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AGREEMENT AND PLAN OF MERGER
dated September 11, 1998
by and among
WINBOND ELECTRONICS CORPORATION,
WINBOND INT'L CORPORATION,
ORIOLE HOLDING CORPORATION,
WINBOND ACQUISITION CORPORATION
and
INFORMATION STORAGE DEVICES, INC.
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TABLE OF CONTENTS
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ARTICLE I THE MERGER AND REORGANIZATION. . . . . . . . . . . . . . . . . . . .2
1.1 Effective Time of the Merger. . . . . . . . . . . . . . . . . . . . .2
1.2 Closing.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
1.3 Effects of the Merger.. . . . . . . . . . . . . . . . . . . . . . . .2
1.4 Federal Income Tax Consequences.. . . . . . . . . . . . . . . . . . .3
1.5 Certain Definitions.. . . . . . . . . . . . . . . . . . . . . . . . .3
ARTICLE II MANNER AND BASIS OF CONVERTING SHARES OF CAPITAL STOCK. . . . . . .8
2.1 Effect on Capital Stock.. . . . . . . . . . . . . . . . . . . . . . .8
2.2 Surrender and Exchange of Certificates. . . . . . . . . . . . . . . .9
2.3 Adjustment for Stock Splits, Etc. . . . . . . . . . . . . . . . . . 10
2.4 Stock Options.. . . . . . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY. . . . . . . . . . 11
3.1 Organization. . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.2 Capitalization. . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.3 Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.4 Validity of Agreement.. . . . . . . . . . . . . . . . . . . . . . . 12
3.5 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.6 No Conflict; Required Filings and Consents. . . . . . . . . . . . . 13
3.7 Copies of Certain Documents.. . . . . . . . . . . . . . . . . . . . 14
3.8 Compliance; Permits.. . . . . . . . . . . . . . . . . . . . . . . . 14
3.9 SEC Filings; Financial Statements.. . . . . . . . . . . . . . . . . 14
3.10 Absence of Certain Changes or Events.. . . . . . . . . . . . . . . 15
3.11 No Undisclosed Liabilities.. . . . . . . . . . . . . . . . . . . . 15
3.12 Employee Benefit Plans; Employment Agreements. . . . . . . . . . . 16
3.13 Employment Matters.. . . . . . . . . . . . . . . . . . . . . . . . 17
3.14 Title to Property. . . . . . . . . . . . . . . . . . . . . . . . . 17
3.15 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.16 Environmental Matters. . . . . . . . . . . . . . . . . . . . . . . 19
3.17 Compliance with Other Laws.. . . . . . . . . . . . . . . . . . . . 20
3.18 Brokers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.19 Opinion of Financial Advisor.. . . . . . . . . . . . . . . . . . . 20
3.20 Intellectual Property. . . . . . . . . . . . . . . . . . . . . . . 20
3.21 Interested Party Transactions. . . . . . . . . . . . . . . . . . . 23
3.22 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
3.23 Vote Required. . . . . . . . . . . . . . . . . . . . . . . . . . . 23
3.24 Full Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF WEC, Oriole, AND WAC. . . . . . 24
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TABLE OF CONTENTS
(continued)
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4.1 Organization. . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
4.2 Validity of Agreement.. . . . . . . . . . . . . . . . . . . . . . . 24
4.3 Effect of Agreement.. . . . . . . . . . . . . . . . . . . . . . . . 24
4.4 Cash Consideration. . . . . . . . . . . . . . . . . . . . . . . . . 24
4.5 Proxy Statement.. . . . . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE V CONDUCT OF BUSINESS PRIOR TO CLOSING DATE. . . . . . . . . . . . . 25
ARTICLE VI ADDITIONAL AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . 26
6.1 Access to Information.. . . . . . . . . . . . . . . . . . . . . . . 26
6.2 Governmental Filings. . . . . . . . . . . . . . . . . . . . . . . . 27
6.3 Shareholders' Approval. . . . . . . . . . . . . . . . . . . . . . . 27
6.4 Certain Defaults. . . . . . . . . . . . . . . . . . . . . . . . . . 28
6.5 Communications. . . . . . . . . . . . . . . . . . . . . . . . . . . 28
6.6 Consents and Approvals. . . . . . . . . . . . . . . . . . . . . . . 28
6.7 Company Shareholder Rights Plan.. . . . . . . . . . . . . . . . . . 28
6.8 Employment Offers.. . . . . . . . . . . . . . . . . . . . . . . . . 28
6.9 Employee Benefit Plans. . . . . . . . . . . . . . . . . . . . . . . 29
6.10 Certain Information. . . . . . . . . . . . . . . . . . . . . . . . 29
6.11 Brokers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
6.12 Exclusivity. . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
6.13 Accountants' Letter. . . . . . . . . . . . . . . . . . . . . . . . 30
6.14 Closing Conditions.. . . . . . . . . . . . . . . . . . . . . . . . 32
ARTICLE VII CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . . . 32
7.1 Conditions to Each Party's Obligation to Effect the Merger. . . . . 32
7.2 Conditions to Obligations of the Company. . . . . . . . . . . . . . 33
7.3 Conditions to Obligations of WEC. . . . . . . . . . . . . . . . . . 33
ARTICLE VIII NO SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS. . . . 35
ARTICLE IX GENERAL PROVISIONS. . . . . . . . . . . . . . . . . . . . . . . . 36
9.1 Notices.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
9.2 Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
9.3 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
9.4 Assignment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
9.5 Termination.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
9.6 Effect of Termination.. . . . . . . . . . . . . . . . . . . . . . . 38
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TABLE OF CONTENTS
(continued)
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9.7 Break-up Fee. . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
9.8 Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
9.9 Entire Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . 39
9.10 Good Faith.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
9.11 Applicable Law.. . . . . . . . . . . . . . . . . . . . . . . . . . 39
9.12 Severability.. . . . . . . . . . . . . . . . . . . . . . . . . . . 39
EXHIBITS
Exhibit A - Voting Agreement
Exhibit B - Merger Agreement
Exhibit C - Bylaws of Surviving Company
Exhibit D - Form of Opinion of Company Counsel
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER is made and entered into as of the
11th day of September, 1998, by and among Winbond Electronics Corporation, a
corporation organized under the laws of the Republic of China in Taiwan
("WEC"), Winbond Int'l Corporation, a British Virgin Islands corporation
("WIC"), Oriole Holding Corporation, a Delaware corporation ("Oriole"),
Winbond Acquisition Corporation, a California corporation and a wholly-owned
subsidiary of Oriole ("WAC"), and Information Storage Devices, Inc., a
California corporation (the "Company").
R E C I T A L S:
A. WEC and certain wholly owned subsidiaries of WEC, which are WIC,
Peaceful River Corp., a British Virgin Islands corporation, and Pigeon Creek
Holding Co., Ltd., a British Virgin Islands corporation (collectively with
WEC, the "WEC Group"), own approximately 14% of the issued and outstanding
Common Stock, no par value, of the Company ("Company Common Stock"), and WIC
has sufficient cash to effect the purchase of the Company Common Stock as
contemplated hereby;
B. The respective boards of directors of WEC and the Company believe it
is in the best interests of each company and their respective shareholders that
the Company be acquired by WEC;
C. To complete such acquisition, the respective boards of directors of
WEC, WIC, Oriole and WAC and the Company, and Oriole acting as the sole
shareholder of WAC, have approved the merger of WAC with and into the Company
(the "Merger") pursuant to and subject to the terms and conditions of this
Agreement, which provides for, among other things, the cancellation of each
issued and outstanding share of Company Common Stock owned by any of Oriole,
WAC and the WEC Group (the "WEC Shares") and the manner and basis of
converting each issued and outstanding share of Company Common Stock held by
other Company shareholders into the right to receive a cash payment of $7.50
per share;
D. The parties desire to enter into this Agreement for the purpose of
setting forth certain representations, warranties and covenants in connection
with the Merger, and to prescribe various conditions precedent to the Merger;
and
E. Certain shareholders of the Company, including WEC and the
directors and certain senior executive officers of the Company, are entering
into a Voting Agreement substantially in the form attached as Exhibit A to
this Agreement pursuant to which each such shareholder will agree to vote all
of his or its shares of Company Common Stock in favor of the Merger and this
Agreement.
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NOW, THEREFORE, in consideration of the mutual covenants herein contained,
the parties hereby agree as follows:
ARTICLE I
THE MERGER AND REORGANIZATION
1.1 EFFECTIVE TIME OF THE MERGER. Subject to the terms and conditions of
this Agreement, Oriole, WAC and the Company shall effect the Merger as soon as
practicable on or after the Closing Date (as defined in Section 1.2), by filing
an executed copy of a merger agreement substantially in the form attached as
Exhibit B to this Agreement (the "Merger Agreement"), together with required
officers' certificates, with the Secretary of State of the State of California
in accordance with the California General Corporation Law, as amended (the
"CGCL"). The Merger shall become effective upon such filing (the "Effective
Time of the Merger").
1.2 CLOSING. The closing of the Merger (the "Closing") will take place
as soon as practicable on the later of (a) the date of the Special Meeting
referred to in Section 6.3 or (b) the first business day after satisfaction of
the latest to occur of the conditions set forth in Article VII (the "Closing
Date"), at the offices of Xxxxxx & Xxxxx LLP, 000 Xxxxxx Xxx, Xxxx Xxxx,
Xxxxxxxxxx 00000, unless another date or place is agreed to in writing by WEC
and the Company.
1.3 EFFECTS OF THE MERGER. At the Effective Time of the Merger:
(a) WAC shall be merged with and into the Company and the separate
corporate existence of WAC shall cease. The Company shall be the surviving
corporation in the Merger and the separate corporate existence of the Company,
with all its purposes, objects, rights, privileges, powers, immunities and
franchises, shall continue unaffected and unimpaired by the Merger. (WAC and
the Company are sometimes referred to herein as the "Constituent Companies" and
the Company after the Merger is sometimes referred to herein as the "Surviving
Company);
(b) the Articles of Incorporation of the Surviving Company shall be
as set forth in Attachment A to the Merger Agreement;
(c) the Bylaws of the Company, amended as provided in Exhibit C
attached hereto shall be the Bylaws of the Surviving Company;
(d) the directors of WAC immediately prior to the Effective Time of
the Merger shall be the directors of the Surviving Company, and the officers of
the Surviving Company shall be as designated by the directors of the Surviving
Company following the Merger, in each case until their successors shall have
been elected and qualified or until otherwise provided by law;
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(e) all Company Option Plans (as defined in Section 2.4 of this
Agreement) and the Employee Purchase Plan maintained by the Company immediately
prior to the Merger, and the outstanding and unexercised portions of all options
to purchase Company Common stock, including without limitations all options
outstanding under such Company Option Plans, the Employee Purchase Plan and any
other outstanding options, shall terminate, and the Surviving Company shall have
no obligations after the Effective Time of the Merger with respect thereto; and
(f) the Merger shall, from and after the Effective Time of the
Merger, have all the effects provided by applicable law.
1.4 FEDERAL INCOME TAX CONSEQUENCES. It is anticipated that the
transaction will be taxable to the Company's shareholders and treated as a
purchase of the outstanding stock of the Company not owned by the WEC Group.
1.5 CERTAIN DEFINITIONS. "AFFILIATE" shall mean, as to any Person, any
other Person that, directly or indirectly through one or more intermediaries,
controls or is controlled by or is under common control with the Person
specified. The term "Affiliate", when used with regard to a natural person,
shall also include members of such person's immediate family.
"CODE" shall mean the Internal Revenue Code of 1986, as amended from time
to time (and any successor statute), and the rules and regulations thereunder.
"COMPANY COMMON STOCK" shall mean the common stock, no par value, of the
Company.
"COMPANY PREFERRED STOCK" shall mean the preferred stock, no par value, of
the Company.
"COMPANY SHAREHOLDER RIGHTS PLAN" shall mean the rights plan adopted by the
Company on December 28, 1995 which provides for the distribution to the
shareholders of the Company of rights to acquire Company Series A Participating
Preferred Stock, no par value, and/or Company Common Stock in the event of
certain acquisitions effected without the approval of the Company's board of
directors or shareholders.
"CONTRACT" of any Person shall mean any written or oral agreement,
contract, arrangement, lease, license, commitment or other obligation to which
such Person is a party or by which any property of such Person is bound.
"DIRECTORS OPTION PLAN" shall mean the Company's 1994 Directors Stock
Option Plan providing for the issuance of options to purchase up to 200,000
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shares of Company Common Stock, of which options to purchase 97,500 shares were
outstanding on August 31, 1998.
"DISSENTING SHARES" shall mean all shares of Company Common Stock which
shall constitute "dissenting shares" within the meaning of Section 1300 of the
CGCL with respect to the Merger.
"ELIGIBLE SHARES" shall mean the outstanding shares of Company Common Stock
as of the Effective Time of the Merger that are not WEC Shares.
"EMPLOYEE PURCHASE PLAN" shall mean the Company's Employee Stock Purchase
Plan which provides for the purchase of up to 290,000 shares of Company Common
Stock, of which 163,869 shares had been purchased as of August 31, 1998.
"EQUITY INCENTIVE PLAN" shall mean the Company's 1994 Equity Incentive Plan
providing for the issuance of options to purchase up to 3,550,000 shares of
Company Common Stock, of which options to purchase 2,322,916 shares were
outstanding on August 31, 1998.
"ENVIRONMENTAL AND SAFETY LAWS" shall mean any and all federal, state,
local and foreign statutes, laws, regulations, ordinances, rules, judgments,
orders, decrees, permits, licenses, agreements or other governmental
restrictions relating to the environment or to emissions, discharges or releases
of pollutants, contaminants, petroleum or petroleum products, or toxic or
hazardous substances or wastes into the environment, including ambient air,
surface water, groundwater, or land, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of pollutants, contaminants, petroleum or petroleum products, or toxic
or Hazardous Substances or Hazardous Wastes or the clean-up or other remediation
thereof.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the rules and regulations thereunder.
"GOVERNMENTAL AUTHORITY" shall mean any federal, state, local or foreign
court, governmental or administrative agency or commission or other governmental
agency, authority, instrumentality or regulatory body.
"GUARANTY" of or by any Person shall mean any obligation, contingent or
otherwise, of such Person guaranteeing any Indebtedness of any other Person (the
"primary obligor") in any manner, whether directly or indirectly, and including
any obligation of such Person, direct or indirect, (a) to purchase or pay (or
advance or supply funds for the purchase or payment of) such Indebtedness or to
purchase (or to advance or supply funds for the purchase of) any security for
the payment of such Indebtedness, (b) to purchase property, securities or
services for the purpose of assuring the owner of such Indebtedness of the
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payment of such Indebtedness or (c) to maintain working capital, equity capital
or other financial statement condition or liquidity of the primary obligor so as
to enable the primary obligor to pay such Indebtedness; provided, however, that
the term Guaranty shall not include endorsements for collection or deposit, in
either case in the ordinary course of business.
"HAZARDOUS SUBSTANCE" shall mean "hazardous substance" as defined in any
law, rule or regulation applicable to such substance of any Governmental
Authority.
"HAZARDOUS WASTE" shall mean "hazardous waste" as defined in any law, rule
or regulation applicable to such waste of any Governmental Authority.
"HSR ACT" shall mean the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976, as amended.
"INDEBTEDNESS" of any Person shall mean, without duplication, (a) all
obligations of such Person for borrowed money or with respect to deposits or
advances of any kind, (b) all obligations of such Person evidenced by bonds,
debentures, notes or similar instruments, (c) all obligations of such Person
upon which interest charges are customarily paid, (d) all obligations of such
Person under conditional sale or other title retention agreements relating to
property or assets purchased by such Person, (e) all obligations of such Person
issued or assumed as the deferred purchase price of property or services, (f)
all Indebtedness of others secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured by)
any Lien on property owned or acquired by such Person, whether or not the
obligations secured thereby have been assumed, (g) all Guaranties by such Person
of Indebtedness of others, (h) all obligations of such Person to pay rent or
other amounts under any lease of (or other arrangement conveying the right to
use) real or personal property, or a combination thereof, which obligations are
required to be classified and accounted for as capital leases on a balance sheet
of such Person under generally accepted accounting principles, (i) all
obligations of such Person in respect of interest rate protection agreements,
foreign currency exchange agreements or other interest or exchange rate hedging
arrangements and (j) all obligations of such Person as an account party in
respect of letters of credit and bankers' acceptances. The Indebtedness of any
Person shall include the Indebtedness of any entity which is a Subsidiary of
such Person.
"INTELLECTUAL PROPERTY" shall mean any and all patents, patent
applications, patent rights, trademarks, trademark registrations, trademark
applications, licenses, service marks, business marks, trade dress, trade names,
brand names, all other names and slogans embodying business or product goodwill
(or both), copyright registrations, copyrights (including those in computer
programs, software, including all source code and object code, development
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documentation, programming tools, drawings, specifications and data), circuit
designs, algorithms, verilog test results, proprietary design tools, masks, mask
works, layouts, test keys, cells, databases, trade secrets, technology,
inventions, discoveries and improvements, know-how, proprietary rights,
formulae, processes, methods, technical information, confidentiality and
proprietary information and all other intellectual property rights, whether or
not subject to statutory registration or protection, and licenses to any and all
of the foregoing.
"LIEN" shall mean, with respect to any asset, (a) any mortgage, deed of
trust, lien, pledge, encumbrance, charge, restriction or security interest in or
on such asset, (b) the interest of a vendor or a lessor under any conditional
sale agreement, capital lease or title retention agreement relating to such
asset and (c) in the case of securities, any purchase option, call or similar
right of a third party with respect to such securities.
"LITIGATION" shall mean any claim, suit, action, arbitration, proceeding or
investigation.
"OPTION PLAN" shall mean the Company's 1987 Stock Option Plan, of which
options to purchase 77,686 shares were outstanding on August 31, 1998.
"PERMITTED LIENS" shall mean:
(a) mechanics', carriers', workmen's, repairmen's or other like
Liens arising from or incurred in the ordinary course of business and security
obligations which are not due or that are being contested in good faith by the
Company (provided that the Company has set up adequate reserves therefor), Liens
for Taxes that are not due and payable or which may thereafter be paid without
penalty or that are being contested in good faith by the Company (provided that
the Company has set up adequate reserves for the payment of such Taxes) and
other imperfections of title or encumbrances, if any, which imperfections of
title or other encumbrances do not materially impair the use of the assets to
which they relate in the business of the Company as presently conducted;
(b) easements, covenants, rights-of-way and other encumbrances or
restrictions of record;
(c) zoning, building and other similar restrictions; provided that
the same are not violated in any material respect by any improvements of the
Company or by the use thereof for the conduct of the Company's business; and
(d) unrecorded easements, covenants, rights-of-way or other
encumbrances or restrictions, and other Liens that are not material in character
or amount, none of which unrecorded items or other Liens materially impairs the
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use of the property to which they relate in the business of the Company as
presently conducted.
"PERSON" shall mean any individual, firm, corporation, partnership, limited
liability company, trust, joint venture, Governmental Authority or other entity,
and shall include any successor (by merger or otherwise) of such entity.
"PROXY STATEMENT" shall mean all proxy statements of the Company which are
filed with the SEC or mailed to the Company's shareholders in connection with
obtaining shareholder approval of the Merger and this Agreement at the Special
Meeting.
"RETURNS" shall mean all reports, estimates, declarations of estimated tax,
information statements and returns relating to, or required to be filed in
connection with, any Taxes, including information returns or reports with
respect to backup withholding and other payments to third parties.
"SEC" shall mean the U.S. Securities and Exchange Commission.
"SHARE PRICE" shall mean $7.50.
"SPECIAL MEETING" shall mean the Special Meeting of Shareholders of the
Company for which proxies will be solicited for adoption and approval of this
Agreement and the Merger.
"SUBSIDIARY" of any Person shall mean a corporation, company or other
entity (i) more than 50% of whose outstanding shares or securities (representing
the right to vote for the election of directors or other managing authority)
are, or (ii) which does not have outstanding shares or securities (as may be the
case in a partnership, joint venture or unincorporated association), but more
than 50% of whose ownership interest representing the right to make decisions
for such other entity is, now or hereafter owned or controlled, directly or
indirectly, by such Person, but such corporation, company or other entity shall
be deemed to be a Subsidiary only so long as such ownership or control exists.
"TAXES" shall mean all taxes, however denominated, including any interest,
penalties or other additions to tax that may become payable in respect thereof,
imposed by any federal, territorial, state, local or foreign government or any
agency or political subdivision of any such government, which taxes shall
include, without limiting the generality of the foregoing, all income or profits
taxes (including but not limited to, federal income taxes and state income
taxes), payroll and employee withholding taxes, unemployment insurance, social
security taxes, sales and use taxes, ad valorem taxes, excise taxes, franchise
taxes, gross receipts taxes, business license taxes, occupation taxes, real and
personal property taxes, stamp taxes, environmental taxes, transfer taxes,
workers' compensation, Pension Benefit Guaranty Corporation premiums and
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other governmental charges, and other obligations of the same or of a similar
nature to any of the foregoing, which are required to be paid, withheld or
collected.
ARTICLE II
MANNER AND BASIS OF CONVERTING
SHARES OF CAPITAL STOCK
2.1 EFFECT ON CAPITAL STOCK. At the Effective Time of the Merger, by
virtue of the Merger and without any action on the part of the holders of any
shares of the Company Common Stock:
(a) CANCELLATION OF COMPANY, WEC GROUP, ORIOLE AND WAC OWNED STOCK.
All of the WEC Shares shall have been assigned and transferred to Oriole or WAC,
and all shares of Company Common Stock that are owned directly or indirectly by
the Company or by any of the WEC Group, Oriole, WAC or any other subsidiary of
WEC shall be canceled and extinguished without conversion and no consideration
shall be delivered in exchange therefor.
(b) CONVERSION OF COMPANY COMMON STOCK. Each of the Eligible Shares
or fractional share will be canceled and extinguished at the Effective Time of
the Merger and will be converted into the right to receive, upon surrender of
the certificate representing such share of Company Common Stock in the manner
provided in Section 2.2 hereof, an amount of cash equal to the Share Price
(without interest), on the terms and subject to the conditions set forth in this
Agreement (the "Merger Consideration");
(c) EFFECT ON COMPANY PREFERRED STOCK. Any outstanding shares of
Company Preferred Stock shall be canceled and all authorized shares of Company
Preferred Stock shall be eliminated at the Effective Time of the Merger.
(d) CAPITAL STOCK OF WAC. All issued and outstanding shares of
capital stock of WAC shall continue to be issued and shall be converted into
1,000 shares of Common Stock of the Surviving Company. Each stock certificate
of WAC evidencing ownership of such certificates shall continue to evidence
ownership of such shares of capital stock of the Surviving Company.
(e) DISSENTERS' RIGHTS. If holders of the shares of Company Common
Stock are entitled to dissenters' rights in connection with the Merger under
Section 1300 of the CGCL, any Dissenting Shares shall not be converted into the
right to receive cash as set forth in Section 2.1(b) above, but shall be
converted into the right to receive such consideration as may be determined to
be due with respect to such Dissenting Shares pursuant to the CGCL. If,
however, such dissenting shareholder withdraws such shareholder's demand for
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appraisal or fails to perfect or otherwise loses such shareholder's dissenters'
rights, in any case pursuant to the CGCL, such shareholder's shares shall be
deemed to be converted as of the Effective Time of the Merger into the right to
receive the Merger Consideration, without interest.
2.2 SURRENDER AND EXCHANGE OF CERTIFICATES. As soon as practicable after
the Effective Time of the Merger, and after surrender to an agent appointed and
compensated by Oriole (the "Exchange Agent") of any certificate which prior to
the Effective Time of the Merger shall have represented any of the shares of
Company Common Stock, Oriole shall cause to be distributed to the person in
whose name such certificate is registered a check representing the Merger
Consideration determined pursuant to Section 2.1(b) above. Until surrendered as
contemplated by the preceding sentence, each certificate which immediately prior
to the Effective Time of the Merger shall have represented any of the shares of
Company Common Stock shall be deemed at and after the Effective Time of the
Merger to represent only the right to receive the Merger Consideration (without
interest) into which such shares shall have been converted hereunder. If any
payment is to be made to a Person other than the Person in whose name the
certificate surrendered in exchange therefor is registered, it will be a
condition of the payment thereof that the certificate so surrendered will be
properly endorsed and accompanied by all documents required by Oriole and the
Exchange Agent to evidence and effect such transfer and to evidence that any
applicable stock transfer taxes have been paid. If any certificate shall have
been lost, stolen or destroyed, upon the making of an affidavit of that fact by
the Person claiming such certificate to be lost, stolen or destroyed and, if
required by the Surviving Company, the posting by such Person of a bond in such
reasonable amount as the Surviving Company may direct as indemnity against any
claim that may be made against it with respect to such certificate, Oriole and
the Surviving Company will cause to be issued in exchange for such lost, stolen
or destroyed certificate the Merger Consideration (without interest) and unpaid
dividends and distributions on shares of Company Common Stock deliverable in
respect thereof, pursuant to this Agreement. Neither WEC nor Oriole or the
Surviving Company shall be liable to any Person in respect of any shares of
Company Common Stock (or dividends or distributions with respect thereto) in
each case delivered to a public official pursuant to any applicable abandoned
property escheat or similar law. If any certificate shall not have been
surrendered prior to five years after the Effective Time of the Merger (or
immediately prior to such earlier date on which any Merger Consideration, any
cash payable to the holder of such certificate pursuant to this Article II or
any dividends or distributions payable to the holder of such certificate would
otherwise escheat to or become the property of any Governmental Authority) any
such Merger Consideration or cash, dividends or distributions in respect of such
certificate shall, to the extent permitted by applicable law, become the
property of the Surviving Company, free and clear of all claims or interest of
any Person previously entitled thereto.
9
2.3 ADJUSTMENT FOR STOCK SPLITS, ETC. If, between the date of this
Agreement and the Effective Time of the Merger, the outstanding shares of
Company Common Stock shall have been changed into a different number of shares
or a different class by reason of any reclassification, recapitalization,
split-up, combination, exchange of shares or readjustment, or a stock dividend
thereon shall be declared with a record date within such period (an "Adjustment
Event") the cash consideration to be paid in the Merger in exchange for each
outstanding share of Company Common Stock, as provided in this Agreement, shall
be appropriately adjusted to reflect such Adjustment Event.
2.4 STOCK OPTIONS. The Company agrees that it will use its best efforts
to deliver to WEC, prior to the Closing Date, consents from the holders of all
options outstanding on such date granted prior to the date of this Agreement
pursuant to the Directors Option Plan, Equity Incentive Plan and Option Plan
(the "Company Option Plans"), pursuant to which such holders consent to the
purchase of such option (and any related stock appreciation right) immediately
prior to the Effective Time of the Merger in exchange for a payment by the
Company, which the Company hereby agrees to make, in an amount (less any
applicable withholding taxes) equal to the excess, if any, of the Share Price
over the exercise price per share of Company Common Stock, multiplied by the
number of shares of Company Common Stock underlying such option immediately
prior to the Effective Time of the Merger (such options to be purchased herein
sometimes called the "Purchased Company Stock Options").
2.5 SHARE PRICE ADJUSTMENT. If the Company grants options or issues
additional shares of Capital Stock in excess of the amounts permitted under
Article V, subsection (b), without the prior written consent of WEC as required
by Article V of this Agreement, and such excess options are purchased pursuant
to the foregoing provisions and/or such additional shares are outstanding at the
Effective Time of the Merger, the amount paid by the Company to purchase such
additional options and/or additional shares shall reduce the Share Price
according to the following formula: The adjusted Share Price shall mean the
product of the Share Price multiplied by a fraction, the numerator of which is
equal to the sum of the number of outstanding shares of Company Common Stock
plus the shares subject to options outstanding on the date of this Agreement and
shares and options permitted to be granted or issued under Article V, subsection
(b) of this Agreement, and the denominator of which is equal to the sum of the
number of outstanding shares of Company Common Stock at the Effective Time of
the Merger plus a number of shares determined by dividing the total amount paid
for such additional options and/or additional outstanding shares by the Share
Price.
10
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY
Subject to and except as set forth in the schedule of exceptions,
identified by the Section in this Article to which they pertain, delivered to
and accepted by WEC prior to the execution of this Agreement, initialed for
identification on behalf of WEC and the Company (the "Company Disclosure
Schedule"), and made a part of this Agreement, the Company represents and
warrants to WEC, Oriole and WAC that:
3.1 ORGANIZATION. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of California and has
full corporate power and authority to own and maintain its properties and to
carry on its business as it is now being conducted. The Company is duly
qualified or licensed as a foreign corporation to do business, and is in good
standing, in each jurisdiction where the character of its properties owned,
leased or operated by it or the nature of its activities makes such
qualification or licensing necessary.
3.2 CAPITALIZATION.
(a) The authorized capital stock of the Company consists of
22,000,000 shares of Company Common Stock, 9,922,389 shares of which are
outstanding and 5,000,000 shares of Company Preferred Stock, none of which are
issued and outstanding. All such outstanding shares have been duly authorized,
are validly issued, fully paid and nonassessable and not subject to preemptive
rights created by statute, the Company's Articles of Incorporation or Bylaws or
any agreement to which the Company is a party or by which it is bound.
(b) (i) There are no outstanding warrants, options, rights,
securities, agreements, subscriptions or other commitments pursuant to which the
Company is or may become obligated to issue, deliver or sell any additional
shares of capital stock or convertible debt of the Company or to issue, grant,
extend or enter into any such warrant, option, right, security, agreement,
subscription or other commitment and (ii) there are no outstanding options,
rights, securities, agreements or other commitments pursuant to which the
Company is or may become obligated to redeem, repurchase or otherwise acquire or
retire any shares of capital stock of the Company that are currently outstanding
or may be issued in the future. True and complete copies of all the warrants,
options, rights, securities, agreements, subscriptions and other commitments set
forth in the Company Disclosure Schedule have been delivered to WEC.
11
(c) The Company Disclosure Schedule contains a true and complete
list of the holders of stock options of the Company under the Company Option
Plans, the number of shares of Company Common Stock which such holders have the
right to acquire, and the exercise prices of such options as of the date hereof.
(d) All securities of the Company heretofore issued and sold by the
Company were issued and sold in compliance with all applicable federal and state
securities laws.
(e) There are no voting trusts or agreements or proxies in effect
with respect to equity securities of the Company to which the Company or any of
its Affiliates is a party.
(f) There are no agreements pursuant to which the Company has a
right of first refusal with respect to, or similar right to purchase, shares of
outstanding capital stock of the Company.
3.3 SUBSIDIARIES. The Company has no Subsidiaries and does not presently
own, directly or indirectly, any interest in any other corporation, limited
liability company, partnership, association, joint venture or other business
entity.
3.4 VALIDITY OF AGREEMENT. The Company has full corporate power and
authority to execute and deliver this Agreement. This Agreement constitutes the
valid and binding obligation of the Company, enforceable in accordance with its
terms, except as enforcement may be limited by applicable bankruptcy laws or
other similar laws affecting creditors' rights generally and by principles of
equity. Subject to obtaining any necessary shareholder approval, the execution
and delivery of this Agreement by the Company, and the consummation of the
transactions contemplated hereby, have been duly authorized by all necessary
corporate action, and such execution and delivery do not require the consent,
approval or authorization of any Person, public authority or other entity. The
board of directors of the Company has determined that it is advisable and in the
best interest of the Company's shareholders for the Company to enter into the
Merger upon the terms and subject to the conditions of this Agreement, and has
properly and effectively waived the application as to the Merger of the
provisions of the Rights Agreement dated December 28, 1995, between the Company
and the First National Bank of Boston, as Rights Agent, and related documents
pursuant to the Company Shareholder Rights Plan; in particular, the Company's
board of directors has amended the Rights Agreement to provide that none of WEC,
Oriole, WAC, the WEC Group or any of their other Affiliates shall be deemed to
be an "Acquiring Person," as defined in the Rights Agreement, and such amendment
is enforceable against the Company and its shareholders by WEC.
12
3.5 LITIGATION. There is no claim, dispute, action, proceeding, suit,
appeal or investigation, at law or in equity, pending against the Company or
involving any of its business or properties, before any court, agency,
authority, arbitration panel or other tribunal, and, to the best knowledge of
the Company, none have been threatened. To the best knowledge of the Company,
there are no facts which, if known to shareholders, customers, governmental
authorities or other persons, would result in any such claim, dispute, action,
proceeding, suit, appeal or investigation which would have a material adverse
effect on the condition (financial or otherwise), business, net worth, assets,
properties or operations of the Company. The Company is not subject to any
order, writ, injunction or decree of any court, agency, authority, arbitration
panel or other tribunal, or in default with respect to any notice, order, writ,
injunction or decree. The Company has no knowledge, or any reliable information
from which it could reasonably be inferred, that Samsung Electronics Co., Ltd.
("Samsung") will not fulfill its obligations under the Foundry Agreement between
the Company and Samsung dated November 12, 1996 (the "Foundry Agreement") to
indemnify the Company with respect to claims for patent infringement asserted
against the Company by Atmel Corporation in the complaint filed against the
Company in the United States District Court for the Northern District of
California (Case No. C95-01987 FMS).
3.6 NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) The Company Disclosure Schedule includes a list of (i) all
material agreements and (ii) all agreements which, as of the date hereof, are
required to be filed with the SEC pursuant to the requirements of the Securities
Exchange Act of 1934, as amended, and the SEC's rules thereunder (collectively,
the "Exchange Act") as "material contracts" ((i) and (ii) being collectively,
the "Material Contracts") of the Company.
(b) The execution and delivery of this Agreement by the Company does
not, and the performance of this Agreement by the Company will not, (i) conflict
with or violate the Articles of Incorporation or any Certificate of
Determination of the Company, (ii) conflict with or violate any law, rule,
regulation, order, judgment or decree applicable to the Company or by which any
of its properties are bound or affected, or (iii) result in any breach of or
constitute a default (or an event that with notice or lapse of time or both
would become a default), or impair the Company's rights or alter the rights or
obligations of any third party under, or give to others any rights of
termination, amendment, acceleration or cancellation of, any Material Contract,
or result in the creation of a Lien or encumbrance on any of the properties or
assets of the Company, other than Permitted Liens, pursuant to any Indebtedness,
Contract, agreement, lease, license, permit, franchise or other instrument or
obligation to which the Company is a party or by which the Company or any of its
properties is bound or affected.
13
(c) The execution and delivery of this Agreement by the Company does
not, and the performance of this Agreement by the Company will not, require any
consent, approval, authorization or permit of, or filing with or notification
to, any Governmental Authority, except (i) submitting the Proxy Statement to the
SEC, (ii) compliance with other applicable requirements of the Exchange Act, the
rules of the Nasdaq National Market, the HSR Act and rules and regulations
thereunder, (iii) the filing and recordation of appropriate merger documents as
required by the CGCL, (iv) obtaining any licenses required by the rules and
regulations of the U.S. Export Administration and (v) where the failure to
obtain such consents, approvals, authorizations or permits, or to make such
filings or notifications, would not prevent or delay consummation of the Merger,
or otherwise prevent or delay the Company from performing its obligations under
this Agreement.
3.7 COPIES OF CERTAIN DOCUMENTS. The Company Disclosure Schedule
contains true and complete copies of: (i) the currently effective Articles of
Incorporation and Certificate of Determination of the Company, certified by the
Secretary of State of California; and (ii) the currently effective Bylaws of the
Company, certified by the Secretary of the Company.
3.8 COMPLIANCE; PERMITS. The Company holds all permits, licenses,
easements, variances, exemptions, consents, certificates, orders and approvals
from Governmental Authorities which are material to the operation of the
business of the Company taken as a whole as it is now being conducted
(collectively, the "Company Permits"). The Company is in compliance with the
terms of the Company Permits.
3.9 SEC FILINGS; FINANCIAL STATEMENTS.
(a) The Company has filed all forms, reports and documents required
to be filed with the SEC since December 31, 1995 (collectively, the "Company SEC
Reports"), and has made available to WEC (i) its Quarterly Report on Form 10-Q
for the periods ended April 4, 1998 and July 4, 1998, and its Annual Report on
Form 10-K for the period ended December 31, 1997, (ii) all proxy statements
relating to the Company's meetings of stockholders (whether annual or special)
held since December 31, 1997, (iv) all other reports or registration statements
filed by the Company with the SEC since December 31, 1997, and (v) all
amendments and supplements to all such reports and registration statements filed
by the Company with the SEC. The Company SEC Reports (i) were prepared in
accordance with the requirements of the Securities Act of 1933, as amended (the
"Securities Act"), or the Exchange Act, as the case may be, and (ii) did not at
the time they were filed (or if amended or superseded by a filing prior to the
date of this Agreement, then on the date of such filing) contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements
14
therein, in the light of the circumstances under which they were made, not
misleading.
(b) Each of the financial statements (including, in each case,
any related notes thereto) contained in the Company SEC Reports was prepared
in accordance with U.S. generally accepted accounting principles for the
periods involved (except as may be indicated in the notes thereto) and each
fairly presented the financial position of the Company as at the respective
dates thereof and the results of its operations and cash flows and statements
of shareholders' equity for the periods indicated, except that the unaudited
interim financial statements were or are subject to normal and recurring
year-end adjustments which were not or are not expected to be material in
amount.
(c) The Company has heretofore furnished to WEC a complete and
correct copy of any amendments or modifications, which have not yet been filed
with the SEC but which are required to be filed, to agreements, documents or
other instruments which previously had been filed by the Company with the SEC
pursuant to the Securities Act or the Exchange Act.
3.10 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since December 31, 1997, the
Company has conducted its business in the ordinary course and there has not
occurred: (i) any amendments or changes in the Articles of Incorporation or
Certificate of Determination of the Company; (ii) any material damage to,
destruction or loss of any assets of the Company, (whether or not covered by
insurance) (iii) any change by the Company in its accounting methods, principles
or practices; (iv) any revaluation by the Company of any of its assets,
including, without limitation, writing down the value of inventory or writing
off notes or accounts receivable other than in the ordinary course of business;
(v) any other action or event that would have required the consent of WEC
pursuant to Article V below had such action or event occurred after the date of
this Agreement, or (vi) any sale of a material amount of property of the Company
except in the ordinary course of business.
3.11 NO UNDISCLOSED LIABILITIES. Except as disclosed in the Company SEC
Reports, the Company has no liabilities (absolute, accrued, contingent or
otherwise) which are, in the aggregate, material to the business, operations or
financial condition of the Company taken as a whole, except liabilities
(a) adequately provided for in the Company's audited balance sheet (including
any related notes thereto) for the fiscal year ended December 31, 1997 (the
"1997 Company Balance Sheet"); (b) incurred in the ordinary course of business
and not required under U.S. generally accepted accounting principles to be
reflected on the 1997 Company Balance Sheet; or (c) incurred since December 31,
1997 in the ordinary course of business and consistent with past practice, and
liabilities incurred in connection with this Agreement. The Company Disclosure
Schedule lists all Indebtedness for borrowed money,
15
Guaranties and derivative financial instruments of the Company as of a date not
more than two business days preceding the date of this Agreement.
3.12 EMPLOYEE BENEFIT PLANS; EMPLOYMENT AGREEMENTS.
(a) The Company Disclosure Schedule lists all employee benefit plans
and all bonus, stock option, stock purchase, incentive, deferred compensation,
supplemental retirement superannuated, severance and other similar fringe or
employee benefit plans, programs or arrangements, and any current or former
employment or executive compensation or severance agreements, written or
otherwise, for the benefit of, or relating to, any employee of the Company or
any trade or business (whether or not incorporated) which is a member of a
controlled group including the Company or which is under common control with the
Company (a "Company ERISA Affiliate"), as well as each plan with respect to
which the Company or a Company ERISA Affiliate could incur liability under
applicable law (if such plan has been or were terminated) (together, the
"Employee Plans"), excluding agreements with former employees under which the
Company has no remaining monetary obligations. A copy of each such written
Employee Plan has been made available to WEC.
(b) (i) None of the Employee Plans promises or provides retiree
medical or other retiree welfare or superannuated benefits to any person;
(ii) there has been no prohibited transaction with respect to any Employee Plan,
which could result in any material liability of the Company; (iii) all Employee
Plans are in compliance in all material respects with the requirements
prescribed by any and all statutes, orders, or governmental rules and
regulations currently in effect with respect thereto, and the Company has
performed all material obligations required to be performed by them under, are
not in any material respect in default under or violation of, and has no
knowledge of any default or violation by any other party of, any of the Employee
Plans; (iv) each Employee Plan intended to qualify under Section 401(a) of the
Code and each trust intended to qualify under Section 501(a) of the Code is the
subject of a favorable determination letter from the IRS, and nothing has
occurred which may reasonably be expected to impair such determination; (v) all
contributions required to be made to any Employee Plan pursuant to Section 412
of the code, or the terms of the Employee Plan or any collective bargaining
agreement, have been made on or before their due dates and a reasonable amount
has been accrued for contributions to each Employee Plan for the current plan
years; (vi) with respect to each Employee Plan, no "reportable event" within the
meaning of Section 4043 of ERISA (excluding any such event for which the thirty
(30)-day notice requirement has been waived under the regulations to
Section 4043 of ERISA) nor any event described in Section 4062, 4063 or 4041 of
ERISA has occurred, and (vii) neither the Company nor any Company ERISA
Affiliate has incurred, nor reasonably expects to incur, any liability under
Title IV
16
of ERISA (other than liability for premium payments to the Pension Benefit
Guaranty Company arising in the ordinary course).
(c) The Company has made available to WEC: (i) copies of all
employment agreements with officers of the Company; (ii) copies of all
agreements with consultants who are individuals obligating the Company to make
annual cash payments in an amount exceeding $25,000, (iii) a schedule listing
all officers of the Company who have executed a noncompetition agreement with
the Company; (iv) copies (or descriptions) of all severance agreements, programs
and policies of the Company with or relating to its employees, excluding
programs and policies required to be maintained by law, and (v) copies of all
plans, programs, agreements and other arrangements of the Company with or
relating to its employees which contain change in control provisions.
3.13 EMPLOYMENT MATTERS. (i) There are no controversies pending or, to
the knowledge of the Company, threatened between the Company and any of its
employees; (ii) the Company is not a party to any collective bargaining
agreement or other labor union contract applicable to persons employed by the
Company nor does the Company know of any activities or proceedings of any labor
union to organize any such employees, and (iii) the Company has no knowledge of
any strikes, slowdowns, work stoppages, lockouts, or threats thereof, by or with
respect to any employees of the Company.
3.14 TITLE TO PROPERTY. The Company owns and leases no real property
other than as set forth on the Company Disclosure Schedule. The Company has
good and defensible title to all of its properties and assets, free and clear of
all Liens, charges and encumbrances other than Permitted Liens; and, to the
knowledge of the Company, all leases pursuant to which the Company leases from
others material amounts of real or personal property are in good standing, valid
and effective in accordance with their respective terms, and there is not, to
the knowledge of the Company, under any of such leases, any existing material
default or event of default (or event which with notice or lapse of time, or
both, would constitute a material default and in respect of which the Company
has not taken adequate steps to prevent such a default from occurring).
3.15 TAXES.
(a) All Returns required to be filed by or on behalf of the Company
have been duly filed on a timely basis and such Returns are true, complete and
correct. All Taxes shown to be payable on the Returns or on subsequent
assessments with respect thereto, and all payments of estimated Taxes required
to be made by or on behalf of Company under Section 6655 of the Code or
comparable provisions of state, local or foreign law, have been paid in full on
timely basis or have been accrued on the Financial Statements, and no other
Taxes are payable by the Company with respect to items or periods
17
covered by such Returns (whether or not shown on or reportable on such Returns)
or with respect to any other period prior to the date of this Agreement. The
Company has withheld and paid over all Taxes required to have been withheld and
paid over, and complied with all information reporting and backup withholding
requirements, including maintenance of required records with respect thereto, in
connection with amounts paid or owning to any employee, creditor, independent
contractor, or other third party. There are no Liens on any of the assets of
the Company with respect to Taxes, other than liens for taxes not yet due and
payable. The Company has not been at any time a member of any partnership or
joint venture for a period for which the statute of limitations for any Tax
potentially applicable as a result of such membership has not expired.
(b) The amount of the Company's liability for unpaid Taxes for all
periods (or portions thereof) ending on or before the date of this Agreement
does not in the aggregate, exceed the amount of the current liability accruals
for Taxes (excluding reserves for deferred Taxes) reflected on the Company
Financial Statements, and no material liability for Taxes will be incurred by
the Company between the date of this Agreement and the Closing Date other than
in the ordinary course of the Company's business.
(c) The Company has furnished or caused to be furnished to WEC true
and complete copies of (i) relevant portions of income tax audit reports,
statements of deficiencies, closing or other agreements received by or on behalf
of the Company relating to Taxes, and (ii) all federal and state income or
franchise tax returns and state sales, use and property tax returns for Company
for all periods ending on and after December 31, 1987. The Company has never
been a member of an affiliated group of companies filing combined returns.
Company does not do business in, derive income from, or is not otherwise subject
to the taxing jurisdiction of any state other than states for which Returns have
been duly filed and furnished to WEC.
(d) No deficiencies exist or have been asserted (either in writing
or verbally, formally or informally) with respect to Taxes of the Company, and
Company has not received notice (either in writing or verbally, formally or
informally) and has no knowledge that it will receive notice that it has not
filed a Return or paid Taxes required to be filed or paid by it. The Company is
neither a party to any action or proceeding for assessment or collection of
Taxes, nor has such event been asserted or threatened (either in writing or
verbally, formally or informally) against the Company or any of its assets. No
waiver or extension of any statute of limitations is in effect with respect to
Taxes or Returns of the Company. The Company has disclosed on its federal and
state income tax returns all positions taken therein that cold give rise to a
substantial understatement penalty within the meaning of Code Section 6662 or
corresponding provisions of state tax law. The Company has not required any
extension of time to file any Return which has not since been filed. There are
no
18
requests for rulings with respect to any tax or potential Tax of Company pending
before any taxing authority.
(e) The Company has never been a party to any tax sharing agreement,
nor is otherwise currently under any obligation to pay any Tax obligation of any
other person or is obligated to indemnify any other person with respect to
Taxes.
(f) The Company is not, nor has it been, a United States real
property holding company with the meaning of Section 897(c)(2) of the Code
during the applicable period specified in Section 897(c)(1)(A)(ii) of the Code,
and WEC is not required to withhold tax on the purchase of the stock of the
Company by reason of Section 1445 of the Code. The Company is not a "consenting
company" under Section 341(f) of the Code. The Company has not entered into any
compensatory agreements with respect to the performance of services which
payment thereunder would result in a nondeductible expense to the Company
pursuant to Section 280G of the Code or an excise tax to the recipient of such
payment pursuant to Section 4999 of the Code. The Company has not agreed to or
is not required to make any adjustment under Code Section 481(a) by reason of a
change in accounting method. The Company does not otherwise have any income
reportable for a period ending after the Closing Date attributable to a
transaction or other event (e.g. an installment sale) occurring prior to the
Closing Date involving in excess of $10,000. The Company is not nor has it been
a "reporting company" subject to the information reporting and record
maintenance requirements of Section 6038A and the regulations thereunder. The
Company does not own any interest in real property located in any state or local
taxing jurisdiction which imposes a tax on the transfer of such an interest
which could apply with respect to the transactions contemplated by this
Agreement.
(g) The Company Disclosure Schedule sets forth accurate and complete
information regarding Company's tax basis in its assets as of December 31, 1997
and its net operating losses for federal and each state tax purposes as of
December 31, 1997. The Company has no net operating losses or other tax
attributes currently subject to limitation under Code Sections 382, 383, or 384.
3.16 ENVIRONMENTAL MATTERS. The Company (i) has obtained all applicable
permits, licenses and other authorization which are required under all
Environmental and Safety Laws; (ii) is in compliance with all terms and
conditions of such required permits, licenses and authorizations, and also is in
compliance with all other limitations, restrictions, conditions, standards,
prohibitions, requirements, obligations, schedules and timetables contained in
such Laws or contained in any regulation, code, plan, order, decree, judgment,
notice or demand letter issues, entered, promulgated or approved thereunder;
(iii) as of the date hereof, is not aware of nor has received notice of any
event,
19
condition, circumstance, activity, practice, incident, action or plan which is
reasonably likely to interfere with or prevent continued compliance with or
which would give rise to any common law or statutory liability, or otherwise,
form the basis of any claim, action, suit or proceeding, based on or resulting
from the Company's (or any of its agents') manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling, or the
emission, discharge or release into the environment, of any Hazardous Substance
or Hazardous waste, and (iv) has taken all actions necessary under applicable
requirements of federal, state or local laws, rules or regulations to register
any Hazardous Substances required to be registered by the Company (or any of its
agents) thereunder.
3.17 COMPLIANCE WITH OTHER LAWS. The Company is not in violation of any
U.S. federal, state or local or foreign Governmental Authority, judgment, writ,
decree, order, statute, rule or regulation applicable to it. The operations of
the Company have not violated any federal, state or local laws, or foreign
Governmental Authority, regulations or orders. Neither the Company nor any
director, officer, agent, employee, or other person associated with or acting on
behalf of the Company has, directly or indirectly: used any corporate funds for
unlawful contributions, gifts, entertainment, or other unlawful expenses
relating to political activity; made any unlawful payment to foreign or domestic
government officials or employees or to foreign or domestic political parties or
campaigns from corporate funds; violated any provision of the Foreign Corrupt
Practices Act of 1977, as amended; or made any bribe, rebate, payoff, influence
payment, kickback, or other unlawful payment.
3.18 BROKERS. No broker, finder or investment banker is entitled to any
brokers, finder's or other fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
the Company.
3.19 OPINION OF FINANCIAL ADVISOR. The Board of Directors of the
Company has been advised by its financial advisor, BancBoston Xxxxxxxxx
Xxxxxxxx, that in its opinion, as of the date of this Agreement, the
consideration to be paid for the Eligible Shares pursuant to this Agreement
is fair from a financial point of view to the holders of the Company Common
Stock. A written copy of such opinion has been delivered to WEC.
3.20 INTELLECTUAL PROPERTY.
(a) The Company Disclosure Schedule sets forth a true and complete
list of all patents, patent applications, trademarks, trade names, service marks
and registered copyrights and applications therefor, if any, owned or claimed by
or licensed to the Company. The Company owns or is licensed or otherwise has
the right to use, without future payment to any other Person, all Intellectual
Property used in or necessary for the conduct of its business as
20
presently conducted and as proposed to be conducted by the Company (such
Intellectual Property referred to below, is referred to as the "Company
Intellectual Property"), free and clear of all Liens except Permitted Liens.
All patents, patent applications, trademarks, trade names, service marks and
copyrights of the Company have been duly registered and filed with or issued by
each appropriate Governmental Authority in the jurisdictions indicated in the
Company Disclosure Schedule, all necessary affidavits of use or continuing use
have been filed, and all necessary maintenance fees have been paid to continue
all such rights in effect. The conduct of the Company's business, as presently
conducted and as proposed to be conducted by the Company, does not violate,
conflict with or infringe any Contract between the Company and any Person or any
Contract, license, or other Intellectual Property rights or proprietary,
privacy, publicity or similar rights, of any other Person, except that this
representation with respect to patents infringed by products currently under
development by the Company is only to the knowledge of the Company. The Company
does not have any notice or knowledge of any objection or claim being asserted
by any Person with respect to the ownership, validity, enforceability or use of
any Company Intellectual Property or challenging or questioning the validity or
effectiveness of any license relating thereto. There are no unresolved
conflicts with, or pending claims by or against the Company, whether in
Litigation or otherwise, involving any Company Intellectual Property, and there
are no Liens or rights of any other Person with respect to Intellectual Property
that would prevent the Company from fulfilling its obligations under this
Agreement.
(b) The Company Disclosure Schedule sets forth a true and complete
list of all material options, rights (including marketing rights), licenses or
interests of any kind relating to Intellectual Property granted to the Company
and all material options, rights (including marketing rights), licenses or
interests of any kind relating to Intellectual Property of the Company or any
portions thereof, granted by the Company to any other Person. To the knowledge
of the Company, no such Person is in breach or default under its obligations.
(c) All software, other than generally available software (such as
Windows NT and the like) and generally available system development tools, that
is either marketed to customers of the Company as part of a service or is used
by the Company to support its business:
(i) is owned by the Company or the Company has the right to use,
modify, copy, sell, distribute, sublicense and make derivative works free
and clear of any limitations or encumbrances except as may be set forth in
any license agreement listed in the Company Disclosure Schedule; and
(ii) is free from any interest of any former or present employees of,
or contractors or consultants to, the Company.
21
(d) The execution and delivery of this Agreement, compliance with
its terms and the consummation of the transactions contemplated hereby do not
and will not conflict with, or result in any violation or breach of, or default
(with or without notice or lapse of time or both) or give rise to any right,
license or Lien relating to any material Intellectual Property owned by the
Company or with respect to which the Company now has or has had any Contract
with any Person, or right of termination, cancellation or acceleration of any
Intellectual Property right or obligation set forth in any Contracts to which
the Company is a party, or the loss or encumbrance of any Intellectual Property
or material benefit related thereto, or result in or require the creation,
imposition or extension of any Lien upon any Intellectual Property or right or
otherwise impair the Company's right to use the Intellectual Property of the
Company in the same manner as such Intellectual Property is currently being used
by the Company or the customers of the Company.
(e) None of the trade secrets (as defined in the Uniform Trade
Secrets Act) of the Company has been published or disclosed by the Company, or
to the knowledge of the Company by any other Person, to any Person except
pursuant to licenses or Contracts requiring such other Persons to keep such
trade secrets confidential.
(f) The Company is not, and to the knowledge of the Company, no
other party to any licensing, distributorship or other similar arrangements with
the Company relating to Intellectual Property is, in breach of or default under
its material obligations under such arrangements.
(g) There exists no litigation pending or, to the Company's
knowledge, threatened against the Company with regard to any patent, copyright,
trade secret, trademark, trade name, service xxxx or other Intellectual
Property. There is no outstanding order, writ, injunction, decree, judgment or
stipulation by or with any court, administrative agency or arbitration panel
regarding patent, copyright, trade secret, trademark, trade name or other claims
relating to Intellectual Property by which the Company is bound.
(h) The Company has not received any communications alleging that
the Company has infringed or violated or, by conducting its businesses as
proposed by the Company, would infringe or violate any of the patents,
trademarks, service marks, trade names, copyrights, trade secrets or other
proprietary rights, processes or other Intellectual Property of any other
Person.
(i) To the knowledge of the Company, no Person is infringing on or
otherwise violating any right of the Company with respect to any Intellectual
Property owned by or licensed to the Company.
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(j) The Company has taken reasonable and necessary steps to protect
the Intellectual Property of third parties received by the Company under
obligation of confidentiality and its material Intellectual Property and its
rights thereunder, and to the knowledge of the Company no such rights have been
lost or are in jeopardy of being lost through failure to act by the Company.
(k) The Company has not assigned, sold or otherwise transferred
ownership of or the right to use any patent, patent application, trademark or
service xxxx.
(l) Neither the Company nor any of its officers or employees has any
patents issued or patent applications pending for any device, process, method,
design or invention of any kind now used or needed by the Company in the
furtherance of its business operations as presently conducted or as proposed to
be conducted by the Company, which patents or applications have not been
assigned to the Company with such assignment duly recorded in the United States
Patent Office or with the applicable foreign Governmental Authority.
(m) The tangible and intangible property, including Intellectual
Property, developed for and provided to the Company by the employees and agents
of, and the consultants and contractors to, the Company, are original works of
those employees, agents, consultants and contractors.
3.21 INTERESTED PARTY TRANSACTIONS. Except as set forth in the Company
SEC Reports, since December 31, 1997, no event has occurred that would be
required to be reported as a certain relationship or related transaction
pursuant to Item 404 of Regulation S-K promulgated by the SEC.
3.22 INSURANCE. The Company maintains fire and casualty, general
liability, business interruption, product liability and sprinkler and water
damage, employment claims, and directors and officers liability insurance that
the Company believes to be reasonably prudent for its business. The Company
Disclosure Schedule sets forth a complete list of the Company's insurance
policies.
3.23 VOTE REQUIRED. The affirmative vote of the holders (entitled to vote
and voting on the Merger) of a majority of the shares of the Company Common
Stock outstanding at the record date for the Special Meeting is the only vote of
the holders of the Company's Common Stock necessary to approve the Merger.
3.24 FULL DISCLOSURE. No statement contained in any certificate or
schedule furnished or to be furnished by the Company to WEC or WAC in, or
pursuant to the provisions of, this Agreement or in the Proxy Statement
(exclusive of statements based solely on information provided by WEC or WAC),
contains or will contain any untrue statement of a material fact or omits or
will omit to state any material fact necessary, in the light of the
circumstances under
23
which it was made, in order to make the statements herein or therein not
misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF WEC, ORIOLE, AND WAC
WEC, Oriole, and WAC, jointly and severally, represent and warrant to the
Company that:
4.1 ORGANIZATION. WEC is a corporation duly organized, validly existing
and in good standing under the laws of the Republic of China in Taiwan. Oriole
is a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware. WAC is a corporation duly organized, validly
existing and in good standing under the laws of the State of California. Each
of WEC, Oriole and WAC has full corporate power and authority to carry on its
business as now being conducted.
4.2 VALIDITY OF AGREEMENT. WEC, Oriole and WAC each has all requisite
corporate power and authority to execute and deliver this Agreement. This
Agreement constitutes the valid and binding obligation of WEC, Oriole and WAC,
enforceable in accordance with its terms, except as enforcement may be limited
by applicable bankruptcy laws or other similar laws affecting creditors' rights
generally. The execution and delivery of this Agreement by WEC, Oriole and WAC,
and the consummation of the transactions contemplated hereby, have been duly
authorized by all necessary corporate action, and such execution and delivery do
not require the consent, approval or authorization of any person, public
authority or other entity.
4.3 EFFECT OF AGREEMENT. The execution, delivery and performance by WEC,
Oriole and WAC of this Agreement, and the consummation of the transactions
herein contemplated, will not conflict with, or result in a breach of the terms
of, or constitute a default under or violation of, any law or regulation of any
governmental authority or any provision of the charter documents of WEC, the
Certificate of Incorporation or Bylaws of Oriole, or the Articles of
Incorporation or Bylaws of WAC, or any agreement or instrument to which WEC,
Oriole or WAC is a party or by which they are bound or to which they are
subject. No consent of any person not a party to this Agreement and no consent
of any governmental authority is required to be obtained on the part of WEC,
Oriole or WAC to permit the consummation of the transactions contemplated by
this Agreement which consent will not have been received before the Closing
Date.
4.4 CASH CONSIDERATION. WEC or WIC currently has available, and at
the Effective Time of the Merger WEC, WIC or Oriole will have available,
sufficient cash to enable Oriole to perform its obligations under this
Agreement.
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4.5 PROXY STATEMENT. WEC shall furnish or cause to be furnished, for
inclusion in the Proxy Statement, such information about WEC, the WEC Group,
Oriole, and WAC as may be required or as may be reasonably requested by the
Company, and shall continue to furnish or cause to be furnished such information
for the purpose of supplementing the Proxy Statement until the Special Meeting.
WEC represents and warrants that the information so furnished does not now, and
will not at any time prior to the Special Meeting, (i) contain an untrue
statement of a material fact or (ii) omit to state a material fact required to
be stated therein or necessary to make the statements therein not false or
misleading.
ARTICLE V
CONDUCT OF BUSINESS PRIOR TO
CLOSING DATE
Except as set forth on the Company Disclosure Schedule, during the
period from the date of this Agreement to the Closing Date, the Company shall,
and shall cause its officers and directors to, use their collective best efforts
to preserve intact the Company's business organization and to maintain
satisfactory relationships with licensors, suppliers, distributors, employees
and customers. Prior to the Closing Date, the Company shall, and shall cause
its officers and directors to, notify and consult with WEC before taking any
material action or entering into any material agreement with respect to the
Company's business or assets. Prior to the Closing Date, the Company shall not,
and shall ensure that its officers and directors shall not, without the prior
written consent of WEC, which shall not be unreasonably withheld, or except as
specifically contemplated by this Agreement:
(a) amend its Articles of Incorporation or Bylaws;
(b) authorize for issuance, issue, deliver or sell any additional
shares of its capital stock of any class (except upon the exercise of options
existing as of the date of this Agreement), or securities convertible into
shares of such stock, or issue or grant any rights, options or other commitments
for the issuance of shares of such stock or such convertible securities or
accelerate the vesting date of any such rights, options or other commitments;
provided, however, that the Company may, in the ordinary course of business,
grant options for the purchase of Company Common Stock under the Equity
Incentive Plan to new employees hired in accordance with subsection (g) below so
long as the total number of options outstanding under the Equity Incentive Plan
does not exceed the total number of shares reserved for issuance under the
Equity Incentive Plan as of August 19, 1998;
(c) split, combine or reclassify any shares of its capital stock or
declare, set aside or pay any dividend or other distribution (whether in cash,
25
stock or property) in respect of its capital stock or purchase or redeem or
otherwise acquire any of its capital stock;
(d) dispose of or acquire any material properties or assets, except
in the ordinary course of business;
(e) engage in any activities or transactions that are outside the
ordinary course of the Company's business or which could reasonably be
anticipated to materially adversely affect the Company's business or assets;
(f) enter into or materially amend any consulting agreement or
employment agreement or increase the compensation payable or to become payable
by it to any of its officers, employees or agents over the amounts payable as of
December 31, 1997, or adopt or materially amend any employee benefit plan or
arrangement, other than agreements, increases or amendments in the ordinary
course of business or required by law;
(g) extend offers of employment or hire any new employees or
consultants, except in the ordinary course of business consistent with past
practice;
(h) incur any Indebtedness, other than in the ordinary course of
business; or
(i) authorize or make any capital expenditure in excess of $25,000,
except for expenditures made in the ordinary course of business consistent with
past practice and the Company's capital expenditure budget.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 ACCESS TO INFORMATION. (a) Subject to the terms and conditions
of Section 6.1(b) below, at such times prior to the Closing as may be
reasonably requested by WEC, upon the occurrence of a materially adverse
development in the Company's business, the Company shall make available to
WEC and its employees, agents and representatives such information concerning
the operation, business and products of the Company and its subsidiaries as
may be reasonably requested by WEC, subject to the provisions of
non-disclosure agreements to which the Company is a party. In furtherance of
any request made pursuant to the preceding sentence, the Company and its
subsidiaries will cooperate with WEC for the purpose of permitting WEC to
visit all sites of the Company and its subsidiaries and discuss the Company's
operations, business and products with the Company's officers, directors,
employees, customers, independent contractors, creditors, suppliers,
licensors, licensees, and other persons having business dealings with the
Company and its subsidiaries.
26
(b) Any and all information, correspondence, financial statements
and records and other documents transmitted or communicated by any party to
another party in connection with this Agreement shall be received and treated in
secrecy and confidence, and shall not be used by the receiving party, or
disclosed by the receiving party to any person or firm without the prior express
written consent of the disclosing party, except as otherwise provided herein.
Such restrictions on use or disclosure of information do not extend to any item
of information which (i) is publicly known at the time of its disclosure,
(ii) is lawfully received by the receiving party from a third party which does
not have a confidential relationship to the disclosing party or (iii) the
receiving party can demonstrate was in its possession or known by it before its
receipt from the disclosing party. If the Merger does not occur, each party
agrees to return any and all copies of written materials received by it from the
other party or its agents in connection with this Agreement or the transactions
contemplated hereby.
(c) Any furnishing of information by the Company pursuant hereto,
and any investigation by WEC, shall not affect WEC's and WEC's right to rely on
the representations and warranties made by the Company in this Agreement.
(d) In the event that between the date hereof and the Closing Date
any Governmental Authority shall commence any examination, review,
investigation, action, suit or proceeding against WEC or the Company with
respect to the Merger, the party as to which such examination, review,
investigation, action, suit or proceeding is commenced shall give prompt notice
thereof to the other party, shall keep the other party informed as to the status
thereof and shall permit the other party to observe and be present at each
meeting, conference or other proceeding and have access to and be consulted in
connection with any document filed or provided to such governmental authority in
connection with such examination, review, investigation, action, suit or
proceeding.
6.2 GOVERNMENTAL FILINGS. WEC and the Company shall, as applicable and
as promptly as reasonably practicable after the date of this Agreement, file
with the Federal Trade Commission and the Antitrust Division of the United
States Department of Justice, with the Taiwan Foreign Investment Committee, and
with any other governmental agencies or departments all notices, reports and
other documents required by law, or deemed by WEC appropriate, with respect to
the Merger and shall promptly submit any additional information or documentary
material properly requested by any such governmental agency or department.
6.3 SHAREHOLDERS' APPROVAL. The Company shall promptly call the Special
Meeting for the purpose of voting upon the Merger. The Company shall use all
reasonable efforts to ensure that such meeting shall be held not later than 75
days following the date of this Agreement. The Board of Directors of the
27
Company (subject to its fiduciary responsibilities and obligations) shall
recommend to the Company's shareholders that the Merger be approved in all
communications to the Company's shareholders, including but not limited to the
Proxy Statement.
6.4 CERTAIN DEFAULTS. The Company will give prompt notice to WEC of (i)
any notice of default received by the Company subsequent to the date of this
Agreement and prior to the Closing Date under any Material Contract, which
default would, if not remedied, result in any material adverse change in the
Company's operations, financial condition or business, taken as a whole, or
which would render incorrect any representation made herein, and (ii) any suit,
action or proceeding instituted or, to the knowledge of the Company, threatened
against or affecting the Company subsequent to the date of this Agreement and
prior to the Closing Date which, if adversely determined, could reasonably be
expected to result in any material adverse change in the financial condition or
business of the Company, taken as a whole, or which would render incorrect any
representation made herein.
6.5 COMMUNICATIONS. WEC and the Company agree to cooperate in good faith
concerning the timing and content of any written communication with
shareholders, announcements, press releases or public statements concerning the
Merger. Neither party will make any public announcement concerning the matters
set forth in this Agreement or discuss it or its subject matter with any third
party (other than persons retained to advise it in connection with the Merger,
employees, shareholders or other persons with a need to know, or in connection
with WEC's due diligence review) without the prior written approval of the other
party, which approval shall not be unreasonably withheld; provided that the
foregoing shall not be deemed to prohibit any disclosure required by any
applicable law or by any competent Governmental Authority.
6.6 CONSENTS AND APPROVALS. The Company shall use its best efforts to
obtain any and all consents from other parties necessary to continue in full
force and effect the contracts, leases and other instruments material to the
Company's business, if necessary or appropriate to allow the consummation of the
Merger and the continuance of the Company's business after consummation of the
Merger. Each party hereto shall use its best efforts to obtain any and all
permits or approvals of any governmental body or agency required by such party
for the lawful consummation of the Merger.
6.7 COMPANY SHAREHOLDER RIGHTS PLAN. The Company will terminate the
Shareholder Rights Plan without any rights thereunder becoming exercisable with
respect to the Merger.
6.8 EMPLOYMENT OFFERS. If the Merger is consummated, WEC will cause the
Company or an Affiliate of WEC to offer continuing employment to the Company
employees identified by name or job description, and on the terms set
28
forth in, a memorandum executed and delivered by WEC and the Company prior to
the Closing Date.
6.9 EMPLOYEE BENEFIT PLANS. If the Merger is consummated, for a period
of six (6) months after the Closing Date the employee benefit plans offered to
the Company's employees shall be no less beneficial than the employee benefit
plans currently in effect, provided however that all Company Option Plans and
the Employee Purchase Plan shall be terminated on the Closing and the bonus and
incentive plans after the Closing may differ from those in effect prior to the
Closing.
6.10 CERTAIN INFORMATION. Between the date of this Agreement and the
Closing Date, the Company shall furnish to WEC copies of (i) the monthly
financial information which the Company customarily prepares for the internal
use of its management; and (ii) when it is made available to the public, the
financial information which the Company customarily prepares on a quarterly
basis for reporting purposes under the Exchange Act.
6.11 BROKERS. Each of the Company on the one hand and WEC and the WAC on
the other hand shall save, indemnify, defend and hold harmless the other from
and against any claim or liability for any broker's or finder's fees arising out
of the transactions contemplated hereby by any person claiming to have been
engaged by such party.
6.12 EXCLUSIVITY. Until the earlier of the Closing Date or the date of
termination of the Agreement pursuant to the provisions of Section 9.5 below,
the Company shall not (nor will the Company authorize or permit any of its
officers, directors, agents, representatives or affiliates to), directly or
indirectly, take any of the following actions: (i) solicit, initiate,
entertain, encourage, participate in, conduct discussions with or engage in
negotiations with any Person relating to any merger, consolidation or business
combination, of or with the Company, or any purchase or sale of the Company's
capital stock or other equity securities or any purchase or sale of any of the
Company's material assets or any exchange offer or tender offer to the
shareholders of the Company or other similar transactions (any such transaction
being hereafter referred to as an "Acquisition Proposal"); (ii) provide any
written or oral information with respect to the Company to any Person (other
than as contemplated in this Agreement or required by applicable law) relating
to any Acquisition Proposal; or (iii) enter into any agreement with any Person
with regard to any Acquisition Proposal; PROVIDED, HOWEVER, that nothing
contained in this Agreement shall prevent the Company or its board of directors
from (A) complying with Rule 14e-2 promulgated under the Exchange Act with
regard to an Acquisition Proposal; (B) engaging in any discussion or
negotiations with, or providing any information to, any Person in response to an
unsolicited bona fide written Acquisition Proposal by any such Person; or (C)
recommending such an unsolicited bona fide written Acquisition Proposal to the
shareholders of the Company or withdrawing or
29
modifying its recommendation in favor of this Agreement and the Merger in
compliance with Section 6.3, if and only to the extent that, in any such case as
is referred to in clause (B) or (C), (i) a majority of the members of the board
of directors of the Company concludes in good faith (after consultation with its
financial advisors) that such Acquisition Proposal is reasonably capable of
being completed, taking into account all legal, financial, regulatory and other
aspects of the proposal and the Person making the proposal, and would, if
consummated, result in a transaction more favorable to the Company's
shareholders than the transaction contemplated by this Agreement (any such more
favorable Acquisition Proposal being referred to in this Agreement as a
"Superior Proposal"), (ii) a majority of the members of the board of directors
of the Company concludes in good faith (after consultation with outside counsel)
that such action is necessary for the board of directors to act in a manner
consistent with its fiduciary duties under applicable law,(iii) prior to
providing any information or data to any Person in connection with an
Acquisition Proposal by any such Person, such board of directors receives from
such Person an executed confidentiality agreement on terms substantially similar
to those contained in the confidentiality agreement previously entered into
between WEC and the Company in connection with their consideration of the
Merger, and (iv) prior to providing any information or data to any Person or
entering into discussions or negotiations with any Person, the board of
directors of the Company notifies WEC of such inquiries, expressions of
interest, proposals or offers received by, any such information requested from,
or any such discussions or negotiations to be initiated or continued with, any
of the Company's representatives indicating, in connection with such notice, the
name of such Person and the terms and conditions of any proposals or offers. The
Company agrees that it will immediately cease and cause to be terminated any
existing activities, discussions or negotiations with any parties conducted
heretofore with respect to any Acquisition Proposal. The Company agrees that it
will take the necessary steps to promptly inform the officers, directors and
other representatives referred to in the first sentence hereof of the
obligations undertaken in this Section 6.12. The Company agrees that it shall
keep WEC informed, on a current basis, of the status and material terms of any
such proposals or offers and the status of any such discussions or negotiations.
6.13 ACCOUNTANTS' LETTER. The Company shall direct and retain its
independent auditors, Xxxxxx Xxxxxxxx LLP, to deliver to WEC at the Effective
Time of the Merger, a letter dated as of that date, addressed to WEC, in form
and substance satisfactory to WEC, stating in effect:
(a) that they are, and during the period covered by their report(s)
relating to the financial statements included in or incorporated by reference
into the Proxy Statement they were, independent certified public accountants
with respect to the Company within the meaning of Regulation S-X under the
federal securities laws;
30
(b) that, in their opinion, the financial statements of the Company
included in or incorporated by reference into the Proxy Statement and covered by
their report included therein or incorporated by reference therein comply as to
form in all material respects with the applicable accounting requirements of the
Exchange Act and the rules and regulations thereunder with respect to proxy
statements;
(c) that, on the basis of procedures (but not an examination made in
accordance with generally accepted auditing standards) consisting of a reading
of the latest available unaudited consolidated interim financial statements of
the Company (with an indication of the date of the latest available unaudited
interim financial statements), a reading of the latest available minutes of
meetings of the stockholders and board of directors of the Company and the
committees of the board and unanimous written consents thereof, if any,
inquiries to certain officers and other employees of the Company responsible for
financial and accounting matters, and other specified procedures and inquiries,
nothing has come to their attention that caused them to believe that:
(i) the unaudited consolidated financial statements of the
Company included in the Proxy Statement do not comply as to form in all material
respects with the applicable accounting requirements of the Exchange Act and the
rules and regulations under the Exchange Act, or such unaudited financial
statements were not prepared in accordance with generally accepted accounting
principles (except to the extent certain footnote disclosures regarding any stub
period may have been omitted in accordance with the applicable rules of the SEC
under the Exchange Act) consistent in all material respects with those followed
in the preparation of the audited financial statements of the Company included
therein or incorporated by reference therein, or are not a fair presentation of
the information purported to be shown; or
(ii) there was any change in the capital stock or debt of the
Company or any decrease in the net current assets of stockholders' equity of the
Company and a specified date not more than 10 business days prior to the date of
such letter, each as compared with the amounts shown in the balance sheet of the
Company at January 1, 1998, other than as disclosed in this Agreement or any
change or decrease (which shall be set forth in such letter) which WEC in its
sole discretion shall accept;
(d) that they have reviewed (in accordance with established
professional standards and procedures under Rule 10-01(d) of SEC Regulation S-X)
the Company's net sales, net earnings, and net earnings per share (on a basic
and a fully diluted basis) of the Company's Common Stock during the period from
January 1, 1998 to October 3, 1998;
(e) that they have reviewed (in accordance with established
professional standards and procedures under Rule 10-01(d) of SEC Regulation
31
S-X) the adequacy of all reserves on the Company's books at October 3, 1998
including, without limitation, inventory and litigation reserves; and
(f) that they have compared specific numerical data and financial
information pertaining to the Company set forth in the Proxy Statement, which
have been specified by WEC prior to the date of this Agreement, to the extent
that such data and information may be derived from the general accounting
records of the Company, and excluding any questions requiring an interpretation
by legal counsel, with the results obtained from the application of specified
readings, inquiries, and other appropriate procedures (which procedures do not
constitute an examination in accordance with generally accepted auditing
standards) set forth in the letter, and found them to be in agreement.
6.14 CLOSING CONDITIONS. Each party covenants and agrees to take such
actions, or to cause its agents or representatives to take such actions, as may
be necessary or appropriate to cause the conditions precedent to closing set
forth in Article VII to be satisfied. In addition, the Company agrees that all
representations and warranties of the Company set forth in Article III will be
true and complete as of the Closing Date and agrees to fulfill or to cause its
agents to fulfill the conditions precedent to Winbond's obligations to close set
forth in Section 7.3(a), (b), (d), (e), (h), (i) and (k). WEC agrees that all
representations and warranties of WEC set forth in Article IV will be true and
complete as of the Closing Date and agrees to fulfill or to cause its agents to
fulfill the conditions precedent to the Company's obligations to close set forth
in Section 7.2(a), (b) and (d).
ARTICLE VII
CONDITIONS PRECEDENT
7.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. The
respective obligation of each party to effect the Merger shall be, at the
election of such party, subject to the fulfillment at or prior to the Closing
Date of the following conditions:
(a) CORPORATE APPROVALS. This Agreement shall have been approved
and adopted by the board of directors of WEC and by the board of directors and
shareholders of the Company in the manner required under the CGCL and rules of
the Nasdaq National Market.
(b) ANCILLARY AGREEMENTS AND DOCUMENTS. This Agreement and all
ancillary agreements and documents provided herein shall have been duly executed
and delivered by the parties hereto and thereto.
32
(c) HSR ACT. The waiting period required by the U.S. Department of
Justice and the Federal Trade Commission in connection with filings under the
HSR Act shall have expired or terminated without any action having been taken to
impede or delay the Merger.
(d) LITIGATION. There shall be no pending or threatened litigation,
proceeding or other similar action seeking to enjoin or otherwise stop or delay
the transactions contemplated hereby.
7.2 CONDITIONS TO OBLIGATIONS OF THE COMPANY. The obligations of the
Company under this Agreement are, at the option of the Company, subject to
the satisfaction at or prior to the Closing of the following conditions:
(a) ACCURACY OF REPRESENTATIONS AND WARRANTIES. All of the
representations and warranties made by WEC in this Agreement shall be true in
all material respects as of the Closing Date with the same force and effect as
though such representations and warranties had been made as of the Closing Date,
except for changes expressly contemplated by this Agreement, and WEC shall have
delivered to the Company a certificate to such effect dated the Closing Date and
signed by its Chief Executive Officer and Chief Financial Officer.
(b) FULFILLMENT OF COVENANTS. All of the terms, covenants and
conditions of this Agreement to be complied with and performed by WEC at or
before the Closing Date shall have been duly complied with and performed, and
WEC shall have delivered to the Company a certificate to such effect dated the
Closing Date and signed by its Chief Executive Officer and Chief Financial
Officer.
(c) GOVERNMENT APPROVALS. All authorizations, consents and
approvals of all Governmental Authorities required to be obtained in order to
permit consummation of the transactions contemplated by this Agreement shall
have been obtained, and all waiting periods imposed by such agencies and
authorities shall have expired or terminated without adverse action.
(d) OTHER THIRD PARTIES. All required consents to the consummation
of the contemplated transactions from third parties to any contracts, leases and
other instruments material to the parties' businesses shall have been obtained.
7.3 CONDITIONS TO OBLIGATIONS OF WEC. The obligations of WEC under this
Agreement are, at the option of WEC, subject to the satisfaction at or prior to
the Closing of the following conditions:
(a) ACCURACY OF REPRESENTATIONS AND WARRANTIES. All of the
representations and warranties made by the Company in this Agreement shall be
33
true in all material respects as of the Closing Date with the same force and
effect as though such representations and warranties had been made as of the
Closing Date, except for changes expressly contemplated by this Agreement, and
the Company shall have delivered to WEC a certificate to such effect dated the
Closing Date and signed by the Chief Executive Officer and Chief Financial
Officer of the Company.
(b) FULFILLMENT OF COVENANTS. All of the terms, covenants and
conditions of this Agreement to be complied with and performed by the Company at
or before the Closing Date shall have been duly complied with and performed, and
the Company shall have delivered to WEC a certificate to such effect dated the
Closing Date and signed by the Chief Executive Officer and Chief Financial
Officer of the Company.
(c) GOVERNMENT APPROVALS. All authorizations, consents and
approvals of all federal, state and local Governmental Authorities required to
be obtained in order to permit consummation of the transactions contemplated by
this Agreement shall have been obtained, and all waiting periods imposed by such
agencies and authorities shall have expired or terminated without adverse
action. WEC shall have obtained all licenses, or determined to its satisfaction
the applicability of lawful exemptions, permitting the transfer of technical
information and of Company Intellectual Property to the R.O.C. under U.S. Export
Administration Regulations and other applicable export control restrictions.
(d) OTHER THIRD PARTIES. All required consents to the consummation
of the contemplated transactions from third parties to any contracts, leases and
other instruments material to the parties' businesses shall have been obtained.
(e) LEGAL OPINION. WEC shall have received from counsel to the
Company an opinion, dated the Closing Date, satisfactory to WEC, in
substantially the form attached hereto as Exhibit D to this Agreement.
(f) NO MATERIAL ADVERSE CHANGE. There shall be no material adverse
change in the financial condition, results of operations or business of the
Company from July 4, 1998, through the Closing Date other than changes disclosed
in the Company Disclosure Schedule, and, provided that such closing shall have
occurred on or before October 31, 1998, the amount of the Company's cash, cash
equivalents and liquid investments (after payment or provision for payment of
the fees and expenses specified in Section 7.3(i)) shall be not less than
$23,000,000.
(g) R.O.C. APPROVALS. WEC shall have received approval for the
transactions contemplated hereby from the Taiwan Foreign Investment Commission
and shall have received foreign exchange authorization from the
34
Central Bank of China for payment of the U.S. Dollars payable to the Company's
shareholders at the Closing.
(h) RESIGNATION OF DIRECTORS. All persons serving as directors of
the Company and its subsidiaries shall have tendered their resignations to be
effective as of the Closing Date.
(i) EXPENSES. The Company shall have paid (or made adequate
provision for the payment of) all reasonable fees and expenses incurred by the
Company in connection with the transactions contemplated hereby (including
without limitation fees paid to the Company's financial advisors, accountants
and attorneys, costs and expenses related to the Special Meeting and the Proxy
Statement, any compensatory payments made pursuant to employment or other
written agreements on account of the Merger and any other bonus payments made on
account of the Merger, but excluding payments made pursuant to Section 2.4 of
this Agreement) in an amount approved by WEC, which shall in no event exceed
$3,000,000.
(j) COMPANY SHAREHOLDER APPROVAL. Less than five percent (5%) of
the outstanding shares of the Company (including shares held by WEC and the WEC
Group) entitled to vote at the Special Meeting shall have been voted against the
Merger at the Special Meeting.
(k) COMFORT LETTER. WEC shall have received from Xxxxxx Xxxxxxxx
LLP the Accountants' Letter described in Section 6.13.
ARTICLE VIII
NO SURVIVAL OF REPRESENTATIONS,
WARRANTIES AND COVENANTS
Except as provided in the following sentence, the representations and
warranties of the parties contained in this Agreement or in any certificate or
instrument delivered pursuant hereto and the covenants in Articles V and VI of
this Agreement and in the Voting Agreement shall not survive the Closing
hereunder. Notwithstanding the preceding sentence to the contrary, the parties
agree that nothing herein limits any potential remedies of WEC, Oriole or the
Surviving Company arising under applicable federal and state laws with respect
to any intentional or willful fraud, intentional or willful misrepresentation,
intentional or willful act of concealment or deceit, or gross negligence
committed by any director, officer, employee or other agent of the Company.
35
ARTICLE IX
GENERAL PROVISIONS
9.1 NOTICES. All notices and other communications required or permitted
hereunder shall be in writing and shall be deemed effectively given upon
personal delivery or on the day sent by facsimile transmission if a true and
correct copy is sent the same day by first class mail, postage prepaid, or by
dispatch by an internationally recognized express courier service, and in each
case addressed as follows:
TO THE COMPANY: Information Storage Devices, Inc.
0000 Xxxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: President
With a copy to Fenwick & West LLP
counsel for the Two Palo Alto Square
Company: Xxxx Xxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxxxxx, Esq.
TO WEC, WIC, ORIOLE Winbond Electronics Corporation
and WAC: Xx. 0, Xxxxxxxx Xx. III
Science-Based Industrial Park
Hsinchu, Taiwan, R.O.C.
Attention: Xxxxxx X.X. Xxxxx, Chairman
With a copy to: Winbond Electronics Corporation
Xx. 0, Xxxxxxxx Xx. III
Science-Based Industrial Park
Hsinchu, Taiwan, R.O.C.
Attention: Xxx Xxxx, Deputy Director
Legal & Auditing Division
With a copy to Xxxxxx & Xxxxx, LLP
counsel for WEC, 000 Xxxxxx Xxx
XXX, ORIOLE and WAC: Xxxx Xxxx, XX 00000
Attention: Xxxx X. Xxxxx, Esq.
or to such other addresses or other persons as may be designated in writing
by any of the parties, by notice given as aforesaid.
9.2 HEADINGS. The headings of the several sections of this Agreement are
inserted for the convenience of reference only and are not intended to affect
the meaning or interpretation of this Agreement.
36
9.3 COUNTERPARTS. This Agreement may be executed in counterparts, and a
party's delivery of a signed counterpart by facsimile transmission will
constitute valid execution and delivery of this Agreement by such party.
9.4 ASSIGNMENT. None of the parties may assign or transfer any rights or
obligations under this Agreement.
9.5 TERMINATION. This Agreement may be terminated at any time prior to
the Closing Date, whether before or after approval by the shareholders of the
Company, by written notice or agreement as follows:
(a) by mutual agreement of the boards of directors of WEC and the
Company;
(b) by the board of directors of either WEC or the Company if the
Closing Date shall not have occurred on or prior to December 31, 1998, or such
other date as may be mutually agreed by the parties;
(c) by the board of directors of WEC if (i) any of the conditions
specified in Sections 7.01 or 7.03 has not been satisfied or waived in writing
by WEC or (ii) the Company's shareholders do not approve this Agreement and the
Merger as required by applicable law;
(d) by the board of directors of the Company if any of the
conditions specified in Sections 7.01 or 7.02 has not been satisfied or waived
in writing by the Company;
(e) by WEC if (i) the Company's board of directors shall have
withdrawn or modified its recommendation in favor of this Agreement and the
Merger or (ii) a tender offer (to which Rule 14e-2 applies) other than by WEC or
its Affiliates for any outstanding shares of capital stock of the Company is
commenced prior to the Special Meeting, and the Company's board of directors
fails to recommend against acceptance of such tender offer within the time
period required by Rule 14e-2 (including by taking no position with respect to
acceptance of such tender offer by the Company's shareholders);
(f) by the Company if its board of directors determines in good
faith that an Acquisition Proposal becomes a Superior Proposal; or
(g) by the board of directors of either WEC or the Company if (i)
there shall be a nonappealable order of a federal or state court in effect
preventing consummation of the Merger of (ii) there shall be any action taken,
or any statute, rule, regulation or order enacted, promulgated or issue or
deemed
37
applicable to the Merger by any governmental entity that would make consummation
of the Merger illegal.
9.6 EFFECT OF TERMINATION. In the event of termination of this Agreement
by either WEC or the Company, as provided in Section 9.5, this Agreement shall
forthwith become void and there shall be no liability or obligation on the part
of either WEC or the Company or their respective officers or directors except as
set forth in Section 9.7 and Sections 6.1(b), 6.5 and 6.11 of this Agreement and
except to the extent that such termination results from fraud by a party
hereto.
9.7 BREAK-UP FEE. In the event that (a) this Agreement is terminated,
other than by reason of termination due to fraud of WEC as described in
Section 9.6, and, within 18 months of the date of this Agreement, the Company
enters into an agreement for, or otherwise consummates, any of the
transactions described in Section 6.12, or (b) the Company's shareholders do
not approve this Agreement and the Merger, or (c) this Agreement is
terminated by WEC pursuant to Section 9.5(e), or (d) this Agreement is
terminated by the Company pursuant to Section 9.5(f), then, in each case the
Company shall immediately advise WEC in writing and, further, shall pay to
WEC, on demand, the sum of Four Million United States Dollars (US$4,000,000)
in immediately available funds, as liquidated damages. In addition, in the
event that the Closing does not occur prior to December 31, 1998 due to a
breach by the Company or WEC of its respective obligations to satisfy the
conditions to closing set forth in Article VII of this Agreement, the party
which so breaches shall pay to the non-defaulting party, on demand, the sum
of Four Million United States Dollars (US $4,000,000) in immediately
available funds, as liquidated damages; PROVIDED, HOWEVER, that in the case
of WEC, neither WEC, WIC nor any other member of the WEC Group shall be
required to pay a break-up fee if the failure to close is due to any of the
following: (i) there shall have occurred a material adverse change in the
financial condition, results of operations or business of the Company from
the date of this Agreement through the Closing Date, as determined in good
faith by the board of directors of WEC; (ii) the Department of Justice and/or
the Federal Trade Commission has not given written notice of the expiration
of the waiting period under the HSR Act or has notified the Company or WEC of
its or their intention to take action to stop or delay the Merger; (iii)
there shall be pending or threatened litigation, or other proceeding or
similar action (other than R.O.C. governmental approval) seeking to enjoin or
otherwise stop or delay the Merger or (iv) there shall have been an uncured
breach by the Company of its representations, warranties, covenants or
agreements set forth in this Agreement or the Company or its agents or
shareholders shall have failed to satisfy a condition precedent to WEC's
obligations to close; and, in the case of the Company, the Company shall not
be required to pay a break-up fee if the failure to close is due to any of
the following: (i) the Department of Justice and/or the Federal Trade
Commission has not given written notice of the expiration of the
38
waiting period under the HSR Act or has notified the Company or WEC of its or
their intention to take action to stop or delay the Merger; (ii) there shall
be pending or threatened litigation, or other proceeding or similar action
seeking to enjoin or otherwise stop or delay the Merger; or (iii) there shall
have been an uncured breach by WEC of its representations, warranties,
covenants or agreements set forth in this Agreement or WEC or its agents
shall have failed to satisfy a condition precedent to the Company's
obligation to close.
9.8 WAIVER. Any party hereto may, by written notice to the others: (i)
waive any of the conditions to its obligations hereunder or extend the time for
the performance of any of the obligations or actions of the others; (ii) waive
any inaccuracies in the representations of the others contained in this
Agreement or in any documents delivered pursuant to this Agreement; (iii) waive
compliance with any of the covenants of the others contained in this Agreement;
or (iv) waive or modify performance of any of the obligations of the others. No
action taken pursuant to this Agreement, including without limitation any
investigation by or on behalf of any party, shall be deemed to constitute a
waiver by the party taking such action of compliance with any representation,
warranty, condition or agreement contained herein. Waiver of the breach of any
one or more provisions of this Agreement shall not be deemed or construed to be
a waiver of other breaches or subsequent breaches of the same provisions.
9.9 ENTIRE AGREEMENT. This Agreement, including the schedules and
exhibits hereto, constitutes the entire agreement between the parties pertaining
to the subject matter contained herein and supersedes all prior and
contemporaneous agreements, representations, and understandings of the parties.
No supplement, modification, or amendment of this Agreement shall be binding
unless executed in writing by the party sought to be bound.
9.10 GOOD FAITH. Each of the parties hereto agrees that it shall act in
good faith in an attempt to cause all the conditions precedent to its respective
obligations hereunder to be satisfied.
9.11 APPLICABLE LAW. This Agreement shall be governed by and construed,
interpreted and enforced in accordance with the laws of the State of California
without regard to its principles governing conflicts of laws.
9.12 SEVERABILITY. Should any provision of this Agreement be determined
to be invalid, it shall be severed from this Agreement and the remaining
provisions of the Agreement shall remain in full force and effect.
39
Witness the due execution of this Agreement by the parties hereto as
of the date first set forth above.
WINBOND ELECTRONICS CORPORATION INFORMATION STORAGE DEVICES,
INC.
By: By:
------------------------------------- ----------------------------------
Chairman of the Board of Directors Chief Executive Officer
ORIOLE HOLDING CORPORATION
By:
-------------------------------------
Chairman of the Board of Directors
WINBOND ACQUISITION CORPORATION
By:
-------------------------------------
Chairman of the Board of Directors
WINBOND INT'L CORPORATION
By:
-------------------------------------
Director
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