise be unable to fulfill his responsibilities as agent of the
Company stockholders, then The North Carolina Enterprise Fund, L.P. shall,
within ten days after such death or disability, appoint a successor
representative reasonably satisfactory to Parent. Any such successor shall
become the "Company Stockholders' Representative" for purposes of Section 9,
the Escrow Agreement and this Section 10.1. If for any reason there is no
Company Stockholders' Representative at any time, all references herein to the
Company Stockholders' Representative shall be deemed to refer to C.N. Reddy. No
bond shall be required of any Company Stockholders' Representative, and no
Company Stockholders' Representative shall receive compensation for his or her
services. Any Company Stockholders' Representative shall be entitled to submit
a claim and receive reimbursement from the Escrow Shares for reasonable,
documented out-of-pocket expenses incurred by such Company Stockholders'
Representative as a result of acting as a Company Stockholders' Representative,
including the reasonable fees and expenses of any legal counsel retained by
such Company Stockholders' Representative; provided, however, that such right
to reimbursement shall be subordinate to the Indemnitees' claims on the Escrow
Shares, if any, and shall be paid only after all such claims have been
satisfied and after the termination of the escrow.
46
(c) A Company Stockholders' Representative shall not be liable for
any act done or omitted hereunder as Company Stockholders' Representative while
acting in good faith. Company stockholders on whose behalf Escrow Shares were
contributed to the escrow shall severally indemnify each Company Stockholders'
Representative and hold each Company Stockholders' Representative harmless
against any loss, liability or expense incurred without gross negligence, bad
faith or willful misconduct on the part of such Company Stockholders'
Representative and arising out of or in connection with the acceptance or
administration of such Company Stockholders' Representative's duties hereunder,
including the fees and expenses of any legal counsel retained by such Company
Stockholders' Representative.
(d) The Company Stockholders' Representative shall be entitled to
rely upon any order, judgment, certificate, demand, notice, instrument or other
writing delivered to it hereunder without being required to investigate the
validity, accuracy or content thereof nor shall the Company Stockholders'
Representative be responsible for the validity or sufficiency of this
Agreement. In all questions arising under this Agreement, the Company
Stockholders' Representative may rely on the advice of counsel, and for
anything done, omitted or suffered in good faith by the Company Stockholders'
Representative based on such advice, the Company Stockholders' Representative
shall not be liable to anyone.
10.2 Further Assurances. Each party hereto shall execute and cause to
be delivered to each other party hereto such instruments and other documents,
and shall take such other actions, as such other party may reasonably request
(prior to, at or after the Closing) for the purpose of carrying out or
evidencing any of the transactions contemplated by this Agreement.
10.3 Fees and Expenses.
(a) Each party to this Agreement shall bear and pay all fees, costs
and expenses (including legal fees and accounting fees) that have been incurred
or that are incurred by such party in connection with the transactions
contemplated by this Agreement, including all fees, costs and expenses incurred
by such party in connection with or by virtue of:
(i) the investigation and review conducted by Parent and its
Representatives with respect to the Company's business (and the furnishing of
information to Parent and its Representatives in connection with such
investigation and review),
(ii) the negotiation, preparation and review of this Agreement
(including the Company Disclosure Schedule) and all agreements, certificates,
opinions and other instruments and documents delivered or to be delivered in
connection with the transactions contemplated by this Agreement,
(iii) the preparation and submission of any filing or notice
required to be made or given in connection with any of the transactions
contemplated by this Agreement, and the obtaining of any Consent required to be
obtained in connection with any of such transactions, and
(iv) the consummation of the Merger; provided however, that, to
the extent the total amount of all such fees, costs and expenses incurred by or
for the benefit of the
47
Company (including all such fees, costs and expenses incurred prior to the date
of this Agreement and including the amount of all special bonuses and other
amounts that may become payable to any officers of the Company or other Persons
in connection with the consummation of the transactions contemplated by this
Agreement) exceeds $300,000 in the aggregate, except for the Company's
obligations to its financial advisor, Xxxxxx Xxxxxx Partners, LLC, such fees,
costs and expenses shall be paid and satisfied by the cancellation of that
number of Escrow Shares equal in value to the total of such fees, costs and
expenses in excess of $300,000.
(b) The Company's obligations to Xxxxxx Xxxxxx Partners, LLC,
for any fees or other compensation shall be satisfied by Parent.
10.4 Attorneys' Fees. If any action or proceeding relating to this
Agreement or the enforcement of any provision of this Agreement is brought
against any party hereto, the prevailing party shall be entitled to recover
reasonable attorneys' fees, costs and disbursements (in addition to any other
relief to which the prevailing party may be entitled).
10.5 Notices. Any notice or other communication required or permitted to
be delivered to any party under this Agreement shall be in writing and shall be
deemed properly delivered, given and received when delivered (by hand, by
registered mail, by courier or express delivery service or by facsimile) to the
address or facsimile telephone number set forth beneath the name of such party
below (or to such other address or facsimile telephone number as such party
shall have specified in a written notice given to the other parties hereto):
if to Parent:
Vitesse Semiconductor Corporation
000 Xxxxx Xxxxx
Xxxxxxxxx, XX 00000
Attn: Xxxxx Xxxx
Fax: 000-000-0000
with a copy to:
Xxxxx Xxxx & Xxxxxxxx
0000 Xx Xxxxxx Xxxx
Xxxxx Xxxx, XX 00000
Attn: Xxxxxxx X. Xxxxxx
Fax: 000-000-0000
if to the Company:
Orologic, Inc.
0000-X Xxxxxxxxx Xxxx
Xxxxxxxxxxx, XX 00000
Attn: Xx. Xxxx X. Xxxxxxx
Fax: (000) 000-0000
48
with a copy to:
Xxxxxx Xxxxxxx Xxxxx & Xxxxxx LLP
0000 Xxxx Xxxxx Xxxxx, Xxxxx 000
Xxxxxxx, XX 00000
Attn: J. Xxxxxxxxxxx Xxxxx, Esq.
Fax: (000) 000-0000
10.6 Time of the Essence. Time is of the essence of this Agreement.
10.7 Headings. The underlined headings contained in this Agreement are for
convenience of reference only, shall not be deemed to be a part of this
Agreement and shall not be referred to in connection with the construction or
interpretation of this Agreement.
10.8 Counterparts. This Agreement may be executed in several counterparts,
each of which shall constitute an original and all of which, when taken
together, shall constitute one agreement.
10.9 Governing Law. This Agreement shall be construed in accordance with,
and governed in all respects by, the internal laws of the State of North
Carolina (without giving effect to principles of conflicts of laws).
10.10 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their successors and assigns (if
any). The Company shall not assign this Agreement or any rights or obligations
hereunder (by operation of law or otherwise) to any Person. Prior to the
Closing, Parent shall not assign this Agreement or any rights or obligations
hereunder (by operation of law or otherwise) to any Person. After the Closing,
Parent may freely assign any or all of its rights under this Agreement
(including its rights under Section 9), in whole or in part, to any other
Person without obtaining the consent or approval of any other party hereto or
of any other Person.
10.11 Remedies Cumulative; Specific Performance. The rights and remedies
of the parties hereto shall be cumulative (and not alternative). The parties to
this Agreement agree that, in the event of any breach or threatened breach by
any party to this Agreement of any covenant, obligation or other provision set
forth in this Agreement for the benefit of any other party to this Agreement,
such other party shall be entitled (in addition to any other remedy that may be
available to it) to (a) a decree or order of specific performance or mandamus
to enforce the observance and performance of such covenant, obligation or other
provision, and (b) an injunction restraining such breach or threatened breach.
10.12 Waiver. No failure on the part of any Person to exercise any power,
right, privilege or remedy under this Agreement, and no delay on the part of
any Person in exercising any power, right, privilege or remedy under this
Agreement, shall operate as a waiver of such power, right, privilege or remedy
and no single or partial exercise of any such power, right, privilege or remedy
shall preclude any other or further exercise thereof or of any other power,
right, privilege or remedy. No Person shall be deemed to have waived any claim
arising out of
49
this Agreement, or any power, right, privilege or remedy under this Agreement,
unless the waiver of such claim, power, right, privilege or remedy is expressly
set forth in a written instrument duly executed and delivered on behalf of such
Person; and any such waiver shall not be applicable or have any effect except
in the specific instance in which it is given.
10.13 Amendments. This Agreement may not be amended, modified, altered or
supplemented other than by means of a written instrument duly executed and
delivered on behalf of all of the parties hereto.
10.14 Severability. In the event that any provision of this Agreement, or
the application of any such provision to any Person or set of circumstances,
shall be determined to be invalid, unlawful, void or unenforceable to any
extent, the remainder of this Agreement, and the application of such provision
to Persons or circumstances other than those as to which it is determined to be
invalid, unlawful, void or unenforceable, shall not be impaired or otherwise
affected and shall continue to be valid and enforceable to the fullest extent
permitted by law.
10.15 Parties in Interest. Except for the provisions of Sections 1.5, 1.6,
9 and 10.1, none of the provisions of this Agreement is intended to provide any
rights or remedies to any Person other than the parties hereto and their
respective successors and assigns (if any).
10.16 Entire Agreement. This Agreement and the other agreements referred
to herein set forth the entire understanding of the parties hereto relating to
the subject matter hereof and thereof and supersede all prior agreements and
understandings among or between any of the parties relating to the subject
matter hereof and thereof.
10.17 Construction.
(a) For purposes of this Agreement, whenever the context requires:
the singular number shall include the plural, and vice versa; the masculine
gender shall include the feminine and neuter genders; the feminine gender shall
include the masculine and neuter genders; and the neuter gender shall include
the masculine and feminine genders.
(b) The parties hereto agree that any rule of construction to the
effect that ambiguities are to be resolved against the drafting party shall not
be applied in the construction or interpretation of this Agreement.
(c) As used in this Agreement, the words "include" and "including,"
and variations thereof, shall not be deemed to be terms of limitation, but
rather shall be deemed to be followed by the words "without limitation."
(d) Except as otherwise indicated, all references in this Agreement
to "Sections" and "Exhibits" are intended to refer to Sections of this
Agreement and Exhibits to this Agreement.
50
The parties hereto have caused this Agreement to be executed and delivered
as of the date first set forth above.
VITESSE SEMICONDUCTOR CORPORATION
a Delaware corporation
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
HOLIDAY ACQUISITION CORP.
a Delaware corporation
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
OROLOGIC, INC.
a Delaware corporation
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
EXHIBIT A
CERTAIN DEFINITIONS
For purposes of the Agreement (including this Exhibit A):
Acquisition Transaction. "Acquisition Transaction" shall mean any
transaction involving:
(a) the sale, lease, exchange, transfer license, disposition or
acquisition of more than 20% of the assets of the Company's business or assets;
(b) the issuance, disposition or acquisition of (i) any capital stock
or other equity securities of the Company (other than Common Stock issued to
employees of the Company upon exercise of Company Options), (ii) any option,
call, warrant or right (whether or not immediately exercisable) to acquire any
capital stock or other equity securities of the Company, or (iii) any security,
instrument or obligation that is or may become convertible into or exchangeable
for any capital stock or other equity securities of the Company; or
(c) any merger, consolidation, business combination, reorganization
or similar transaction involving the Company.
Agreement. "Agreement" shall mean the Agreement and Plan of Merger and
Reorganization to which this Exhibit A is attached (including the Company
Disclosure Schedule), as it may be amended from time to time.
Company Contract. "Company Contract" shall mean any Contract: (a) to
which the Company is a party; (b) by which the Company or any of its assets is
or may become bound or under which the Company has, or may become subject to,
any obligation; or (c) under which the Company has or may acquire any right or
interest.
Company Disclosure Schedule. "Company Disclosure Schedule" shall mean
the schedule (dated as of the date of the Agreement) delivered to Parent on
behalf of the Company.
Company Proprietary Asset. "Company Proprietary Asset" shall mean any
Proprietary Asset owned by or licensed to the Company or otherwise used by the
Company.
Company Stock Option Plans. "Company Stock Option Plans" shall mean
the Company's 1997 Stock Plan.
Consent. "Consent" shall mean any approval, consent, ratification,
permission, waiver or authorization (including any Governmental Authorization).
Contract. "Contract" shall mean any written, oral or other agreement,
contract, subcontract, lease, understanding, instrument, note, warranty,
insurance policy, benefit plan or legally binding commitment or undertaking of
any nature.
A-1
Damages. "Damages" shall include any loss, damage, injury, decline in
value, lost opportunity, liability, claim, demand, settlement, judgment, award,
fine, penalty, Tax, fee (including reasonable attorneys' fees), charge, cost
(including costs of investigation or defense) or expense of any nature.
Encumbrance. "Encumbrance" shall mean any lien, pledge, hypothecation,
charge, mortgage, security interest, encumbrance, claim, infringement,
interference, option, right of first refusal, preemptive right, community
property interest or restriction of any nature (including any restriction on
the voting of any security, any restriction on the transfer of any security or
other asset, any restriction on the receipt of any income derived from any
asset, any restriction on the use of any asset and any restriction on the
possession, exercise or transfer of any other attribute of ownership of any
asset).
Entity. "Entity" shall mean any corporation (including any non-profit
corporation), general partnership, limited partnership, limited liability
partnership, joint venture, estate, trust, company (including any limited
liability company or joint stock company), firm or other enterprise,
association, organization or entity.
Exchange Act. "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
Government Bid. "Government Bid" shall mean any quotation, bid or proposal
submitted to any Governmental Body or any proposed prime contractor or
higher-tier subcontractor of any Governmental Body.
Government Contract. "Government Contract" shall mean any prime
contract, subcontract, letter contract, purchase order or delivery order
executed or submitted to or on behalf of any Governmental Body or any prime
contractor or higher-tier subcontractor, or under which any Governmental Body
or any such prime contractor or subcontractor otherwise has or may acquire any
right or interest.
Governmental Authorization. "Governmental Authorization" shall mean any:
(a) permit, license, certificate, franchise, permission, clearance,
registration, qualification or authorization issued, granted, given or
otherwise made available by or under the authority of any Governmental Body or
pursuant to any Legal Requirement; or (b) right under any Contract with any
Governmental Body.
Governmental Body. "Governmental Body" shall mean any: (a) nation,
state, commonwealth, province, territory, county, municipality, district or
other jurisdiction of any nature; (b) federal, state, local, municipal, foreign
or other government; or (c) governmental or quasi-governmental authority of any
nature (including any governmental division, department, agency, commission,
instrumentality, official, organization, unit, body or Entity and any court or
other tribunal).
Indemnitees. "Indemnitees" shall mean the following Persons: (a) Parent;
(b) Parent's current and future affiliates (including the Surviving
Corporation); (c) the respective
A-2
Representatives of the Persons referred to in clauses "(a)" and "(b)" above;
and (d) the respective successors and assigns of the Persons referred to in
clauses "(a)", "(b)" and "(c)" above.
Legal Proceeding. "Legal Proceeding" shall mean any action, suit,
litigation, arbitration, proceeding (including any civil, criminal,
administrative, investigative or appellate proceeding), hearing, inquiry,
audit, examination or investigation commenced, brought, conducted or heard by
or before, or otherwise involving, any court or other Governmental Body or any
arbitrator or arbitration panel by any Person or Governmental Body.
Legal Requirement. "Legal Requirement" shall mean any federal, state,
local, municipal, foreign or other law, statute, constitution, principle of
common law, resolution, ordinance, code, edict, decree, rule, regulation,
ruling or requirement issued, enacted, adopted, promulgated, implemented or
otherwise put into effect by or under the authority of any Governmental Body.
Material Adverse Effect. A violation or other matter will be deemed
to have a "Material Adverse Effect" on the Company if such violation or other
matter (considered together with all other matters that would constitute
exceptions to the representations and warranties set forth in the Agreement or
in the Company Compliance Certificate but for the presence of "Material Adverse
Effect" or other materiality qualifications, or any similar qualifications, in
such representations and warranties) has had or could have a material adverse
effect on the Company's business, condition, prospects, assets, liabilities,
operations, financial performance customer relationships or Purchase
Commitments.
Nasdaq. "Nasdaq" shall mean the Nasdaq National Stock Market.
Person. "Person" shall mean any individual, Entity or Governmental
Body.
Proprietary Asset. "Proprietary Asset" shall mean any or all of the
following and all rights in, arising out of, or associated therewith: (i) all
United States and foreign patents and applications therefor and all reissues,
divisions, renewals, extensions, provisionals, continuations and
continuations-in-part thereof; (ii) all inventions (whether patentable or not),
invention disclosures, improvements, trade secrets, proprietary information,
know how, technology, technical data and customer lists, and all documentation
relating to any of the foregoing; (iii) all copyrights, copyright registrations
and applications therefor and all other rights corresponding thereto throughout
the world; (iv) all semiconductor and semiconductor circuit designs; (v) all
rights to all mask works and reticles, mask work registrations and applications
therefor; (vi) all industrial designs and any registrations and applications
therefor throughout the world; (vii) all trade names, logos, common law
trademarks and service marks; trademark and service xxxx registrations and
applications therefor and all goodwill associated therewith throughout the
world; (viii) all registered domain names and applications therefor; (ix) all
databases and data collections and all rights therein throughout the world; (x)
all computer software including all source code, object code, firmware,
development tools, files, records and data, all media on which any of the
foregoing is recorded, all Web addresses, sites and domain names; (xi) any
similar corresponding or equivalent rights to any of the foregoing; and (xii)
all documentation related to any of the foregoing.
A-3
Representatives. "Representatives" shall mean officers, directors,
employees, agents, attorneys, accountants, advisors and representatives.
SEC. "SEC" shall mean the United States Securities and Exchange Commission.
Securities Act. "Securities Act" shall mean the Securities Act of 1933, as
amended.
Subsidiary. Any Entity shall be deemed to be a "Subsidiary" of another
Person if such Person directly or indirectly owns, beneficially or of record,
(a) an amount of voting securities or other interests in such Entity that is
sufficient to enable such Person to elect at least a majority of the members of
such Entity's board of directors or other governing body, or (b) at least 50%
of the outstanding equity or financial interests of such Entity.
Tax. "Tax" shall mean (i) any income tax, value-added tax, withholding tax
or payroll tax, and any related charge or amount (including any fine, penalty
or interest), imposed, assessed or collected by or under the authority of any
Governmental Body, (ii) in the case of the Company or any subsidiary thereof,
liability for the payment of any amount of the type described in clause (i) as
a result of being or having been before the Closing Date a member of an
affiliated, consolidated, combined or unitary group, or a party to any
agreement or arrangement, as a result of which liability of the Company or any
subsidiary thereof to a Governmental Body is determined or taken into account
with reference to the activities of any other Person, and (iii) liability of
the Company or any subsidiary thereof for the payment of any amount as a result
of being party to any Tax sharing agreement or with respect to the payment of
any amount imposed on any person of the type described in (i) or (ii) as a
result of any existing express or implied agreement or arrangement (including,
but not limited to, an indemnification agreement or arrangement).
Tax Return. "Tax Return" shall mean any return (including any information
return), report, statement, declaration, estimate, schedule, notice,
notification, form, election, certificate or other document or information
filed with or submitted to, or required to be filed with or submitted to, any
Governmental Body in connection with the determination, assessment, collection
or payment of any Tax or in connection with the administration, implementation
or enforcement of or compliance with any Legal Requirement relating to any Tax.
A-4
===============================================================================
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
among:
VITESSE SEMICONDUCTOR CORPORATION,
a Delaware corporation;
HOLIDAY ACQUISISITION CORP.,
a Delaware corporation;
and
OROLOGIC, INC.,
a Delaware corporation.
---------------------------
Dated as of March 24, 2000
---------------------------
===============================================================================
EXHIBITS
Exhibit A - Certain definitions
Exhibit B - Form of Amended and Restated Certificate of Incorporation of
Surviving Corporation
Exhibit C - Directors and officers of Surviving Corporation
Exhibit D - Escrow Agreement
Exhibit E - Persons to sign Noncompetition Agreements
Exhibit F - Form of Noncompetition Agreement
Exhibit G - Forms of tax representation letters
Exhibit H-1 - Company Stockholders
Exhibit H-2 - Form of Release
Exhibit I - Form of legal opinion of Xxxxxx Xxxxxxx Xxxxx & Xxxxxx LLP
Exhibit J - Persons to execute employee agreements
Exhibit K - List of Employees
Exhibit L - Form of legal opinion of Xxxxx Xxxx & Xxxxxxxx
