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EXHIBIT 2.1
MERGER AGREEMENT AND
PLAN OF REORGANIZATION
BY AND AMONG
BROADCOM CORPORATION,
RCC ACQUISITION CORP.,
RELIANCE COMPUTER CORP.
AND
THE OTHER PARTIES SIGNATORY HERETO
Dated as of January 5, 2001
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MERGER AGREEMENT AND PLAN OF REORGANIZATION............................................................................1
ARTICLE 1 THE MERGER...................................................................................................2
1.1 The Merger........................................................................................2
1.2 Effective Time....................................................................................2
1.3 Effect of the Merger on Constituent Corporations..................................................2
1.4 Certificate of Incorporation and Bylaws of Surviving Corporation..................................3
1.5 Directors and Officers of Surviving Corporation...................................................3
1.6 Maximum Number of Shares of Parent Common Stock to be Issued; Effect on Outstanding
Securities of the Company.........................................................................3
1.7 Adjustments to Exchange Ratios and Rights to Receive Parent Common Stock..........................5
1.8 Fractional Shares.................................................................................5
1.9 Dissenting Shares.................................................................................6
1.10 Exchange Procedures...............................................................................6
1.11 No Further Ownership Rights in Company Common Stock...............................................9
1.12 Lost, Stolen or Destroyed Certificates............................................................9
1.13 Earn Out Shares..................................................................................10
1.14 Exemption From Registration; California Permit...................................................12
1.15 Taking of Necessary Action; Further Action.......................................................12
ARTICLE 2 REPRESENTATIONS AND WARRANTIES OF THE COMPANY...............................................................12
2.1 Organization and Qualification...................................................................13
2.2 Authority Relative to this Agreement.............................................................13
2.3 Capital Stock....................................................................................14
2.4 No Subsidiaries..................................................................................15
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2.5 Directors and Officers...........................................................................15
2.6 No Conflicts.....................................................................................15
2.7 Company Financial Statements.....................................................................16
2.8 Books and Records; Organizational Documents......................................................16
2.9 Absence of Changes...............................................................................16
2.10 No Undisclosed Liabilities.......................................................................21
2.11 Taxes............................................................................................22
2.12 Legal Proceedings................................................................................24
2.13 Compliance with Laws and Orders..................................................................24
2.14 Plans; ERISA.....................................................................................25
2.15 Real Property....................................................................................28
2.16 Tangible Personal Property.......................................................................29
2.17 Intellectual Property............................................................................29
2.18 Contracts........................................................................................33
2.19 Insurance........................................................................................34
2.20 Affiliate Transactions...........................................................................35
2.21 Employees; Labor Relations.......................................................................35
2.22 Environmental Matters............................................................................37
2.23 Substantial Customers and Suppliers..............................................................38
2.24 Accounts Receivable..............................................................................38
2.25 Inventory........................................................................................38
2.26 Other Negotiations; Brokers; Third Party Expenses................................................39
2.27 Banks and Brokerage Accounts.....................................................................39
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2.28 Warranty Obligations.............................................................................39
2.29 Foreign Corrupt Practices Act....................................................................40
2.30 Tax-Free Reorganization..........................................................................40
2.31 Financial Projections/Operating Plan.............................................................40
2.32 Approvals........................................................................................41
2.33 Company Options, Company Stock Purchase Rights and Restricted Stock Purchase Agreements..........41
2.34 Compliance.......................................................................................42
2.35 Takeover Statutes................................................................................42
2.36 Permit Application; Information Statement........................................................42
2.37 No Solicitation..................................................................................42
2.38 Disclosure.......................................................................................42
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB.....................................................43
3.1 Organization and Qualification...................................................................43
3.2 Authority Relative to this Agreement.............................................................43
3.3 Issuance of Parent Common Stock..................................................................44
3.4 SEC Documents; Parent Financial Statements.......................................................44
3.5 No Conflicts.....................................................................................44
3.6 Information to be Supplied by Parent or Merger Sub...............................................45
3.7 Ownership of Merger Sub; No Prior Activities.....................................................45
3.8 Tax-Free Reorganization..........................................................................45
3.9 Takeover Statutes................................................................................46
3.10 Approvals........................................................................................46
3.11 Sealed Box.......................................................................................46
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ARTICLE 4 CONDUCT PRIOR TO THE EFFECTIVE TIME.........................................................................46
4.1 Conduct of Business of the Company...............................................................46
4.2 No Solicitation..................................................................................49
ARTICLE 5 ADDITIONAL AGREEMENTS.......................................................................................50
5.1 Information Statement; Permit Application........................................................50
5.2 Stockholder Approval.............................................................................52
5.3 Access to Information............................................................................53
5.4 Confidentiality..................................................................................53
5.5 Expenses.........................................................................................54
5.6 Public Disclosure................................................................................54
5.7 Approvals........................................................................................54
5.8 FIRPTA Compliance................................................................................54
5.9 Notification of Certain Matters..................................................................54
5.10 Company Affiliate Agreements.....................................................................55
5.11 Additional Documents and Further Assurances; Cooperation.........................................55
5.12 Indemnification..................................................................................55
5.13 Form S-8.........................................................................................56
5.14 NNM Listing of Additional Shares Application.....................................................56
5.15 Company's Auditors...............................................................................56
5.16 Termination of 401(k) Plans......................................................................56
5.17 Takeover Statutes................................................................................56
5.18 Post-Closing Conduct of Business.................................................................56
5.19 Company Repurchases..............................................................................57
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5.20 Information Technology Access....................................................................57
5.21 Intellectual Property............................................................................58
5.22 Delivery of Stock Ledger and Minute Book of the Company..........................................58
5.23 New Hires; Top-Up Grants.........................................................................58
ARTICLE 6 . CONDITIONS TO THE MERGER..................................................................................58
6.1 Conditions to Obligations of Each Party to Effect the Merger.....................................58
6.2 Additional Conditions to Obligations of the Company..............................................59
6.3 Additional Conditions to the Obligations of Parent and Merger Sub................................60
ARTICLE 7 SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS; ESCROW PROVISIONS........................63
7.1 Survival of Representations, Warranties, Covenants and Agreements................................63
7.2 Escrow Provisions................................................................................63
ARTICLE 8 TERMINATION, AMENDMENT AND WAIVER...........................................................................72
8.1 Termination......................................................................................72
8.2 Effect of Termination............................................................................74
8.3 Amendment........................................................................................74
8.4 Extension; Waiver................................................................................74
ARTICLE 9 MISCELLANEOUS PROVISIONS....................................................................................74
9.1 Notices..........................................................................................74
9.2 Entire Agreement.................................................................................76
9.3 Further Assurances; Post-Closing Cooperation.....................................................76
9.4 Waiver...........................................................................................76
9.5 Third Party Beneficiaries........................................................................77
9.6 No Assignment; Binding Effect....................................................................77
9.7 Headings.........................................................................................77
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9.8 Invalid Provisions...............................................................................77
9.9 Governing Law, Submission to Jurisdiction........................................................77
9.10 WAIVER OF TRIAL BY JURY..........................................................................78
9.11 Construction.....................................................................................78
9.12 Counterparts.....................................................................................78
9.13 Specific Performance.............................................................................78
ARTICLE 10 DEFINITIONS................................................................................................78
10.1 Definitions......................................................................................78
10.2 Construction.....................................................................................93
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MERGER AGREEMENT AND
PLAN OF REORGANIZATION
MERGER AGREEMENT AND PLAN OF REORGANIZATION, dated as of January 5,
2001, by and among Broadcom Corporation, a California corporation ("Parent"),
RCC Acquisition Corp., a Delaware corporation and a wholly-owned subsidiary of
Parent ("Merger Sub"), Reliance Computer Corp., a Delaware corporation (the
"Company"), and, with respect to Article 7, Article 9 and Article 10 only,
Anantakotiraju Xxxxxxx as Stockholder Agent, and U.S. Stock Transfer
Corporation, as Depositary Agent. Capitalized terms used and not otherwise
defined herein have the meanings set forth in Article 10.
RECITALS
A. The boards of directors of each of Parent, Merger Sub and the Company
believe it is in the best interests of Parent, Merger Sub and the Company (as
applicable) and their respective shareholders or stockholders (as applicable)
that Parent acquire the Company through the merger of the Merger Sub with and
into the Company (the "Merger") and, in furtherance thereof, have approved the
Merger, this Agreement and the transactions contemplated hereby.
B. Pursuant to the Merger, among other things, and subject to the terms
and conditions of this Agreement, (i) all of the shares of capital stock of the
Company which are issued and outstanding immediately prior to the Effective Time
shall be converted into the right to receive shares of Class A common stock, par
value $0.0001 per share, of Parent ("Parent Common Stock"), and (ii) all Company
Options, Company Warrants and Company Stock Purchase Rights then outstanding
(whether vested or unvested) will become exercisable for Parent Common Stock, on
the terms and subject to the conditions set forth herein.
C. As a condition and an inducement to the willingness of Parent and
Merger Sub to enter into this Agreement, certain stockholders of the Company
have concurrently herewith entered into (i) Support Agreements with Parent in
substantially the form attached hereto as Exhibit A ("Support Agreements")
pursuant to which, among other things, such stockholders have agreed to vote the
shares of Company Common Stock owned by them in favor of adoption of this
Agreement; (ii) Company Affiliate Agreements in substantially the form attached
hereto as Exhibit B ("Company Affiliate Agreements"); and (iii) Stock Repurchase
Agreements in substantially the form attached hereto as Exhibit C ("Stock
Repurchase Agreements").
D. As a condition and a further inducement to Parent and Merger Sub to
enter into this Agreement, certain employees of the Company have entered into
Non-Competition Agreements substantially in the form attached hereto as Exhibit
D (the "Non-Competition Agreements"), each of which shall become effective at
the Effective Time.
E. Parent, Merger Sub and the Company intend that the Merger shall
constitute a reorganization within the meaning of Section 368(a) of the Internal
Revenue Code, and in furtherance thereof intend that this Agreement shall be a
"plan of reorganization" within the meaning of Sections 354(a) and 361(a) of the
Internal Revenue Code.
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F. The Company, Parent and Merger Sub desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger.
G. The Company, Parent and Merger Sub each intend that, except to the
extent the conditions set forth in Article 6 are not satisfied, events arising
after the date of this Agreement shall not serve to relieve any party from its
obligations to consummate the Merger and that, except as provided in Section
8.2, the parties shall have no liability upon termination of this Agreement as
permitted by Section 8.1.
H. A portion of the shares of Parent Common Stock otherwise issuable or
reserved for issuance by Parent in connection with the Merger shall be placed in
escrow by Parent, the release of which amount shall be contingent upon certain
events and conditions, all as set forth in Article 7.
NOW, THEREFORE, in consideration of the covenants, representations and
warranties set forth herein, intending to be legally bound hereby, the parties
agree as follows:
ARTICLE 1
THE MERGER
1.1 The Merger. At the Effective Time and upon the terms and subject to
the conditions of this Agreement and the applicable provisions of the California
Code and Delaware Law, Merger Sub shall be merged with and into the Company, the
separate corporate existence of Merger Sub shall cease, and the Company shall
continue as the surviving corporation. The Company is sometimes referred to
herein as the "Surviving Corporation."
1.2 Effective Time. Unless this Agreement is earlier terminated pursuant
to Section 8.1, the closing of the Merger (the "Closing"), which is expected to
take place on or about January 16, 2001, will take place no later than five
Business Days following satisfaction or waiver of the conditions set forth in
Article 6, at the offices of Xxxxxxx, Phleger & Xxxxxxxx LLP, 000 Xxxxx Xxxx
Xxxxxx, Xxx Xxxxxxx, Xxxxxxxxxx, unless another place or time is agreed to by
Parent and the Company. The date upon which the Closing actually occurs is
referred to herein as the "Closing Date." On the Closing Date, the parties
hereto shall cause the Merger to be consummated by filing a Certificate of
Merger (or like instrument), in substantially the form attached hereto as
Exhibit E (the "Certificate of Merger"), with the Secretary of State of the
State of Delaware, in accordance with the relevant provisions of applicable law
(the time of acceptance by the Secretary of State of the State of Delaware of
such filing or such later time as may be agreed to by the parties and set forth
in the Certificate of Merger being referred to herein as the "Effective Time").
1.3 Effect of the Merger on Constituent Corporations. At the Effective
Time, the effect of the Merger shall be as provided in the applicable provisions
of Delaware Law. Without limiting the generality of the foregoing, and subject
thereto, at the Effective Time, all the property, rights, privileges, powers and
franchises of Merger Sub and the Company shall vest in the Surviving
Corporation, and all debts, liabilities, obligations, restrictions, disabilities
and duties of Merger Sub and the Company shall become the debts, liabilities,
obligations, restrictions, disabilities and duties of the Surviving Corporation.
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1.4 Certificate of Incorporation and Bylaws of Surviving Corporation.
(a) At the Effective Time, the certificate of incorporation of the
Company, as in effect immediately prior to the Effective Time, shall be amended
and restated in its entirety in the form set forth as Annex 1 to Exhibit E
attached hereto, and, as so amended and restated, shall be the certificate of
incorporation of the Surviving Corporation from and after the Effective Time
until thereafter amended as provided by law, such certificate of incorporation
and bylaws of the Surviving Corporation.
(b) The bylaws of Merger Sub, as in effect immediately prior to the
Effective Time, shall be the bylaws of the Surviving Corporation until
thereafter amended as provided by such bylaws, the certificate of incorporation
and applicable law.
1.5 Directors and Officers of Surviving Corporation. The directors of
Merger Sub immediately prior to the Effective Time and Anantakotiraju Xxxxxxx
shall be the directors of the Surviving Corporation, each to hold office in
accordance with the certificate of incorporation and bylaws of the Surviving
Corporation. The officers of Merger Sub immediately prior to the Effective Time
shall be the officers of the Surviving Corporation, except that Anantakotiraju
Xxxxxxx shall hold the office of President and Chief Executive Officer and Xxx
XxXxxxxx shall hold the office of Vice President, Operations, each to hold
office in accordance with the bylaws of the Surviving Corporation.
1.6 Maximum Number of Shares of Parent Common Stock to be Issued; Effect
on Outstanding Securities of the Company. Subject to Section 5.23, the maximum
number of shares of Parent Common Stock to be issued (including Parent Common
Stock to be reserved for issuance upon exercise of any Company Options or
Company Warrants to be assumed by Parent as provided herein) in exchange for the
acquisition by Parent of all shares of Company Common Stock (including any
restricted stock issued to employees and others) which are issued and
outstanding immediately prior to the Effective Time and all vested and unvested
Company Options and Company Warrants which are then outstanding (other than
Company Warrants which by their terms expire without payment, conversion,
adjustment or other consideration at the Effective Time) shall not exceed the
Aggregate Share Number. No adjustment shall be made in the number of shares of
Parent Common Stock issued in the Merger as a result of any consideration (in
any form whatsoever) received by the Company from the date hereof to the
Effective Time as a result of any exercise, conversion or exchange of Company
Options or Company Warrants. On the terms and subject to the conditions of this
Agreement, at the Effective Time, by virtue of the Merger and without any action
on the part of Parent, Merger Sub, the Company or the holder of any shares of
the Company Common Stock or Company Options or Company Warrants, the following
shall occur:
(a) Conversion of Company Common Stock. Each share of Company Common
Stock issued and outstanding immediately prior to the Effective Time (other than
any shares of Company Common Stock to be cancelled pursuant to Section 1.6(b)
and any Dissenting Shares (as provided in Section 1.9)) shall be cancelled,
extinguished and converted automatically into the right to receive, following
the expiration or early termination of any waiting period under the HSR Act
which is applicable to the holder of such share, (i) at the Effective Time, that
number of shares of Parent Common Stock equal to the Closing Exchange Ratio, and
(ii) on each Earn Out
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Delivery Date, that number of shares of Parent Common Stock (if any) equal to
the applicable Earn Out Exchange Ratio (subject to Section 1.13); provided that
shares of Company Common Stock issued upon exercise of the Lenders Warrant shall
not be entitled to receive shares of Parent Common Stock under this clause (ii).
(b) Cancellation of Parent-Owned and Company-Owned Stock. Each share
of Company Common Stock owned by Parent or the Company or any Subsidiary of
Parent or the Company immediately prior to the Effective Time shall be
automatically canceled and extinguished without any (i) conversion thereof or
(ii) further action on the part of Parent or the Company.
(c) Capital Stock of Merger Sub. Each share of common stock of
Merger Sub issued and outstanding immediately prior to the Effective Time shall
be converted into and exchanged for one validly issued, fully paid and
nonassessable share of common stock of the Surviving Corporation. From and after
the Effective Time, each share certificate of Merger Sub theretofore evidencing
ownership of any such shares shall evidence ownership of such shares of capital
stock of the Surviving Corporation.
(d) Company Options, Company Warrants and Company Stock Plans. All
unexpired and unexercised Company Options and Company Warrants, then
outstanding, whether vested or unvested, together with the Company Stock Plans,
shall be assumed by Parent in accordance with the provisions set forth in this
Section 1.6(d).
(i) Each unexpired and unexercised Company Option and Company
Warrant then outstanding, whether vested or unvested, shall be, in connection
with the Merger, assumed by Parent, together with the Company Stock Plans. Each
Company Option and Company Warrant so assumed by Parent under this Agreement
shall continue to have, and be subject to, the same terms and conditions as were
applicable to such Company Option or Company Warrant immediately prior to the
Effective Time (including any repurchase rights or vesting provisions), provided
that such Company Option or Company Warrant, as the case may be, shall be
exercisable for (A) that number of shares of Parent Common Stock equal to the
product of (x) the number of shares of Company Common Stock that were issuable
upon exercise of such Company Option or Company Warrant immediately prior to the
Effective Time (the "Exercise Number") multiplied by (y) the Closing Exchange
Ratio, plus (B) that number of shares of Parent Common Stock equal to the
product of the Exercise Number multiplied by the sum of all Earn Out Exchange
Ratios with respect to Earn Out Delivery Dates occurring prior to the date of
exercise of such Company Option or Company Warrant (with the sum of the amounts
set forth in (A) and (B) being rounded down to the nearest whole number of
shares of Parent Common Stock, and the fractional share of Parent Common Stock
so deleted, if any, being paid instead in cash pursuant to Section 1.8), plus
(C) the right to receive on each Earn Out Delivery Date, if any, occurring after
the date of exercise of such Company Option or Company Warrant, that number of
shares of Parent Common Stock equal to the product of the Exercise Number
multiplied by the sum of the Earn Out Exchange Ratios with respect to all such
after occurring Earn Out Delivery Dates (rounded down to the nearest whole
number of shares of Parent Common Stock, with the fractional share of Parent
Common Stock so deleted, if any, being paid instead in cash pursuant to Section
1.8); provided, that the Lenders' Warrant shall not, in accordance with its
terms, be entitled to any shares of Parent Common Stock on any Earn Out
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Delivery Date. In the case of a partial exercise of a Company Option or Company
Warrant, the above amounts shall be adjusted proportionally. It is the intention
of the parties that the Company Options assumed by Parent shall qualify
following the Effective Time as incentive stock options as defined in Section
422 of the Internal Revenue Code to the same extent the Company Options
qualified as incentive stock options immediately prior to the Effective Time and
the provisions of this Section 1.6(d) shall be applied consistent with this
intent.
(ii) Parent shall assume the Company's obligations, and shall be
assigned the Company's repurchase rights and purchase options, under any stock
option agreements, buy-back agreements, and supplemental agreements entered into
pursuant to the RTAC Corp. Stock Option Plan 1.0, as amended, Reliance Computer
Corp. Stock Option Plan 1.1, as amended and Reliance Computer Corp. 2000
Long-Term Incentive Plan (collectively, the "Company Stock Plans") and the other
agreements listed on Schedule 1.6(d)(ii) of the Company Disclosure Schedule,
true and correct copies of which have been made available by the Company to
Parent. Except as provided in Section 1.6(d)(iii), any and all restrictions on
the Company Options granted under the Company Stock Plans and related
agreements, and the Company Common Stock issued pursuant thereto or pursuant to
any such other agreements which do not lapse in accordance with their terms (as
in effect at the Effective Time) shall continue in full force and effect until
such restrictions lapse pursuant to the terms of such Company Stock Plans and
agreements, and any repurchase rights or repurchase options which the Company
has with respect to such Company Options and Company Common Stock shall also
continue in full force and effect.
(iii) Each of the Company and Parent agrees to take all actions
necessary or advisable to cause all Company Options and Company Warrants to
remain unchanged except for the conversion into options, warrants or rights to
purchase shares of Parent Common Stock as provided for in this Section 1.6(d).
(e) Reservation of Shares. Parent will reserve sufficient shares of
Parent Common Stock for issuance pursuant to Section 1.6(d).
1.7 Adjustments to Exchange Ratios and Rights to Receive Parent Common
Stock. The Exchange Ratios, and any rights of the holders of Company Common
Stock, Company Warrants, and/or Company Options to receive Parent Common Stock
at any time hereunder, and other relevant amounts hereunder shall be equitably
adjusted to reflect fully the effect of any stock split, reverse split, stock
combination, stock dividend (including any dividend or distribution of
securities convertible into Parent Common Stock or Company Common Stock),
reorganization, reclassification, recapitalization or other like change with
respect to Parent Common Stock or Company Common Stock the effective date of
which occurs after the date hereof.
1.8 Fractional Shares. No fraction of a share of Parent Common Stock
will be issued in the Merger, but in lieu thereof, each holder of shares of
Company Common Stock who would otherwise be entitled, whether as of the Closing
or any Earn Out Delivery Date, to a fraction of a share of Parent Common Stock
(after aggregating all fractional shares of Parent Common Stock to be received
by such holder) shall be entitled to receive from Parent an amount of cash
(rounded to the nearest whole cent) equal to the product of (a) such fraction,
multiplied by (b) the Closing Price.
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1.9 Dissenting Shares.
(a) Notwithstanding any provision of this Agreement to the contrary
(other than Section 1.9(b)), any shares of Company Common Stock held by a holder
who has demanded and perfected appraisal rights for such shares in accordance
with Delaware Law and the California Code, as applicable, and who, as of the
Effective Time, has not effectively withdrawn or lost such appraisal or
dissenters' rights ("Dissenting Shares") shall not be converted into or
represent a right to receive Parent Common Stock pursuant to Section 1.6, but
the holder thereof shall only be entitled to such rights as are granted by the
Delaware Law and the California Code, as applicable.
(b) Notwithstanding the provisions of Section 1.9(a), if any holder
of shares of Company Common Stock who demands appraisal of such shares under
Delaware Law or the California Code shall effectively withdraw or lose (through
failure to perfect or otherwise) the right to appraisal, then, as of the later
of (i) the Effective Time or (ii) the occurrence of such event, such holder's
shares shall automatically be converted into and represent only the right to
receive Parent Common Stock as provided in Section 1.6, without interest
thereon, upon surrender to the Company of the certificate representing such
shares in accordance with Section 1.10.
(c) The Company shall give Parent (i) prompt notice of its receipt
of any written demands for appraisal of any shares of Company Common Stock,
withdrawals of such demands, and any other instruments relating to the Merger
served pursuant to Delaware Law or the California Code and received by the
Company and (ii) the opportunity to participate in all negotiations and
proceedings with respect to demands for appraisal under Delaware Law or the
California Code, as applicable. Any payment with respect to any demands for
appraisal of Company Common Stock or offer to settle any such demands shall be
made by the Company from its own funds and shall not be funded directly or
indirectly by Parent, provided, that the Company shall not, except with the
prior written consent of Parent or as may be required under applicable law,
voluntarily make any such payment or offer to settle.
1.10 Exchange Procedures.
(a) Parent Common Stock. On the Closing Date, Parent shall deposit
with the Exchange Agent for exchange in accordance with this Article 1, the
aggregate number of shares of Parent Common Stock issuable at the time of
Closing (including shares to be deposited into the Escrow Fund under Article 7)
in exchange for outstanding shares of Company Common Stock. On each Earn Out
Delivery Date, Parent shall deposit with the Exchange Agent, for distribution in
accordance with Section 1.6 and Section 1.13, the aggregate number of shares, if
any, of Parent Common Stock (including shares, if any, to be deposited into the
Escrow Fund under Article 7) then issuable pursuant to Sections 1.6 and 1.13,
together, in each case, with cash in an amount sufficient to permit the payment
of cash in lieu of fractional shares pursuant to Section 1.8. The Exchange Agent
shall deposit the appropriate portion of each such deposit by Parent into the
Escrow Fund in accordance with the subsections of this Section 1.10(a) and
Article 7.
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(i) The deposits into the Escrow Fund on behalf of each holder
of Company Common Stock shall be (x), on the Closing Date, the number of shares
of Company Common Stock actually owned by such holder immediately prior to the
Effective Time, multiplied by the Closing Exchange Ratio multiplied by one-tenth
(0.10); and (y), on each Earn Out Delivery Date, the lesser of (A) the number of
shares of Company Common Stock actually owned by such holder immediately prior
to the Effective Time multiplied by the applicable Earn Out Exchange Ratio,
multiplied by one-tenth (0.10) and (B) such holder's Fully Diluted Stock Share
of the difference between (I) the sum of all Reasonable Amounts as of such Earn
Out Delivery Date and (II) the Escrow Amount, immediately prior to such Earn Out
Delivery Date, determined under Article 7.
(ii) The deposits into the Escrow Fund on behalf of each holder
of a Company Option or Company Warrant (but not the Lender Warrants) shall be
(x), on the Closing Date, zero (0); (y), on an Option Exercise Date, (A) the
number of shares of Parent Common Stock that would have been deposited in the
Escrow Fund on Closing Date pursuant to Section 1.10(a)(i)(x) had such Company
Option or Company Warrant (other than the Lenders Warrants) been exercised
immediately prior to the Effective Time and (B) the number of shares of Parent
Common Stock that would have been deposited in the Escrow Fund on each Earn Out
Delivery Date occurring prior to such Option Exercise Date pursuant to Section
1.10(a)(i)(y) had such Company Option or Company Warrant (other than the
Lenders' Warrants) been exercised immediately prior to the Effective Time; and
(z), on each Earn Out Delivery Date occurring after an Option Exercise Date, the
number of shares that would have deposited in the Escrow Fund on such Earn Out
Delivery Date pursuant to Section 1.10(a)(i)(y) (replacing the Fully Diluted
Stock Share with Fully Dilutes Option Share for purposes of this calculation)
had such Company Option or Company Warrant (other than the Lenders' Warrants)
been exercised immediately prior to the Effective Time. Additionally, there
shall be deposited into the Unexercised Escrow on behalf of each holder of a
Company Option or Company Warrant (but not the Lender Warrants) (x) on the
Closing Date, the number of shares of Parent Common Stock specified in clause
(y)(A) above; and (y) on each Earn Out Delivery Date occurring prior to the
Option Exercise Date, the number of shares of Parent Common Stock that would
have been deposited in the Escrow Fund on such Earn Out Delivery Date had such
Company Option or Company Warrant been exercised immediately prior to the
Effective Time.
(iii) All shares of Parent Common Stock released at any time
from the Escrow Fund shall be credited to such holders in the proportions set
forth in Section 1.10(a)(i) and Section 1.10(a)(ii). Shares so credited under
Section 1.10(a)(i) and Section 1.10(a)(ii) shall be delivered to the Exchange
Agent immediately upon release from the Escrow Fund for delivery to such holder.
(b) Exchange Procedures. As soon as reasonably practicable after the
Effective Time, the Surviving Corporation shall cause to be mailed to each
holder of record of a certificate or certificates which immediately prior to the
Effective Time represented outstanding shares of Company Common Stock (the
"Certificates") and which shares were converted into the right to receive shares
of Parent Common Stock pursuant to Section 1.6, (i) a letter of transmittal in
customary form (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Exchange Agent and shall be in such form and have such other
provisions as Parent may reasonably specify) and
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(ii) instructions for use in effecting the surrender of the Certificates in
exchange for certificates representing shares of Parent Common Stock and cash in
lieu of fractional shares. Upon surrender of a Certificate for cancellation to
the Exchange Agent or to such other agent or agents as may be appointed by
Parent, together with such letter of transmittal, duly completed and validly
executed in accordance with the instructions thereto, the holder of such
Certificate shall be entitled to receive in exchange therefor a certificate
representing the number of whole shares of Parent Common Stock, less the number
of shares of Parent Common Stock to be deposited in the Escrow Fund on such
holder's behalf pursuant to Section 1.10(a)(i), to which such holder is entitled
pursuant to Section 1.6 (without giving effect to any of the Earn Outs) plus the
amount of cash in lieu of fractional shares to which such holder is entitled
pursuant to Section 1.8, and the Certificate so surrendered shall be canceled.
From and after each of the Earn Out Delivery Dates, the Person who immediately
prior to the Effective Time was the holder of a Certificate (other than
Certificates representing shares issued or issuable upon exercise of any
Lenders' Warrant) shall be entitled to receive a certificate representing the
number of additional whole shares of Parent Common Stock (if any) to which such
holder is entitled pursuant to Section 1.6 and Section 1.13, plus the amount of
cash in lieu of fractional shares to which such holder is entitled pursuant to
Section 1.8. As soon as practicable after the Effective Time and subject to and
in accordance with the provisions of Article 7, the Exchange Agent shall cause
to be distributed to the Depositary Agent a certificate or certificates (in such
denominations as may be requested by the Depositary Agent) representing that
number of shares of Parent Common Stock equal to the sum of all amounts under
Section 1.10(a)(i)(x) which certificate shall be registered in the name of the
Depositary Agent. As soon as practicable after any Earn Out Delivery Date, and
subject to and in accordance with the provisions of Article 7, (A) the Exchange
Agent shall cause to be distributed to the Depositary Agent a certificate or
certificates (in such denominations as may be requested by the Depositary Agent)
representing the number of shares of Parent Common Stock equal to the sum of all
amounts under Section 1.10(a)(i)(y) and (B) Parent shall cause to be distributed
to the Depositary Agent a certificate or certificates (in such denominations as
may be requested by the Depositary Agent) representing the number of shares of
Parent Common Stock equal to the sum of all amounts under Section
1.10(a)(ii)(z). As soon as practicable after any Option Exercise Date, and
subject to and in accordance with the provisions of Article 7, Parent shall
cause to be distributed to the Depositary Agent a certificate or certificates
(in such denominations as may be requested by the Depositary Agent) representing
the number of shares of Parent Common Stock equal to the sum of all amounts
under Section 1.10(a)(ii)(y). Such shares shall be beneficially owned by the
holders on whose behalf such shares were deposited in the Escrow Fund and shall
be available, together and pro rata with the shares deemed to be in the
Unexercised Escrow, to compensate Parent as provided in Article 7. Until
surrendered, each outstanding Certificate that, prior to the Effective Time,
represented shares of Company Common Stock will be deemed from and after the
Effective Time, for all corporate purposes, other than the payment of taxable
dividends, to evidence the ownership of the number of full shares of Parent
Common Stock into which such shares of Company Common Stock shall have been so
converted (subject only to, if applicable, the expiration or early termination
of any waiting period under the HSR Act which is applicable to the holder of
such shares), and, except in the case of shares of Company Common Stock issued
upon exercise of the Lenders' Warrant, the right to receive Earn Out Shares (if
any) and cash in lieu of fractional shares. Each of Parent, Company, the
Surviving Corporation and the Stockholder Agent shall use commercially
reasonable efforts to comply with the procedures and requirements imposed upon
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the above matters by that certain Pledge and Security Agreement, dated as of
August 24, 2000, by Anantakotiraju Xxxxxxx, Xxx Xxxxxxxx, Xxxxxx Xxxxxxxxxx, in
favor of Bank of America, N.A. and related documents.
(c) Distributions With Respect to Unexchanged Shares of Company
Common Stock. No dividends or other distributions with respect to Parent Common
Stock declared or made after the Effective Time and with a record date after the
Effective Time will be paid to the holder of any unsurrendered Certificate with
respect to the shares of Parent Common Stock represented thereby until the
holder of record of such Certificate shall surrender such Certificate. Subject
to applicable law, following surrender of any such Certificate, there shall be
paid to the record holder of the certificates representing whole shares of
Parent Common Stock issued in exchange therefor, without interest, at the time
of such surrender, the amount of dividends or other distributions with a record
date after the Effective Time theretofore payable (but for the provisions of
this Section 1.10(c)) with respect to such whole shares of Parent Common Stock.
(d) Transfers of Ownership. If any certificate for shares of Parent
Common Stock is to be issued pursuant to the Merger in a name other than that in
which the Certificate surrendered in exchange therefor is registered, it will be
a condition of the issuance thereof that the Certificate so surrendered will be
properly endorsed and otherwise in proper form for transfer and that the person
requesting such exchange will have paid to Parent or any agent designated by it
any transfer or other taxes required by reason of the issuance of a certificate
for shares of Parent Common Stock in any name other than that of the registered
holder of the Certificate surrendered, or established to the satisfaction of
Parent or any agent designated by it that such tax has been paid or is not
payable.
1.11 No Further Ownership Rights in Company Common Stock. All shares of
Parent Common Stock issued upon the surrender for exchange of shares of Company
Common Stock in accordance with the terms hereof (including any cash in lieu of
fractional shares) shall be deemed to have been issued in full satisfaction of
all rights pertaining to such shares of Company Common Stock, and there shall be
no further registration of transfers on the records of the Company of shares of
Company Common Stock which were outstanding immediately prior to the Effective
Time. If, after the Effective Time, Certificates are presented to the Surviving
Corporation for any reason, they shall be canceled and exchanged as provided in
this Article 1.
1.12 Lost, Stolen or Destroyed Certificates. In the event any
certificates evidencing shares of Company Common Stock shall have been lost,
stolen or destroyed, the Exchange Agent shall issue certificates representing
such shares of Parent Common Stock and cash in lieu of fractional shares in
exchange for such lost, stolen or destroyed Certificates, upon the making of an
affidavit of that fact by the holder thereof; provided, however, that Parent or
the Exchange Agent may, in its discretion and as a condition precedent to the
issuance thereof, require the owner of such lost, stolen or destroyed
Certificates to provide an indemnity or deliver a bond in such sum as it may
reasonably direct as indemnity against any claim that may be made against Parent
or the Exchange Agent with respect to the Certificates alleged to have been
lost, stolen or destroyed.
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1.13 Earn Out Shares.
(a) Earn Out Shares; Earn Out Milestones. Schedule 1.13 sets forth
three (3) additional distributions (of Earn Out Shares) in the form of shares of
Parent Common Stock which may be issued or issuable as additional consideration
pursuant to Section 1.6(a)(ii), 1.6(d)(i)(B) and 1.6(d)(i)(C), and the
applicable Milestones that must be satisfied in order for the Parent to become
obligated to issue any Earn Out Shares. Except as set forth in Schedule 1.13, no
Earn Out Shares are subject to increase to make up for any reduction or
forfeiture of any other Earn Out Shares. Earn Out Shares that are distributable
shall be distributed in accordance with Sections 1.6(d) and 1.10(b) or to the
extent appropriate (in the case of unexercised Company Options and Company
Warrants) reserved for issuance in accordance with Sections 1.6(d) and 1.7 to
the Persons who immediately prior to the Effective Time were holders of shares
of Company Common Stock (other than shares of Company Common Stock issued upon
exercise of the Lenders' Warrant), Company Options or Company Warrants (other
than the Lenders' Warrant). For purposes of this Section 1.13, holders of Parent
Common Stock received upon the exercise, after the Effective Time and prior to
the satisfaction of the applicable Milestone, of Company Options or Company
Warrants (other than any Lenders' Warrant) outstanding immediately prior to the
Effective Time shall be treated as holders of Certificates under Section
1.10(b). Notwithstanding anything to the contrary in this Agreement, no Earn Out
Shares shall be allocable to the Lenders' Warrant or shares of Company Common
Stock issued upon exercise of the Lenders' Warrant.
(b) Illustrative Examples. The provisions of this Agreement relating
to the Earn Out Shares shall be interpreted and applied in a manner consistent
with the examples set forth in Schedule 1.13. Those examples are illustrative
only and no representation or warranty is made with respect to the amounts set
forth therein.
(c) Procedure.
(i) No later than each Earn Out Delivery Date, Parent shall
provide to the Stockholder Agent either (A) a statement that the relevant
Milestones for distribution of Earn Out Shares set forth in Schedule 1.13 have
been satisfied in whole or in part) and, if relevant to such determination,
appropriate supporting documentation regarding such Milestones and criteria or
(B) a statement that the relevant Milestones set forth in Schedule 1.13 have not
been satisfied and, if relevant to such determination, appropriate supporting
documentation regarding such Milestones (each, in case of either clause (A) or
(B), an "Earn Out Determination"). If the Earn Out Determination indicates that
the applicable Milestones have been satisfied in full and that the applicable
maximum number of Earn Out Shares are distributable with respect to such
Milestones or, in the case of Company Options or Company Warrants (other than
the Lenders' Warrant), will be reserved for issuance, then no action on the part
of the Stockholder Agent shall be necessary and such Earn Out Determination
shall be deemed final (a "Final Earn Out Amount"). In any other case, the
Stockholder Agent will notify Parent in writing within fifteen (15) Business
Days of receipt of such Earn Out Determination whether the Stockholder Agent
disputes any such determination, setting forth in reasonable detail the basis
for the dispute (each an "Earn Out Dispute Notice"). If the Stockholder Agent
does not deliver an Earn Out Dispute Notice within fifteen (15) Business Days of
receipt of an Earn Out Determination or if the Stockholder Agent accepts such
amount in writing, such Earn Out Determination shall be deemed a Final Earn Out
Amount. In the event an Earn Out Dispute Notice is delivered, Parent and the
Stockholder Agent shall meet within ten (10) Business Days of the delivery of
such Earn
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Out Dispute Notice to attempt to resolve such dispute in good faith. If a final
resolution of such dispute is reached, the agreed upon amount shall be deemed to
be the Final Earn Out Amount. If no final resolution is determined within
fifteen (15) Business Days of the delivery of such Earn Out Dispute Notice after
good faith negotiation, the final determination of a Final Earn Out Amount shall
be submitted by the Parent and the Company Stockholders first, to non-binding
mediation in accordance with the Commercial Mediation Rules of the American
Arbitration Association and utilizing a mediator acceptable to both parties,
and, if no final resolution of such dispute is reached within thirty (30) days
of appointment of the mediator, or if the parties cannot agree on a mediator
within thirty (30) days, then to arbitration in accordance with the procedures
set forth in Section 7.2(g)(ii) and Section 7.2(g)(iii). The determination of
the arbitrators shall, to the fullest extent permitted by law, be final, binding
and conclusive upon each Company Stockholder, each holder of Company Options or
Company Warrants, the Stockholder Agent and Parent.
(ii) The Stockholder Agent may notify Parent in writing at any
time that he believes an applicable Milestone has been satisfied. Parent will
cooperate in good faith with the Stockholder Agent to determine whether such
Milestone has been satisfied at such time.
(d) Stockholder Agent. The provisions of Sections 7.2(h), 7.2(i) and
7.2(k) shall apply to any acts taken by the Stockholder Agent pursuant to this
Section 1.13. To the fullest extent permitted by law, any decision, act, consent
or instruction of the Stockholder Agent in connection with this Section 1.13
shall constitute a decision of all Company Stockholders shall be final, binding
and conclusive upon each of the Company Stockholders and Parent may rely upon
any such decision, act, consent or instruction of the Stockholder Agent as being
the decision, act, consent or instruction of every such holder. Parent is hereby
relieved from any liability to any Person for acts done in accordance with such
decision, act, consent or instruction of the Stockholder Agent.
(e) No Assignment of Earn Out Rights. No interest in any Earn Out
Shares or any portion thereof, no right to participate, in whole or in part, in
any distribution of Earn Out Shares pursuant to Section 1.13, and no right to
receive any distribution of cash or securities in connection therewith pursuant
to Section 1.10 may be assigned or transferred to any Person (whether by
operation of law, or in connection with any sale, assignment or other transfer
of any shares of Company Common Stock, Company Warrants or Company Options (or
any Parent securities issued in exchange therefor pursuant to Section 1.6), or
otherwise), and any attempt to do so will be null and void, provided that
notwithstanding the foregoing, such rights may be assigned (i) by holders of
Company Warrants, as permitted under the terms of such Company Warrants and (ii)
by holders of Company Options, as permitted under the terms of the documents
governing such Company Options. Except as otherwise provided in this Section
1.13(e), the Earn Out Shares and the provisions of Section 1.10 and Section 1.13
relating to such Earn Out Shares are intended solely for the benefit of the
Persons who immediately prior to the Effective Time were holders of shares of
Company Common Stock, Company Warrants or Company Options. Subject to the
proviso at the end of the first sentence of this Section 1.13(e), the right (if
any) to receive distributions in connection with any Earn Out Shares shall be
personal to the Persons who immediately prior to the Effective Time were holders
of Company Common Stock, Company Warrants or Company Options, and such right
shall not (x) attach to or run with such stock, warrants or options or any
Parent securities issued in exchange therefor or (y) inure to the
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benefit of any purchaser, assignee or other transferee of such stock, warrants
or options or such Parent securities. Notwithstanding the foregoing, an interest
in Earn Out Shares may be assigned or transferred involuntarily pursuant to (A)
will, (B) the laws of intestate succession, (C) a qualified domestic relations
order as defined by the Internal Revenue Code, or (D) to the extent permitted
under Revenue Procedure 84-42 (or any successor thereto) a transfer by an entity
to a successor entity.
(f) No Interest. No interest shall accrue or be paid on any Earn
Out Shares or any payment or distribution pursuant to Section 1.13 relating to
the Earn Out Shares.
1.14 Exemption From Registration; California Permit. Parent and the
Company intend that the shares of Parent Common Stock to be issued pursuant to
Section 1.6 in connection with the Merger will be issued in a transaction exempt
from registration under the Securities Act of 1933, as amended, and the rules
and regulations promulgated by the SEC thereunder (the "Securities Act"), by
reason of Section 3(a)(10) thereof or, pursuant to Section 5.1(c), by reason of
Section 4(2) of the Securities Act. Subject to the provisions of Section 5.1(c),
Parent and the Company intend that the shares of Parent Common Stock to be
issued pursuant to Section 1.6 in connection with the Merger will be qualified
under the California Code, pursuant to Section 25121 thereof, after a fairness
hearing has been held pursuant to the authority granted by Section 25142 of such
law (the "Fairness Hearing"), and (if deemed necessary by Parent in its good
faith judgment) such Fairness Hearing may also address the assumption by Parent
of all Company Options, Company Warrants and Company Stock Purchase Rights
pursuant to Section 1.6. Each of Parent and the Company shall use commercially
reasonable efforts (i) to file promptly following the execution and delivery of
this Agreement, an application for issuance of a permit pursuant to Section
25121 of the California Code to issue such securities and (if deemed necessary
by Parent as provided above) to assume such Company Options and Company Warrants
required by this Agreement to be assumed by Parent (the "California Permit") and
(ii) to obtain the California Permit as promptly as practicable thereafter.
1.15 Taking of Necessary Action; Further Action. If, at any time after
the Effective Time, any such further action is necessary or desirable to carry
out the purposes of this Agreement or to vest the Surviving Corporation with
full right, title and possession to all assets, property, rights, privileges,
powers and franchises of the Company or Merger Sub, or to perfect the Surviving
Corporation's ownership of any and all Company Intellectual Property, or to
complete and prosecute all domestic and foreign patent and trademark filings
related to Company Intellectual Property, the officers and directors of the
Surviving Corporation are fully authorized to take, and will take, all such
lawful and necessary action.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent and Merger Sub,
subject to such exceptions as are specifically disclosed with respect to
specific numbered and lettered sections and subsections of this Article 2 in the
disclosure schedule and schedule of exceptions (the "Company Disclosure
Schedule") delivered herewith and dated as of the date hereof, and numbered with
corresponding numbered and lettered sections and subsections, as follows:
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2.1 Organization and Qualification. Each of the Company and its
Subsidiaries is a corporation or partnership duly organized, validly existing
and in good standing under the laws of the state of its incorporation or
formation, as the case may be, and has full corporate or partnership power and
authority, as the case may be to conduct its business as now conducted and as
currently proposed to be conducted and to own, use, license and lease its Assets
and Properties. Each of the Company and its Subsidiaries is duly qualified,
licensed or admitted to do business and is in good standing as a foreign
corporation in each jurisdiction in which the ownership, use, licensing or
leasing of its Assets and Properties, or the conduct or nature of its business,
makes such qualification, licensing or admission necessary, except for such
failures to be so duly qualified, licensed or admitted and in good standing that
could not reasonably be expected to have a material adverse effect on the
Business or Condition of the Company. Section 2.1 of the Company Disclosure
Schedule sets forth each jurisdiction where the Company or any of its
Subsidiaries (as applicable) is so qualified, licensed or admitted to do
business and separately lists each other jurisdiction in which the Company and
each of its Subsidiaries (as applicable) owns uses or leases from third parties
substantial tangible Assets and Properties, or has employees except for such
failures to be so duly qualified, licensed or admitted and in good standing that
could not be reasonably expected to have a material adverse effect on the
Business or Condition of the Company.
2.2 Authority Relative to this Agreement. Subject only to the requisite
adoption of this Agreement by the stockholders of the Company, the Company has
full corporate power and authority to execute and deliver this Agreement and the
other agreements which are attached (or forms of which are attached) as exhibits
hereto (the "Ancillary Agreements") to which the Company is a party, to perform
its obligations hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby. The Company's board of directors has approved
this Agreement and declared its advisability. The execution and delivery by the
Company of this Agreement and the Ancillary Agreements to which the Company is
or will become a party and the consummation by the Company of the transactions
contemplated hereby and thereby, and the performance by the Company of its
obligations hereunder and thereunder, have been duly and validly authorized by
all necessary action by the board of directors of the Company, and no other
action on the part of the board of directors of the Company is required to
authorize the execution, delivery and performance of this Agreement and the
Ancillary Agreements to which the Company is or will become a party and the
consummation by the Company of the transactions contemplated hereby and thereby.
This Agreement and the Ancillary Agreements to which the Company is or will
become a party have been or will be, as applicable, duly and validly executed
and delivered by the Company and, assuming the due authorization, execution and
delivery hereof (and, in the case of the Ancillary Agreements to which Parent is
a party, thereof) by Parent, assuming enforceability against Parent and Merger
Sub, each constitutes or will constitute, as applicable, a legal, valid and
binding obligation of the Company enforceable against the Company in accordance
with its respective terms, except as the enforceability thereof may be limited
by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or
other similar Laws relating to the enforcement of creditors' rights generally
and by general principles of equity.
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2.3 Capital Stock.
(a) The authorized capital stock of the Company consists only of
31,400,000 shares of Common Stock, $.0001 par value per share (the "Company
Common Stock"), of which the number of shares of Company Common Stock set forth
in Section 2.3 of the Company Disclosure Schedule are issued and outstanding.
All of the issued and outstanding shares of Company Common Stock are validly
issued, fully paid and nonassessable, and have been issued in compliance with
all applicable federal, state and foreign securities Laws. Except as set forth
in Section 2.3(a) of the Company Disclosure Schedule, no shares of Company
Common Stock are held in treasury or are authorized or reserved for issuance.
(b) Section 2.3(b) of the Company Disclosure Schedule lists the name
and state of residence of each holder of Company Common Stock provided to the
Company by such holder.
(c) With respect to any Company Common Stock that has been issued
subject to a repurchase option or buy-back agreement on the part of the Company,
Section 2.3(c) of the Company Disclosure Schedule sets forth the holder thereof,
the number and type of securities covered thereby, and the vesting schedule
thereof (including a description of the circumstances under which such vesting
schedule can or will be accelerated).
(d) Except as set forth in Section 2.3(d) of the Company Disclosure
Schedule, there are no outstanding Company Options, Company Warrants, Company
Stock Purchase Rights, Restricted Stock Purchase Agreements or shares of Company
Restricted Stock or agreements, arrangements or understandings to which the
Company is a party (written or oral) to issue any Company Warrant, Options with
respect to the Company. With respect to each Company Option, Company Warrant or
agreement, arrangement or understanding to which the Company is a party (written
or oral) to issue any Options or any other equity securities with respect to the
Company, Section 2.3(d) of the Company Disclosure Schedule sets forth the holder
thereof, the number and type of securities issuable thereunder, and, if
applicable, the exercise price therefor, the exercise period and vesting
schedule thereof (including a description of the circumstances under which such
vesting schedule can or will be accelerated). All of the Company Options and
Company Warrants were issued in compliance with all applicable federal, state
and foreign securities Laws.
(e) Except as set forth in Section 2.3(e) of the Company Disclosure
Schedule, there are no preemptive rights or agreements, arrangements or
understandings to issue preemptive rights with respect to the issuance or sale
of Company Common Stock created by statute, the certificate of incorporation or
bylaws of the Company, or any agreement or other arrangement to which the
Company is a party (written or oral) or to which it is bound and there are no
agreements, arrangements or understandings to which the Company is a party
(written or oral) pursuant to which the Company has the right to elect to
satisfy any Liability by issuing Company Common Stock or Equity Equivalents.
(f) The terms of the Company Stock Plans and the applicable stock
option agreements, as amended and/or waived in writing from time to time prior
to the date of this Agreement, related to the outstanding Company Options permit
the assumption or substitution of options to purchase Parent Common Stock as
provided in this Agreement, without the consent or approval of the holders of
such securities, Company Stockholder Action or otherwise and without any
acceleration of the exercise schedule or vesting provisions in effect for those
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options. All acceleration waivers obtained by the Company were obtained without
undue influence and are enforceable against the parties thereto. True and
complete copies of all agreements and instruments relating to or issued under
the Company Stock Plans have been provided to Parent and such agreements and
instruments have not been amended, modified or supplemented, and there are no
agreements to amend, modify or supplement such agreements or instruments in any
case from the form provided to Parent. Except for the Support Agreements, the
Company is not a party or subject to any agreement or understanding, and, to the
Company's knowledge, there is no agreement, arrangement or understanding between
or among any Persons which affects, restricts or relates to voting, giving of
written consents, dividend rights or transferability of shares with respect to
the Company Common Stock, including any voting trust agreement or proxy. Except
as set forth in Section 2.3(f) of the Company Disclosure Schedule, no debt
securities of the Company are issued and outstanding.
2.4 No Subsidiaries. Except as set forth in Section 2.4 of the Company
Disclosure Schedule, the Company has no (and prior to the Closing will have no)
Subsidiaries and does not (and prior to the Closing will not) otherwise hold any
equity, membership, partnership, joint venture or other ownership interest in
any Person.
2.5 Directors and Officers. The names of each director and officer of
the Company and its Subsidiaries (as applicable) on the date hereof, and his or
her position with the Company and its Subsidiaries are listed in Section 2.5 of
the Company Disclosure Schedule.
2.6 No Conflicts. The execution and delivery by the Company of this
Agreement and the Ancillary Agreements to which the Company is a party does not,
and the performance by the Company of its obligations under this Agreement and
the Ancillary Agreements to which the Company is a party and the consummation of
the transactions contemplated hereby and thereby do not and will not:
(a) conflict with or result in a violation or breach of any of the
terms, conditions or provisions of the certificate of incorporation or bylaws
(or similar organizational documents) of the Company or any of its Subsidiaries;
(b) subject to obtaining the consents, approvals and actions, making
the filings and giving the notices disclosed in Section 2.6(c) of the Company
Disclosure Schedule, if any, conflict with or result in a violation or breach of
any Law or Order applicable to the Company, its Subsidiaries or any of their
respective Assets and Properties; or
(c) except as disclosed in Section 2.6(c) of the Company Disclosure
Schedule, (i) conflict with or result in a violation or breach of, (ii)
constitute a default (or an event that, with or without notice or lapse of time
or both, would constitute a default) under, (iii) require the Company or any of
its Subsidiaries to obtain any consent, approval or action of, make any filing
with or give any notice to any Person as a result or under the terms of (except
for (A) the filing of the Certificate of Merger; (B) such consents approvals,
orders, authorizations, registrations, declarations and filings as may be
required under applicable state or federal securities laws; and (C) such filings
as may be required under the HSR Act), (iv) result in or give to any Person any
right of termination, cancellation, acceleration or modification in or with
respect to, (v) result in or give to any Person any additional rights or
entitlement to increased, additional, accelerated or
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guaranteed payments or performance under, (vi) result in the creation or
imposition of (or the obligation to create or impose) any Lien upon the Company
or any of its Assets and Properties under or (vii) result in the loss of any
material benefit under, any of the terms, conditions or provisions of any
Contract or License to which the Company or any of its Subsidiaries is a party
or by which any of the Assets and Properties of the Company or its Subsidiaries
is bound.
2.7 Company Financial Statements. Section 2.7(a) of the Company
Disclosure Schedule sets forth the Company Financials. The Company Financials
delivered to Parent have been prepared in accordance with GAAP applied on a
basis consistent throughout the periods indicated and consistent with each other
(except (i) as may be indicated in the notes thereto as delivered to Parent
prior to the date hereof, and (ii) in the case of the Interim Financial
Statements, subject to normal year-end adjustments, which adjustments will not
be material in amount or significance and provided without footnotes). The
Company Financials present fairly, in all material respects, the financial
condition and operating results of the Company as of the dates and during the
periods indicated therein, subject, in the case of the Interim Financial
Statements, to normal year-end adjustments, which adjustments will not be
material in amount or significance and except that the Interim Financial
Statements may not contain footnotes. Except as set forth in Section 2.7(b) of
the Company Disclosure Schedule, since April 1, 1997, there has been no change
in any accounting policies, principles, methods or practices, including any
change, except as disclosed in the Company Financials, with respect to reserves
(whether for bad debts, contingent liabilities or otherwise), of the Company.
2.8 Books and Records; Organizational Documents. The minute books and
stock record books and other similar records of the Company and each of its
Subsidiaries (a) have been provided or made available to Parent or its counsel
prior to the execution of this Agreement, (b) are complete and correct in all
respects and (c) have been maintained in accordance with sound business
practices. Such minute books contain a true and complete record of all actions
taken at all meetings and by all written consents in lieu of meetings of the
directors, stockholders and committees of the board of directors of the Company
and its Subsidiaries from the applicable date of the incorporation through the
date hereof. The Company has prior to the execution of this Agreement delivered
to Parent true and complete copies of the certificate of incorporation and
bylaws (or similar organizational documents) of the Company and each of its
Subsidiaries each as amended through the date hereof. Neither the Company nor
any of its Subsidiaries is in violation of any provisions of their respective
certificate of incorporation or bylaws (or similar organizational documents).
2.9 Absence of Changes. Since the date of the Interim Financial
Statements, except as set forth in Section 2.9 of the Company Disclosure
Schedule, there has not been any material adverse effect upon the Business or
Condition of the Company or any occurrence or event which, individually or in
the aggregate, could be reasonably expected to have any material adverse effect
upon the Business or Condition of the Company. Since the date of the Interim
Financial Statements, the Company and its Subsidiaries have operated its
business in accordance with the Company's Operating Plan (a copy of which has
been provided to and approved by Parent). In addition, without limiting the
generality of the foregoing, except as expressly contemplated by this Agreement
and except as disclosed in Section 2.9 of the Company Disclosure Schedule, since
the date of the Interim Financial Statements:
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(a) neither the Company nor any of its Subsidiaries have entered into
any Contract, other than with Parent or its Affiliates, commitment or
transaction or incurred any Liabilities outside of the ordinary course of
business consistent with part practice;
(b) neither the Company nor any of its Subsidiaries have entered into
any Contract, other than with Parent or its Affiliates, commitment or
transaction or incurred any Liabilities outside of the ordinary course of
business consistent with past practice;
(c) neither the Company nor any of its Subsidiaries have entered into
any Contract, other than with Parent and its Affiliates, in connection with any
transaction involving a Business Combination;
(d) the Company and its Subsidiaries have not altered or entered into
any Contract or other commitment to alter, their respective interest in any
corporation, association, joint venture, partnership or business entity in which
the Company or its Subsidiaries directly or indirectly holds any interest on the
date hereof;
(e) neither the Company nor any of its Subsidiaries have entered into
any strategic alliance, joint development or joint marketing Contract;
(f) there has not been any material amendment or other material
modification (or agreement to do so) or violation of the terms of, any of the
Contracts set forth or described in the Company Disclosure Schedule;
(g) neither the Company nor any of its Subsidiaries have entered into
any material transaction with any officer, director, stockholder, Affiliate or
Associate of the Company or, as applicable, its Subsidiaries, other than
pursuant to any Contract in effect on the Audited Financial Statement Date and
disclosed to Parent pursuant to (and so identified in) Section 2.9(f), Section
2.18(a) or Section 2.20 of the Company Disclosure Schedule or other than
pursuant to any contract of employment and listed pursuant to Section 2.18(a) of
the Company Disclosure Schedule;
(h) neither the Company nor any of its Subsidiaries have entered into
or amended any Contract pursuant to which any other Person is granted
manufacturing, marketing, distribution, licensing or similar rights of any type
or scope with respect to any products of the Company and its Subsidiaries or
Company Intellectual Property, other than as contemplated by the Contracts and
Licenses disclosed in the Company Disclosure Schedule;
(i) no Action or Proceeding has been commenced or, to the knowledge
of the Company threatened, by or against the Company or any of its Subsidiaries;
(j) neither the Company nor any of its Subsidiaries have declared or
set aside or paid any dividends on or made any other distributions (whether in
cash, stock or property) in respect of any Company Common Stock, capital stock
(however denominated) of any Company Subsidiary or Equity Equivalents, or
effected or approved any split, combination or reclassification of any Company
Common Stock, capital stock (however denominated) of any Company Subsidiary or
Equity Equivalents or issued or authorized the issuance of any other securities
in respect of, in lieu of or in substitution for shares of Company Common Stock,
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capital stock (however denominated) of any Company Subsidiary or Equity
Equivalents, or repurchased, redeemed or otherwise acquired, directly or
indirectly, any shares of Company Capital Stock, capital stock (however
denominated) of any Company Subsidiary or Equity Equivalents, except repurchases
of Company Stock pursuant to agreements of the Company or any Company Subsidiary
with employees, officers, directors and consultants relating to repurchases at
cost upon termination of service with the Company or the applicable Company
Subsidiary;
(k) except for (i) the issuance of shares of Company Common Stock
upon exercise or conversion of then-outstanding Company Options or Company
Warrants listed in Section 2.3(b) of the Company Disclosure Schedule, (ii) the
issuance of options available for grant under the Company's existing Company
Stock Plans in the ordinary course of business to employees hired after the
Audited Financial Statement Date who are not officers of the Company on terms
and in amounts consistent with past practice, (iii) any amendments contemplated
by Section 1.6(d)(iii) or (iv) the Permitted Grants, (A) neither the Company nor
any of its Subsidiaries has issued, granted, delivered, sold or authorized or
proposed to issue, grant, deliver or sell, or purchased or proposed to purchase,
any shares of Company Common Stock, capital stock (however denominated) of any
Company Subsidiaries or Equity Equivalents, (B) the Company has not modified or
amended the rights of any holder of any outstanding shares of Company Common
Stock, capital stock (however denominated) of any Company Subsidiaries or Equity
Equivalents (including to reduce or alter the consideration to be paid to the
Company upon the exercise of any outstanding Company Options, Company Warrants,
Company Stock Purchase Rights or other Equity Equivalents), (C) there have not
been any agreements, arrangements, plans or understandings with respect to any
such modification or amendment; and (D) the Company has not granted any Options
with an exercise price of less than the fair market value of Company Common
Stock on the date the Option was granted (as determined in good faith by the
board of directors of the Company, following Good Faith Consultation with, and
consistent with the advice provided by, the Company's independent accountants);
(l) there has not been any amendment to the Company's or any Company
Subsidiary's certificate of incorporation or bylaws (or similar organizational
documents);
(m) there has not been any transfer (by way of a License or
otherwise) to any Person of rights to any Company Intellectual Property;
(n) neither the Company nor any of its Subsidiaries has made or
agreed to make any disposition or sale of, waiver of rights to, license or lease
of, or incurrence of any Lien on, any Assets and Properties of the Company or
any Company Subsidiary, other than dispositions of inventory, or nonexclusive
licenses of products to Persons to whom the Company or, as applicable, a
Subsidiary of the Company had granted licenses of its products at the Audited
Financial Statement Date, in the ordinary course of business of the Company and
its Subsidiaries consistent with past practice;
(o) neither the Company nor any of its Subsidiaries has made or
agreed to make any purchase of any Assets and Properties of any Person other
than (i) acquisitions of inventory, or licenses of products, in the ordinary
course of business of the Company and its Subsidiaries consistent with past
practice and (ii) other acquisitions in an amount not exceeding two hundred
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26
fifty thousand dollars ($250,000) in the case of any individual item or five
hundred thousand dollars ($500,000) in the aggregate;
(p) neither the Company nor any of its Subsidiaries has made or
agreed to make any capital expenditures or commitments for additions to
property, plant or equipment of the Company or, as applicable, its Subsidiaries,
constituting capital assets individually or in the aggregate in an amount
exceeding two hundred fifty thousand dollars ($250,000);
(q) neither the Company nor any of its Subsidiaries has made or
agreed to make any write-off or write-down, any determination to write off or
write-down, or revalue, any of the Assets and Properties of the Company or, as
applicable, its Subsidiaries, or change any reserves or liabilities associated
therewith, individually or in the aggregate in an amount exceeding two hundred
fifty thousand dollars ($250,000);
(r) neither the Company nor any of its Subsidiaries has made or
agreed to make payment, discharge or satisfaction, in an amount in excess of one
hundred twenty-five thousand dollars ($125,000), in any one case, or two hundred
fifty thousand dollars ($250,000) in the aggregate, of any claim, Liability or
obligation (whether absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction in the ordinary
course of business of Liabilities reflected or reserved against in the Company
Financials and other than Liabilities incurred in the ordinary course of
business since the Financial Statement Date;
(s) neither the Company nor any of its Subsidiaries has failed to pay
or otherwise satisfy any Liabilities presently due and payable of the Company or
any Subsidiary of the Company (other than immaterial delays in the ordinary
course of the Company's business consistent with past practices), except such
Liabilities which are being contested in good faith by appropriate means or
procedures and which, individually or in the aggregate, are immaterial in
amount;
(t) neither the Company nor any of its Subsidiaries has incurred any
Indebtedness or guaranteed any Indebtedness in an aggregate amount exceeding two
hundred fifty thousand dollars ($250,000) or issued or sold any debt securities
of the Company or its Subsidiaries or guaranteed any debt securities of others;
(u) neither the Company nor any of its Subsidiaries has granted any
severance or termination pay to any director, officer employee or consultant,
except payments made pursuant to written Contracts outstanding on the date
hereof, copies of which have been delivered to Parent and the terms of which are
disclosed in Section 2.9(u) of the Company Disclosure Schedule;
(v) except pursuant to a Contract disclosed to Parent pursuant to
Section 2.9(f) or Section 2.18 of the Company Disclosure Schedule, neither the
Company nor any of its Subsidiaries has granted or approved any increase of
greater than five percent (5%) in salary, rate of commissions, rate of
consulting fees or any other compensation of any current or former officer,
director, stockholder, employee, independent contractor or consultant of the
Company or, as applicable, its Subsidiaries;
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(w) neither the Company nor any of its Subsidiaries has paid or
approved the payment of any consideration of any nature whatsoever (other than
salary, commissions or consulting fees and customary benefits paid to any
current or former officer, director, stockholder, employee or consultant of the
Company or, as applicable, its Subsidiaries) to any current or former officer,
director, stockholder, employee, independent contractor or consultant of the
Company or, as applicable, its Subsidiaries;
(x) except as disclosed in Section 2.9(x)(i) of the Company
Disclosure Schedule, neither the Company nor any of its Subsidiaries has
established or modified any (i) targets, goals, pools or similar provisions
under any Plan, employment Contract or other employee compensation arrangement
or independent contractor Contract or other compensation arrangement or (ii)
except as disclosed in Section 2.9(x)(ii) of the Company Disclosure Schedule,
salary ranges, increased guidelines or similar provisions in respect of any
Plan, employment Contract or other employee compensation arrangement or
independent contractor Contract or other compensation arrangement;
(y) neither the Company nor any of its Subsidiaries has adopted,
entered into, amended, modified or terminated (partially or completely) any
Plan;
(z) neither the Company nor any of its Subsidiaries has paid or
agreed or made any commitment to pay any discretionary or stay bonus;
(aa) to the knowledge of the Company, after Good Faith Consultation
with the Company's independent accountants, neither the Company nor any of its
Subsidiaries has taken or approved any action, including the acceleration (or
other modification) of vesting of any Company Options, Company Warrants or other
rights to acquire shares of Company Common Stock, which could reasonably be
expected to jeopardize the status of the Merger as a tax-free reorganization;
(bb) neither the Company nor any of its Subsidiaries has made or
changed any material election in respect of Taxes, adopted or changed any
accounting method in respect of Taxes, entered into any tax allocation
agreement, tax sharing agreement, tax indemnity agreement or closing agreement,
settlement or compromise of any claim or assessment in respect of Taxes, or
consented to any extension or waiver of the limitation period applicable to any
claim or assessment in respect of Taxes with any Taxing Authority or otherwise;
(cc) neither the Company nor any of its Subsidiaries has made any
change in accounting policies, principles, methods, practices or procedures
(including for bad debts, contingent liabilities or otherwise, respecting
capitalization or expense of research and development expenditures, depreciation
or amortization rates or timing of recognition of income and expense);
(dd) other than in the ordinary course of business, neither the
Company nor any of its Subsidiaries has made any representation or proposal to,
or engaged in substantive discussions with, any of the holders (or their
representatives) of any Indebtedness, or to or with any party which has issued a
letter of credit which benefits the Company or, as applicable, any of its
Subsidiaries;
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(ee) neither the Company nor any of its Subsidiaries has commenced
or terminated, or made any change in, any line of business;
(ff) neither the Company nor any of its Subsidiaries has failed to
renew any insurance policy; no insurance policy of the Company or any of its
Subsidiaries has been cancelled or materially amended; and the Company and each
of its Subsidiaries has given all notices and presented all claims (if any)
under all such policies in a timely fashion;
(gg) there has been no material amendment or non-renewal of any of
the Company's Approvals, and the Company and its Subsidiaries have used
commercially reasonable efforts to maintain such Approvals and has observed in
all material respects all Laws and Orders applicable to the conduct of the
Company's or any of its Subsidiaries' business or the Company's or its
Subsidiaries' Assets and Properties;
(hh) the Company and its Subsidiaries have taken all commercially
reasonable action required to procure, maintain, renew, extend or enforce any
Company or Subsidiary Intellectual Property in a manner consistent with the
Company's historical practices, including, without limitation, where considered
appropriate by the Company, submission of required documents or fees during the
prosecution of patent, trademark or other applications for Registered
Intellectual Property rights;
(ii) there has been no physical damage, destruction or other
casualty loss (whether or not covered by insurance) affecting any of the real or
personal property or equipment of the Company or any of its Subsidiaries
individually or in the aggregate in an amount exceeding two hundred fifty
thousand dollars ($250,000).
(jj) neither the Company nor any of its Subsidiaries has
repurchased, cancelled or modified the terms of any Company Common Stock,
capital stock (however denominated) of any Company Subsidiaries, Equity
Equivalents, Company Options, Company Warrants, Company Stock Purchase Rights or
other financial instrument that derives value from its convertibility into
Company Common Stock, capital stock (however denominated) of any Company
Subsidiaries, or Equity Equivalents, other than transactions entered into in the
ordinary course of business and pursuant to either (i) contractual provisions or
(ii) the Company Stock Plans, in each case as in effect at the time of execution
and delivery of this Agreement; and
(kk) neither the Company nor any of its Subsidiaries has entered
into or approved any contract, arrangement or understanding or acquiesced in
respect of any arrangement or understanding, to do, engage in or cause or having
the effect of any of the foregoing, including with respect to any Business
Combination not otherwise restricted by the foregoing paragraphs.
2.10 No Undisclosed Liabilities. Except as reflected or reserved against
in the Company Financials (including the notes thereto) or as disclosed in
Section 2.10 of the Company Disclosure Schedule, there are no Liabilities of,
relating to or affecting the Company, any of its Subsidiaries, or any of their
respective Assets and Properties, other than Liabilities incurred in the
ordinary course of business consistent with past practice since the Audited
Financial Statement Date and in accordance with the provisions of this Agreement
which, individually and
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in the aggregate, are not material to the Business or Condition of the Company,
and are not for tort or for breach of contract.
2.11 Taxes.
(a) All Tax Returns required to have been filed by or with respect
to the Company and any Subsidiary of the Company have been duly and timely filed
(including any extensions), and each such Tax Return correctly and completely
reflects Tax liability and all other information required to be reported
thereon. All such Tax Returns are true, complete and correct in all material
respects. All Taxes due and payable by the Company or Subsidiary of the Company,
whether or not shown on any Tax Return, or claimed to be due by any Tax
Authority, for periods (or portions of periods) covered by the Company
Financials, have been paid or accrued on the balance sheet included in the
Company Financials.
(b) Neither the Company nor any of its Subsidiaries has incurred
any material liability for Taxes in the period after the date of the Company
Financials, other than Tax liabilities incurred since such date in the ordinary
course of the Company's business. The unpaid Taxes of the Company and its
Subsidiaries (i) did not, as of the most recent fiscal month end, exceed by any
material amount the reserve for Liability for Income Tax (other than the reserve
for deferred taxes established to reflect timing differences between book and
tax income) or Other Tax set forth in the balance sheet included in the Company
Financials and (ii) will not exceed by any material amount such reserve as
adjusted for operations and transactions in the ordinary course of business
through the Closing Date.
(c) Neither the Company nor any of its Subsidiaries are a party to
any agreement extending the time within which to file any Tax Return, other than
standard extensions of filing dates. No claim has ever been made by a Taxing
Authority of any jurisdiction in which the Company or its Subsidiaries does not
file Tax Returns that the Company or any of its Subsidiaries is or may be
subject to taxation by that jurisdiction.
(d) Neither the Company nor any of its Subsidiaries have failed to
withhold or pay any Taxes required to have been withheld and paid in connection
with amounts paid or owing to any employee, creditor or independent contractor.
(e) The Company does not have knowledge of any actions by any
Taxing Authority in connection with assessing additional Taxes against or in
respect of it or any of its Subsidiaries for any past period. There is no
dispute or claim concerning any Tax Liability of the Company or its
Subsidiaries, either (i) threatened, claimed or raised by any Taxing Authority
or (ii) of which the Company or any of its Subsidiaries is otherwise aware.
There are no Liens for Taxes upon the Assets and Properties of the Company or
its Subsidiaries, other than Liens for Taxes not yet due. Section 2.11(e) of the
Company Disclosure Schedule indicates those Tax Returns, if any, of the Company
or any of its Subsidiaries that have been audited or, to the Company's
knowledge, examined by Taxing Authorities, and indicates those Tax Returns of
the Company or any of its Subsidiaries that currently are the subject of audit
or examination. The Company has delivered to Parent complete and correct copies
of all federal, state, local and foreign income Tax Returns filed by, and all
Tax examination reports and statements of
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deficiencies assessed against or agreed to by, the Company and its Subsidiaries
since the fiscal year ended March 31, 1997.
(f) There are no outstanding agreements or waivers extending the
statutory period of limitation applicable to any Tax Returns required to be
filed by, or which include or are treated as including, the Company or any of
its Subsidiaries or with respect to any Tax assessment or deficiency affecting
the Company or its Subsidiaries.
(g) Neither the Company nor any of Subsidiaries has received any
written ruling related to Taxes or entered into any agreement with a Taxing
Authority relating to Taxes (other than standard rulings pertaining to the
Company's foreign sales structure).
(h) Neither the Company nor any of its Subsidiaries have any
liability for the Taxes of any Person other than the Company and, as applicable,
its Subsidiaries (i) under Section 1.1502-6 of the Treasury regulations (or any
similar provision of state, local or foreign Law), (ii) as a transferee or
successor, (iii) by Contract or (iv) otherwise.
(i) Neither the Company nor any of its Subsidiaries (i) has agreed
to make, or is required to make, any adjustment under Section 481 of the
Internal Revenue Code by reason of a change in accounting method and (ii) are
not a "consenting corporation" within the meaning of Section 341(f)(1) of the
Internal Revenue Code.
(j) Neither the Company nor any of its Subsidiaries is a party to
or bound by any obligations under any tax sharing, tax allocation, tax indemnity
or similar agreement or arrangement.
(k) Neither the Company nor any of its Subsidiaries is involved in,
subject to, or a party to any joint venture, partnership, Contract or other
arrangement that is treated as a partnership for federal, state, local or
foreign Income Tax purposes.
(l) During the period from after April 1, 1996, neither the Company
nor any of its Subsidiaries was included and is not includible in the Tax Return
of any other corporation other than such a return of which the Company is the
common parent corporation.
(m) With respect to periods prior to April 1, 1996, neither the
Company nor any of its Subsidiaries has any liability with respect to Taxes of
any other Person arising out of the inclusion of the Company or its Subsidiaries
in a consolidated return of any other Person.
(n) Neither the Company nor any of its Subsidiaries has made any
payments, is not obligated to make any payments, nor is a party to any contract,
agreement or arrangement covering any current or former employee or consultant
of the Company, or, as applicable, its Subsidiaries, that under certain
circumstances could require it to make or give rise to any payments that are not
deductible as a result of the provisions set forth in Section 280G of the
Internal Revenue Code or the treasury regulations thereunder or would result in
an excise tax to the recipient of any such payment under Section 4999 of the
Internal Revenue Code.
(o) There is currently no limitation on the utilization of the net
operating losses, built-in losses, capital losses, Tax credits or other similar
items of the Company or its
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Subsidiaries under (i) Section 382 of the Internal Revenue Code, (ii) Section
383 of the Internal Revenue Code, (iii) Section 384 of the Internal Revenue Code
or (iv) Section 1502 of the Internal Revenue Code.
(p) Each material election with respect to income Taxes affecting
the Company or any of its Subsidiaries are set forth in Section 2.11(p) of the
Company Disclosure Schedule.
(q) Neither the Company nor any of its Subsidiaries is nor has it
or any of them ever been a United States real property holding corporation
within the meaning of Section 897(c)(1)(A)(ii) of the Internal Revenue Code.
2.12 Legal Proceedings. Except as set forth in Section 2.12 of the
Company Disclosure Schedule:
(i) there are no Actions or Proceedings pending or, to the
knowledge of the Company or its Subsidiaries, threatened, against, relating to
or affecting the Company or its Subsidiaries or any of their respective Assets
and Properties;
(ii) there are no facts or circumstances known to the Company or
its Subsidiaries that could reasonably be expected to give rise to any Action or
Proceeding against, relating to or affecting the Company or its Subsidiaries or
any of their respective Assets and Properties;
(iii) neither the Company nor any of its Subsidiaries has received
notice, and do not otherwise have knowledge of any Orders outstanding against
the Company or, as applicable, its Subsidiaries; and
(iv) neither the Company nor any of its Subsidiaries has received
notice, and neither the Company nor any of its Subsidiaries have knowledge of,
any defects, dangerous or substandard conditions in the products or materials
sold, distributed, or currently proposed to be sold or distributed by the
Company or its Subsidiaries that could cause bodily injury, sickness, disease,
death or damage to property, or result in loss of use of property, or any claim,
suit, demand for arbitration or notice seeking damages for bodily injury,
sickness, disease, death, or damage to property, or loss of use of property.
Prior to the execution of this Agreement, the Company has delivered to Parent
all responses of counsel for the Company and its Subsidiaries to auditor's
requests for information for the preceding three years (together with any
updates provided by such counsel) regarding Actions or Proceedings pending or
threatened against, relating to or affecting the Company or its Subsidiaries.
Section 2.12(b) of the Company Disclosure Schedule sets forth all Actions or
Proceedings relating to or affecting, or, to the knowledge of the Company and
its Subsidiaries, threatened against, the Company, any Company Subsidiaries or
any of their respective Assets and Properties during the three-year period prior
to the date hereof.
2.13 Compliance with Laws and Orders. Neither the Company nor any of its
Subsidiaries, directors, officers, Affiliates, agents or employees has violated
in any material respect since the incorporation of the Company or is currently
in default or violation in any material respect under, any Law or Order
applicable to the Company or its Subsidiaries or any of their respective Assets
and Properties, and neither the Company nor any of its Subsidiaries is
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aware of any claim of violation, or of any actual violation, of any such Laws
and Orders by the Company or any of its Subsidiaries since the incorporation of
the Company or, as applicable, its Subsidiaries.
2.14 Plans; ERISA.
(a) Existence of Plans. Except as disclosed in Section 2.13(a) of
the Company Disclosure Schedule, (i) neither the Company, any of its
Subsidiaries nor any of their respective ERISA Affiliates maintains or sponsors
(or ever maintained or sponsored), or makes or is required to make contributions
to, any Plans, (ii) none of the Plans is or was a "multi-employer plan" as
defined in Section 3(37) of ERISA, (iii) none of the Plans is or was a "defined
benefit pension plan" within the meaning of Section 3(35) of ERISA, (iv) none of
the Plans provides or provided post-retirement medical or health benefits, (v)
none of the Plans is or was a "welfare benefit fund" as defined in Section
419(e) of the Internal Revenue Code, or an organization described in Sections
501(c)(9) or 501(c)(20) of the Internal Revenue Code, (vi) neither the Company,
any of its Subsidiaries nor any of their ERISA Affiliates is or was a party to
any collective bargaining agreement, and (vii) neither the Company, any of its
Subsidiaries nor any of their ERISA Affiliates has announced or otherwise made
any commitment to create or amend any Plan. Notwithstanding any statement or
indication in this Agreement to the contrary, there are no Plans (A) as to which
Parent or the Surviving Corporation will be required to make any contributions
or with respect to which Parent or the Surviving Corporation shall have any
obligation or liability whatsoever, whether on behalf of any of the current
employees of the Company, any of its Subsidiaries or on behalf of any other
person, after the Closing, or (B) which Parent or the Surviving Corporation or
any Subsidiary of the Company will not be able to terminate immediately after
the Closing in accordance with their terms and ERISA. With respect to each of
such Plans, at the Closing there will be no unrecorded liabilities with respect
to the establishment, implementation, operation, administration or termination
of any such Plan, or the termination of the participation in any such Plan by
the Company, any of its Subsidiaries or any of their respective ERISA
Affiliates. The Company has delivered to Parent true and complete copies of: (I)
each of the Plans and any related funding agreements thereto (including
insurance contracts) including all amendments, all of which are legally valid
and binding and in full force and effect and there are no defaults thereunder,
(II) the currently effective Summary Plan Description pertaining to each of the
Plans, (III) all recent annual reports for each of the Plans (including all
related schedules), (IV) the most recently filed PBGC Form 1 (if applicable),
(V) the most recent Internal Revenue Service determination letter, opinion,
notification or advisory letter (as the case may be) for each Plan which is
intended to constitute a qualified plan under Section 401 of the Internal
Revenue Code and each amendment to each of the foregoing documents, and (VI) for
each unfunded Plan, financial statements consisting of (a) the consolidated
statement of assets and liabilities of such Plan as of its most recent valuation
date, and (b) the statement of changes in fund balance and in financial position
or the statement of changes in net assets available for benefits under such Plan
for the most recently-ended plan year, which such financial statements shall
fairly present the financial condition and the results of operations of such
Plan in accordance with GAAP, consistently applied, as of such dates.
(b) Present Value of Benefits. The present value of all accrued
benefits under any Plan subject to Title IV of ERISA shall not, as of the
Closing Date, exceed the value of the assets of such Plan allocated to such
accrued benefits, based upon the applicable provisions of the
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Internal Revenue Code and ERISA, and each such Plan shall be capable of being
terminated as of the Closing Date in a "standard termination" under Section
4041(b) of ERISA. With respect to each Plan that is subject to Title IV of
ERISA, (i) no amount is due or owing from the Company, any of its Subsidiaries
or any of their respective ERISA Affiliates to the PBGC or to any
"multi-employer plan" as defined in Section 3(37) of ERISA on account of any
withdrawal therefrom and (ii) no such Plan has been terminated other than in
accordance with ERISA or at a time when the Plan was not sufficiently funded.
The transactions contemplated hereunder, including the termination of any Plan
at or prior to the Closing, shall not result in any such withdrawal or other
liability under any applicable Laws.
(c) Penalties; Reportable Events. Neither the Company, any of its
Subsidiaries nor any of their respective ERISA Affiliates is subject to any
material liability, tax or penalty whatsoever to any person or agency whomsoever
as a result of engaging in a prohibited transaction under ERISA or the Internal
Revenue Code, and neither the Company, any of its Subsidiaries nor any of their
respective its ERISA Affiliates has any knowledge of any circumstances which
reasonably might result in any material liability, tax or penalty, including a
penalty under Section 502 of ERISA, as a result of a breach of any duty under
ERISA or under other Laws. Each Plan which is required to comply with the
provisions of Sections 4980B and 4980C of the Internal Revenue Code, or with the
requirements referred to in Section 4980D of the Internal Revenue Code, has
complied in all material respects. No event has occurred which could subject any
Plan to tax under Section 511 of the Internal Revenue Code. None of the Plans
subject to Title IV of ERISA has, since September 2, 1974, been completely or
partially terminated nor has there been any "reportable event" as such term is
defined in Section 4043(b) of ERISA, with respect to any of the Plans since the
effective date of ERISA nor has any notice of intent to terminate been filed or
given with respect to any such Plan. There has been no (i) withdrawal by the
Company, any of its Subsidiaries or any of their respective ERISA Affiliates
that is a substantial employer from a single-employer plan which is a Plan and
which has two or more contributing sponsors at least two of whom are not under
common control, as referred to in Section 4063(b) of ERISA, or (ii) cessation by
the Company, any of its Subsidiaries or any of their respective ERISA Affiliates
of operations at a facility causing more than twenty percent (20%) of Plan
participants to be separated from employment, as referred to in Section 4062(f)
of ERISA. Neither the Company, any of its Subsidiaries nor any of their
respective ERISA Affiliates, nor any other organization of which any of them are
a successor or parent corporation as defined in Section 4069(b) of ERISA, has
engaged in any transaction described in Section 4069(a) of ERISA.
(d) Deficiencies; Qualification. None of the Plans nor any trust
created thereunder has incurred any "accumulated funding deficiency" as such
term is defined in Section 412 of the Internal Revenue Code, whether or not
waived, since the effective date of said Section 412, and no condition has
occurred or exists which by the passage of time could be expected to result in
an accumulated funding deficiency as of the last day of the current plan year of
any such Plan. Furthermore, neither the Company, any of its Subsidiaries nor any
of their respective ERISA Affiliates has any unfunded liability under ERISA in
respect of any of the Plans. Each of the Plans which is intended to be a
qualified plan under Section 401(a) of the Internal Revenue Code has received a
favorable determination letter, opinion, notification or advisory letter from
the Internal Revenue Service, and has been operated in accordance with its terms
and with the provisions of the Internal Revenue Code. All of the Plans have been
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administered and maintained in substantial compliance with ERISA, the Internal
Revenue Code and all other applicable Laws. All contributions required to be
made to each of the Plans under the terms of that Plan, ERISA, the Internal
Revenue Code or any other applicable Laws have been timely made. Each Plan
intended to meet the requirements for tax-favored treatment under Subchapter B
of Chapter 1 of the Internal Revenue Code is in compliance with such
requirements. There are no Liens against the property of the Company, any of its
Subsidiaries or any of their respective ERISA Affiliates under Section 412(n) of
the Internal Revenue Code or Sections 302(f) or 4068 of ERISA. The Interim
Financial Statements properly reflect all amounts required to be accrued as
liabilities to date under each of the Plans.
(e) Acceleration. Neither the execution and delivery of this
Agreement nor the consummation of any of the transactions contemplated hereby
(whether alone or upon the occurrence of any additional or further acts or
events) will (i) result in any obligation or liability (with respect to accrued
benefits or otherwise) on the part of the Company, Parent, the Surviving
Corporation, or any of their respective Subsidiaries to the PBGC, to any Plan,
or to any present or former employee, director, officer, stockholder, contractor
or consultant (or any of their dependents) of Parent, the Surviving Corporation,
or any of their respective Subsidiaries, (ii) be a trigger event under any Plan
that will result in any payment (whether of severance pay or otherwise) becoming
due to any such present or former employee, officer, director, stockholder,
contractor, or consultant (or any of their dependents), or (iii) accelerate the
time of payment or vesting, or increase the amount, of any compensation
theretofore or thereafter due or granted to any employee, officer, director,
stockholder, contractor, or consultant (or any of their dependents) of the
Company or any of its Subsidiaries . With respect to any insurance policy which
provides, or has provided, funding for benefits under any Plan, (A) there is and
will be no liability of the Company, Parent, the Surviving Corporation or any of
their respective Subsidiaries in the nature of a retroactive or retrospective
rate adjustment, loss sharing arrangement, or actual or contingent liability as
of the Closing Date, nor would there be any such liability if such insurance
policy were terminated as of the Closing Date, and (B) no insurance company
issuing any such policy is in receivership, conservatorship, bankruptcy,
liquidation, or similar proceeding, and, to the knowledge of the Company, no
such proceedings with respect to any insurer are imminent.
(f) COBRA. With respect to each Plan which provides health care
coverage, the Company, its Subsidiaries and each ERISA Affiliate have complied
in all material respects with (i) the applicable health care continuation and
notice provisions of the Consolidated Omnibus Budget Reconciliation Act of 1985,
as amended ("COBRA"), and the applicable COBRA regulations and (ii) the
applicable requirements of the Health Insurance Portability and Accountability
Act of 1996 and the regulations thereunder, and neither the Company, each
Subsidiary of the Company nor any ERISA Affiliate has incurred any liability
under Section 4980B of the Internal Revenue Code.
(g) Litigation. Other than routine claims for benefits under the
Plans, there are no pending, or, to the best knowledge of the Company or its
Subsidiaries, threatened, Actions or Proceedings involving the Plans, or the
fiduciaries, administrators, or trustees of any of the Plans or the Company, any
Subsidiary or any of their respective ERISA Affiliates as the employer or
sponsor under any Plan, with any of the IRS, the Department of Labor, the PBGC,
any
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participant in or beneficiary of any Plan or any other person. Neither the
Company nor any of its Subsidiaries know of any reasonable basis for any such
Action or Proceeding.
2.15 Real Property.
(a) Section 2.15(a) of the Company Disclosure Schedule contains a
true and correct list of (i) each parcel of real property leased, utilized
and/or operated by the Company or any of its Subsidiaries (as lessor or lessee
or otherwise) (the "Leased Real Property") and (ii) all Liens relating to or
affecting any parcel of real property referred to in clause (i) to which the
Company or any of its Subsidiaries is a party. Neither the Company nor any of
its Subsidiaries owns any real property other than Company or Subsidiary owned
leasehold improvements, if any, on Leased Real Property.
(b) Subject to the terms of its respective leases, the Company or
any of its Subsidiaries, as applicable, has a valid and subsisting leasehold
estate in and the right to quiet enjoyment of each of the Leased Real Properties
for the full term of the leases (including renewal periods) relating thereto.
Each lease referred to in Section 2.15(a)(i) is a legal, valid and binding
agreement, enforceable in accordance with its terms, of the Company or its
Subsidiary, as applicable, and of each other Person that is a party thereto, and
except as set forth in Section 2.15(b) of the Company Disclosure Schedule, there
is no, and neither the Company nor any of its Subsidiaries has received notice
of any, default (or any condition or event which, after notice or lapse of time
or both, would constitute a default) thereunder. Neither the Company nor any of
its Subsidiaries owes brokerage commissions or finders fees with respect to any
such Leased Real Property, except to the extent that the Company or its
Subsidiary, as applicable, may renew the term of any such lease, in which case,
any such commissions and fees would be in amounts that are reasonable and
customary for the spaces so leased, given their intended use and terms.
(c) Except as disclosed in Section 2.15(c) of the Company
Disclosure Schedule, all improvements on the Leased Real Property (A) comply
with and are operated in accordance with applicable Laws (including
Environmental Laws) and all applicable Liens, Approvals, Contracts, covenants
and restrictions and (B) are in all material respects in good operating
condition and in a state of good maintenance and repair, ordinary wear and tear
excepted, and such improvements are in all material respects adequate and
suitable for the purposes for which they are presently being used and there are
no condemnation or appropriation proceedings pending or, to the knowledge of the
Company or its Subsidiaries, threatened against any of such real property or the
improvements thereon.
(d) True and correct copies of the documents under which the Leased
Real Property is leased, subleased (to or by the Company, any of its
Subsidiaries, or otherwise), utilized, and/or operated (the "Lease Documents")
have been delivered to Parent. The Lease Documents are unmodified and in full
force and effect, and there are no other Contracts between the Company, any of
its Subsidiaries, and any third party(ies), or by and among any third
party(ies), claiming an interest in the interest of the Company or any of its
Subsidiaries in the Leased Real Property or otherwise relating to the use and
occupancy of the Leased Real Property.
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2.16 Tangible Personal Property. The Company and each of its
Subsidiaries is in possession of and has good and marketable title to, or has
valid leasehold interests in or valid rights under Contract to use, all tangible
personal property used in the conduct of its business, including all tangible
personal property reflected on the Company Financials and tangible personal
property acquired since the date of the Interim Financial Statements, other than
property disposed of since such date in the ordinary course of business
consistent with past practice. Except (i) for purchase money liens on equipment
purchases or product purchases in the ordinary course of the Company's or any of
its Subsidiaries' business for which the purchase price is not yet due and
payable, or (ii) as disclosed in Section 2.16 of the Company Disclosure
Schedule, all such tangible personal property (including plant, property and
equipment) is free and clear of all Liens and is adequate and suitable in all
material respects for the conduct by the Company or its Subsidiary, as
applicable, of its respective business as presently conducted, and is in good
working order and condition in all material respects, ordinary wear and tear
excepted, and its use complies in all material respects with all applicable
Laws.
2.17 Intellectual Property.
(a) Section 2.17(a) of the Company Disclosure Schedule lists all
Company Registered Intellectual Property (including all trademarks and service
marks that the Company or its Subsidiaries have used with the intent of creating
or benefiting from any common law rights relating to such marks) and lists any
proceedings or actions pending as of the date hereof before any court or
tribunal (including the PTO or equivalent authority anywhere in the world)
related to any of the Company Registered Intellectual Property.
(b) The Company and its Subsidiaries have all requisite right,
title and interest in or valid and enforceable rights under Contracts or
Licenses to use all Company Intellectual Property necessary to the conduct of
their respective businesses as presently conducted. Each item of Company
Intellectual Property of the Company and its Subsidiaries, including all Company
Registered Intellectual Property listed in Section 2.17(a) of the Company
Disclosure Schedule, is owned exclusively by the Company or, as applicable, its
Subsidiaries (excluding Intellectual Property licensed to the Company or its
Subsidiaries under any License and is free and clear of any Liens. The Company
and its Subsidiaries (i) own exclusively all trademarks, service marks and trade
names used by the Company and, as applicable, its Subsidiaries in connection
with the operation or conduct of the business of the Company and its
Subsidiaries, including the sale of any products or technology or the provision
of any services by the Company and, as applicable, its Subsidiaries; provided,
however, that the Company and its Subsidiaries may use trademarks, service marks
and trade names of third parties which are licensed to the Company or, as
applicable, its Subsidiaries or are in the public domain, and (ii) own
exclusively, and have good title to, each copyrighted work that is a Company or
Subsidiary product and each other work of authorship that the Company or
Subsidiary otherwise purports to own.
(c) To the extent that any Company Intellectual Property has been
developed or created by any Person other than the Company or its Subsidiaries,
the Company or its applicable Subsidiary, has a written agreement with such
Person with respect thereto and the Company or, as applicable, its Subsidiaries
has either (i) obtained ownership of, and is the exclusive owner of, all such
Intellectual Property by operation of law or by valid assignment of any such
rights or (ii) has obtained a License under or to such Intellectual Property.
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(d) Except pursuant to agreements described in Section 2.17(d) of
the Company Disclosure Schedule, the Company and its Subsidiaries have not
transferred ownership of or granted any License of or other right to use or
authorized the retention of any rights to use any Intellectual Property that is
or was Company Intellectual Property to any other Person.
(e) The Company Intellectual Property constitutes all the
Intellectual Property used in and/or necessary to the conduct of the Company's
and each of its Subsidiaries' businesses as currently conducted or as reasonably
contemplated to be conducted, including the design, development, distribution,
marketing, manufacture, use, import, license, and sale of the products,
technology and services of the Company and its Subsidiaries (including products,
technology, or services currently under development).
(f) Section 2.17(f) of the Company Disclosure Schedule lists all
Contracts and Licenses (including all inbound Licenses) to which the Company
and, as applicable, its Subsidiaries are a party with respect to any
Intellectual Property. No Person other than the Company or its Subsidiaries has
ownership rights to improvements made by the Company or any of its Subsidiaries
in Intellectual Property which has been licensed to the Company or any of its
Subsidiaries.
(g) Section 2.17(g) of the Company Disclosure Schedule lists all
Contracts, Licenses and agreements between the Company or any of its
Subsidiaries and any other Person wherein or whereby the Company or its
Subsidiaries has agreed to, or assumed, any obligation or duty to warrant,
indemnify, reimburse, hold harmless, guaranty or otherwise assume or incur any
obligation or Liability or provide a right of rescission with respect to the
infringement or misappropriation by the Company or, as applicable, its
Subsidiaries or such other Person of the Intellectual Property of any Person
other than the Company.
(h) The operation of the business of the Company and each of its
Subsidiaries as currently conducted, including the Company's and its
Subsidiaries', design, development, use, import, manufacture and sale of the
products, technology or services (including products, technology or services
currently under development) of the Company or its Subsidiaries does not (i)
infringe or misappropriate the Intellectual Property of any Person, (ii) violate
any term or provision of any License or Contract concerning such Intellectual
Property (including any provision required by or imposed pursuant to 35 U.S.C.
ss.ss.200-212 in any License or Contract to which the Company is a party
requiring that products be manufactured substantially in the United States
("Made-in-America Requirements")), (iii) violate the rights of any Person
(including rights to privacy or publicity), or (iv) constitute unfair
competition or an unfair trade practice under any Law, and neither the Company
nor any of its Subsidiaries has received notice from any Person claiming that
such operation or any act, product, technology or service (including products,
technology or services currently under development) of the Company or any of its
Subsidiaries infringes or misappropriates the Intellectual Property of any
Person or constitutes unfair competition or trade practices under any Law,
including notice of third-party patent or other Intellectual Property rights
from a potential licensor of such rights.
(i) Each item of Company Registered Intellectual Property which has
actually been registered is valid and subsisting, and all necessary
registration, maintenance, renewal fees, annuity fees and taxes in connection
with such Registered Intellectual Property have been paid
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and all necessary documents and certificates in connection with such Registered
Intellectual Property have been filed with the relevant patent, copyright,
trademark or other authorities in the United States or foreign jurisdictions, as
the case may be, for the purposes of maintaining such Registered Intellectual
Property. Section 2.17(i)(1) of the Company Disclosure Schedule lists all
actions that must be taken by the Company or any of its Subsidiaries within one
hundred eighty (180) days from the date hereof, including the payment of any
registration, maintenance, renewal fees, annuity fees and taxes or the filing of
any documents, applications or certificates for the purposes of maintaining,
perfecting or preserving or renewing any Company Registered Intellectual
Property. Except as set forth in Section 2.17(i)(2) of the Company Disclosure
Schedule, the Company or any of its Subsidiary has registered the copyright with
the U.S. Copyright Office and its equivalent in any relevant foreign
jurisdiction for the latest version of each product or technology of the Company
or its Subsidiaries that constitutes or includes a copyrightable work. In each
case in which the Company or any Subsidiary of the Company has acquired
ownership of any Intellectual Property rights from any Person, the Company or
its applicable Subsidiary has obtained a valid and enforceable assignment
sufficient to irrevocably transfer all rights in such Intellectual Property
(including the right to seek past and future damages with respect to such
Intellectual Property) to the Company and, to the maximum extent provided for by
and required to protect the Company's or its Subsidiary's ownership rights in
and to such Intellectual Property in accordance with applicable Laws, the
Company or, as applicable, the Subsidiary of the Company has recorded each such
assignment of Registered Intellectual Property with the relevant Governmental or
Regulatory Authority, including the PTO, the U.S. Copyright Office, or their
respective equivalents in any relevant foreign jurisdiction, as the case may be.
(j) There are no Contracts or Licenses between the Company or its
Subsidiaries and any other Person with respect to Company Intellectual Property
under which there is any dispute (or, to the Company's knowledge, facts that may
reasonably lead to a dispute) known to the Company regarding the scope of such
Contract or License, or performance under such Contract or License, including
with respect to any payments to be made or received by the Company or its
Subsidiaries thereunder.
(k) To the knowledge of the Company, no Person is infringing or
misappropriating any Intellectual Property.
(l) The Company and each of its Subsidiaries have taken all
commercially reasonable steps to protect the Company's rights in confidential
information and trade secrets of the Company or the applicable Subsidiary of the
Company or provided by any other Person to the Company or Subsidiary of the
Company subject to a duty of confidentiality. Without limiting the generality of
the foregoing, the Company and each of the Subsidiaries has, and enforce, a
policy requiring each employee, consultant and independent contractor to execute
proprietary information, confidentiality and invention and copyright assignment
agreements substantially in the form set forth in Section 2.17(l) of the Company
Disclosure Schedule, and all current and former employees, consultants and
independent contractors of the Company and each of its Subsidiaries have
executed such an agreement and copies of all such agreements have been provided
to Parent or made available to Parent for review.
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(m) No Company Intellectual Property or product, technology or
service of the Company or its Subsidiaries is subject to any Order, Action or
Proceeding or "march in" rights that restricts, or that is reasonably expected
to restrict in any manner, the use, transfer or licensing of any Company
Intellectual Property by the Company or, as applicable, its Subsidiaries or that
may affect the validity, use or enforceability of such Company Intellectual
Property.
(n) No (i) product, technology, service or publication of the
Company or its Subsidiaries, (ii) material published or distributed by the
Company or its Subsidiaries or (iii) conduct or statement of Company or its
Subsidiaries constitutes obscene material, a defamatory statement or material,
false advertising or otherwise violates any Law.
(o) The Company and each of its Subsidiaries has taken all actions
necessary and appropriate to assure that there shall be no material adverse
change to their respective business or electronic systems or material
interruptions in the delivery of the Company's or, as applicable, any of its
Subsidiary's products and services by reason of the advent of the year 2000,
including that all of its products (including products currently under
development) will, without interruption or manual intervention, continue to
consistently, predictably and accurately record, store, process, calculate and
present calendar dates falling on and after (and if applicable, spans of time
including) January 1, 2000, and will consistently, predictably and accurately
calculate any information dependent on or relating to such dates in the same
manner, and with the same functionality, data integrity and performance, as such
products record, store, process, calculate and present calendar dates on or
before December 31, 1999, or calculate any information dependent on or relating
to such dates. Without limiting the generality of the foregoing, (i) the Company
and each of its Subsidiaries have taken all actions necessary and appropriate to
ensure that the IT systems and non-IT systems used by the Company and its
Subsidiaries in their respective internal operations will function properly
beyond 1999 (and the Company has no knowledge of any material issues that have
arisen in connection therewith) and (ii) the Company and each of its
Subsidiaries has made inquiries of the suppliers listed in Section 2.23(b) of
the Company Disclosure Schedule as to the status of their Year 2000 efforts and
as a result thereof has not uncovered any problems that could materially disrupt
or harm the day-to-day functioning of business and operations of the Company.
(p) Neither this Agreement nor any transactions to be accomplished
pursuant to this Agreement will result in Parent's granting any rights or
licenses with respect to the Intellectual Property of Parent to any Person
pursuant to any Contract to which the Company or any of its Subsidiaries is a
party or by which any of their respective Assets and Properties are bound.
(q) Section 2.17(q) of the Company Disclosure Schedule sets forth a
list of (x) all software which the Company or any of its Subsidiaries has
licensed from any third party which is used by the Company and its Subsidiaries
in its products or otherwise in its business (other than standard off-the-shelf
software) and (y) a list of all "freeware" and "shareware" incorporated into any
product now or heretofore shipped by the Company or any of its Subsidiaries. The
Company and each of its Subsidiaries has all rights necessary to the use of such
software, "freeware" and "shareware".
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(r) The products of the Company and each of its Subsidiaries comply
in all material respects with all applicable standards and with the feature
specifications and performance standards set forth in the product data sheets of
the Company and, as applicable, its Subsidiaries. There are no outstanding
claims (or facts that may reasonably lead to a claim) for breach of warranties
by the Company or any of its Subsidiaries in connection with the foregoing. All
product performance comparisons heretofore furnished by the Company or any of
its Subsidiaries to customers or Parent are accurate in all material respects as
of the dates so furnished (except that, in the case of product performance
comparisons made as of a specified earlier date, such comparisons shall be
accurate as of such specified earlier date, and, in the case of product
performance comparisons superseded by a subsequent product performance
comparison furnished to the customer before the customer's acquisition of a
license on the product covered by the superseded comparison, the superseding
comparison shall be accurate in all material respects and the superseded
comparison shall be disregarded).
(s) The Company and each of its Subsidiaries have taken all
necessary and appropriate steps to protect and preserve ownership of Company
Intellectual Property. The Company and each of its Subsidiaries has secured
valid written assignments from all consultants and employees who contributed to
the creation or development of the Company Intellectual Property. In the event
that the consultant is concurrently employed by the Company or any of its
Subsidiaries and a third party, the Company or, as applicable, its Subsidiary
has taken appropriate steps to ensure that any Company Intellectual Property
developed by such a consultant does not belong to the third party or conflict
with the third party's employment agreement (such steps include ensuring that
all research and development work performed by such a consultant are performed
only on the facilities of the Company or its Subsidiaries and only using the
resources of the Company or its Subsidiaries), except as set forth in Section
2.17(s) of the Company Disclosure Schedule.
2.18 Contracts.
(a) Section 2.18(a)(1) of the Company Disclosure Schedule
contains a true and complete list of each of the Contracts or other arrangements
(true and complete copies or, if none, reasonably complete and accurate written
descriptions of which, together with all amendments and supplements thereto and
all waivers of any terms thereof, have been made available to Parent prior to
the execution of this Agreement), to which the Company or any of its
Subsidiaries is a party or by which any of their respective Assets and
Properties are bound (other than employee offer letters). Section 2.18(a)(2) of
the Company Disclosure Schedule contains a true and complete list of each
Contract of the Company or any of its Subsidiaries (i) not terminable by the
Company or, as applicable, its Subsidiaries upon thirty (30) days (or less)
notice by the Company or, its Subsidiary as applicable, without penalty or
obligation to make payments based on such termination or (ii) which provides for
continuing design or other services (including engineering and research and
development services) by the Surviving Corporation after the Closing Date.
(b) Each Contract required to be disclosed in Section 2.18(a) of
the Company Disclosure Schedule is in full force and effect and constitutes a
legal, valid and binding agreement, enforceable in accordance with its terms,
and to the knowledge of the Company or its Subsidiaries, each other party
thereto; and except as disclosed in Section 2.18(b) of the Company
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Disclosure Schedule, to the knowledge of the Company or its Subsidiaries, no
other party to such Contract is, nor has received notice that it is, in
violation or breach of or default under any such Contract (or with notice or
lapse of time or both, would be in violation or breach of or default under any
such Contract).
(c) Except as disclosed in Section 2.18(c) of the Company
Disclosure Schedule, neither the Company nor any of its Subsidiaries is a party
to or bound by any Contract that has been or could reasonably be expected to be,
individually or in the aggregate with any other similar Contracts, materially
adverse to the Business or Condition of the Company or, as applicable, its
Subsidiaries, or that has been or could reasonably be expected to result,
individually or in the aggregate with any such other Contracts in Losses to the
Company or, as applicable, its Subsidiaries, or be materially adverse to the
Business or Condition of the Company.
(d) Except as disclosed in Section 2.18(d) of the Company
Disclosure Schedule, neither the Company nor any of its Subsidiaries is a party
to or bound by any Contract that (i) automatically terminates or allows
termination by the other party thereto upon consummation of the transactions
contemplated by this Agreement or (ii) contains any covenant or other provision
which limits the Company's or, as applicable, any of its Subsidiaries' ability
to compete with any Person in any line of business or in any area or territory.
2.19 Insurance.
(a) Section 2.19(a) of the Company Disclosure Schedule contains a
true and complete list (including the names and addresses of the insurers, the
expiration dates thereof, the annual premiums and payment terms thereof, the
period of time covered thereby and a brief description of the interests insured
thereby) of all liability, property, workers' compensation, directors' and
officers' liability and other insurance policies currently in effect that insure
any of the business, operations or employees of the Company and its Subsidiaries
or affect or relate to the ownership, use or operation of any of the Assets and
Properties of the Company and that (a) have been issued to the Company or its
Subsidiaries or (b) to the knowledge of the Company or its Subsidiaries, have
been issued to any Person (other than the Company) for the benefit of the
Company or any of its Subsidiaries. The insurance coverage provided by the
policies set forth in Section 2.19(a) of the Company Disclosure Schedule will
not terminate or lapse by reason of any of the transactions contemplated by this
Agreement or any of the Ancillary Agreements. Each policy listed in Section
2.19(a) of the Company Disclosure Schedule is valid and binding and in full
force and effect, all premiums due thereunder have been paid when due and
neither the Company, the applicable Subsidiary of the Company or the Person to
whom such policy has been issued has received any notice of cancellation or
termination in respect of any such policy or is in default thereunder, and the
Company has no knowledge of any reason or state of facts that could reasonably
be expected to lead to the cancellation of such policies or of any threatened
termination of, or material premium increase with respect to, any of such
policies. The insurance policies listed in Section 2.19(a) of the Company
Disclosure Schedule, (i) in light of the business, operations and Assets and
Properties of the Company and of its Subsidiaries are in amounts and have
coverages that are reasonable and customary for Persons engaged in similar
businesses and operations and having similar Assets and Properties and (ii) are
in amounts and
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have coverages as required by any Contract to which the Company or any of its
Subsidiaries is a party or by which any of their respective Assets and
Properties is bound.
(b) Section 2.19(b) of the Company Disclosure Schedule contains a
list of all claims made under any insurance policies covering the Company or any
of its Subsidiaries in the last two years. Neither the Company nor any of its
Subsidiaries has received notice that any insurer under any policy listed (or
required to be listed) in Section 2.19(b) of the Company Disclosure Schedule is
denying, disputing or questioning liability with respect to a claim thereunder
or defending under a reservation of rights clause. The Company and its
Subsidiaries have , in the reasonable judgment of the Company, in light of their
respective business, location, operations and Assets and Properties, maintained,
at all times, without interruption, appropriate insurance, both in scope and
amount of coverages.
2.20 Affiliate Transactions.
(a) Except as disclosed in Section 2.9(f) or Section 2.20(a) of
the Company Disclosure Schedule, (i) there are no Contracts or Liabilities
between the Company or its Subsidiaries, on the one hand, and (A) any current or
former officer, director, stockholder, or to the Company's knowledge, any
Affiliate or Associate of the Company or its Subsidiaries or (B) any Person who,
to the Company's knowledge, is an Associate of any such officer, director,
stockholder or Affiliate, on the other hand, (ii) neither the Company nor any of
its Subsidiaries provides or causes to be provided any assets, services or
facilities to any such current or former officer, director, stockholder,
Affiliate or Associate, (iii) neither the Company, its Subsidiaries nor any such
current or former officer, director, stockholder, Affiliate or Associate
provides or causes to be provided any assets, services or facilities to the
Company and (iv) neither the Company nor any of its Subsidiaries beneficially
owns, directly or indirectly, any Investment Assets of any such current or
former officer, director, stockholder, Affiliate or Associate.
(b) Except as disclosed in Section 2.20(b) of the Company
Disclosure Schedule, each of the Contracts and Liabilities listed in Section
2.20(a) of the Company Disclosure Schedule were entered into or incurred, as the
case may be, on terms no less favorable to the Company or its Subsidiaries (in
the reasonable judgment of the Company) than if such Contract or Liability was
entered into or incurred on an arm's-length basis on competitive terms.
2.21 Employees; Labor Relations.
(a) Neither the Company nor any of its Subsidiaries is a party to
any collective bargaining agreement and there are no unfair labor practice or
labor arbitration proceedings pending with respect to the Company or any of its
Subsidiaries, or, to the knowledge of the Company, threatened, and there are no
facts or circumstances known to the Company or any of its Subsidiaries that
could reasonably be expected to give rise to such complaint or claim. To the
knowledge of the Company or any of its Subsidiaries, there are no organizational
efforts presently underway or threatened involving any employees of the Company
or any of its Subsidiaries or any of the employees performing work for the
Company or any of its Subsidiaries but provided by an outside employment agency,
if any. There has been no work stoppage, strike or other concerted action by
employees of the Company or any of its Subsidiaries.
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(b) Each Person who is an employee of the Company or any of its
Subsidiaries is employed at will, and no employee of the Company or any of its
Subsidiaries is represented by a union. Each Person who is an independent
contractor of the Company or any of its Subsidiaries is properly classified as
an independent contractor for purposes of all employment related Laws and all
Laws concerning the status of independent contractors. Section 2.21(b)(i) of the
Company Disclosure Schedule sets forth, individually and by category, the name
of each officer, employee, independent contractor and consultant, together with
such person's position or function, annual base salary or wage and any
incentive, severance or bonus arrangements with respect to such person. Except
as described in Section 2.21(b)(ii) of the Company Disclosure Schedule, the
completion of the transactions contemplated by this Agreement will not result in
any payment or increased payment becoming due from the Company or its Subsidiary
to any current or former officer, director, or employee of, or consultant to,
the Company, and to the knowledge of the Company no employee of the Company or,
its Subsidiaries have made any threat, or otherwise revealed an intent, to
terminate such employee's relationship with the Company or, as applicable, its
Subsidiary, for any reason, including because of the consummation of the
transactions contemplated by this Agreement. Neither the Company nor any of its
Subsidiaries is a party to any agreement for the provision of labor from any
outside agency. To the knowledge of the Company, since December 31, 1997 there
have been no claims by employees of such outside agencies, if any, with regard
to employees assigned to work for the Company and its Subsidiaries, and no
claims by any governmental agency with regard to such employees.
(c) Since December 31, 1997, there have been no federal or state
claims based on sex, sexual or other harassment, age, disability, race or other
discrimination or common law claims, including claims of wrongful termination,
by any employees of the Company or any of its Subsidiaries or by any of the
employees performing work for the Company, or any of its Subsidiaries but
provided by an outside employment agency, and there are no facts or
circumstances known to the Company that could reasonably be expected to give
rise to such complaint or claim. The Company and each of its Subsidiaries has
complied with all laws related to the employment of employees and, except as set
forth in Section 2.21(c) of the Company Disclosure Schedule, since December 31,
1997 the Company has not received any notice of any claim that it has not
complied in any material respect with any Laws relating to the employment of
employees, including any provisions thereof relating to wages, hours, collective
bargaining, the payment of social security and similar taxes, equal employment
opportunity, employment discrimination, employee safety, or that it is liable
for any arrearages of wages or any taxes or penalties for failure to comply with
any of the foregoing.
(d) Neither the Company nor any of its Subsidiaries has any written
policies and/or employee handbooks or manuals except as described in Section
2.21(d) of the Company Disclosure Schedule.
(e) To the knowledge of the Company, no officer, employee or
consultant of the Company or any its Subsidiaries is obligated under any
Contract or other agreement or subject to any Order or Law that would interfere
with the Company's, or as applicable, any of its Subsidiaries' business as
currently conducted. Neither the execution nor delivery of this Agreement, nor
the carrying on of the Company's or any of its Subsidiaries' business as
presently conducted nor any activity of such officers, employees or consultants
in connection
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with the carrying on of the Company's, or as applicable, any of its
Subsidiaries' business as presently conducted, will conflict with or result in a
breach of the terms, conditions or provisions of, constitute a default under, or
trigger a condition precedent to any rights under any Contract or other
agreement under which any of such officer's, employees or consultants is now
bound.
2.22 Environmental Matters.
(a) The Company and its Subsidiaries possess any and all
Environmental Permits necessary to or required for the operation of their
respective businesses. The Company and its Subsidiaries will obtain, prior to
the Closing, any Environmental Permits that must be obtained as of or
immediately after the Closing in order for the Surviving Corporation, and its
Subsidiaries to conduct their respective businesses as was conducted prior to
the Closing.
(b) The Company and each of its Subsidiaries is in compliance with
(i) all terms, conditions and provisions of its Environmental Permits; and (ii)
all Environmental Laws.
(c) Neither the Company, or any Subsidiary of the Company nor any
predecessor of the Company or, any Subsidiary of the Company nor any entity
previously owned by the Company or any of its Subsidiaries has received any
notice of alleged, actual or potential responsibility for, or any inquiry
regarding, (i) any Release or threatened or suspected Release of any Hazardous
Material, or (ii) any violation of Environmental Law.
(d) Neither the Company, any Subsidiary of the Company, any
predecessor of the Company or of any Subsidiary of the Company, nor any entity
previously owned by the Company or any of its Subsidiaries has any obligation or
liability with respect to any Hazardous Material, including any Release or
threatened or suspected Release of any Hazardous Material, and there have been
no events, facts or circumstances which could form the basis of any such
obligation or liability.
(e) No Releases of Hazardous Material(s) have occurred at, from,
in, to, on, or under any Site and no Hazardous Material is present in, on, about
or migrating to or from any Site.
(f) Neither the Company, or any Subsidiary of the Company, nor any
predecessor of the Company, or, any Subsidiary of the Company nor any entity
previously owned by the Company or any of its Subsidiaries, has transported or
arranged for the treatment, storage, handling, disposal or transportation of any
Hazardous Material at or to any location.
(g) No Site is a current or proposed Environmental Clean-up Site.
(h) There are no Liens under or pursuant to any Environmental Law
on any Site.
(i) There is no (i) underground storage tank, active or abandoned,
(ii) polychlorinated biphenyl containing equipment, (iii) asbestos-containing
material, (iv) radon, (v) lead-based paint or (vi) urea formaldehyde at any
Site. Any underground storage tank meets all 1998 upgrade requirements.
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(j) There have been no environmental investigations, studies,
audits, tests, reviews or other analyses conducted with respect to any Site
which have not been delivered to Parent prior to execution of this Agreement.
(k) Neither the Company nor any of its Subsidiaries is a party,
whether as a direct signatory or as successor, assign, third-party beneficiary,
guarantor or otherwise, to, and is not otherwise bound by, any lease or other
contract under which the Company or any of its Subsidiaries is obligated or may
be obligated by any representation, warranty, covenant, restriction,
indemnification or other undertaking respecting Hazardous Materials or under
which any other person is or has been released respecting Hazardous Materials.
(l) The Company and any predecessors of the Company or any of its
Subsidiaries and any entity previously owned by the Company or any of its
Subsidiaries have provided all notifications and warnings, made all reports, and
kept and maintained all records required pursuant to Environmental Laws.
2.23 Substantial Customers and Suppliers. Section 2.23(a) of the Company
Disclosure Schedule lists the fifteen (15) largest customers of the Company and
its Subsidiaries, collectively, on the basis of revenues collected or accrued
for the most recent complete fiscal year. Section 2.23(b) of the Company
Disclosure Schedule lists the 15 largest suppliers of the Company and its
Subsidiaries on the basis of cost of goods or services purchased for the most
recent fiscal year. Except as disclosed in Section 2.23(c) of the Company
Disclosure Schedule, no such customer or supplier has ceased or materially
reduced its purchases from or sales or provision of services to the Company and
its Subsidiaries since September 30, 1999 or, to the knowledge of the Company or
its Subsidiaries, has threatened to cease or materially reduce such purchases or
sales or provision of services after the date hereof. Except as disclosed in
Section 2.23(d) of the Company Disclosure Schedule, to the knowledge of the
Company or its Subsidiaries, no such customer or supplier is threatened with
bankruptcy or insolvency.
2.24 Accounts Receivable. Except as set forth in Section 2.24 of the
Company Disclosure Schedule, the accounts and notes receivable of the Company
and its Subsidiaries reflected on the Company Financials, and all accounts and
notes receivable arising subsequent to the Financial Statement Date, (a) arose
from bona fide sales transactions in the ordinary course of business, consistent
with past practice, and are payable on ordinary trade terms, (b) are legal,
valid and binding obligations of the respective debtors enforceable in
accordance with their respective terms, (c) are not subject to any valid set-off
or counterclaim and (d) do not represent obligations for goods sold on
consignment, on approval or on a sale-or-return basis or subject to any other
repurchase or return arrangement.
2.25 Inventory. All inventory of the Company and its Subsidiaries
reflected on the balance sheet included in the Company Financials consisted, and
all such inventory acquired since the Audited Financial Statement Date consists,
of a quality and quantity usable and salable in the ordinary course of business.
Except as disclosed in the notes to the Financial Statements or in Section 2.25
of the Company Disclosure Schedule, all items included in the inventory of the
Company and its Subsidiaries are the property of the Company or its Subsidiaries
free and clear of any Lien, have not been pledged as collateral, are not held by
the Company or its Subsidiaries
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on consignment from others and conform in all material respects to all standards
applicable to such inventory or its use or sale imposed by Governmental or
Regulatory Authorities.
2.26 Other Negotiations; Brokers; Third-Party Expenses. Neither the
Company nor any of its Subsidiaries officers, directors, employees, agents, or,
to the knowledge of the Company, any of its or its Subsidiaries, stockholders or
Affiliates (nor any investment banker, financial advisor, attorney, accountant
or other Person retained by or acting for or on behalf of the Company, any of
its Subsidiaries or any such Affiliate) (a) has entered into any Contract that
conflicts with any of the transactions contemplated by this Agreement or (b) has
entered into any Contract or had any discussions with any Person regarding any
transaction involving the Company or its Subsidiaries which could result in
Parent, the Company, any of its Subsidiaries or any general partner, limited
partner, manager, officer, director, employee, agent or Affiliate of any of them
being subject to any claim for liability to said Person as a result of entering
into this Agreement or consummating the transactions contemplated hereby. No
broker, investment banker, financial advisor or other Person is entitled to any
broker's, finder's, financial advisor's or similar fee or commission in
connection with this Agreement and the transactions contemplated hereby based on
arrangements made by or on behalf of the Company or its Subsidiaries.
2.27 Banks and Brokerage Accounts. Section 2.27 of the Company
Disclosure Schedule sets forth (a) a true and complete list of the names and
locations of all banks, trust companies, securities brokers and other financial
institutions at which the Company or its Subsidiaries have an account or safe
deposit box or maintains a banking, custodial, trading or other similar
relationship, (b) a true and complete list and description of each such account,
box and relationship, indicating in each case the account number and the names
of the respective officers, employees, agents or other similar representatives
of the Company or its Subsidiaries having signatory power with respect thereto
and (c) a list of each Investment Asset, the name of the record and beneficial
owner thereof, the location of the certificates, if any, therefor, the maturity
date, if any, and any stock or bond powers or other authority for transfer
granted with respect thereto.
2.28 Warranty Obligations.
(a) Section 2.28(a) of the Company Disclosure Schedule sets forth
(i) a list of all forms of written warranties, guarantees and written warranty
policies of the Company and its Subsidiaries in respect of any of the Company's
and, as applicable, its Subsidiaries' products and services, which are currently
in effect (the "Warranty Obligations"), and the duration of each such Warranty
Obligation, (ii) each of the Warranty Obligations which is subject to any
dispute or, to the knowledge of the Company, threatened dispute and (iii) the
experience of the Company and, as applicable, its Subsidiary with respect to
warranties, guarantees and warranty policies of or relating to the Company's
and, as applicable, its Subsidiaries' products and services. True and correct
copies of the Warranty Obligations have been delivered to Parent prior to the
execution of this Agreement.
(b) Except as disclosed in Section 2.28(b) of the Company
Disclosure Schedule, (i) there have not been any material deviations from the
Warranty Obligations, and no salesperson, employee or agent of the Company or
any of its Subsidiaries are authorized to
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undertake obligations to any customer or other Person in excess of such Warranty
Obligations and (ii) the balance sheet included in the Interim Financial
Statements reflects adequate reserves for Warranty Obligations. All products
manufactured, designed, licensed, leased, rented or sold by the Company or any
of its Subsidiaries (A) are and were free from material defects in construction
and design and (B) satisfy any and all Contract or other specifications related
thereto to the extent stated in writing in such Contracts or specifications, in
each case, in all material respects.
2.29 Foreign Corrupt Practices Act. Neither the Company, nor to the
knowledge of the Company or its Subsidiaries, any agent, employee or other
Person associated with or acting on behalf of the Company or any of its
Subsidiaries has, directly or indirectly, used any corporate funds for unlawful
contributions, gifts, entertainment or other unlawful expenses relating to
political activity, made any unlawful payment to foreign or domestic government
officials or employees or to foreign or domestic political parties or campaigns
from corporate funds, violated any provision of the Foreign Corrupt Practices
Act of 1977, as amended, or made any bribe, rebate, payoff, influence payment,
kickback or other similar unlawful payment.
2.30 Tax-Free Reorganization.
(a) To the knowledge of the Company or its Subsidiaries after Good
Faith Consultation with the Company's independent accountants, neither the
Company nor any of its directors, officers or stockholders has taken, or
permitted any Affiliate to take, any action which could reasonably be expected
to jeopardize the status of the Merger as a "reorganization" within the meaning
of Section 368(a) of the Internal Revenue Code.
(b) The Company has been informed by Xxxxxx & Xxxxxx, counsel to
the Company, that Xxxxxx & Xxxxxx will deliver, at or prior to Closing, a
written opinion in the form of Exhibit L attached hereto.
2.31 Financial Projections/Operating Plan.
(a) The Company has made available to Parent certain financial
projections with respect to the Company's business which projections were
prepared for internal use only. The Company makes no representation or warranty
regarding the accuracy of such projections or as to whether such projections
will be achieved, except that the Company represents and warrants that such
projections were prepared in good faith and are based on assumptions believed by
the Company to be reasonable as of the date of this Agreement. The redacted
confidential information requested by Parent or its counsel and not provided to
Parent or its counsel based upon the Company's or its Subsidiaries obligations
of confidentiality to third parties is accurately incorporated into the
financial projections referred to above.
(b) The Company has made available to Parent and Parent has
reviewed and approved the written budget or other written operating plan for the
balance of 2000 and 2001 (the "Operating Plan"). The Company makes no
representation or warranty regarding its ability to successfully execute the
Operating Plan, except that the Company represents and warrants that the
Operating Plan was prepared in good faith and is based on assumptions believed
by it to be reasonable as of the date of this Agreement.
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2.32 Approvals.
(a) Section 2.32(a) of the Company Disclosure Schedule contains a
list of all material Approvals of Governmental or Regulatory Authorities
relating to the business conducted by the Company which are required to be given
to or obtained by the Company or any of its Subsidiaries from any and all
Governmental or Regulatory Authorities in connection with the consummation of
the transactions contemplated by this Agreement and the Ancillary Agreements
(other than the filing of the Certificate of Merger, together with the required
officers' certificates, and such consents, approvals, orders, authorizations,
registrations, declarations and filings as may be required under state or
federal securities laws).
(b) Section 2.32(b) of the Company Disclosure Schedule contains a
list of all material Approvals which are required to be given to or obtained by
the Company or any of its Subsidiaries from any and all third parties other than
Governmental or Regulatory Authorities in connection with the consummation of
the transactions contemplated by this Agreement and the Ancillary Agreements.
(c) Except as set forth in Section 2.32(c)(1) of the Company
Disclosure Schedule, the Company and each of its Subsidiaries has obtained all
material Approvals from Governmental or Regulatory Authorities necessary to
conduct the business conducted by the Company or any of its Subsidiaries in the
manner as it is currently being conducted and there has been no written notice
received by the Company or any of its Subsidiaries of any material violation or
material non-compliance with any such Approvals. All material Approvals from
Governmental or Regulatory Authorities necessary to conduct the business
conducted by the Company or any of its Subsidiaries as it is currently being
conducted are set forth in Section 2.32(c)(2) of the Company Disclosure
Schedule.
(d) The affirmative vote or consent of the holders of a majority of
the shares of Company Common Stock outstanding as of the applicable record date
is the only vote of the holders of any of the Company Capital Stock necessary to
approve this Agreement and the Merger and the transactions contemplated hereby.
The shares owned by the stockholders of the Company listed on Schedule 6.3(f)(i)
who have concurrently herewith entered into Support Agreements constitute a
majority of the Company Common Stock.
2.33 Company Options, Company Stock Purchase Rights and Restricted Stock
Purchase Agreements.
(a) All employees and other Persons, who may be entitled to receive
additional Company Options or shares of Company Common Stock upon certain
dilutive events or who are entitled to any acceleration of vesting of options or
stock upon a change of control, have waived any such claim.
(b) The Company has not issued any, and has no outstanding, Company
Stock Purchase Rights.
(c) The Company is not a party to any Restricted Stock Purchase
Agreements.
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2.34 Compliance. Except as set forth in Section 2.33 of the Company
Disclosure Schedule, since December 31, 1995, the Company, each of its
Subsidiaries and their Affiliates, officers, directors, agents and employees
have been and are in compliance with all applicable Laws and Orders of any
Governmental or Regulatory Authorities applicable to the business conducted by
the Company or any of its Subsidiaries, and neither the Company and its
Subsidiaries nor any of their Affiliates, is aware of any claim of violation, or
of any actual violation, of any such Laws and Orders by the Company or its
Subsidiaries.
2.35 Takeover Statutes. No Takeover Statute applicable to the Company or
its Subsidiaries is applicable to the Merger or the transactions contemplated
hereby.
2.36 Permit Application; Information Statement. The information supplied
by the Company for inclusion in the application for issuance of a California
Permit pursuant to which the shares of Parent Common Stock to be issued in the
Merger and (if deemed necessary by Parent in its good faith judgment) the
Company Options to be assumed in the Merger will be qualified under the
California Code (the "Permit Application") shall not at the time the Fairness
Hearing is held pursuant to Section 25142 of the California Code and the time
the qualification of such securities is effective under Section 25122 of the
California Code contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading. The information supplied by the Company for inclusion in
the information statement to be sent to the stockholders of the Company in
connection with the Company stockholders' consideration of the adoption of this
Agreement (the "Company Stockholder Action") (such information statement as
amended or supplemented is referred to herein as the "Information Statement")
shall not, on the date the Information Statement is first mailed to the
Company's stockholders, at the time of the Company Stockholder Action and at the
Effective Time, contain any statement which, at such time, is false or
misleading with respect to any material fact, or omit to state any material fact
necessary in order to make the statements made therein, in light of the
circumstances under which they are made, not false or misleading; or omit to
state any material fact necessary to correct any statement in any earlier
communication with respect to the solicitation of proxies or written consents
for the Company Stockholder Action which has become false or misleading.
Notwithstanding the foregoing, the Company makes no representation, warranty or
covenant with respect to any information supplied by Parent or Merger Sub which
is contained in the Permit Application or the Information Statement.
2.37 No Solicitation. The Company and its Subsidiaries have from October
16, 2000 to the date hereof acted in accordance with the terms and conditions of
Section 1 of the Exclusivity Agreement dated October 16, 2000 between Broadcom
and the Company.
2.38 Disclosure.
(a) No representation or warranty made by the Company contained in
this Agreement, and no statement contained in the Company Disclosure Schedule or
in any certificate, list or other writing furnished to Parent pursuant to any
provision of this Agreement (including the Company Financials and the notes
thereto) contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements herein or therein, in
the light of the circumstances under which they were made, not misleading. The
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Company has provided Parent with all of the Contracts and Licenses heretofore
requested on behalf of Parent in writing, and all other material information
concerning the Company or its Subsidiaries in the possession, custody or control
of the Company or its Subsidiaries.
(b) The sealed box delivered on the date of this Agreement to
counsel for Parent purporting to contain a complete set of the redacted copies
of certain documents made available to Parent or its counsel prior to the date
of this Agreement contains a true, accurate and complete set of the redacted
documents previously made available to Parent or its counsel.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub each hereby represent and warrant to the
Company as follows:
3.1 Organization and Qualification. Parent is a corporation duly
organized, validly existing and in good standing under the Laws of the State of
California. Merger Sub is a corporation duly organized, validly existing and in
good standing under the Laws of the State of Delaware. Each of Parent and Merger
Sub has full corporate power and authority to conduct its business as now
conducted and as currently proposed to be conducted and to own, use and lease
its Assets and Properties. Each of Parent and Merger Sub is duly qualified,
licensed or admitted to do business and is in good standing in each jurisdiction
in which the ownership, use, licensing or leasing of its Assets and Properties,
or the conduct or nature of its business, makes such qualification, licensing or
admission necessary, except for such failures to be so duly qualified, licensed
or admitted and in good standing that could not reasonably be expected to have a
material adverse effect on the Business or Condition of Parent or Merger Sub, as
the case may be.
3.2 Authority Relative to this Agreement. Each of Parent and Merger Sub
has full corporate power and authority to execute and deliver this Agreement and
the Ancillary Agreements to which it is a party, to perform its obligations
hereunder and thereunder and to consummate the transactions contemplated hereby
and thereby. The execution and delivery by Parent and Merger Sub of this
Agreement and the Ancillary Agreements to which it is a party and the
consummation by Parent and Merger Sub of the transactions contemplated hereby
and thereby have been duly and validly authorized by all necessary action by the
board of directors of Parent and Merger Sub, and no other action on the part of
the board of directors of Parent and Merger Sub is required to authorize the
execution, delivery and performance of this Agreement and the Ancillary
Agreements to which it is a party and the consummation by Parent and Merger Sub
of the transactions contemplated hereby and thereby. This Agreement and the
Ancillary Agreements to which Parent and Merger Sub is a party have been or will
be, as applicable, duly and validly executed and delivered by Parent and Merger
Sub, as applicable, and, assuming the due authorization, execution and delivery
hereof by the Company and/or the other parties thereto, constitutes or will
constitute, as applicable, a legal, valid and binding obligation of Parent and
Merger Sub, as applicable, enforceable against Parent and Merger Sub in
accordance with its respective terms, except as the enforceability thereof may
be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium or other similar Laws relating to the enforcement of creditors'
rights generally and by general principles of equity.
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3.3 Issuance of Parent Common Stock. The shares of Parent Common Stock
to be issued pursuant to the Merger, when issued, will be duly authorized,
validly issued, fully paid, non-assessable and issued in compliance with
applicable federal and state securities laws subject to the truth and accuracy
of the representations made by the Company in Section 2.3.
3.4 SEC Documents; Parent Financial Statements. Parent has furnished or
made available to the Company true and complete copies of all SEC Documents
filed by it with the SEC since January 1, 2000, all in the form so filed. As of
their respective filing dates, such SEC Documents filed by Parent and all SEC
Documents filed after the date hereof but before the Closing complied or, if
filed after the date hereof, will comply in all material respects with the
requirements of the Securities Act and the Exchange Act and the rules and
regulations of the SEC thereunder, as the case may be, and none of the SEC
Documents contained or will contain any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements made therein, in light of the circumstances in which they
were made, not misleading, except to the extent such SEC Documents have been
corrected, updated or superseded by a document subsequently filed with the SEC.
The financial statements of Parent, including the notes thereto, included in the
SEC Documents (the "Parent Financial Statements") comply as to form in all
material respects with the published rules and regulations of the SEC with
respect thereto, have been prepared in accordance with GAAP consistently applied
(except as may be indicated in the notes thereto or, in the case of unaudited
statements, as permitted by Form 10-Q under the Exchange Act) and present fairly
the consolidated financial position of Parent at the dates thereof and the
consolidated results of its operations and cash flows for the periods then ended
(subject, in the case of unaudited financial statements, to normal year-end
adjustments), it being understood that such financial statements may be required
to be restated from time to time as may be required under applicable pooling of
interests accounting rules in connection with past, present or future
acquisitions. There has been no change in Parent's accounting policies except as
described in the notes to the Parent Financial Statements. Except as reflected
or reserved against in the Parent Financial Statements, Parent has no material
Liabilities, except for Liabilities and obligations (i) incurred in the ordinary
course of business or (ii) that would not be required to be reflected or
reserved against in the balance sheet of Parent prepared in accordance with
GAAP.
3.5 No Conflicts. The execution and delivery by Parent and Merger Sub of
this Agreement and the Ancillary Agreements to which it is a party does not, and
the performance by Parent and Merger Sub of its obligations under this Agreement
and the Ancillary Agreements to which it is a party and the consummation of the
transactions contemplated hereby and thereby do not and will not:
(a) conflict with or result in a violation or breach of any of the
terms, conditions or provisions of (i) the articles of incorporation or bylaws
of Parent or (ii) the certificate of incorporation or bylaws of Merger Sub.
(b) conflict with or result in a violation or breach of any Law or
Order applicable to Parent and Merger Sub or its Assets or Properties; or
(c) except as would not have a material adverse effect on the
Business or Condition of Parent, (i) conflict with or result in a violation or
breach of, (ii) constitute a default
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(or an event that, with or without notice or lapse of time or both, would
constitute a default) under, (iii) require Parent to obtain any consent,
approval or action of, make any filing with or give any notice to any Person as
a result of the terms of (except for (A) the filing of the Certificate of
Merger; (B) such consents approvals, orders, authorizations, registrations,
declarations and filings as may be required under applicable state or federal
securities laws; and (C) such filings as may be required under the HSR Act),
(iv) result in or give to any Person any right of termination, cancellation,
acceleration or modification in or with respect to, (v) result in or give to any
person any additional rights or entitlement to increased, additional,
accelerated or guaranteed payments or performance under, (vi) result in the
creation or imposition of (or the obligation to create or impose) any Lien upon
Parent or Merger Sub or any of their respective Assets or Properties, or (vii)
result in the loss of a material benefit under, any of the terms, conditions or
provisions of any Contract or License to which Parent or Merger Sub is a party
or by which any of its Assets and Properties are bound.
3.6 Information to be Supplied by Parent or Merger Sub. The information
supplied by Parent or Merger Sub for inclusion in the Permit Application shall
not either at the time the Fairness Hearing is held pursuant to Section 25142 of
the California Code or the time the qualification of such securities is
effective under Section 25122 of the California Code, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. The information
supplied by Parent or Merger Sub for inclusion in the Information Statement
shall not, on the date the Information Statement is first mailed to the
Company's stockholders, at the time of the Company Stockholder Action and at the
Effective Time, contain any statement which, at such time, is false or
misleading with respect to any material fact, or omit to state any material fact
necessary in order to make the statements therein, in light of the circumstances
under which it is made, not false or misleading; or omit to state any material
fact necessary to correct any statement in any earlier communication with
respect to the solicitation of proxies or written consents for the Company
Stockholder Action which has become false or misleading. Notwithstanding the
foregoing, Parent and Merger Sub make no representation, warranty or covenant
with respect to any information supplied by the Company which is contained in
any of the foregoing documents.
3.7 Ownership of Merger Sub; No Prior Activities. As of the date hereof
and the Effective Time, except for obligations or liabilities incurred in
connection with its incorporation or organization and the transactions
contemplated by this Agreement and except for this Agreement and any other
agreements or arrangements contemplated by this Agreement, Merger Sub has not
and will not have incurred, directly or indirectly, through any subsidiary or
affiliate, any obligations or liabilities or engaged in any business activities
of any type or kind whatsoever or entered into any agreements or arrangements
with any Person.
3.8 Tax-Free Reorganization. To the knowledge of Parent after Good Faith
Consultation with Parent's independent accountants, neither Parent nor any of
its directors, officers or shareholders has taken, or permitted its Affiliates
to take, any action which could reasonably be expected to jeopardize the status
of the Merger as a "reorganization" within the meaning of Section 368(a) of the
Internal Revenue Code.
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3.9 Takeover Statutes. No Takeover Statute applicable to the Parent or
its Subsidiaries is applicable to the Merger or the transactions contemplated
hereby.
3.10 Approvals.
(a) No Approvals of Governmental or Regulatory Authorities relating
to the business conducted by the Parent are required to be given to or obtained
by the Parent from any and all Governmental or Regulatory Authorities in
connection with the consummation of the transactions contemplated by this
Agreement and the Ancillary Agreements (other than (i) the filing of the
Certificate of Merger, (ii) termination of the waiting period under the HSR Act,
(iii) such consents, approvals, orders, authorizations, registrations,
declarations and filings as may be required under state or federal securities
laws, (iv) filing with the NASD of a listing of additional shares with respect
to the shares of Parent Common Stock issuable under this Agreement and (v)
Approvals of Governmental or Regulatory Authorities which could not reasonably
be expected to have a material adverse effect on the Business or Condition of
the Parent).
(b) No Approvals are required to be given to or obtained by the
Parent from any and all third parties (other than Governmental or Regulatory
Authorities) in connection with the consummation of the transactions
contemplated by this Agreement and the Ancillary Agreements, other than such
Approvals the failure of which to make or obtain as could not reasonably be
expected to have a material adverse effect on the Business or Condition of the
Parent.
3.11 Sealed Box. The sealed box delivered on the date of this Agreement
to counsel for Parent purporting to contain a complete set of the redacted
copies of certain documents made available to Parent or its counsel prior to the
date of this agreement contains a true, accurate and complete set of the
redacted documents previously made available to Parent or its counsel.
ARTICLE 4
CONDUCT PRIOR TO THE EFFECTIVE TIME
4.1 Conduct of Business of the Company. During the period from the date
of this Agreement and continuing until the earlier of (x) the termination of
this Agreement and (y) the Effective Time, the Company agrees (unless the
Company is required to take such action pursuant to this Agreement or Parent
shall give its prior consent in writing, which consent shall not be unreasonably
withheld) to carry on its business substantially in the usual, regular and
ordinary course substantially consistent with past practice and in any event
consistent with the Operating Plan provided prior to the date of this Agreement
to Parent (any material deviations therefrom or material modifications to the
Operating Plan shall be required to be approved in advance by Parent), to pay
its Liabilities and Taxes consistent with the Company's past practices (and in
any event when due), to pay or perform other obligations when due consistent
with the Company's past practices (other than Liabilities, Taxes and other
obligations, if any, contested in good faith through appropriate proceedings),
and, to the extent consistent with such business, to use all commercially
reasonable efforts and institute all commercially reasonable policies required
to preserve substantially intact its present business organization, keep
available the services of its present officers and key employees and preserve
its relationships with customers, suppliers, distributors, licensors, licensees,
independent contractors and other Persons having
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business dealings with it, all with the express purpose and intent of preserving
substantially unimpaired its goodwill and ongoing businesses at the Effective
Time, provided, however, that the Company may without necessity of Parent
approval make adjustments to its operations that the Company's management
reasonably deems necessary or appropriate to respond to any changed market,
competitive, or economic conditions. Subject to the same proviso, except as
expressly contemplated by this Agreement, the Company shall not, without the
prior written consent of Parent, take or agree in writing or otherwise to take,
any action that would result in the occurrence of any of the changes described
in Section 2.9 or any other action that would make any of its representations or
warranties contained in this Agreement untrue or incorrect in any material
respect. The Company shall not, without the prior written consent of Parent,
take or agree in writing or otherwise to take, any action that would prevent the
Company from performing or cause the Company not to perform its agreements and
covenants hereunder or knowingly cause any condition to Parent's closing
obligations in Section 6.1 or Section 6.3 not to be satisfied. Without limiting
the generality of the foregoing, during the period from the date of this
Agreement and continuing until the earlier of the termination of this Agreement
or the Effective Time, except as set forth in the Company Disclosure Schedule or
as required or expressly permitted by this Agreement, the Company and each of
its Subsidiaries shall not (and shall cause each of their respective
Subsidiaries, if any, not to) do, cause or permit any of the following, without
the prior written consent of Parent, which shall not be unreasonably withheld:
(a) Charter Documents: cause or permit any amendments to its
certificate of incorporation or bylaws;
(b) Dividends; Changes in Capital Stock: except as set forth on
Section 4.1(b) of the Company Disclosure Schedule, declare or pay any dividend
on or make any other distribution (whether in cash, stock or property) in
respect of any of its capital stock, or split, combine or reclassify any of its
capital stock or issue or authorize the issuance of any other securities in
respect of, in lieu of or in substitution for shares of its capital stock, or
repurchase or otherwise acquire, directly or indirectly, any shares of its
capital stock except from former employees, directors and consultants in
accordance with agreements providing for the repurchase of shares in connection
with any termination of service to it;
(c) Stock Option Plans: accelerate, amend or change the period of
exercisability or vesting of options or other rights granted under its stock
plans (except pursuant to supplemental agreements with advisory board members
substantially in the form provided to Parent) or authorize cash or other
payments in exchange for any options or other rights granted under any of such
plans; or grant any Option with an exercise price of less than eighty percent
(80%) of the fair market value of its common stock on the date the Option was
granted (as determined in good faith by the Company's board of directors
following consultation with, and consistent with the advice provided by, each of
the Company's and Parent's independent public accountants); or grant any
additional Options (other than Permitted Grants);
(d) Contracts: enter into any Contract or commitment, or violate,
amend or otherwise modify or waive any of the terms of any of its Contracts,
other than Contracts, modifications, and waivers in the ordinary course of
business consistent with past practice.
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(e) Issuance of Securities: issue, deliver or sell or authorize or
propose the issuance, delivery or sale of, any shares of Company Common Stock or
capital stock of a Company Subsidiary (however denominated) or securities
convertible into, or subscriptions, rights, warrants or options to acquire, or
other agreements or commitments of any character obligating it to issue any such
shares or other convertible securities, other than the issuance of shares of its
common stock pursuant to the exercise of Company Options or Company Warrants
outstanding as of the date hereof (or notice of which was given to Parent prior
to the date hereof) and grants to employees and service providers hired after
the date of this Agreement, with consultation of Parent, in the ordinary course
of business consistent with past practice;
(f) Transfer of Assets: dispose of, license or transfer any
material assets of the Company to a third party except in the ordinary course of
business consistent with past practice;
(g) Intellectual Property: dispose of, license or transfer to any
person or entity any rights to any Intellectual Property, other than
non-exclusive licenses in connection with the joint-development, manufacture or
sale of Company products in the ordinary course of business consistent with past
practice;
(h) Exclusive Rights: enter into or amend any agreement pursuant to
which any other party is granted exclusive marketing or other exclusive rights
of any type or scope with respect to any of Company's products or technology;
(i) Dispositions: sell, lease, license or otherwise dispose of or
encumber any of properties or assets of the Company or any of its Subsidiaries,
except as permitted under Section 4.1(g) or for sales of products (and related
nonexclusive licenses) in the ordinary course consistent with past practice;
(j) Indebtedness: incur any indebtedness for borrowed money or
guarantee any such indebtedness or issue or sell any debt securities or
guarantee any debt securities of others;
(k) Leases: enter into any operating lease other than leases for
office premises;
(l) Payment of Obligations: pay, discharge or satisfy any claim,
liability or obligation (absolute, accrued, asserted or unasserted, contingent
or otherwise) arising other than in the ordinary course of business, other than
the payment, discharge or satisfaction of liabilities reflected or reserved
against in the Company Financials and reasonable expenses incurred in connection
with the transactions contemplated by this Agreement;
(m) Capital Expenditures: make any capital expenditures, capital
additions or capital improvements except in accordance with the Company's
Operating Plan or in the ordinary course of business for work stations, servers,
design tools, and laboratory equipment;
(n) Insurance: reduce the amount of any insurance coverage provided
by existing insurance policies;
(o) Termination or Waiver: terminate or waive any right of
substantial value;
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(p) Employee Benefit Plans; New Hires; Pay Increases: adopt or
amend any employee benefit or stock purchase or option plan, hire any new
director level or officer level consultant or employee, pay any special bonus or
special remuneration to any employee, consultant or director other than pursuant
to cash bonus arrangements set forth on the Company Disclosure Schedule and
entered into by the Company or its Subsidiaries prior to the date hereof, or
increase the salaries, wage rates or compensation of any employee or consultant;
(q) Severance Arrangements: grant any severance or termination pay
(i) to any director, officer or consultant or (ii) to any other employee or
consultant except payments made pursuant to standard written agreements
outstanding on the date hereof;
(r) Lawsuits: commence a lawsuit other than (i) for the routine
collection of bills, (ii) in such cases where it in good faith determines that
failure to commence suit would result in the material impairment of a valuable
aspect of its business, provided that it consults with Parent prior to the
filing of such a suit, or (iii) against Parent or Merger Sub for any reason,
including a breach of this Agreement;
(s) Acquisitions: acquire or agree to acquire by merging or
consolidating with, or by purchasing a substantial portion of the assets of, or
by any other manner, any business or any corporation, partnership, association
or other business organization or division thereof;
(t) Taxes: make or change any election in respect of Taxes, adopt
or change any accounting method in respect of Taxes, file any Tax Return or any
amendment to a Tax Return other than the Company's or, if applicable, a Company
Subsidiary's corporate Tax Return for the year ended March 31, 2000, enter into
any closing agreement, settle any claim or assessment in respect of Taxes, or
consent to any extension or waiver of the limitation period applicable to any
claim or assessment in respect of Taxes;
(u) Revaluation: revalue any of its assets, including writing down
the value of inventory or writing off notes or accounts receivable; or
(v) Other: take or agree in writing or otherwise to take, any of
the actions described in Section 4.1(a) through Section 4.1(u), or any other
action that would prevent the Company or any of its Subsidiaries from
performing, or cause the Company or any of its Subsidiaries, not to perform, its
covenants and agreements hereunder.
4.2 No Solicitation. Until the earlier of the Effective Time and the
date of termination of this Agreement pursuant to the provisions of Section 8.1,
neither the Company nor any of its Subsidiaries will take, nor will the Company
permit any of the Company's or its Subsidiaries' Representatives to take any of
the following actions with any Person other than Parent and its designees: (a)
solicit, encourage, initiate, entertain, accept receipt of, review or encourage
any proposals or offers from, or participate in or conduct discussions with or
engage in negotiations with, any Person relating to any offer or proposal, oral,
written or otherwise, formal or informal, with respect to any possible Business
Combination with the Company or any of its Subsidiaries (whether such
Subsidiaries are in existence on the date hereof or are
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hereafter organized), (a "Competing Proposed Transaction"), (b) provide
information with respect to the Company or any of its Subsidiaries (whether such
Subsidiaries are in existence on the date hereof or are hereafter organized) to
any Person, other than Parent, relating to (or which the Company believes would
be used for the purpose of formulating an offer or proposal with respect to), or
otherwise assist, cooperate with, facilitate or encourage any effort or attempt
by any such Person with regard to, any possible Business Combination with the
Company or any Subsidiary of the Company (whether such Subsidiary is in
existence on the date hereof or are hereafter organized), (c) agree to, enter
into a Contract with any Person, other than Parent, providing for, or approve a
Business Combination with the Company or any Subsidiary (whether such Subsidiary
is in existence on the date hereof or are hereafter organized) or (d) authorize
or permit any of the Company's Representatives to take any such action.
Notwithstanding the foregoing, the Company and its board of directors shall be
permitted to engage in discussions or negotiations with, or provide any
information or data to, any Person in response to an unsolicited bona fide
written inquiry, proposal or offer of a Competing Proposed Transaction by any
such Person, if and only to the extent that, in any such case, (i) the board of
directors of the Company concludes in good faith that such inquiry, proposal or
offer of a Competing Proposed Transaction constitutes a Superior Proposal, (ii)
the board of directors of the Company determines in good faith (after
considering the written advice of outside counsel admitted to practice in
Delaware) that failing to take such action would be reasonably likely to
constitute a breach of its fiduciary duties to the Company's stockholders under
applicable law, (iii) prior to providing any information or data to any Person
in connection with any such written offer of a Competing Proposed Transaction by
any such Person, the board of directors of the Company receives from such person
an executed confidentiality agreement containing terms at least as stringent as
those contained in the Confidentiality Agreements and (iv) prior to providing
any information or data to any Person or entering into any negotiations with any
Person, the Company notifies ( the "Proposal Notice") Parent promptly, but in
any event within 24 hours, of such inquiries, proposals or offers received by,
any such information or data requested from, or any such discussions or
negotiations sought to be initiated or continued with, the Company, its
directors, or employees or any of its agents or representatives indication in
connection with such notice, the names of such Person and the material terms and
conditions of any inquiries, proposals or offers; provided, however, that the
Company shall not provide any information or data to any such Person or enter
into discussions or negotiations with any such Person until two Business Days
have expired following the delivery of the Proposal Notice to Parent. The
Company agrees that it will promptly keep Parent informed of the status and
terms of any such inquiries, proposals or offers and the status and terms of any
such proposals or offers and the status and terms of any such discussions or
negotiations. The Company agrees that it will use commercially reasonable
efforts to promptly inform its officers, directors, key employees and
representatives of the obligations undertaken in this Section 4.2. Nothing in
this Section 4.2 shall permit the Company to terminate this Agreement. Each of
the Company and Parent acknowledge that this Section 4.2 was a significant
inducement for Parent and Merger Sub to enter into this Agreement and the
absence of such provision would have resulted in either (i) a material reduction
in the consideration to be paid to the stockholders of the Company in the Merger
or (ii) a failure to induce Parent and Merger Sub to enter into this Agreement.
ARTICLE 5
ADDITIONAL AGREEMENTS
5.1 Information Statement; Permit Application.
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(a) As soon as reasonably practicable after the execution of this
Agreement, the Company, and as applicable, its Subsidiaries shall prepare, with
the full cooperation of Parent, the Information Statement for the stockholders
of the Company to adopt this Agreement. Parent, the Company, and each of
Company's Subsidiaries shall each use commercially reasonable efforts to cause
the Information Statement to comply with applicable federal and state securities
laws requirements. Each of Parent and the Company agrees to provide promptly to
the other such information concerning its and its Subsidiaries' business and
financial statements and affairs as, in the reasonable judgment of the providing
party or its counsel, may be required or appropriate for inclusion in the
Information Statement, or in any amendments or supplements thereto, and to cause
its counsel and auditors to cooperate with the other's counsel and auditors in
the preparation of the Information Statement. The Company and each of its
Subsidiaries will promptly advise Parent, and Parent will promptly advise the
Company in writing if at any time prior to the Effective Time either the
Company, its Subsidiaries or Parent, as applicable, shall obtain knowledge of
any facts that might make it necessary or appropriate to amend or supplement the
Information Statement in order to make the statements contained or incorporated
by reference therein not misleading or to comply with applicable law. The
Information Statement shall contain the unanimous recommendation of the board of
directors of the Company that the Company's stockholders adopt this Agreement
and the conclusion of the board of directors that the terms and conditions of
the Merger are advisable and fair and reasonable to, and in the best interests
of, the stockholders of the Company. Anything to the contrary contained herein
notwithstanding, the Company shall not include in the Information Statement any
information with respect to Parent or its affiliates or associates, the form and
content of which information shall not have been approved by Parent prior to
such inclusion. Notwithstanding the foregoing, the Company may make a Qualifying
Amendment if, in the good faith judgment of the Company's board of directors
(consistent with the written advice of outside counsel admitted to practice in
Delaware) the failure to make such Qualifying Amendment is likely to constitute
to a breach of the directors' fiduciary duties to the Company's stockholders
under Delaware Law.
(b) As soon as reasonably practicable after the execution of this
Agreement, Parent shall prepare, with the cooperation of the Company and its
Subsidiaries, and file the Permit Application. Parent and the Company and its
Subsidiaries shall each use commercially reasonable efforts to cause the Permit
Application to comply with the requirements of applicable federal and state laws
and to cause the California Permit to be issued. Each of Parent and the Company
agrees to provide promptly to the other such information concerning its and its
Subsidiaries' business and financial statements and affairs as, in the
reasonable judgment of the providing party or its counsel, may be required or
appropriate for inclusion in the Permit Application, or in any amendments or
supplements thereto, and to cause its counsel and auditors to cooperate with the
other's counsel and auditors in the preparation and completion of the Permit
Application. The Company and its Subsidiaries will promptly advise Parent, and
Parent will promptly advise the Company, in writing if at any time prior to the
Effective Time either the Company and its Subsidiaries or Parent, as applicable,
shall obtain knowledge of any facts that might make it necessary or appropriate
to amend or supplement the Permit Application in order to make the statements
contained or incorporated by reference therein not misleading or to comply with
applicable law. Anything to the contrary contained herein notwithstanding,
Parent shall not include in the Permit Application any information with respect
to the Company or its Subsidiaries or their respective affiliates or associates,
the form and content of which information shall not have been approved by the
Company prior to such inclusion.
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(c) In the event that it is reasonably determined by Parent or the
Company, following consultation with the other party and after Parent or the
Company, as applicable, has used commercially reasonable efforts to obtain the
California Permit, that such Permit cannot be obtained, or cannot reasonably be
expected to be obtained, in time to permit the Closing to occur on or before
January 31, 2001, then Parent and the Company shall use commercially reasonable
efforts to effect the issuance of the shares of Parent Common Stock to be issued
pursuant to Section 1.6 in a private placement pursuant to Section 4(2) of the
Securities Act on terms and conditions that are reasonably satisfactory to both
Parent and Company. The parties hereto acknowledge and agree that in such event:
(i) as a condition to effecting such issuance as a private placement pursuant to
Section 4(2) of the Securities Act, Parent shall be entitled to obtain from each
stockholder of the Company a Stockholder Certificate in the form attached hereto
as Exhibit F (or such other form as shall be reasonably satisfactory to Parent)
(the "Stockholder Certificate") and that Parent will be relying upon the
representations made by each stockholder of the Company in the applicable
Stockholder Certificate in connection with the issuance of Parent Common Stock
to such stockholder, provided that Parent shall use commercially reasonable
efforts in arranging for a purchaser representative for any Company stockholders
for whom such a representative may be necessary; (ii) (A) prior to Closing,
Parent shall acting in good faith enter into and deliver to Company a
registration rights agreement reasonably acceptable to each of Parent and the
Company (the "Backup Registration Rights Agreement") providing that as soon as
practicable, and in any event within thirty days after the Closing, Parent
shall, with cooperation in customary form of each Company stockholder
participating in such registration, prepare and file with the SEC a registration
statement under the Securities Act for such shares on whatever form shall then
be available to register such shares for public sale on a shelf registration
basis, and (B) Parent shall use all commercially reasonable efforts to obtain
the effectiveness of such registration statement as quickly as possible and to
maintain such effectiveness of at least one-half of each calendar quarter (or
portion thereof) following the Closing until all such shares may be sold
publicly under the Securities Act (including sales under Rule 144 in brokers'
transactions as therein defined); (iii) prior to the effectiveness of such
registration, the shares of Parent Common Stock so issued in the private
placement pursuant to Section 1.6 will not be registered under the Securities
Act and will constitute "restricted securities" within the meaning of the
Securities Act; and (iv) the certificates representing the shares of Parent
Common Stock shall bear appropriate legends to identify such privately placed
shares as being restricted under the Securities Act, to comply with applicable
state securities laws and, if applicable, to notice the restrictions on transfer
of such shares.
5.2 Stockholder Approval. As soon as reasonably practicable following
the execution and delivery of this Agreement, the Company shall give written
notice of this Agreement and the proposed Merger to all Company stockholders and
shall use commercially reasonable efforts to take all other action necessary in
accordance with Delaware Law and its certificate of incorporation and bylaws to
convene a meeting of the stockholders of the Company or to secure the written
consent of its stockholders ("Company Stockholder Action") before January 18,
2001. The Company shall submit this Agreement to its stockholders for adoption
whether or not the Company's board of directors determines at any time
subsequent to declaring its advisability that this Agreement is no longer
advisable and recommends that its stockholders reject it. The Company shall
consult with Parent regarding the date of the Company Stockholder Action and
shall not postpone or adjourn (other than for the absence of a quorum) any
meeting of the stockholders of the Company without the consent of Parent, which
consent shall not be
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unreasonably withheld. The Company shall use all commercially reasonable efforts
required to solicit and obtain from stockholders of the Company proxies or
written consents in favor of the Merger and this Agreement and shall take all
other action necessary or advisable to secure the vote or written consent of
stockholders required to effect the Merger. The materials submitted to the
stockholders of the Company in respect of the Merger shall have been subject to
prior review and comment by Parent and shall include (a) information regarding
the Company, the terms of the Merger and this Agreement, (b) subject to the
right under Section 5.1(a) to make a Qualifying Amendment, the unanimous
recommendation of the board of directors of the Company that the Company's
stockholders adopt this Agreement and approve and execute such other documents
as may be required to satisfy the applicable requirements of the Securities Act
in connection with the issuance and sale of Parent Common Stock in the Merger,
(c) subject to the right under Section 5.1(a) to make a Qualifying Amendment,
the conclusion of the board of directors of the Company that the terms and
conditions of this Agreement and the Merger are advisable, fair and reasonable
to, and in the best interests of, the Company's stockholders and (d) such other
documents as may be required to satisfy the applicable requirements of the
Securities Act in connection with the issuance and sale of Parent Common Stock
in the Merger.
5.3 Access to Information. Subject in all cases to the Company's
obligations of confidentiality with respect to third-party confidential
information, between the date of this Agreement and the earlier of the Effective
Time or the termination of this Agreement, upon reasonable notice, the Company
shall (a) give Parent and its officers, employees, accountants, counsel,
financing sources and other agents and representatives full access to all
buildings, offices, and other facilities and to all Books and Records of the
Company or its Subsidiaries, whether located on the premises of the Company or
at another location; (b) permit Parent to make such inspections as it may
require; (c) cause its officers to furnish Parent such financial, operating,
technical and product data and other information with respect to the business
and Assets and Properties of the Company or its Subsidiaries as Parent from time
to time may request, including financial statements and schedules; (e) allow
Parent the opportunity to interview such employees and other personnel and
Affiliates of the Company or its Subsidiaries with the Company's prior written
consent, which consent shall not be unreasonably withheld or delayed; and (f)
assist and cooperate with Parent in the development of cooperation plans for
implementation by Parent and the Surviving Corporation following the Effective
Time; provided, however, that no investigation made prior to the date of this
Agreement or made pursuant to this Section 5.3 shall affect or be deemed to
modify any representation or warranty made by the Company herein. Subject to
Section 5.4 and the agreements referenced therein, materials furnished to Parent
pursuant to this Section 5.4 may be used by Parent for strategic and integration
planning purposes relating to accomplishing the transactions contemplated
hereby.
5.4 Confidentiality. The parties acknowledge that Parent and the Company
have previously executed certain non-disclosure agreements and an Exclusivity
Agreement containing confidentiality provisions dated as of October 16, 2000,
and have implemented certain confidentiality procedures pursuant thereto
(collectively, the "Confidentiality Agreements"), which Confidentiality
Agreement shall continue in full force and effect in accordance with their
terms. Without limiting the foregoing, all information furnished to Parent and
its officers, employees, accountants and counsel by the Company, and all
information furnished to the Company by Parent and its officers, employees,
accountants and counsel, shall be covered by the Confidentiality Agreements, and
Parent and the Company shall be fully liable and responsible
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under the Confidentiality Agreements for any breach of the terms and conditions
thereof by their respective subsidiaries, officers, employees, accountants,
counsel and other Representatives.
5.5 Expenses. All fees and expenses incurred in connection with the
Merger (whether or not it is consummated), including all legal, accounting,
financial advisory, consulting and all other fees and expenses of third parties
("Third-Party Expenses") incurred by a party or other Person in connection with
the negotiation and effectuation of the terms and conditions of this Agreement
and the transactions contemplated hereby, shall be the obligation of the
respective party or other Person incurring such fees and expenses. The Company
shall consult, in advance, with Parent prior to incurring material Third-Party
Expenses in excess of the estimates previously provided to Parent.
5.6 Public Disclosure. Unless otherwise required by Law (including
federal and state securities laws) or, as to Parent, by the rules and
regulations of the NASD, prior to the Effective Time, no public disclosure
(whether or not in response to any inquiry) of the existence of any subject
matter of, or the terms and conditions of, this Agreement shall be made by any
party hereto unless approved by Parent and the Company prior to release;
provided, however, that such approval shall not be unreasonably withheld or
delayed. Notwithstanding the foregoing, (i) each of Parent and the Company shall
be permitted to disclose the existence (but not the terms) of this Agreement to
their customers, suppliers and sales representatives with whom it has
non-disclosure agreements that apply to such disclosure (or the other party
otherwise agrees to such disclosure) and, except as set forth in Section 4.2,
for which there is a business reason for the disclosure and (ii) pursuant to
Section 4.2, the Company may, in general terms only, in response to inquiries
from third parties concerning any Competing Proposed Transaction, inform such
third parties that the Company is under a contractual obligation not to discuss
such matters.
5.7 Approvals. The Company and Parent shall use commercially reasonable
efforts to obtain all Approvals from Governmental or Regulatory Authorities or
under any of the Contracts or other agreements as may be required in connection
with the Merger (all of which Approvals are set forth in the Company Disclosure
Schedule) so as to preserve all rights of and benefits to the Company thereunder
and each party shall provide the other with such assistance and information as
is reasonably required to obtain such Approvals.
5.8 FIRPTA Compliance. On or prior to the Closing Date, the Company
shall deliver to Parent a properly executed statement in a form reasonably
acceptable to Parent for purposes of satisfying Parent's obligations under
Treasury Regulation Section 1.1445-2(c)(3).
5.9 Notification of Certain Matters. The Company shall give prompt
notice to Parent, and Parent shall give prompt notice to the Company, of (a) the
occurrence or non-occurrence of any event, the occurrence or non-occurrence of
which is likely to cause any representation or warranty of the Company, Parent
or Merger Sub, respectively, contained in this Agreement to be untrue or
inaccurate at or prior to the Closing Date and (b) any failure of the Company,
Parent or Merger Sub, as the case may be, to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it
hereunder; provided, however, that the delivery of any notice pursuant to this
Section 5.9 shall not limit or otherwise affect any remedies available to the
party receiving such notice.
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5.10 Company Affiliate Agreements. Section 5.10 of the Company
Disclosure Schedule sets forth those persons who, in the Company's reasonable
judgment following consultation with legal counsel and accounting advisors, are
or may be "affiliates" of the Company within the meaning of Rule 145 under the
Securities Act (the "Company Affiliates"). The Company shall provide Parent such
information and documents as Parent shall reasonably request for purposes of
reviewing such list. The Company shall use commercially reasonable efforts to
deliver or cause to be delivered to Parent on or prior to the Closing from each
of the Company Affiliates, an executed Company Affiliate Agreement. The Company
agrees that if any Person would have been a Company Affiliate had such Person
been an officer, director or stockholder of the Company as of the date of this
Agreement, the Company shall use its commercially reasonable efforts to cause
such person to execute and deliver to the Company a Company Affiliate Agreement
promptly upon such Person attaining such status.
5.11 Additional Documents and Further Assurances; Cooperation. Each
party hereto, at the request of the other party hereto, shall execute and
deliver such other instruments and do and perform such other acts and things
(including all action reasonably necessary to seek and obtain any and all
consents, waivers and approvals of any Governmental or Regulatory Authority or
Person required in connection with the Merger; provided, however, that neither
party shall be obligated to consent to any divestitures or operational
limitations or activities in connection therewith and no party shall be
obligated to make a payment of money as a condition to obtaining any such
consent, waiver or approval) as may be necessary or desirable for effecting
completely the consummation of this Agreement and the transactions contemplated
hereby. Each party agrees to use best efforts to cause the conditions set forth
in Article 6 to be satisfied, where the satisfaction of such conditions depends
on action or forbearance from action by such party. The Company and Parent shall
each use best efforts to deliver (including taking all actions within their
respective control necessary to be able to deliver) tax matter certificates to
counsel substantially in the form of Exhibit G-1 attached hereto, in the case of
the Company, and Exhibit G-2 attached hereto, in the case of Parent.
5.12 Indemnification. Parent, the Company and the Surviving Corporation
agree that all rights to indemnification or exculpation now existing in favor of
the employees, agents, directors or officers of the Company (the "Company
Indemnified Parties") as provided in its certificate of incorporation or bylaws
or indemnification agreements as in effect on the date of this Agreement shall
continue in full force and effect for a period of three years from and after the
Closing Date, assuming the consummation of the Merger; provided, however, that,
in the event any claim or claims are asserted or made within such three-year
period, all rights to indemnification in respect of any such claim or claims
shall continue to disposition of any and all such claims. Any determination
required to be made with respect to whether a Company Indemnified Party's
conduct complies with the standards set forth in the certificate of
incorporation or bylaws or indemnification agreements of the Surviving
Corporation or otherwise shall be made by independent counsel selected by the
Surviving Corporation reasonably satisfactory to the Company Indemnified Party
(whose fees and expenses shall be paid by the Surviving Corporation), which such
determination shall be final and binding on the parties thereto. The Company
hereby represents and warrants to Parent that no claim for indemnification has
been made by any director or officer of the Company and, to the knowledge of the
Company, no basis exists for any such claim for indemnification.
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5.13 Form S-8. Parent shall file a registration statement on Form S-8
for the shares of Parent Common Stock issuable with respect to assumed Company
Options promptly after the Effective Time to the extent the shares of Parent
Common Stock issuable upon exercise of such Company Options qualify for
registration on Form S-8.
5.14 NNM Listing of Additional Shares Application. Parent shall, to the
extent required by the rules of the NNM, file a listing of additional shares
with the NNM with respect to the shares of Parent Common Stock required to be
reserved for issuance, in connection with the Merger.
5.15 Company's Auditors. The Company will use commercially reasonable
efforts to cause its management and its independent auditors to facilitate on a
timely basis (a) the preparation of financial statements (including pro forma
financial statements if required) as required by Parent to comply with
applicable SEC regulations, (b) the review of any Company audit or review work
papers, including the examination of selected interim financial statements and
data, (c) the delivery of such representations from the Company's independent
accountants as may be reasonably requested by Parent or its accountants, and (d)
the securing of a binding fee commitment (on terms similar to those in place on
the date of this Agreement) with respect to consents and comfort letters
requested by Parent after the Closing.
5.16 Termination of 401(k) Plans. Unless Parent requests otherwise in
writing, the board of directors of the Company shall adopt resolutions
terminating, effective prior to the Closing Date, any Plan which is intended to
meet the requirements of Section 401(k) of the Internal Revenue Code, and which
is sponsored, or contributed to, by the Company or any Subsidiary. At the
Closing, the Company shall provide Parent (a) executed resolutions of the board
of directors of Parent authorizing such termination and (b) as necessary, an
executed amendment to the 401(k) Plan sufficient to assure compliance with all
applicable requirements of the Internal Revenue Code and regulations thereunder
so that the tax-qualified status of the 401(k) Plan will be maintained at the
time of termination.
5.17 Takeover Statutes. If any Takeover Statute is or may become
applicable to the transactions contemplated hereby, the board of directors of
the Company will grant such approvals and take such actions as are necessary so
that the transactions contemplated by this Agreement and the Ancillary
Agreements may be consummated as promptly as practicable on the terms
contemplated hereby and otherwise act to eliminate the effects of any Takeover
Statute on any of the transactions contemplated hereby.
5.18 Post-Closing Conduct of Business.
(a) Neither Parent nor the Company shall take, nor permit its
Affiliates to take, any action prior to or following the Closing that would
cause the Merger, including the delivery of all Parent Common Stock to the
holders of shares of Company Stock, Company Options or Company Warrants under
Section 1.6(a), to fail to qualify as a "reorganization" within the meaning of
Section 368(a) of the Internal Revenue Code, and each shall report all
transactions under this Agreement and the Ancillary Agreements in accordance
with their characterizations herein.
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(b) Neither Parent nor the Surviving Corporation shall take any
action that would cause Parent or the Surviving Corporation to disclose any
confidential information subject to non-disclosure agreements with third parties
to each other or to any third party in a manner that would reasonably be
expected to breach such agreements with third parties. Parent and the Surviving
Corporation shall use commercially reasonable efforts to ensure that any such
confidential information is not disclosed to each other or to any third party in
a manner that would reasonably be expected to breach such agreements with third
parties, by Parent or the Surviving Corporation, as the case may be, or any of
their respective employees. If any such confidential information is disclosed to
the other party or to any third party (by mistake, or otherwise), in a manner
that would reasonably be expected to breach such agreements with third parties,
the party receiving such confidential information shall promptly notify the
other party of such disclosure and return such confidential information to the
other party.
5.19 Company Repurchases. The Company will exercise any rights that
mature between the date hereof and the Effective Time to repurchase any
outstanding shares of Company Common Stock at the price at which such shares
were issued.
5.20 Information Technology Access. Subject in all cases to the
Company's obligations of confidentiality with respect to third-party
confidential information, in furtherance of Section 5.3 and to facilitate prompt
integration following the Closing of the Company's information technology ("IT")
inventory (e.g., voice and data network services and software and hardware,
licenses, financial/accounting software, IT budgets, etc.) with Parent's, the
Company will, between the date of this Agreement and the Closing Date, provide
Parent and its Representatives with access to the Company's IT inventory, as
well as the Company's personnel responsible for such IT inventory. Because of
the substantial lead time that may be required to order and install new software
and hardware to integrate the Company's IT systems with Parent's, and the
importance of a smooth integration of such IT systems promptly after the
Closing, the Company agrees that Parent may order, between the date of this
Agreement and the Closing Date, either in Parent's name or, if required by the
vendor, the Company's name, any new IT services, hardware and software that
Parent believes will be needed at the Company's facilities in order to
coordinate Parent's and the Company's respective operations following the
Closing. The Company, between the date of this Agreement and the Closing Date,
will cooperate with Parent in the installation of such IT systems, hardware and
software prior to and in anticipation of the Closing, including providing Parent
with reasonable access to and use of appropriate Company personnel. If required
by the vendor, at Parent's request, the Company, between the date of this
Agreement and the Closing Date, will place IT systems, hardware and software
orders in the Company's name. For clarity, it is the parties' intent not to
connect any of the ordered services or systems prior to the Closing. Parent and
the Company agree to cooperate, between the date of this Agreement and the
Closing Date, with each other to minimize any potential disruption to the
Company's business from the IT integration efforts; provided, however, that
Parent will not have any liability to the Company for any such disruption or as
may otherwise result from the IT integration efforts, except as may be directly
caused by Parent's gross negligence or willful misconduct; and provided further
that in no event will Parent have any liability to the Company for any indirect,
incidental, consequential, special or speculative damages, including damages for
loss of profits or use, business interruption or loss of goodwill, irrespective
of whether such damages arise under contract, tort, statute or otherwise and
whether or not the Company has given Parent advance notice of the possibility of
such damages. If the
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Closing does not occur, other than because of the Company's breach of this
Agreement, Parent will reimburse the Company for its reasonable and documented
out-of-pocket costs incurred by it in connection with the ordering and
installation of IT services, hardware and software. If Parent is so required to
reimburse the Company, Parent will own any such hardware and software and will
pay for its removal from Company premises. Parent and the Company will cooperate
in the removal of any such hardware or software so as to minimize any disruption
to the Company's business. In addition, if the Closing does not occur, the
Company will cooperate with Parent in canceling any orders for IT services,
hardware or software and will otherwise act to minimize the costs which might be
incurred in connection with the IT integration efforts.
5.21 Intellectual Property. The Company shall give Parent prompt notice
that any Person shall have (a) commenced, or shall have notified the Company
that it intends to commence, an Action or Proceeding or (b) provided the Company
with notice, in either case which allege(s) that any of the Intellectual
Property, including the Company Intellectual Property, presently embodied, or
proposed to be embodied, in the Company's products or utilized in any
development tools (including standard cells) or design environments designed or
modified by the Company infringes or otherwise violates the intellectual
property rights of such Person, is available for licensing from a potential
licensor providing the notice or otherwise alleges that the Company does not
otherwise own or have the right to exploit such Intellectual Property, including
the Company Intellectual Property.
5.22 Delivery of Stock Ledger and Minute Book of the Company. The
Company shall deliver its stock ledger and minute book to Parent at the Closing.
5.23 New Hires; Top-Up Grants. Grants by the Company of Company Options
to new employees or of additional Company Options to existing employees
following the date hereof and prior to the Closing Date, in each case in excess
of the amounts reflected on the Company Disclosure Schedule as being outstanding
as of the date of this Agreement, if requested or approved by Parent, shall be
supported by additional shares of Parent Common Stock (in excess of the shares
of Parent Common Stock otherwise deliverable under this Agreement) reserved or
otherwise made available for such purpose by Parent on or after the Closing
Date. Nothing in this Section 5.23 shall be construed to permit any grant by the
Company of Company Options that would violate the provisions of that certain
Loan Agreement dated as of August 24, 2000 among the Company, Anantakotiraju
Xxxxxxx , the Lenders named therein and Bank of America, N.A., as administrative
agent, as may be amended from time to time.
ARTICLE 6
CONDITIONS TO THE MERGER
6.1 Conditions to Obligations of Each Party to Effect the Merger. The
respective obligations of each party to this Agreement to effect the Merger
shall be subject to the satisfaction at or prior to the Closing of the following
conditions:
(a) Governmental and Regulatory Approvals. Approvals from any
Governmental or Regulatory Authority (if any) necessary for consummation of the
transactions contemplated hereby shall have been timely obtained; and any
waiting period applicable to the consummation
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of the Merger under the HSR Act (other than with respect to the receipt of
Parent Common Stock by a stockholder of the Company) shall have expired or been
terminated.
(b) No Injunctions or Regulatory Restraints; Illegality. No
temporary restraining order, preliminary or permanent injunction or other Order
issued by any court of competent jurisdiction or Governmental or Regulatory
Authority or other legal or regulatory restraint or prohibition preventing the
consummation of the Merger shall be in effect; nor shall there be any Law or
Order enacted, entered, enforced or deemed applicable to the Merger or the other
transactions contemplated by the terms of this Agreement that would prohibit the
consummation of the Merger or require Parent to (i) hold separate the assets of
the Surviving Corporation or (ii) not exercise full voting rights with respect
to its shares of capital stock of the Surviving Corporation or (iii) which would
permit consummation of the Merger only if certain divestitures were made or if
Parent were to agree to limitations on its or its Subsidiaries' business
activities or operations.
(c) Stockholder Approval. This Agreement shall have been adopted by
the requisite vote of the Company's stockholders in accordance with Delaware
Law.
(d) Fairness Hearing and California Permit; Private Placement
Alternative. Either (i) the fairness hearing shall have been held by the
Commissioner of Corporations of the State of California and the California
Permit shall have been issued by the State of California, or (ii) if the
issuance of the shares of Parent Common Stock pursuant to Section 1.6 is
effected in a private placement pursuant to Section 4(2) of the Securities Act,
Parent and the Company shall have executed and delivered the Backup Registration
Rights Agreement in conformity with Section 5.1(c) and otherwise in form and
substance reasonably satisfactory to the Company (and such Backup Registration
Rights Agreement shall be in full force and effect), and the Company shall be
reasonably satisfied that the shares of Parent Common Stock to be issued in
connection with the Merger pursuant to Section 1.6(a) are issuable without
registration pursuant to Section 4(2) of the Securities Act and SEC rules and
regulations promulgated thereunder.
6.2 Additional Conditions to Obligations of the Company. The obligations
of the Company to consummate the Merger and the other transactions contemplated
by this Agreement shall be subject to the satisfaction at or prior to the
Closing of each of the following conditions, any of which may be waived, in
writing, exclusively by the Company:
(a) Representations and Warranties. The representations and
warranties of Parent contained in this Agreement shall be accurate in all
respects as of the date of this Agreement and shall be accurate in all respects
as of the Closing Date as if made on and as of the Closing Date (other than any
such representations and warranties which by their express terms are made solely
as of a specified earlier date, which shall be accurate as of such specified
earlier date), except that any inaccuracies in such representations and
warranties will be disregarded if the circumstances giving rise to all such
inaccuracies (considered collectively) do not constitute, and would not
reasonably be expected to have, a material adverse change on the Business or
Condition of Parent; provided, however, that, for purposes of determining the
accuracy of such representations and warranties, all qualifications and
exceptions referring to a "material adverse change in the Business or Condition
of Parent" or a "material adverse effect on Parent" and other
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materiality qualifications and materiality exceptions contained in such
representations and warranties shall be disregarded.
(b) Performance. Parent and Merger Sub shall have performed and
complied with in all material respects each agreements, covenant and obligation
required by this Agreement to be so performed or complied with by the Parent and
Merger Sub at or before the Closing.
(c) Officers' Certificates. Parent and Merger Sub shall have
delivered to the Company a certificate, dated the Closing Date and executed by
its President and Chief Executive Officer, substantially in the form set forth
in Exhibit H-1 attached hereto, and a certificate, dated the Closing Date and
executed by the Secretary of Parent and Merger Sub, substantially in the form
set forth in Exhibit H-2 attached hereto.
(d) Legal Opinion. The legal opinion from Xxxxxxx, Phleger &
Xxxxxxxx LLP, counsel to Parent, set forth in Exhibit I attached hereto shall
not have been withdrawn (based solely on facts, circumstances or events that
existed on or prior to the date of this Agreement).
(e) Tax Opinion. The Company shall have received a written opinion
from Xxxxxx & Xxxxxx substantially in the form of Exhibit L attached hereto;
provided, however, if Xxxxxx & Xxxxxx is unable to deliver such opinion, the
Company, Parent and Merger Sub shall use their commercially reasonable best
efforts to cause another law firm of national reputation to deliver a written
opinion to the same effect at or prior to Closing, and if such an opinion is so
delivered, this condition shall be satisfied.
6.3 Additional Conditions to the Obligations of Parent and Merger Sub.
The obligations of Parent to consummate the Merger and the other transactions
contemplated by this Agreement shall be subject to the satisfaction at or prior
to the Closing of each of the following conditions, any of which may be waived,
in writing, exclusively by Parent:
(a) Representations and Warranties. The representations and
warranties of the Company (i) set forth in the Sections of this Agreement set
forth on Schedule 6.3(a)(i) shall be accurate in all respects as of the date of
this Agreement and shall be accurate in all respects as of the Closing Date as
if made on and as of the Closing Date (other than representations and warranties
which by their express terms are made solely as of a specified earlier date,
which shall be accurate as of such specified earlier date), except that any
inaccuracies in such representations and warranties will be disregarded if the
circumstances giving rise to all such inaccuracies (considered collectively) do
not constitute, and would not reasonably be expected to have, a material adverse
change on the Business or Condition of the Company; (ii) set forth in the
Sections of this Agreement set forth on Schedule 6.3(a)(ii) shall be accurate in
all respects as of the date of this Agreement and shall be accurate in all
respects as of the Closing Date as if made on and as of the Closing Date (other
than representations and warranties which by their express terms are made solely
as of a specified earlier date, which shall be accurate as of such specified
earlier date), except that any inaccuracies in such representations and
warranties will be disregarded if (A) the inaccuracy was not made intentionally
or recklessly or (B) the circumstances giving rise to all such inaccuracies
(considered collectively) do not constitute, and would not reasonably be
expected to have, a material adverse change on the Business or Condition of the
Company; (iii) set forth in the Sections of this Agreement set forth on Schedule
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6.3(a)(iii) shall be accurate in all respects as of the date of this Agreement,
except that any inaccuracies in such representations and warranties will be
disregarded if the circumstances giving rise to all such inaccuracies
(considered collectively) do not constitute, and would not reasonably be
expected to have, a material adverse change on the Business or Condition of the
Company; (iv) set forth in the Sections of this Agreement set forth on Schedule
6.3(a)(iv) shall have been accurate in all respects as of the date of this
Agreement, except that any inaccuracies in such representations and warranties
will be disregarded if (A) the inaccuracy was not made intentionally or
recklessly or (B) the circumstances giving rise to all such inaccuracies
(considered collectively) do not constitute, and would not reasonably be
expected to have, a material adverse change on the Business or Condition of the
Company; and (v) set forth in Section 2.36 of this Agreement, with respect to
statements made by the Company in preparation of the Permit Application and
Information Statement, shall have been accurate in all respects as of the time
of such statements and the date of the taking of the Company Stockholder Action;
provided, however, that, in each case for purposes of determining the accuracy
of such representations and warranties, (x) all qualifications and exceptions
referring to a "material adverse change in the Business or Condition of the
Company" and other materiality qualifications and exceptions contained in such
representations and warranties shall be disregarded and (y) any update of or
modification to the Company Disclosure Schedule made or purported to have been
made after the date of this Agreement (other than to reflect actions taken by
the Company which are not in violation of the covenants of this Agreement) shall
be disregarded; and provided, further that neither of the following, in and of
themselves, shall constitute a material adverse change: (i) changes or effects
which are primarily and directly caused by the execution, delivery or
performance of the pre-closing covenants set forth in this Agreement, and (ii)
any material adverse change resulting from changes in economic conditions in the
economy.
(b) Performance. The Company shall have (i) performed and complied
with in all material respects each agreement, covenant or obligation set forth
in the Sections of this Agreement set forth on Schedule 6.3(b)(i) required by
this Agreement to be so performed or complied with by the Company on or before
the Closing Date, and (ii) shall not have willfully and intentionally failed to
comply in a material respect with any agreement, covenant obligation set forth
in the Sections of this Agreement set forth on Schedule 6.3(b)(ii) required by
this Agreement to be so performed or complied with by the Company at or before
the Closing.
(c) Officers' Certificates. The Company shall have delivered to
Parent a certificate, dated the Closing Date and executed by the President and
Chief Executive Officer of the Company, substantially in the form set forth in
Exhibit J-1 attached hereto, and a certificate, dated the Closing Date and
executed by the Secretary of the Company, substantially in the form set forth in
Exhibit J-2 attached hereto.
(d) Legal Opinion. The legal opinions from legal counsel to the
Company, set forth in Exhibit K-1 and Exhibit K-2 attached hereto shall not have
been withdrawn (based solely on facts, circumstances or events that existed as
of the date of this Agreement).
(e) Non-Competition Agreements. Each of the persons listed on
Schedule 6.3(e) shall have executed and delivered to Parent a Non-Competition
Agreement and all of the Non-Competition Agreements shall be in full force and
effect effective with the Closing.
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(f) Delivery of Agreements.
(i) Each Company Affiliate shall have executed and delivered to
Parent a Company Affiliate Agreement in full force and effect as of the Closing.
(ii) The stockholders of the Company listed on Schedule
6.3(f)(ii) shall have executed and delivered to Parent a Support Agreement, and
neither an incurable breach nor a curable breach thereof shall have occurred;
provided that such stockholders shall have the right to cure any curable breach
within five days of the delivery by Parent of a notice specifying such curable
breach.
(iii) The stockholders of the Company listed on Schedule
6.3(f)(iii) shall have executed and delivered to Parent a Stock Repurchase
Agreement, and neither an incurable breach nor a curable breach thereof shall
have occurred; provided that such stockholders shall have the right to cure any
curable breach within five days of the delivery by Parent of a notice specifying
such curable breach.
(g) Employees. The employees of the Company set forth on Schedule
6.3(g) shall continue to be employed by the Company at the Closing and shall not
have given any notice or other indication that they are not willing or do not
intend to be employed by the Surviving Corporation, following the Merger or that
they are not willing or do not intend to execute and deliver to Parent Parent's
standard form of Confidentiality and Invention Assignment Agreement and
associated schedules and statements without amendment or modification thereto in
any substantive respect (other than disclosure and exception of prior inventions
which were disclosed and excepted on their similar agreements existing as of the
date of this Agreement between such employee and the Company). At least ninety
percent (90%) of the engineering and research and development employees of the
Company (excluding the employees identified on Schedule 6.3(g)) employed as of
the date of this Agreement shall continue to be employed by the Company at the
Closing and shall not have given any notice or other indication that they are
not willing or do not intend to be employed by the Surviving Corporation
following the Merger or to execute and deliver to Parent Parent's standard form
of Confidentiality and Invention Assignment Agreement and associated schedules
and statements without amendment or modification thereto in any substantive
respect (other than disclosure and exception of prior inventions which were
disclosed and excepted on their similar agreements existing as of the date of
this Agreement between such employee and the Company). If one or more Company
employees cease to be employed by the Company as a result of death or bona fide
permanent disability, the number of employees of the Company as of the date of
this Agreement will be reduced by one (1) for purposes of making the necessary
calculation.
(h) Limitation on Dissent. Holders of no more than five percent
(5.0%) of the outstanding shares of Company Capital Stock, on an "as if
converted to Company Common Stock" basis, shall have exercised, nor shall they
have any continued right to exercise, appraisal, dissenters' or similar rights
under Delaware Law with respect to their shares by virtue of the Merger.
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ARTICLE 7
SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS;
ESCROW PROVISIONS
7.1 Survival of Representations, Warranties, Covenants and Agreements.
Notwithstanding any right of Parent, Merger Sub or the Company (whether or not
exercised) to investigate the affairs of Parent, Merger Sub or the Company
(whether pursuant to Section 5.3 or otherwise) or a waiver by Parent, Merger Sub
or the Company of any condition to Closing set forth in Article 6, each party
shall have the right to rely fully upon the representations, warranties,
covenants and agreements of the other party contained in this Agreement or in
any instrument delivered pursuant to this Agreement. Except for the
representations and warranties set forth in Section 2.17 (which shall survive
the Merger and continue until the eighteen-month anniversary of the Closing
Date), all of the representations and warranties contained in this Agreement or
in any instrument delivered pursuant to this Agreement shall survive the Merger
and continue until the one-year anniversary of the Closing Date (the "Expiration
Date"). For the avoidance of doubt, each provision of Article 1 and all
corresponding Schedules shall survive until the satisfaction of all obligations
described therein, and each provision of Article 9 and Article 10 shall survive
so long as it is relevant to any other surviving provision. Except with respect
to Losses timely claimed pursuant to Section 7.2(e), no action or proceeding may
be instituted to enforce, or seek damages or other remedies with respect to the
breach of any representation or warranty after the expiration of the period of
survival for such representation or warranty as described above. Subject to the
preceding sentence, the Stockholder Agent and the stockholders of the Company
shall have all remedies available at law or in equity against Parent to
compensate them and their employees, agents, and Affiliates for any and all
Losses (whether or not involving a Third-Party Claim), incurred or sustained by
any of them as a result of (i) any inaccuracy in or breach (or any claim by any
third party alleging or constituting an inaccuracy or breach) of any
representation or warranty of Parent or Merger Sub, as of the date of this
Agreement or the Closing Date, contained in this Agreement or in the Ancillary
Agreements or any other instrument delivered pursuant to this Agreement, or (ii)
any breach of any covenant or agreement of Parent or Merger Sub contained in
this Agreement, any Ancillary Agreement, or in any instrument delivered pursuant
to this Agreement.
7.2 Escrow Provisions.
(a) Establishment of the Escrow Fund. As soon as reasonably
practicable after the Effective Time, an Earn Out Delivery Date or an Option
Exercise Date, as the case may be, the applicable portion of the Escrow Fund,
without any act of any stockholder, will be deposited with the Depositary Agent
(plus any additional shares of Parent Common Stock as may be issued in respect
of the Escrow Fund upon any stock splits, non-taxable stock dividends or
recapitalizations effected by Parent following the Effective Time), such
deposits to constitute the "Escrow Fund" to be governed by the terms set forth
herein. The Escrow Fund shall be increased and the Unexercised Escrow shall be
decreased to the extent that a deposit is made, pursuant to Section
1.10(a)(ii)(y), into the Escrow Fund upon the exercise of a Company Option or a
Company Warrant. Notwithstanding the references in this Agreement to the
"escrow" and the Escrow Fund, the parties acknowledge and agree that the
Depositary Agent is acting as a depositary and not as an escrow agent pursuant
to this Article 7. Additionally, the Unexercised Escrow shall be increased by
any additional shares of Parent Common Stock as may be issued in
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respect of the Unexercised Escrow upon any stock splits, non-taxable stock
dividends or recapitalizations effected by Parent following the Effective Time.
(b) Recourse to the Escrow Fund. The Escrow Amount shall be
available to compensate Parent, its officers, directors, employees, agents and
Affiliates (collectively, the "Parent Indemnitees") for any and all Losses
(whether or not involving a Third-Party Claim), incurred or sustained by Parent
or any other Parent Indemnitee as a result of (i) any inaccuracy in or breach
(or any claim by any third party alleging or constituting an inaccuracy or
breach) of any representation or warranty of the Company, as of the date of this
Agreement, contained in this Agreement or in the Ancillary Agreements or any
other instrument delivered pursuant to this Agreement; (ii) any breach of or
inaccuracy in any representation or warranty of the Company, as of the date of
this Agreement or the Closing Date, contained in the Sections of this Agreement
set forth on Schedule 7.2(b)(ii); (iii) any intentional or reckless breach of
any representation or warranty of the Company, on the Closing Date, contained in
the Sections of this Agreement set forth on Schedule 7.2(b)(iii); (iv) any
breach of any covenant or agreement of the Company contained in this Agreement
(except for the covenants of the Company set forth in the first three sentences
of Section 4.1) the Ancillary Agreements or in any instrument delivered pursuant
to this Agreement; (v) any inaccuracy or breach of any representation or
warranty of the Company in this Agreement arising out of third-party
confidential information, not previously disclosed to Parent based upon the
Company's confidentiality obligations to third parties, that has a material
adverse effect in the Business or the Condition of the Company; (vi) any
redemption, repurchase or other right to purchase shares of Company Capital
Stock exercised prior to the date of this Agreement (other than pursuant to the
Company Stock Plans); (vii) the inclusion of the Company and its Subsidiaries in
the Tax returns of any other Person prior to the Closing Date or (viii) one half
of any payments or royalties owed (net of any offset to other royalty
obligations) with respect to the first item set forth in Section 2.17(b) of the
Company Disclosure Schedule as of the Closing; provided, however, that, except
in the case of claims for Losses resulting from a breach, violation or
inaccuracy in or omission from any of the representations and warranties of the
Company set forth in Section 2.3 or as modified or supplemented by Section 2.3
of the Company Disclosure, Parent may not make any claims against the Escrow
Amount unless the aggregate Losses incurred or sustained exceed $1,500,000 (at
which such time claims may be made for all Losses incurred or sustained in
excess of such amount). The dollar threshold set forth in the immediately
preceding proviso shall not apply to Losses resulting from any breach, violation
or inaccuracy in or omission from any of the representations and warranties of
the Company set forth in Section 2.3 or Section 2.3 of the Company Disclosure
Schedule, which shall be recoverable without respect to any threshold amount to
the extent that such Losses, if any, would relate to unresolved contingencies
existing at the Effective Time, which if resolved at the Effective Time would
have led to a reduction in the aggregate Merger consideration to be paid to the
Company Stockholders. The Company Stockholders shall not have any liability
under this Agreement of any sort whatsoever in excess of the Escrow Amount,
except (x) in the event of fraud or willful misconduct by the Company of any of
its representations, warranties, agreements or covenants contained in this
Agreement, the Ancillary Agreements or in any other instrument or document
required to be delivered pursuant to this Agreement in connection herewith or
(y) with respect to the indemnification obligations in Section 7.2(b)(vi).
Insofar as a Loss is claimed, after the Escrow Fund has been distributed to the
Company Stockholders, under (x) Section 7.2(b)(i) relating to a breach of
Section 2.17 or Section 7.2(b)(iii) relating to a breach of Section 2.17, or (y)
Section 7.2(b)(iv), Section 7.2(b)(v) or Section 7.2(b)(vii) or Section
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7.2(b)(viii), the Company Stockholders shall be liable for such Losses (A) up
to, but not in the aggregate in excess of (for all such Losses and all Company
Stockholders) the released portion of the Escrow Amount and (B) subject to the
procedures set forth in this Article 7. In the event of such a fraudulent
breach, Parent shall have all remedies available at law or in equity (including
for tort) with respect to such breach. Notwithstanding anything to the contrary
contained in this Agreement, in no event shall any stockholder of the Company
have any liability of any sort in excess of the Merger consideration received by
such stockholder in connection with the Merger or the proceeds, if any, received
by such stockholder in connection with the disposition of such Merger
consideration.
(c) Escrow Period; Distribution of Escrow Fund upon Termination of
Escrow Period. Subject to the following requirements, the Escrow Fund shall be
in existence immediately following the Effective Time and shall terminate at
5:00 p.m. Pacific time upon the first date upon which (i) there are no assets in
the Escrow Fund and (ii) it is not possible that any future deposits will be
made into the Escrow Fund (the period of time from the Effective Time through
and including such first date and time is referred to as the "Escrow Period").
All shares of Parent Common Stock and any other securities, property, rights or
privileges remaining in the Escrow Fund at 5:00 p.m. Pacific Time on the
Expiration Date shall be distributed at such time as set forth in the last
sentence of this Section 7.2(c); provided, however, that the amount of such
assets equal to the Funded Fraction of the sum of all Reasonable Amounts with
respect to all Asserted Claims as of the Expiration Date shall not be
distributed, but instead shall be retained in the Escrow Fund. The "Funded
Fraction" as of any date of determination shall mean the fraction having as its
numerator the amount of the Escrow Fund as of such date and as its denominator
the total amount of the Escrow Amount as of such date. The "Reasonable Amount"
with respect to any claim shall equal the amount necessary in the reasonable
judgment of Parent, subject to the objection of the Stockholder Agent and the
subsequent arbitration of the matter in the manner as provided in Section
7.2(g), to satisfy such claim. An "Asserted Claim" as of any date shall mean an
unsatisfied claim under this Section 7.2 (brought within the applicable time
limits specified in Section 7.1) concerning facts and circumstances existing
prior to such date, which claim is specified in any Officer's Certificate timely
delivered to the Depositary Agent prior to such date. As soon as any such
Asserted Claim, if any, has been resolved, the Depositary Agent shall deliver to
the stockholders of the Company their respective shares of the remaining portion
of the Escrow Fund in excess of the Funded Fraction of the sum of the Reasonable
Amounts for all Asserted Claims as of such date. As soon as there are no
remaining unsatisfied Asserted Claims, the entire remaining balance of the
Escrow Fund shall be distributed to the stockholders of the Company in
accordance with the last sentence of this Section 7.2(c). Deliveries of shares
of Parent Common Stock and any other securities, property, rights or privileges
remaining in the Escrow Fund to the stockholders of the Company pursuant to this
Section 7.2(c) shall be made as set forth in Section 1.10(a)(iii). Each Company
Stockholder who would otherwise be entitled to a fraction of a share of Parent
Common Stock in connection with such delivery (after aggregating all fractional
shares of Parent Common Stock to be received by such holder in connection with
such delivery) shall be entitled to receive from Parent an amount of cash
(rounded to the nearest whole cent) equal to the product of (a) such fraction,
multiplied by (b) the Closing Price. Parent and the Depository Agent shall use
their commercially reasonable efforts to have such shares and other
distributable items delivered within five (5) Business Days after such
resolution and in any event shall cause such distribution to occur in full no
later than thirty (30) calendar days after such resolution.
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(d) Protection of Escrow Fund.
(i) The Depositary Agent shall hold and safeguard the Escrow
Fund during the Escrow Period, shall treat such fund as a trust fund in
accordance with the terms of this Agreement and not as the property of Parent
and shall hold and dispose of the Escrow Fund only in accordance with the terms
hereof.
(ii) Any shares of Parent Common Stock or other Equity
Equivalents securities issued or distributed by Parent ("New Shares") in respect
of Parent Common Stock in the Escrow Fund which have not been released from the
Escrow Fund, or in the Unexercised Escrow which have not been released from the
Unexercised Escrow, shall be added to the Escrow Fund or the Unexercised Escrow,
as the case may be. New Shares issued in respect of shares of Parent Common
Stock which have been released from the Escrow Fund shall not be added to the
Escrow Fund but shall be distributed to the record holders thereof. Cash
dividends and other taxable property distributions on Parent Common Stock shall
not be added to the Escrow Fund but shall be distributed to the record holders
of the Parent Common Stock on the record date set for any such dividend.
(iii) Each stockholder shall have voting rights with respect to
the shares of Parent Common Stock contributed to the Escrow Fund with respect to
such stockholder (and on any voting securities added to the Escrow Fund in
respect of such shares of Parent Common Stock).
(e) Claims Upon Escrow Fund.
(i) Upon receipt by the Depositary Agent at any time on or
before the last day of the Escrow Period and within the applicable survival
period specified in Section 7.1, of a certificate signed by any officer of
Parent (an "Officer's Certificate"): (A) stating that Parent or another Parent
Indemnitee has paid or properly accrued or reasonably anticipates that it will
have to pay or accrue Losses, directly or indirectly, as a result of any item
specified in Section 7.2(b)(i) through Section 7.2(b)(viii), inclusive, (or any
claim by any third party alleging, constituting or involving any such item), and
(B) specifying in reasonable detail the individual items of Losses included in
the amount so stated, the date each such item was paid or properly accrued, or
the basis for such anticipated liability, the claimant or payee, if any, and the
nature of the misrepresentation, breach of warranty, agreement or covenant, if
any, to which such item is related, the Depositary Agent shall, subject to the
last sentence of this paragraph and to the provisions of Section 7.2(f), reduce
the Escrow Fund and credit Parent with a portion of the Unexercised Escrow in a
total amount equal to such Losses. The Depositary shall allocate such reduction
between the Escrow Fund and the Unexercised Escrow in the same proportion as the
Escrow Fund and the Unexercised Escrow bear to the Escrow Amount as of the date
of such reduction. The Depositary Agent shall deliver to Parent out of the
Escrow Fund, as promptly as practicable, shares of Parent Common Stock held in
the Escrow Fund equal to such reduction in the Escrow Fund. Additionally, the
Parent shall be entitled to receive the portion of the Escrow Fund attributable
to any portion of the Unexercised Escrow, which on an Option Exercise Date, is
reduced to the extent of a deposit into the Escrow Fund. Furthermore, to the
extent that there are not sufficient assets in the Escrow Amount to reimburse or
cover such Losses at the time such timely claim is made, then future assets
deposited or credited to the Escrow Amount, if any,
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shall be delivered to Parent until the total amount of such Losses has been
reimbursed or covered (including by credit against the Unexercised Escrow).
Where the basis for a claim upon the Escrow Amount by Parent is that Parent
reasonably anticipates that it will pay or accrue a Loss, no payment or credit
will be made from the Escrow Amount for such Loss unless and until such Loss is
actually paid or accrued.
(ii) For the purposes of determining the number of shares of
Parent Common Stock to be delivered or credited to Parent out of the Escrow Fund
pursuant to Section 7.2(e)(i), the shares of Parent Common Stock shall be valued
at the Closing Price.
(f) Objections to Claims. At the time of delivery of any Officer's
Certificate to the Depositary Agent, a duplicate copy of such certificate shall
be delivered to the Stockholder Agent and for a period of thirty (30) days after
such delivery, the Depositary Agent shall not reduce the Escrow Amount pursuant
to Section 7.2(e) unless the Depositary Agent shall have received written
authorization from the Stockholder Agent to make such reduction. After the
expiration of such thirty (30) day period, the Depositary Agent shall reduce the
Escrow Amount in accordance with Section 7.2(e), provided that no such reduction
may be made if the Stockholder Agent shall object in a written statement to the
claim made in the Officer's Certificate, and such statement shall have been
delivered to the Depositary Agent prior to the expiration of such 30 day period.
(g) Resolution of Conflicts; Arbitration.
(i) In case the Stockholder Agent shall object in writing to any
claim or claims made in any Officer's Certificate, the Stockholder Agent and
Parent shall attempt in good faith to agree upon the rights of the respective
parties with respect to each of such claims. If the Stockholder Agent and Parent
should so agree, a memorandum setting forth such agreement shall be prepared and
signed by both parties and shall be furnished to the Depositary Agent. The
Depositary Agent shall be entitled to rely on any such memorandum and reduce the
Escrow Amount in accordance with the terms thereof and thereafter comply with
Section 7.2(e).
(ii) If no such agreement can be reached after good faith
negotiation, either Parent or the Stockholder Agent may demand arbitration of
the dispute unless the amount of the damage or loss is at issue in a pending
Action or Proceeding involving a Third-Party Claim, in which event arbitration
shall not be commenced until such amount is ascertained or both parties agree to
arbitration; and in either event the matter shall be settled by arbitration
conducted by three arbitrators, one selected by Parent and one selected by the
Stockholder Agent, and the two arbitrators selected by Parent and the
Stockholder Agent shall select a third arbitrator. The arbitrators shall set a
limited time period and establish procedures designed to reduce the cost and
time for discovery of information relating to any dispute while allowing the
parties an opportunity, adequate as determined in the sole judgment of the
arbitrators, to discover relevant information from the opposing parties about
the subject matter of the dispute. The arbitrators shall rule upon motions to
compel, limit or allow discovery as they shall deem appropriate given the nature
and extent of the disputed claim. The arbitrators shall also have the authority
to impose sanctions, including attorneys' fees and other costs incurred by the
parties, to the same extent as a court of law or equity, should the arbitrators
determine that discovery was sought without substantial justification or that
discovery was refused or objected to by a party
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without substantial justification. The decision of a majority of the three
arbitrators as to the validity and amount of any claim in such Officer's
Certificate shall be binding and conclusive upon the parties to this Agreement,
and notwithstanding anything in Section 7.2(f), the Depositary Agent shall be
entitled to act in accordance with such decision and make or withhold reductions
to the Escrow Amount in accordance therewith. Such decision shall be written and
shall be supported by written findings of fact and conclusions regarding the
dispute which shall set forth the award, judgment, decree or order awarded by
the arbitrators.
(iii) Judgment upon any award rendered by the arbitrators may be
entered in any court having competent jurisdiction. Any such arbitration shall
be held in the city and county of Los Angeles, California, except in the case of
an arbitration brought by Parent against the Company, Surviving Company, any
Company Stockholder or Stockholder Agent which shall be held in the city or
county of Santa Xxxxx, under the commercial rules of arbitration then in effect
of the American Arbitration Association. For purposes of this Section 7.2(g),
(i) in any arbitration hereunder in which any claim or the amount thereof stated
in the Officer's Certificate is at issue, Parent shall be deemed to be the
"Non-Prevailing Party" in the event that the arbitrators award Parent less than
or equal to the sum of one-half of the disputed amount of any Losses plus any
amounts not in dispute; otherwise, the stockholders of the Company as
represented by the Stockholder Agent shall be deemed to be the Non-Prevailing
Party and (ii) in any arbitration hereunder in which an Earn Out is in dispute,
Parent shall be deemed to be the Non-Prevailing Party in the event that the
arbitrators determine that more than or equal to the sum of one-half of the
disputed amount of any Earn Out Determination plus any amounts not in dispute
have been earned pursuant to the disputed Earn Out; otherwise, the stockholders
of the Company, as represented by the Stockholder Agent, shall be deemed to be
the Non-Prevailing Party. The Non-Prevailing Party to an arbitration shall pay
its own expenses, the fees of each arbitrator, the administrative costs of the
arbitration and the expenses, including reasonable attorneys' fees and costs,
incurred by the other party to the arbitration. Any claims by the Company's
stockholders with respect to Earn Out Shares shall be satisfied, if they
prevail, by the issuance of new shares of Parent Common Stock, and nothing in
this paragraph, or elsewhere in this Agreement shall be interpreted or construed
to mean that any such claims may be satisfied out of the Escrow Fund.
(h) Stockholder Agent of the Stockholders; Power of Attorney.
(i) In the event that the this Agreement is adopted by the
stockholders of the Company, effective upon such vote, and without further act
of any Company Stockholder, Anantakotiraju Xxxxxxx shall, to the fullest extent
permitted by law, be appointed as agent and attorney-in-fact (the "Stockholder
Agent") for the Company Stockholders (except such stockholders, if any, as shall
have perfected their appraisal or dissenters' rights under Delaware Law or the
California Code, as applicable), for and on behalf of the Company Stockholders,
to give and receive notices and communications, to authorize reductions in the
Escrow Amount, to determine, object to and approve Earn Out Amounts, to
authorize delivery to Parent of shares of Parent Common Stock from the Escrow
Fund in satisfaction of claims by Parent, to object to such deliveries, to agree
to, negotiate, enter into settlements and compromises of, and demand and comply
with orders of courts and awards of arbitrators with respect to such claims, and
to take all actions necessary or appropriate in the judgment of the Stockholder
Agent for the accomplishment of the foregoing. Such agency may be changed by the
Company Stockholders
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from time to time upon not less than thirty (30) days prior written notice to
Parent; provided, however, that the Stockholder Agent may not be removed unless
holders of a two-thirds interest in the Escrow Fund agree to such removal and to
the identity of the substituted stockholder agent. Any vacancy in the position
of Stockholder Agent may be filled by approval of the holders of a majority in
interest of the Escrow Fund. No bond shall be required of the Stockholder Agent,
and the Stockholder Agent shall not receive compensation for his services;
provided, however, the Stockholder Agent shall be entitled to reimbursement for
his reasonable out-of-pocket expenses, including reasonable attorney's fees,
incurred in performing his duties and functions hereunder, and shall be entitled
to withhold, sell and apply the proceeds of Parent Common Stock or other assets
otherwise distributable to Company Stockholders, including amounts distributable
at Closing, in such amounts as the Stockholder Agent reasonably deems necessary
or appropriate, toward the reimbursement of such expenses and the establishment
of reserves for future such expenses. Notices or communications to or from the
Stockholder Agent shall constitute, to the fullest extent permitted by law,
notice to or from each of the Company Stockholders.
(ii) The Stockholder Agent shall not incur any liability with
respect to any action taken or suffered by him or omitted hereunder as
Stockholder Agent while acting in good faith and in the exercise of reasonable
judgment. The Stockholder Agent may, in all questions arising hereunder, rely on
the advice of counsel and for anything done, omitted or suffered in good faith
by the Stockholder Agent based on such advice, the Stockholder Agent shall not
be liable to anyone. The Stockholder Agent undertakes to perform such duties and
only such duties as are specifically set forth in this Agreement and no implied
covenants or obligations shall be read into this Agreement against the
Stockholder Agent.
(iii) The Stockholder Agent shall have reasonable access to
information about the Company and Parent, and shall also have the reasonable
assistance of the Company's and Parent's officers and employees for purposes of
performing its duties and exercising its rights hereunder, provided that the
Stockholder Agent shall treat confidentially and not disclose any nonpublic
information from or about the Company or Parent to anyone (except on a need to
know basis to individuals who agree in writing to treat such information
confidentially) without prior consent of Company or Parent, as the case may be.
(i) Actions of the Stockholder Agent. A decision, act, consent or
instruction of the Stockholder Agent shall, to the fullest extent permitted by
law, constitute a decision of all of the Company Stockholders for whom a portion
of the Parent Common Stock otherwise issuable to them is deposited in the Escrow
Fund and shall, to the fullest extent permitted by law, be final, binding and
conclusive upon each Company Stockholders. The Depositary Agent and Parent may
rely upon any such decision, act, consent or instruction of the Stockholder
Agent as being the decision, act, consent or instruction of every such Company
Stockholder. The Depositary Agent and Parent are hereby relieved, to the fullest
extent permitted by law, from any liability to any person for any acts done by
them in accordance with such decision, act, consent or instruction of the
Stockholder Agent.
(j) Third-Party Claims. In the event Parent becomes aware of a
third-party claim (a "Third-Party Claim") which Parent reasonably expects may
result in a demand against the Escrow Amount, Parent shall notify the
Stockholder Agent of such claim, and the Stockholder
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Agent, as representative for the Company Stockholders, shall be entitled, at the
Company Stockholders' expense, to participate in any defense of such claim.
Parent shall have the right in its sole discretion to settle any Third-Party
Claim; provided, however, that if Parent settles any Third-Party Claim without
the Stockholder Agent's consent (which consent shall not be unreasonably
withheld, conditioned or delayed), Parent may not make a claim against the
Escrow Amount with respect to the amount of Losses incurred by Parent in such
settlement. In the event that the Stockholder Agent has consented to any such
settlement, the Stockholder Agent shall have no power or authority to object
under any provision of this Article 7 to the amount of any claim by Parent
against the Escrow Amount with respect to the amount of Losses incurred by
Parent in such settlement.
(k) Indemnification for Stockholder Agent. The Company Stockholders
shall, severally and not jointly, on a pro rata basis based on their
proportionate beneficial ownership interests in the Company, indemnify, defend
and hold the Stockholder Agent harmless from and against any loss, damage, tax,
liability and expense that may be incurred by the Stockholder Agent arising out
of or in connection with the acceptance or administration of the Stockholder
Agent's duties, except as caused by the Stockholder Agent's willful misconduct,
including the legal costs and expenses of defending such Stockholder Agent
against any claim or liability in connection with the performance of the
Stockholder Agent's duties. The Stockholder Agent shall be entitled, but not
limited, to such indemnification from the Escrow Fund prior to any distribution
thereof to the Company Stockholders, but after any distributions therefrom to
Parent, and shall also be entitled without limitation to enforce such indemnity
in accordance with Section 7.2(h)(i).
(l) Depositary Agent's Duties.
(i) The Depositary Agent shall be obligated only for the
performance of such duties as are specifically set forth herein, and as set
forth in any additional written escrow instructions which the Depositary Agent
may receive after the date of this Agreement which are signed by an officer of
Parent and the Stockholder Agent, and may rely and shall be protected in relying
or refraining from acting on any instrument reasonably believed to be genuine
and to have been signed or presented by the proper party or parties. The
Depositary Agent shall not be liable for any act done or omitted hereunder as
Depositary Agent while acting in good faith and in the exercise of reasonable
judgment, and any act done or omitted pursuant to the advice of counsel shall be
conclusive evidence of such good faith.
(ii) The Depositary Agent is hereby expressly authorized to
comply with and obey Orders of any court of law or Governmental or Regulatory
Authority, notwithstanding any notices, warnings or other communications from
any party or any other person to the contrary. In case the Depositary Agent
obeys or complies with any such Order, the Depositary Agent shall not be liable
to any of the parties hereto or to any other person by reason of such
compliance, notwithstanding any such Order being subsequently reversed,
modified, annulled, set aside, vacated or found to have been entered without
jurisdiction or proper authority.
(iii) The Depositary Agent shall not be liable in any respect on
account of (A) the identity, authority or rights of the parties executing or
delivering or purporting to
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execute or deliver this Agreement or any documents or papers deposited or called
for hereunder; or (B) the expiration of any rights under any statute of
limitations with respect to this Agreement or any documents deposited with the
Depositary Agent.
(iv) In performing any duties under the Agreement, the
Depositary Agent shall not be liable to any party for damages, losses, or
expenses, except for gross negligence or willful misconduct on the part of the
Depositary Agent. The Depositary Agent shall not incur any such liability for
(A) any act or failure to act made or omitted in good faith, or (B) any action
taken or omitted in reliance upon any instrument, including any written
statement or affidavit provided for in this Agreement that the Depositary Agent
shall in good faith believe to be genuine, nor will the Depositary Agent be
liable or responsible for forgeries, fraud, impersonations or determining the
scope of any representative authority. In addition, the Depositary Agent may
consult with legal counsel in connection with the Depositary Agent's duties
under this Agreement and shall be fully protected in any act taken, suffered, or
permitted by him, her or it in good faith in accordance with the advice of
counsel. The Depositary Agent is not responsible for determining and verifying
the authority of any person acting or purporting to act on behalf of any party
to this Agreement.
(v) If any controversy arises between the parties to this
Agreement, or with any other party, concerning the subject matter of this
Agreement, its terms or conditions, the Depositary Agent will not be required to
determine the controversy or to take any action regarding it. The Depositary
Agent may hold all documents and shares of Parent Common Stock (and any other
securities, cash or property in its possession) and may wait for settlement of
any such controversy by final appropriate legal proceedings or other means as,
in the Depositary Agent's discretion, the Depositary Agent may be required,
despite what may be set forth elsewhere in this Agreement. In such event, the
Depositary Agent will not be liable for any damages. Furthermore, the Depositary
Agent may at its option, file an action of interpleader requiring the parties to
answer and litigate any claims and rights among themselves. The Depositary Agent
is authorized to deposit with the clerk of the court all documents and shares of
Parent Common Stock (and any other securities, cash or property) held in escrow,
except all costs, expenses, charges and reasonable attorney fees incurred by the
Depositary Agent due to the interpleader action and which the parties jointly
and severally agree to pay. Upon initiating such action, the Depositary Agent
shall be fully released and discharged of and from all obligations and liability
imposed by the terms of this Agreement.
(vi) Parent and its successors and assigns agrees to indemnify
and hold the Depositary Agent harmless against any and all Losses incurred by
the Depositary Agent in connection with the performance of the Depositary
Agent's duties under this Agreement, including but not limited to any litigation
arising from this Agreement or involving its subject matter.
(vii) The Depositary Agent may resign at any time upon giving at
least thirty (30) days written notice to the parties; provided, however, that no
such resignation shall become effective until the appointment of a successor
depositary agent which shall be accomplished as follows: the parties shall use
their commercially reasonable efforts to mutually agree on a successor
depositary agent within thirty (30) days after receiving such notice. If the
parties fail to agree upon a successor depositary agent within such time, the
Depositary Agent
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shall have the right to appoint a successor depositary agent authorized to do
business in the State of California. The successor depositary agent shall
execute and deliver an instrument accepting such appointment and it shall,
without further acts, be vested with all the estates, properties, rights,
powers, and duties of the predecessor depositary agent as if originally named as
Depositary Agent. The Depositary Agent shall be discharged from any further
duties and liability under this Agreement.
(m) All fees of the Depositary Agent for performance of its duties
hereunder shall be paid by Parent. In the event that the conditions of this
Agreement are not promptly fulfilled, or if the Depositary Agent renders any
service not provided for in this Agreement, or if the parties request a
substantial modification of its terms, or if any controversy arises, or if the
Depositary Agent is made a party to, or intervenes in, any Action or Proceeding
pertaining to this escrow or its subject matter, the Depositary Agent shall be
reasonably compensated for such extraordinary services and reimbursed for all
costs, attorney's fees, and expenses occasioned by such default, delay,
controversy or Action or Proceeding. Parent agrees to pay these sums upon
demand.
ARTICLE 8
TERMINATION, AMENDMENT AND WAIVER
8.1 Termination. Except as provided in Section 8.2, this Agreement may
be terminated and the Merger abandoned at any time prior to the Effective Time:
(a) by mutual agreement of the Company, Parent and Merger Sub;
(b) by Parent, Merger Sub or the Company if: (i) the Effective Time
has not occurred before 5:00 p.m. (Pacific Time) on the latest of (x) February
28, 2001, (y) the date that is five (5) Business Days after the termination of
any HSR waiting period, or (z) five Business Days following the final time for
appeal or rehearing of the lifting of any temporary restraining order,
preliminary or permanent injunction or other Order issued by a court of
competent jurisdiction or Governmental or Regulatory Authority or other legal or
regulatory restraint or prohibition preventing the consummation of the Merger or
requiring Parent to (A) hold separate the assets of the Surviving Corporation,
(B) not to exercise full voting rights with respect to its shares of capital
stock of the Surviving Corporation or (C) which would permit consummation of the
Merger only if certain divestitures were made or if Parent were to agree to
material limitations on its subsidiaries business activities or operations, but
in any event no later than the six-month anniversary of this Agreement
(provided, however, that the right to terminate this Agreement under this
Section 8.1(b)(i) shall not be available to any party whose willful failure, or
the willful failure of whose controlled subsidiary, to fulfill any obligation
hereunder has been the cause of, or resulted in, the failure of the Effective
Time to occur on or before such date); (ii) there shall be a final nonappealable
order of a federal or state court in effect preventing consummation of the
Merger; or (iii) there shall be any statute, rule, regulation or order enacted,
promulgated or issued by any Governmental or Regulatory Authority that would
make consummation of the Merger illegal;
(c) by Parent or Merger Sub if there shall be any Law or Order
enacted, promulgated or issued or deemed applicable to the Merger, by any
Governmental or Regulatory
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Authority, which would: (i) prohibit Parent or Merger Sub's ownership or
operation of all or any portion of the business of the Company or (ii) compel
Parent or Merger Sub to dispose of or hold separate all or any portion of the
Assets and Properties of the Company as a result of the Merger;
(d) by Parent or Merger Sub if it is not in material breach of its
representations, warranties, covenants and agreements under this Agreement and
there has been a breach of any representation, warranty, covenant or agreement
contained in this Agreement on the part of the Company and (i) the Company is
not using its commercially reasonable efforts to cure such breach, or has not
cured such breach within thirty (30) days, after notice of such breach to the
Company (provided, however, that, no cure period shall be available for a breach
which by its nature cannot be cured) and (ii) as a result of such breach any of
the conditions set forth in Section 6.1 or Section 6.3, as the case may be,
would not be satisfied prior to the date specified in Section 8.1(b)(i);
(e) by the Company if it is not in material breach of its
representations, warranties, covenants and agreements under this Agreement and
there has been a breach of any representation, warranty, covenant or agreement
contained in this Agreement on the part of Parent or Merger Sub and (i) Parent
is not using its commercially reasonable efforts to cure such breach, or has not
cured such breach within thirty (30) days, after notice of such breach to Parent
(provided, however, that no cure period shall be available for a breach which by
its nature cannot be cured), and (ii) as a result of such breach any of the
conditions set forth in Section 6.1 or Section 6.2, as the case may be, would
not be satisfied as of the date specified in Section 8.1(b)(i);
(f) by Parent if, if at any time after five days following the
meeting at which the Company's stockholders take the Company Stockholder Action,
holders of more than five percent (5.0%) of the outstanding shares of Company
Capital Stock (determined on an "as if converted to Company Common Stock" basis)
shall have exercised, or have any continued right to exercise, appraisal,
dissenters' or similar rights under Delaware Law with respect to their shares by
virtue of the Merger;
(g) by Parent, if this Agreement shall not have been adopted by the
requisite vote or consent, as applicable, of the Company's stockholders in
accordance with Delaware Law (i) at any meeting (or any adjournment thereof)
convened for the purpose of taking a vote with respect to the adoption of this
Agreement or (ii) in any solicitation of stockholder written consents with
respect to the adoption of this Agreement, within twenty-five (25) days after
the record date established for determining the stockholders of the Company
entitled to consent;
(h) by Parent, if any of the individuals listed on Schedule 6.3(g)
cease to be employed by the Company, provided, however, that Parent may exercise
this termination right with respect to a particular individual named in Schedule
6.3(g) only if Parent gives the Company written notice of termination of the
Agreement within five (5) days after receipt of written notice from the Company
that such individual has ceased to be employed by the Company; or
(i) by Parent, if, at any time prior to the Closing, more than ten
percent (10%) of the Company's engineering and research and development
employees employed as of the date of
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this Agreement (exclusive of those listed on Schedule 6.3(g)) shall cease to be
employed by the Company or if more than ten percent (10%) of such employees
shall have given any notice or other indication that they are not willing to be
employed by the Surviving Corporation following the Merger (it being understood
if one or more Company employees cease to be employed by the Company as a result
of death or bona fide permanent disability, the number of employees of the
Company as of the date of this Agreement will be reduced by one (1) for purposes
of making the necessary calculation).
8.2 Effect of Termination. In the event of a valid termination of this
Agreement as provided in Section 8.1, this Agreement shall forthwith become void
and there shall be no liability or obligation on the part of Parent or the
Company, or their respective officers, directors or stockholders or Affiliates
or Associates; provided, however, that each party shall remain liable for any
breaches of this Agreement prior to its termination; and provided further that,
the provisions of Sections 5.4, 5.5 and 8.2, Article 9 (exclusive of Section
9.3) and the applicable definitions set forth in Article 10 shall remain in full
force and effect and survive any termination of this Agreement.
8.3 Amendment. Except as is otherwise required by applicable law after
the stockholders of the Company adopt this Agreement, this Agreement may be
amended by the parties hereto at any time by execution of an instrument in
writing signed on behalf of each of the parties hereto; provided, however, that
the consent of the Stockholder Agent and the Depositary Agent shall not be
required in connection with any amendment to this Agreement that does not affect
the rights and obligations of the Stockholder Agent (or any of the holders of
Company Common Stock, Company Options, or Company Warrants who are represented
by the Stockholder Agent) or the Depositary Agent, as applicable.
8.4 Extension; Waiver. At any time prior to the Effective Time, Parent,
Merger Sub and the Company may (but shall not be obligated to), to the extent
legally allowed, (a) extend the time for the performance of any of the
obligations of the other party hereto, (b) waive any inaccuracies in the
representations and warranties made to such party contained herein or in any
document delivered pursuant hereto, and (c) waive compliance with any of the
agreements, covenants or conditions for the benefit of such party contained
herein. Any agreement on the part of a party hereto to any such extension or
waiver shall be valid only if set forth in an instrument in writing signed on
behalf of such party.
ARTICLE 9
MISCELLANEOUS PROVISIONS
9.1 Notices. All notices, requests and other communications hereunder
must be in writing and will be deemed to have been duly given only if delivered
personally against written receipt or by facsimile transmission against
facsimile confirmation or mailed by internationally recognized overnight courier
prepaid, to the parties at the following addresses or facsimile numbers:
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If to Parent to:
Broadcom Corporation
00000 Xxxxx Xxxxxxx
Xxxxxx, Xxxxxxxxxx 00000-0000
Facsimile No.: (000) 000-0000
Attn: President and Chief Executive Officer
and
Broadcom Corporation
00000 Xxxxx Xxxxxxx
Xxxxxx, Xxxxxxxxxx 00000-0000
Facsimile No.: (000) 000-0000
Attn: General Counsel
with a copy (which shall not constitute notice) to:
Xxxxxxx, Xxxxxxx & Xxxxxxxx LLP
000 Xxxxx Xxxx Xxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Facsimile No.: (000) 000-0000
Attn: Xxxxxxx X. Xxxxxxxxxx
If to the Company to:
Reliance Computer Corp.
0000 Xxxxxx Xxxx
Xxxxx Xxxxx, XX 00000
Facsimile No.: (000) 000-0000
Attn: President and Chief Executive Officer
with a copy (which shall not constitute notice) to:
Xxxxxxx X. XxXxx
000 Xxxxxxxx Xxxx
Xxxxxxx, XX 00000-0000
Facsimile No.: (000) 000-0000
If to the Shareholder Agent:
Anantakotiraju Xxxxxxx
c/o Reliance Computer Corp.
0000 Xxxxxx Xxxx
Xxxxx Xxxxx, XX 00000
Facsimile No.: (000) 000-0000
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with a copy (which shall not constitute notice) to:
Xxxxxxx X. XxXxx
000 Xxxxxxxx Xxxx
Xxxxxxx, XX 00000-0000
Facsimile No.: (000) 000-0000
If to the Depository Agent:
U.S. Stock Transfer Corporation
0000 Xxxxxxx Xxxxxx
Xxxxxxxx, Xxxxxxxxxx 00000-0000
Facsimile No.: (000) 000-0000
Attn: Xxxxxxx X. Xxxxx, Vice President
All such notices, requests and other communications will (a) if delivered
personally to the address as provided in this Section 9.1, be deemed given upon
delivery, (b) if delivered by facsimile transmission to the facsimile number as
provided for in this Section 9.1, be deemed given upon facsimile confirmation,
and (c) if delivered by overnight courier to the address as provided in this
Section 9.1, be deemed given on the earlier of the first Business Day following
the date sent by such overnight courier or upon receipt (in each case regardless
of whether such notice, request or other communication is received by any other
Person to whom a copy of such notice is to be delivered pursuant to this Section
9.1). Any party from time to time may change its address, facsimile number or
other information for the purpose of notices to that party by giving notice
specifying such change to the other party hereto.
9.2 Entire Agreement. This Agreement and the Exhibits and Schedules
hereto, including the Company Disclosure Schedule and Schedule 1.13, (a)
constitute the entire Agreement among the parties with respect to the subject
matter hereof and supersede all prior agreements and understandings, both
written and oral, among the parties with respect to the subject matter hereof,
except for the Confidentiality Agreements (which shall continue in full force
and effect and shall survive any termination of this Agreement or the Closing in
accordance with their terms), and (b) shall be deemed to have the same effect on
construction or interpretation of this Agreement as if set forth herein.
9.3 Further Assurances; Post-Closing Cooperation. At any time or from
time to time after the Closing, the parties shall execute and deliver to the
other party such other documents and instruments, provide such materials and
information and take such other actions as the other party may reasonably
request to consummate the transactions contemplated by this Agreement and
otherwise to cause the other party to fulfill its obligations under this
Agreement and the transactions contemplated hereby. Each party agrees to use
commercially reasonable efforts to cause the conditions to its obligations to
consummate the Merger to be satisfied.
9.4 Waiver. Any term or condition of this Agreement may be waived at any
time by the party that is entitled to the benefit thereof, but no such waiver
shall be effective unless set forth in a written instrument duly executed by or
on behalf of the party waiving such term or condition. No waiver by any party of
any term or condition of this Agreement, in any one or
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more instances, shall be deemed to be or construed as a waiver of the same or
any other term or condition of this Agreement on any future occasion. All
remedies, either under this Agreement or by Law or otherwise afforded, will be
cumulative and not alternative.
9.5 Third-Party Beneficiaries. The terms and provisions of this
Agreement are intended solely for the benefit of each party hereto and their
respective successors or permitted assigns, and it is not the intention of the
parties to confer third-party beneficiary rights, and this Agreement does not
confer any such rights, upon any other Person other than any Person entitled to
indemnity under Section 5.12 or Article 7; provided, that this Section 9.5 shall
not be construed to prohibit an action for consideration which is unpaid at a
time when Parent is then obligated to pay such amounts pursuant to Article 1.
9.6 No Assignment; Binding Effect. Except as contemplated by Section
1.13(e) and in the case of Successor Stockholder Agents as permitted under
Section 7.2(h)(i), neither this Agreement nor any right, interest or obligation
hereunder may be assigned (by operation of law or otherwise) by any party
without the prior written consent of the other party and any attempt to do so
will be void. Subject to the preceding sentence, this Agreement is binding upon,
inures to the benefit of and is enforceable by the parties hereto and their
respective successors and assigns.
9.7 Headings. The headings and table of contents used in this Agreement
have been inserted for convenience of reference only and do not define or limit
the provisions hereof.
9.8 Invalid Provisions. If any provision of this Agreement is held to be
illegal, invalid or unenforceable under any present or future Law, and if the
rights or obligations of any party hereto under this Agreement will not be
materially and adversely affected thereby, (a) such provision will be fully
severable, (b) this Agreement will be construed and enforced as if such illegal,
invalid or unenforceable provision had never comprised a part hereof, (c) the
remaining provisions of this Agreement will remain in full force and effect and
will not be affected by the illegal, invalid or unenforceable provision or by
its severance herefrom and (d) in lieu of such illegal, invalid or unenforceable
provision, there will be added automatically as a part of this Agreement a
legal, valid and enforceable provision as similar in terms to such illegal,
invalid or unenforceable provision as may be possible.
9.9 Governing Law, Submission to Jurisdiction. Except as and to the
extent required to consummate the Merger under Delaware Law, this Agreement, any
Ancillary Agreements and any other closing documents shall be governed by and
construed in accordance with the laws of the State of California as applied to
contracts entered into by California residents and performed entirely in
California, without giving effect to its principles or rules regarding conflicts
of laws, other than such principles directing application of the laws of
California. Each party hereto irrevocably agrees that any legal action or
proceeding with respect to this Agreement or for recognition and enforcement of
any judgment in respect hereof brought by another party hereto or its successors
or assigns may be brought and determined by either a state court or federal
court sitting in Santa Xxxxx County, California and each party hereto hereby
irrevocably submits with regard to any such action or proceeding for itself and
in respect to its property, generally and unconditionally, to the nonexclusive
jurisdiction of the aforesaid courts. Each party hereto hereby irrevocably
waives, and agrees not to assert, by way of motion, as a defense, counter claim
or otherwise, in any action or proceeding with respect to this Agreement, (a)
any claim that
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it is not personally subject to the jurisdiction of the above-named courts for
any reason other than the failure to serve process in accordance with this
Section 9.9, (b) that it or its property is exempt or immune from jurisdiction
of any such court or from any legal process commenced in such courts (whether
through service of notice, attachment prior to judgment, attachment in aid of
execution of judgment, execution of judgment or otherwise), and (c) to the
fullest extent permitted by applicable law, that (i) the suit, action or
proceeding in any such court is brought in an inconvenient forum, (ii) the venue
of such suit, action or proceeding is improper and (iii) this Agreement, or the
subject matter hereof, may not be enforced in or by such courts.
9.10 WAIVER OF TRIAL BY JURY. IN ANY ACTION OR PROCEEDING ARISING
HEREFROM, THE PARTIES HERETO CONSENT TO TRIAL WITHOUT A JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM BROUGHT BY ANY PARTY HERETO AGAINST THE OTHER OR
THEIR SUCCESSORS IN RESPECT OF ANY MATTER ARISING OUT OF OR IN CONNECTION WITH
THIS AGREEMENT, REGARDLESS OF THE FORM OF ACTION OR PROCEEDING.
9.11 Construction. The parties hereto agree that this Agreement is the
product of negotiation between sophisticated parties and individuals, all of
whom were represented by counsel, and each of whom had an opportunity to
participate in and did participate in, the drafting of each provision hereof.
Accordingly, ambiguities in this Agreement, if any, shall not be construed
strictly or in favor of or against any party hereto but rather shall be given a
fair and reasonable construction without regard to the rule of contra
proferentem.
9.12 Counterparts. This Agreement may be executed in any number of
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument. The Depositary Agent may
execute this Agreement following the date hereof and prior to the Closing, and
such later execution, if so executed after the date hereof, shall not affect the
binding nature of this Agreement as of the date hereof between the other
signatories hereto.
9.13 Specific Performance. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. Notwithstanding Section 9.9, it is agreed that the parties shall be
entitled to an injunction or injunctions to prevent breaches of this Agreement
and to enforce specifically the terms and provisions hereof in any court of the
United States or any state having jurisdiction, this being in addition to any
other remedy to which they are entitled at law or in equity. Nothing in Article
7 shall be construed or interpreted to limit this Section 9.13.
ARTICLE 10
DEFINITIONS
10.1 Definitions. As used in this Agreement, the following defined terms
shall have the meanings indicated below:
"Actions or Proceedings" means any action, suit, complaint,
petition, investigation, proceeding, arbitration, litigation or Governmental or
Regulatory Authority
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investigation, audit or other proceeding, whether civil or criminal, in law or
in equity, or before any arbitrator or Governmental Regulatory Authority.
"Affiliate" means, as applied to any Person, (a) any other Person
directly or indirectly controlling, controlled by or under common control with,
that Person, (b) any other Person that owns or controls ten percent (10%) or
more of the total aggregate voting power of all classes of equity securities
(including any equity securities issuable upon the exercise of any option or
convertible security) of that Person, or (c) as to a corporation, each director
thereof and corporation's chief executive officer, president, and chief
financial officer, and as to a partnership, each general partner thereof, and as
to a limited liability company, each managing member or similarly authorized
person thereof (including officers comparable to a corporation's chief executive
officer, president, and chief financial officer), and as to any other entity,
each Person exercising similar authority to those of a director, chief executive
officer, president, or chief financial officer of a corporation. For the
purposes of this definition, "control" (including with correlative meanings, the
terms "controlling", "controlled by", and "under common control with") as
applied to any Person, means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of that
Person, whether through ownership of voting securities or by contract or
otherwise.
"Aggregate Closing Share Number" means eleven million (11,000,000)
shares of Parent Common Stock, subject to adjustment pursuant to Section 1.7 and
Section 5.23.
"Aggregate Common Number" means the aggregate number of shares of
Company Common Stock outstanding immediately prior to the Effective Time
(including for this purpose all shares of Company Common Stock issued or
issuable upon exercise, conversion or exchange in full of all unvested and
vested Company Options and Company Warrants which are not exercised, converted,
exchanged or expired as of the Effective Time).
"Aggregate First Earn Out Share Number" means the number of First
Earn Out Shares, as adjusted pursuant to Section 1.7.
"Aggregate Second Earn Out Share Number" means the number of Second
Earn Out Shares, as adjusted pursuant to Section 1.7.
"Aggregate Share Number" means twenty million (20,000,000) shares
of Parent Common Stock as adjusted pursuant to Section 1.7 and Section 5.23.
"Aggregate Third Earn Out Share Number" means the number of Third
Earn Out Shares, as adjusted pursuant to Section 1.7.
"Agreement" means this Merger Agreement and Plan of Reorganization,
including (unless the context otherwise requires) the Exhibits and the Company
Disclosure Schedule and the certificates and instruments delivered in connection
herewith, or incorporated by reference, as the same may be amended or
supplemented from time to time in accordance with the terms hereof.
"Ancillary Agreements" has the meaning ascribed to it in Section
2.2.
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"Approval" means any approval, authorization, consent, permit,
qualification or registration, or any waiver of any of the foregoing, required
to be obtained from or made with, or any notice, statement or other
communication required to be filed with or delivered to, any Governmental or
Regulatory Authority or any other Person.
"Assets and Properties" of any Person means all assets and
properties of every kind, nature, character and description (whether real,
personal or mixed, whether tangible or intangible, whether absolute, accrued,
contingent, fixed or otherwise and wherever situated), including the goodwill
related thereto, operated, owned, licensed or leased by such Person, including
cash, cash equivalents, Investment Assets, accounts and notes receivable,
chattel paper, documents, instruments, general intangibles, real estate,
equipment, inventory, goods and Intellectual Property.
"Associate" means, with respect to any Person, any corporation or
other business organization of which such Person is an officer or partner or is
the beneficial owner, directly or indirectly, of ten percent (10%) or more of
any class of equity securities, any trust or estate in which such Person has a
substantial beneficial interest or as to which such Person serves as a trustee
or in a similar capacity and any relative or spouse of such Person, or any
relative of such spouse, who has the same home as such Person.
"Audited Financial Statement Date" means March 31, 2000.
"Audited Financial Statements" means the audited consolidated
balance sheets of the Company as of each of the fiscal years ended March 27,
1998 through March 31, 2000, respectively, and the related audited consolidated
statements of operations, stockholders' equity and cash flows for each of the
fiscal years then ended, in each case, together with the notes thereto and the
unqualified report of the Company's independent accountants with respect
thereto.
"Backup Registration Rights Agreement" has the meaning ascribed to
it in Section 5.1(c).
"Books and Records" means all files, documents, instruments,
papers, books and records relating to the Business or Condition of the Company,
including financial statements, internal reports, Tax Returns and related work
papers and letters from accountants, budgets, pricing guidelines, ledgers,
journals, deeds, title policies, minute books, stock certificates and books,
stock transfer ledgers, Contracts, Licenses, customer lists, computer files and
programs (including data processing files and records), retrieval programs,
operating data and plans and environmental studies and plans, excluding,
however, in all cases any materials that contain any confidential information of
any third party (other than the Company or Parent) that is restricted by
agreement or applicable law from being disclosed to parent and/or Persons.
"Business Combination" means, with respect to any Person, (a) any
merger, consolidation, share exchange, reorganization or other business
combination transaction to which such Person is a party, (b) any sale, or other
disposition of any capital stock or other equity interests of such Person
(except for issuances of common stock upon conversion of preferred stock
outstanding on the date hereof or the exercise of options or warrants
outstanding on the
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date hereof or issued in accordance with this Agreement), (c) any tender offer
(including a self tender), exchange offer, recapitalization, restructuring,
liquidation, dissolution or similar or extraordinary transaction, (d) any sale,
dividend or other disposition of all or a substantial portion of the Assets and
Properties of such Person (including by way of exclusive license or joint
venture formation) other than sales of inventory and license in the ordinary
course of such Person's business and consistent with past practice, or (e) the
entering into of any agreement or understanding, the granting of any rights or
options, or the acquiescence of such Person, to do any of the foregoing.
"Business Day" means a day other than Saturday, Sunday or any day
on which banks located in the State of California are authorized or obligated to
close.
"Business or Condition of Parent" means the business, condition
(financial or otherwise), results of operations, prospects or Assets and
Properties of the Parent and its Subsidiaries, considered in the aggregate.
"Business or Condition of the Company" means the business,
condition (financial or otherwise), results of operations, prospects or Assets
and Properties of the Company and its Subsidiaries, considered in the aggregate.
"California Code" means the California Corporations Code and all
amendments and additions thereto.
"California Permit" has the meaning ascribed to it in Section 1.14.
"Certificates" has the meaning ascribed to it in Section 1.10(b).
"Certificate of Merger" has the meaning ascribed to it in Section
1.2.
"Closing" means the closing of the transactions contemplated by
Section 1.2.
"Closing Date" has the meaning ascribed to it in Section 1.2.
"Closing Exchange Ratio" means the quotient obtained by dividing
(a) the Aggregate Closing Share Number by (b) the Aggregate Common Number.
"Closing Price" means the average closing sales price of Parent
Common Stock as traded on the NNM and reported by The Wall Street Journal, for
the thirty (30) consecutive market trading days commencing on the thirty second
(32nd) market trading day prior to the Closing Date and ending on (inclusive)
the third (3rd) market trading day prior to the Closing Date.
"COBRA" has the meaning ascribed to it in Section 2.14(f).
"Company" has the meaning ascribed to it in the forepart of this
Agreement.
"Company Affiliates" has the meaning ascribed to it in Section
5.10.
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"Company Affiliate Agreement" has the meaning ascribed to it in
Recital C to this Agreement.
"Company Common Stock" has the meaning ascribed to it in Section
2.3(a).
"Company Disclosure Schedule" means the schedules delivered to
Parent by or on behalf of the Company, containing all lists, descriptions,
exceptions and other information and materials as are required to be included
therein in connection with the representations and warranties made by the
Company in Article 2 or otherwise.
"Company Financials" means the Audited Financial Statements and the
Interim Financial Statements.
"Company Indemnified Party" has the meaning ascribed to it in
Section 5.12.
"Company Intellectual Property" shall mean any Intellectual
Property that (a) is owned by; (b) is licensed to; (c) was developed or created
by or for the Company or any of its Subsidiaries or (d) is used in or necessary
for the conduct of the business of the Company as presently or heretofore
conducted or as proposed to be conducted in the Company's Operating Plan,
including (x) any Intellectual Property created by any of the Company's
founders, employees, independent contractors or consultants for or on behalf of
the Company or any of its Subsidiaries and (y) currently used or reasonably
usable in the Company's business (except to the extent owned by a third party
under "work for hire" or similar doctrines) created by any of the Company's
founders prior to the creation of the Company or any of its Subsidiaries.
"Company Option(s)" means any Option to purchase Company Capital
Stock, excluding the Company Warrants.
"Company Registered Intellectual Property" means all Registered
Intellectual Property owned by, filed in the name of, assigned to or applied for
by, the Company.
"Company Restricted Stock" means shares of Company Capital Stock
purchased pursuant to an exercise of a Company Stock Purchase Right which are
subject to a repurchase option by the Company.
"Company Stock Plans" has the meaning ascribed to it in Section
1.6(d)(ii).
"Company Stock Purchase Right" means a right to purchase Company
Restricted Stock granted pursuant to a Company Stock Plan or otherwise.
"Company Stockholder Action" has the meaning ascribed to it in
Section 2.35.
"Company Stockholders" means all Persons who are the record holders
of shares of Company Common Stock, Company Option or Company Warrants
immediately prior to the Effective Time and any person who subsequent to the
Effective Time becomes a holder of a Company Option or Company Warrant in
accordance with the terms thereof.
"Company Subsidiary" means a Subsidiary of the Company.
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"Company Warrants" means any and all warrants to purchase Company
Common Stock, including the warrants listed in Section 2.3 of the Company
Disclosure Schedule.
"Competing Proposed Transaction" has the meaning ascribed to it in
Section 4.2.
"Confidentiality Agreements" has the meaning ascribed to it in
Section 5.4.
"Contract" means any material contract, agreement or other business
arrangement (whether oral or written) including but not limited to:
(i) any distributor, sales, advertising, agency or
manufacturer's representative contract;
(ii) any continuing contract for the purchase of
materials, supplies, equipment or services
involving in the case of any such contact more
than fifty thousand dollars ($50,000) over the
life of the contract;
(iii) any contract that expires or may be renewed at
the option of any person other than the Company
so as to expire more than one (1) year after the
date of this Agreement;
(iv) any trust indenture, mortgage, promissory note,
loan agreement or other contract for the
borrowing of money, any currency exchange,
commodities or other hedging arrangement or any
leasing transaction of the type required to be
capitalized in accordance with generally
accepted accounting principles;
(v) any contract for capital expenditures in excess
of fifty thousand dollars ($50,000) in the
aggregate;
(vi) any contract limiting the freedom of the Company
to engage in any line of business or to compete
with any other Person or any confidentiality,
secrecy or non-disclosure contract;
(vii) any contract pursuant to which the Company is a
lessor of any machinery, equipment, motor
vehicles, office furniture, fixtures or other
personal property;
(viii) any contract with any person with whom the
Company does not deal at arm's-length;
(ix) any material contract that is not terminable by
the Company upon thirty (30) days (or less)
notice by the Company without penalty or
obligation to make payments based on such
termination and which (i) requires payments
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by the Company in excess of fifty thousand
dollars ($50,000) (either alone or pursuant to a
series of related contracts), or (ii) requires
the Company to provide services to any Person
after the Closing; or
(x) any agreement of guarantee, support,
indemnification, assumption or endorsement of,
or any similar commitment with respect to, the
obligations, liabilities (whether accrued,
absolute, contingent or otherwise) or
indebtedness of any other Person.
"Delaware Law" means the Delaware General Corporation Law and all
amendments and additions thereto.
"Depositary Agent" means U.S. Stock Transfer Corporation (or other
institution acceptable to Parent and the Stockholder Agent).
"Dissenting Shares" has the meaning ascribed to it in Section
1.9(a).
"Earn Out Determination" has the meaning set forth in Section
1.13(b).
"Earn Out Dispute Notice" has the meaning ascribed to it in Section
1.13(b).
"Earn Out Date Escrow Amount" means (a) 0.10 multiplied by (b) the
number of Earn Out Shares; provided that the Earn Out Date Escrow Amount shall
equal zero (0) if as of the applicable Earn Out Delivery Date the Escrow Fund
has been released to the Company Stockholders.
"Earn Out Delivery Date" means the First Earn Out Delivery Date,
Second Earn Out Delivery Date, and/or Third Earn Out Delivery Date, as
applicable.
"Earn Out Deposit Date" has the meaning ascribed to it in Section
1.13(b).
"Earn Out Exchange Ratio" means the First Earn Out Exchange Ratio,
the Second Earn Out Exchange Ratio, and/or the Third Earn Out Exchange Ratio, as
applicable.
"Earn Out Shares" shall have the meaning set forth in Schedule
1.13, as adjusted pursuant to Section 1.7 and 5.23.
"Effective Time" has the meaning ascribed to it in Section 1.2.
"Environment" means air, surface water, ground water, or land,
including land surface or subsurface, and any receptors such as persons,
wildlife, fish, biota or other natural resources.
"Environmental Clean-up Site" means any location which is listed or
proposed for listing on the National Priorities List, the Comprehensive
Environmental Response, Compensation and Liability Information System, or on any
similar state list of sites relating to
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investigation or cleanup, or which is the subject of any pending or threatened
action, suit, proceeding, or investigation related to or arising from any
location at which there has been a Release or threatened or suspected Release of
a Hazardous Material.
"Environmental Law" means any federal, state, local or foreign
environmental, health and safety or other Law relating to of Hazardous
Materials, including the Comprehensive, Environmental Response Compensation and
Liability Act, the Clean Air Act, the Federal Water Pollution Control Act, the
Solid Waste Disposal Act, the Federal Insecticide, Fungicide and Rodenticide
Act, and the California Safe Drinking Water and Toxic Enforcement Act.
"Environmental Permit" means any permit, license, approval, consent
or authorization required under or in connection with any Environmental Law and
includes any and all orders, consent orders or binding agreements issued by or
entered into with a Governmental or Regulatory Authority.
"Equity Equivalents" means securities (including warrants and
options to purchase any shares of Company Common Stock) which, by their terms,
are or may be exercisable, convertible or exchangeable for or into common stock,
preferred stock or other securities at the election of the holder thereof.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended, and the rules and regulations promulgated thereunder.
"ERISA Affiliate" has the meaning ascribed to it in the definition
of Plan in this Section 10.
"Escrow Amount" means as of any determination date the sum of (a)
the Escrow Fund and (b) the Unexercised Escrow.
"Escrow Fund" has the meaning ascribed to it in Section 7.2(a).
"Escrow Period" has the meaning ascribed to it in Section 7.2(c).
"Estimated Third-Party Expenses" has the meaning ascribed to it in
Section 2.25.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the SEC thereunder.
"Exchange Agent" means U.S. Stock Transfer Corporation.
"Exchange Ratios" means the Closing Exchange Ratio and the Earn Out
Exchange Ratio, as applicable.
"Exercise Number" shall have the meaning set forth in Section
1.6(d)(i).
"Expiration Date" has the meaning ascribed to it in Section 7.1.
"Fairness Hearing" has the meaning ascribed to it in Section 1.13.
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"Financial Statement Date" means December 31, 1999.
"Final Earn Out Amount" has the meaning ascribed to in Section
1.13(c).
"First Earn Out Delivery Date" shall mean the meaning set forth in
Schedule 1.13.
"First Earn Out Exchange Ratio" means the quotient obtained by
dividing (a) the Aggregate First Earn Out Share Number by (b) the Aggregate
Common Number minus the Exercise Number of the Lenders' Warrant.
"First Earn Out Shares" shall have the meaning set forth in
Schedule 1.13, as adjusted pursuant to Section 1.7.
"Fully Diluted Option Share" means the number of shares of Company
Common Stock issuable immediately prior to the Effective Time with respect to
such holder's Company Option or Company Warrant divided by (x) the Aggregate
Common Number minus (y) the number of shares of Company Common Stock issued or
issuable immediately prior to the Effective Time with respect to the Lenders'
Warrant.
"Fully Diluted Stock Share" means the number of shares of Company
Common Stock owned by such holder immediately prior to the Effective Time
divided by (x) the Aggregate Common Number minus (y) the number of shares of
Company Common Stock issued or issuable immediately prior to the Effective Time
with respect to the Lenders' Warrant.
"Funded Fraction" has the meaning ascribed to it in Section 7.2(c).
"GAAP" means generally accepted accounting principles in the United
States, as in effect from time to time.
"Good Faith Consultation" means consultation with a Person's
independent accountants following disclosure in good faith to such accountants
of all facts requested by such accountants or which the specified Person
otherwise had reason to believe would be relevant to such accountants'
assessment.
"Governmental or Regulatory Authority" means any court, tribunal,
arbitrator, authority, agency, bureau, board, commission, department, official
or other instrumentality of the United States, any foreign country or any
domestic or foreign state, county, city or other political subdivision, and
shall include any stock exchange, quotation service and the National Association
of Securities Dealers.
"Hazardous Material" means (a) any chemical, material, substance or
waste including, containing or constituting petroleum or petroleum products,
solvents (including chlorinated solvents), nuclear or radioactive materials,
asbestos in any form that is or could become friable, radon, lead-based paint,
urea formaldehyde foam insulation or polychlorinated biphenyls, (b) any
chemicals, materials, substances or wastes which are now defined as or included
in the definition of "hazardous substances," "hazardous wastes," "hazardous
materials," "extremely hazardous wastes," "restricted hazardous wastes," "toxic
substances," "toxic pollutants" or words of similar import under any
Environmental Law; or (c) any other chemical,
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material, substance or waste which is regulated by any Governmental or
Regulatory Authority or which could constitute a nuisance.
"HSR Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976, as amended.
"Income Tax" means (a) any income, alternative or add-on minimum
tax, gross income, gross receipts, franchise, profits, including estimated taxes
relating to any of the foregoing, or other similar tax or other like assessment
or charge of similar kind whatsoever, excluding any Other Tax, together with any
interest and any penalty, addition to tax or additional amount imposed by any
Taxing Authority responsible for the imposition of any such Tax (domestic or
foreign); or (b) any liability of a Person for the payment of any taxes,
interest, penalty, addition to tax or like additional amount resulting from the
application of Treas. Reg. Section 1.1502-6 or comparable provisions of any
Taxing Authority in respect of a Tax Return of a Relevant Group or any Contract.
"Indebtedness" of any Person means all obligations of such Person
(a) for borrowed money, (b) evidenced by notes, bonds, debentures or similar
instruments, (c) for the deferred purchase price of goods or services (other
than trade payables or accruals incurred in the ordinary course of business),
(d) under capital leases classified as such under GAAP and (e) in the nature of
guarantees of the obligations described in clauses (a) through (d) above of any
other Person.
"Information Statement" has the meaning ascribed to it in Section
2.36.
"Intellectual Property" means all trademarks and trademark rights,
trade names and trade name rights, service marks and service xxxx rights,
service names and service name rights, patents and patent rights, utility models
and utility model rights, copyrights, mask work rights, brand names, trade
dress, product designs, product packaging, business and product names, logos,
slogans, rights of publicity, trade secrets, inventions (whether patentable or
not), invention disclosures, improvements, processes, formulae, industrial
models, processes, designs, specifications, technology, methodologies, computer
software (including all source code and object code), firmware, development
tools, flow charts, annotations, all Web addresses, sites and domain names, all
data bases and data collections and all rights therein, any other confidential
and proprietary right or information, whether or not subject to statutory
registration, and all related technical information, manufacturing, engineering
and technical drawings, know-how and all pending applications for and
registrations of patents, utility models, trademarks, service marks and
copyrights, and the right to xxx for past infringement, if any, in connection
with any of the foregoing, and all documents, disks, records, files and other
media on which any of the foregoing is stored.
"Interim Financial Statements" means the unaudited consolidated
balance sheet of the Company as of November 30, 2000, and the related unaudited
consolidated statement of operations and consolidated statement of cash flows
for the eight- month period ended on such date.
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"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended, and the rules and regulations promulgated thereunder.
"Investment Assets" means all debentures, notes and other evidences
of Indebtedness, stocks, securities (including rights to purchase and securities
convertible into or exchangeable for other securities), interests in joint
ventures and general and limited partnerships, mortgage loans and other
investment or portfolio assets owned of record or beneficially by the Company.
"IRS" means the United States Internal Revenue Service or any
successor entity.
"IT" has the meaning ascribed to it in Section 5.20.
"Law" or "Laws" means any law, statute, order, decree, consent
decree, judgment, rule, regulation, ordinance or other pronouncement having the
effect of law whether in the United States, any foreign country, or any domestic
or foreign state, county, city or other political subdivision or of any
Governmental or Regulatory Authority.
"Lease Documents" has the meaning ascribed to it in Section
2.15(d).
"Leased Real Property(ies)" has the meaning ascribed to it in
Section 2.15(a).
"Lenders' Warrant" shall mean any Company Warrant issued pursuant
to that certain Warrant Agreement dated as of August 24, 2000, among the
Company, Blue Ridge Investments LLC, The Bank of Nova Scotia and FSC Corp.
"Liabilities" means all Indebtedness, obligations and other
liabilities of a Person, whether absolute, accrued, contingent (or based upon
any contingency), known or unknown, fixed or otherwise, or whether due or to
become due.
"License" means any Contract that grants a Person the right to use
or otherwise enjoy the benefits of any Intellectual Property (including any
covenants not to xxx with respect to any Intellectual Property).
"Liens" means any mortgage, pledge, assessment, security interest,
lease, lien, easement, license, covenant, condition, restriction, adverse claim,
levy, charge, option, equity, adverse claim or restriction or other encumbrance
of any kind, or any conditional sale Contract, title retention Contract or other
Contract to give any of the foregoing, except for any restrictions on transfer
generally arising under any applicable federal or state securities law.
"Loss(es)" means (i) any and all damages, fines, fees, Taxes,
penalties, amounts paid in respect of indemnification obligations, deficiencies,
losses, (ii) special damages, incidental damages, consequential damages or
punitive damages, whether or not foreseeable, (except special damages incidental
damages, consequential damages or punitive damages of Parent, the Company or the
Surviving Corporation) and (iii) expenses, including interest, reasonable
expenses of investigation, court costs, reasonable fees and expenses of
attorneys, accountants and other experts or other reasonable expenses of
litigation or other proceedings or of any claim, default or assessment (such
fees and expenses to include all reasonable fees and
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expenses, including reasonable fees and expenses of attorneys, incurred in
connection with (a) the investigation or defense of any Third-Party Claims or
(b) asserting or disputing any rights under this Agreement against any party
hereto), net of any insurance proceeds actually received (offset by the present
value any adverse effect on the premiums paid for such insurance) or proceeds
received by virtue of third-party indemnification.
"Made-in-America Requirements" has the meaning ascribed to it in
Section 2.17(h).
"Merger" has the meaning ascribed to it in Recital A to this
Agreement.
"Merger Sub" has the meaning ascribed to it in the forepart of this
Agreement.
"NASD" means the National Association of Securities Dealers, Inc.
"New Shares" has the meaning ascribed to it in Section 7.2(d)(ii).
"NNM" means the distinct tier of The Nasdaq Stock Market referred
to as the Nasdaq National Market.
"Non-Competition Agreement" has the meaning ascribed to it in
Recital D to this Agreement.
"Non-Prevailing Party" has the meaning ascribed to it in Section
7.2(g)(iii).
"Officer's Certificate" has the meaning ascribed to it in Section
7.2(e)(i).
"Operating Plan" has the meaning ascribed to it in Section 2.31(b).
"Option" with respect to any Person means any security, right,
subscription, warrant, option, "phantom" stock right or other Contract (other
than the Company Preferred Stock) that gives the right to (a) purchase or
otherwise receive or be issued any shares of capital stock or other equity
interests of such Person or any security of any kind convertible into or
exchangeable or exercisable for any shares of capital stock or other equity
interests of such Person or (b) receive any benefits or rights similar to any
rights enjoyed by or accruing to the holder of shares of capital stock or other
equity interests of such Person, including any rights to participate in the
equity, income or election of directors or officers of such Person.
"Option Exercise Date" means a date, (x) occurring during the
Escrow Period, (y) on which any claim is pending against the Escrow Amount or
(z) occurring after indemnifiable Losses under Article 7 exceed the Escrow Fund,
on which a holder of a Company Option or Company Warrant exercises such option
or warrant, in whole or in part, in accordance with the terms of such Company
Warrant or Company Option and this Agreement.
"Order" means any writ, judgment, decree, injunction or similar
order of any Governmental or Regulatory Authority (in each such case whether
preliminary or final).
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"Other Tax" means any sales, use, ad valorem, business license,
withholding, payroll, employment, excise, stamp, transfer, recording,
occupation, premium, property, value added, custom duty, severance, windfall
profit or license tax, governmental fee or other similar assessment or charge,
together with any interest and any penalty, addition to tax or additional amount
imposed by any Taxing Authority responsible for the imposition of any such tax
(domestic or foreign).
"PBGC" means the Pension Benefit Guaranty Corporation established
under ERISA.
"Parent" has the meaning ascribed to in the forepart of this
Agreement.
"Parent Common Equity" means the Parent Common Stock and the Class
B Common Stock of Parent.
"Parent Common Stock" has the meaning ascribed to it in Recital B
to this Agreement.
"Parent Financial Statement" has the meaning ascribed to it in
Section 3.4.
"Parent Indemnitees" has the meaning ascribed to it in Section
7.2(b).
"Permit" means any license, permit, franchise or authorization.
"Permit Application" has the meaning ascribed to it in Section
2.35.
"Permitted Grants" means (a) grants of Company Options in the
ordinary course of business, consistent in amount and terms with the Company's
past practice, to (i) existing Company employees and (ii) Company employees
hired by the Company after the date of this Agreement, and (b) grants of Company
Options and Company Warrants as reflected on the Section 2.3(d) of the Company
Disclosure Schedule. For purposes of this definition, (x) a Company employee
will be deemed to be an "existing Company employee" if such employee was
actually employed by the Company on August 1, 2000; (y) a Company employee will
be deemed to be a "new employee" if such person was hired by the Company after
such date; and (z) the calculation of shares on a "fully converted basis"
includes all shares of Company Common Stock outstanding on the specified date
and all shares of Company Common Stock issuable upon the conversion of all
then-outstanding shares of Company Preferred Stock into Company Common Stock,
and all shares of Company Common Stock issuable upon the exercise in full, by
means of cash exercise and not by means of net exercise, of all Company Options
(including Company Options issued or to be issued pursuant to Permitted Grants)
and all Company Warrants.
"Person" means any natural person, corporation, general
partnership, limited partnership, limited liability company or partnership,
proprietorship, other business organization, trust, union, association or
Governmental or Regulatory Authority.
"Plan" mean (a) each of the "employee benefit plans" (as such term
is defined in Section 3(3) of ERISA, of which any of the Company, any
Subsidiary, or any member of the
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same controlled group of businesses as the Company or any Subsidiary within the
meaning of Section 4001(a)(14) of ERISA (an "ERISA Affiliate") is or ever was a
sponsor or participating employer or as to which the Company or any Subsidiary
or any of their ERISA Affiliates makes contributions or is required to make
contributions, and (b) any similar employment, severance or other arrangement or
policy of any of the Company any Subsidiary or any of their ERISA Affiliates
(whether written or oral) providing for health, life, vision or dental insurance
coverage (including self-insured arrangements), workers' compensation,
disability benefits, supplemental unemployment benefits, vacation benefits or
retirement benefits, fringe benefits, or for profit sharing, deferred
compensation, bonuses, stock options, stock appreciation or other forms of
incentive compensation or post-retirement insurance, compensation or benefits.
"PTO" means the United States Patent and Trademark Office.
"Qualifying Amendment" means a modification, withdrawal, amendment
or other alteration of the recommendation of the Company's board of directors
referred to in Section 5.1 in a manner that is adverse to Parent which is (a) in
the good faith judgment of the board of directors of the Company (consistent
with the written advice of outside counsel) likely required in order to comply
with the fiduciary duties of the board of directors of the Company to the
Company's stockholders under applicable law and (b) made after receipt of a
Superior Proposal. No Qualifying Amendment shall withdraw or unreasonably delay
submission of the proposal for adoption of this Agreement by the stockholders of
the Company.
"Reasonable Amount" has the meaning ascribed to it in Section
7.2(c).
"Registered Intellectual Property" shall mean all United States,
international and foreign: (a) patents and patent applications (including
provisional applications); (b) registered trademarks and servicemarks,
applications to register trademarks and servicemarks, intent-to-use
applications, other registrations or applications to trademarks or servicemarks,
or trademarks or servicemarks in which common law rights are owned or otherwise
controlled; (c) registered copyrights and applications for copyright
registration; (d) any mask work registrations and applications to register mask
works; and (e) any other Intellectual Property that is the subject of an
application, certificate, filing, registration or other document issued by,
filed with, or recorded by, any state, government or other public legal
authority.
"Release" means any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping or disposing of a
Hazardous Material into the Environment.
"Relevant Group" has the meaning ascribed to it in Section 2.11(a).
"Representatives" has the meaning ascribed to it in Section 2.36.
"Restricted Stock Purchase Agreement" means a Restricted Stock
Purchase Agreement in one of the forms attached to one of the Company Stock
Plans pursuant to which the Company has sold Company Restricted Stock or issued
Company Stock Purchase Rights or as may otherwise been entered into by the
Company prior to the date of this Agreement.
"SEC" means the Securities and Exchange Commission or any successor
entity.
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"SEC Documents" means, with respect to any Person, each report,
schedule, form, statement or other document filed or required to be filed with
the SEC by such Person pursuant to Section 13(a) of the Exchange Act.
"Second Earn Out Delivery Date" shall have the meaning set forth in
Schedule 1.13.
"Second Earn Out Exchange Ratio" means the quotient obtained by
dividing (a) the Aggregate Second Earn Out Share Number by (b) the Aggregate
Common Number minus the Exercise Number of the Lenders' Warrant.
"Second Earn Out Shares" shall have the meaning set forth in
Schedule 1.13, as adjusted pursuant to Section 1.7.
"Securities Act" has the meaning ascribed to it in Section 1.14.
"Site" means any of the real properties currently or previously
owned, leased, occupied, used or operated by the Company or Subsidiary of the
Company, any predecessors of the Company or Subsidiary of the Company, or any
entities previously owned by the Company or Subsidiary of the Company, including
all soil, subsoil, surface waters and groundwater.
"Stockholder Agent" has the meaning ascribed to it in Section
7.2(h)(i).
"Stockholder Certificate" has the meaning ascribed to it in Section
5.1(c)
"Stock Repurchase Agreement" has the meaning ascribed to it in
Recital C to this Agreement.
"Subsidiary" means any Person in which the Company or Parent, as
the context requires, directly or indirectly through Subsidiaries or otherwise,
beneficially owns at least fifty percent (50%) of either the equity interest in,
or the voting control of, such Person, whether or not existing on the date
hereof.
"Superior Proposal" means an unsolicited Competing Business
Proposal made by a third party to the board of directors of the Company which in
the good faith judgment of the board of directors of the Company, (a) consistent
with the written advice of an independent internationally recognized investment
bank, provides higher value to the Company's stockholders than the transactions
contemplated by this Agreement; (b) is likely to be consummated in accordance
with its terms; and (c) all required financing is supported by a commitment
letter in customary form.
"Support Agreement" has the meaning ascribed to it in Recital C to
this Agreement. "Surviving Corporation" has the meaning ascribed to it in
Section 1.1.
"Takeover Statute" means a "fair price," "moratorium," "control
share acquisition" or other similar antitakeover statute or regulation enacted
under state or federal laws in the United States, including, without limitation,
Section 203 of the Delaware Law.
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"Tax" or "Taxes" means Income Taxes and/or Other Taxes, as the
context requires.
"Tax Laws" means the Internal Revenue Code, federal, state, county,
local or foreign laws relating to Taxes and any regulations or official
administrative pronouncements released thereunder.
"Tax Returns" means any return, report, information return,
schedule, certificate, statement or other document (including any related or
supporting information) filed or required to be filed with, or, where none is
required to be filed with a Taxing Authority, the statement or other document
issued by, a Taxing Authority in connection with any Tax.
"Taxing Authority" means any governmental agency, board, bureau,
body, department or authority of any United States federal, state or local
jurisdiction or any foreign jurisdiction, having or purporting to exercise
jurisdiction with respect to any Tax.
"Third-Party Claim" has the meaning ascribed to it in Section
7.2(j).
"Third Earn Out Delivery Date" shall have the meaning set forth in
Schedule 1.13.
"Third Earn Out Exchange Ratio" means the quotient obtained by
dividing (a) the Aggregate Third Earn Out Share Number by (b) the Aggregate
Common Number minus the Exercise Number of the Lenders' Warrant.
"Third Earn Out Shares" shall have the meaning set forth in
Schedule 1.13, as adjusted pursuant to Section 1.7.
"Third-Party Expenses" has the meaning ascribed to it in Section
5.5.
"Unexercised Escrow" means the amount deemed to be contributed on
behalf of each holder of a Company Option or Company Warrant, which otherwise
would be deposited in the Escrow Fund.
"Warranty Obligations" has the meaning ascribed to it in Section
2.28.
10.2 Construction.
(a) Unless the context of this Agreement otherwise requires, (i)
words of any gender include each other gender and the neuter, (ii) words using
the singular or plural number also include the plural or singular number,
respectively, (iii) the terms "hereof," "herein," "hereby" and derivative or
similar words refer to this entire Agreement as a whole and not to any
particular Article, Section or other subdivision, (iv) the terms "Article" or
"Section" or other subdivision refer to the specified Article, Section or other
subdivision of the body of this Agreement, (v) the phrases "ordinary course of
business" and "ordinary course of business consistent with past practice" refer
to the business and practice of the Company, (vi) the words "include,"
"includes" and "including" shall be deemed to be followed by the phrase "without
limitation," and (vii) when a reference is made in this Agreement to Exhibits,
such reference
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shall be to an Exhibit to this Agreement unless otherwise indicated. All
accounting terms used herein and not expressly defined herein shall have the
meanings given to them under GAAP. When used herein, the terms "party" or
"parties" refer to Parent and Merger Sub, on the one hand, and the Company, on
the other, and the terms "third party" or "third parties" refers to Persons
other than Parent, Merger Sub or the Company. Parol evidence, including without
limitation prior drafts of this Agreement or any course of performance, may be
used in the construction or interpretation of this Agreement.
(b) When used herein, the phrase "to the knowledge of" any Person,
"to the best knowledge of" any Person, "known to" any Person or any similar
phrase, means (i) with respect to any Person who is an individual, the actual
knowledge of such Person, (ii) with respect to any other Person, the actual
knowledge of the directors and officers of such Person and other individuals
that have a similar position or have similar powers and duties as the officers
and senior management of such Person, and (iii) in the case of each of (i) and
(ii), the knowledge of facts that such individuals should have after due
inquiry. For this purpose, "due inquiry" with respect to any matter means
inquiry of and consultations with (A) the directors and officers of such Person
and other individuals that have a similar position or have similar powers and
duties as such officers and directors, (B) other employees of and the advisors
to such Person, including legal counsel and outside auditors, who have principal
responsibility for the matter in question or are otherwise likely to have
information relevant to the matter, and (C) the stockholders owning more than
ten percent (10%) of the equity interests, by vote or value, of such Person.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, Parent, Merger Sub and the Company, and with respect
to Article 7, Article 9 and Article 10 only, the Stockholder Agent and the
Depositary Agent, have caused this Agreement to be signed by their duly
authorized representatives, all as of the date first written above.
RELIANCE COMPUTER CORP. BROADCOM CORPORATION
By: /s/ ANANTAKOTIRAJU XXXXXXX By: /s/ XXXXX X. XXXXXXXX
------------------------------------- ----------------------------
Anantakotiraju Xxxxxxx Xxxxx X. Xxxxxxxx, III, Ph.D.
President and President and
Chief Executive Officer Chief Executive Officer
RCC ACQUISITION CORP. STOCKHOLDER AGENT
By: /s/ XXXXX X. XXXXXXXX By: /s/ ANANTAKOTIRAJU XXXXXXX
----------------------------------- ---------------------------
Xxxxx X. Xxxxxxxx, III, Ph.D. Anantakotiraju Xxxxxxx
Chief Executive Officer
U.S. STOCK TRANSFER CORPORATION,
AS DEPOSITARY AGENT
By: /s/ XXXXXXX X. XXXXX
-----------------------------
Xxxxxxx X. Xxxxx
Vice President
103
MERGER AGREEMENT AND
PLAN OF REORGANIZATION
BY AND AMONG
BROADCOM CORPORATION,
RCC ACQUISITION CORP.,
RELIANCE COMPUTER CORP.
AND
THE OTHER PARTIES SIGNATORY HERETO
Dated as of January 5, 2001
Exhibit A Form of Support Agreement
Exhibit B Form of Company Affiliate Agreement
Exhibit C Form of Stock Repurchase Agreement
Exhibit D Form of Non-Competition Agreement
Exhibit E Form of Certificate of Merger
Exhibit F Form of Stockholder Certificate
Exhibit G-1 Form of Company Tax Representation Letter
Exhibit G-2 Form of Broadcom Tax Representation Letter
Exhibit H-1 Form of Broadcom Officer's Certificate
Exhibit H-2 Form of Broadcom Secretary's Certificate
Exhibit I Form of Broadcom Counsel Legal Opinion
Exhibit J-1 Form of Company Officer's Certificate
Exhibit J-2 Form of Company Secretary's Certificate
Exhibit K-1 Form of Opinion of Company Counsel
Exhibit K-2 Form of Opinion of Company Counsel
Exhibit L Form of Company Tax Opinion
Schedule 1.13 Earn Out Amounts and Milestones
Broadcom Corporation agrees to furnish supplementally a copy of any of the
foregoing exhibits to the SEC upon request.