Exhibit 2.1
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
ALPHA INDUSTRIES, INC., ARIES ACQUISITION CORPORATION
AND
NETWORK DEVICE INC.
DATED AS OF FEBRUARY 10, 2000
TABLE OF CONTENTS
ARTICLE 1 - THE MERGER
Section 1.1 The Merger................................................2
Section 1.2 The Closing...............................................2
Section 1.3 Actions at the Closing....................................3
Section 1.4 Additional Action.........................................3
Section 1.5 Conversion of Shares......................................3
Section 1.6 Exchange of Company Stock.................................7
Section 1.7 Dissenting Shares.........................................8
Section 1.8 Fractional Shares.........................................9
Section 1.9 Escrow....................................................9
Section 1.10 Options..................................................10
Section 1.11 Organizational Documents.................................11
Section 1.12 Directors and Officers...................................11
Section 1.13 No Further Rights........................................11
Section 1.14 Closing of Transfer Books................................11
ARTICLE 2 - REPRESENTATIONS AND WARRANTIES
OF THE COMPANY
Section 2.1 Organization, Qualification and Corporate Power..........12
Section 2.2 Capitalization...........................................13
Section 2.3 Authority................................................15
Section 2.4 Vote Required............................................16
Section 2.5 Noncontravention.........................................16
Section 2.6 Company Subsidiaries.....................................17
Section 2.7 Financial Statements.....................................17
Section 2.8 No Undisclosed Liabilities...............................18
Section 2.9 Tax Matters..............................................18
Section 2.10 Assets...................................................21
Section 2.11 Owned Real Property......................................22
Section 2.12 Intellectual Property....................................22
Section 2.13 Year 2000................................................25
Section 2.14 Inventory................................................26
Section 2.15 Real Property Leases.....................................26
Section 2.16 Contracts................................................27
Section 2.17 Bank Accounts and Powers of Attorney.....................31
Section 2.18 Insurance................................................31
Section 2.19 Litigation...............................................31
Section 2.20 Employees................................................32
Section 2.21 Employee Benefits........................................32
Section 2.22 Environmental Matters....................................34
Section 2.23 Compliance...............................................36
Section 2.24 Permits..................................................37
Section 2.25 Certain Business Relationships With Affiliates...........37
Section 2.26 Broker's Fees............................................38
Section 2.27 Books and Records........................................38
Section 2.28 Pooling; Tax Matters.....................................38
Section 2.29 Company Action...........................................39
Section 2.30 Information in Certain Documents.........................39
Section 2.31 Absence of Certain Changes...............................40
Section 2.32 Certain Business Practices...............................40
Section 2.33 Agreements with Holders of Company Stock.................40
Section 2.34 Disclosure...............................................41
ARTICLE 3 - REPRESENTATIONS AND WARRANTIES
OF THE PARENT
Section 3.1 Organization.............................................41
Section 3.2 Capitalization...........................................42
Section 3.3 Authority................................................42
Section 3.4 Noncontravention.........................................43
Section 3.5 Reports and Financial Statements.........................43
Section 3.6 Broker's Fees............................................44
Section 3.7 Information in Certain Documents.........................44
Section 3.8 No Material Adverse Change...............................45
ARTICLE 4 - COVENANTS
Section 4.1 Interim Operations of the Company........................45
Section 4.2 Reasonable Best Efforts..................................48
Section 4.3 Shareholder Approval.....................................50
Section 4.4 Filing of Tax Returns; Payment of Taxes..................51
Section 4.5 Exercise of Warrants.....................................51
Section 4.6 Notification of Certain Matters..........................51
Section 4.7 No Other Negotiations....................................52
Section 4.8 Affiliates...............................................53
Section 4.9 Employment Agreements....................................53
Section 4.10 Appointment and Acknowledgment...........................54
Section 4.11 Letter of Accountant.....................................54
Section 4.12 Directors' and Officers' Insurance and Indemnification ..54
Section 4.13 Welfare Plans............................................55
ARTICLE 5 - CONDITIONS TO CONSUMMATION OF MERGER
Section 5.1 Conditions to Each Party's Obligation....................55
Section 5.2 Conditions to Obligations
of the Parent and the Transitory Subsidiary...........56
Section 5.3 Conditions to Obligations of the Company.................60
ARTICLE 6 - FAIRNESS HEARING; REGISTRATION....................61
ARTICLE 7 - TAX MATTERS COVENANTS
Section 7.1 Cooperation..............................................61
Section 7.2 Taxes Relating to the Transactions Contemplated
by this Agreement......................................62
Section 7.3 Tax Administration.......................................62
Section 7.4 Tax Consequences.........................................62
Section 7.5 Tax or Accounting Changes................................62
ARTICLE 8 - INDEMNIFICATION
Section 8.1 Indemnification..........................................63
Section 8.2 Method of Asserting Claims...............................64
Section 8.3 Survival.................................................66
Section 8.4 Limitations..............................................66
Section 8.5 The Representative.......................................67
ARTICLE 9 - TERMINATION
Section 9.1 Termination of Agreement.................................69
Section 9.2 Effect of Termination....................................71
Section 9.3 Option to Elect Certain Remedies.........................71
Section 9.4 Bust-up Payments and Purchase Order......................72
ARTICLE 10 - DEFINITIONS...........................73
ARTICLE 11 - MISCELLANEOUS
Section 11.1 Further Assurances.......................................76
Section 11.2 Press Releases and Announcements.........................77
Section 11.3 No Third Party Beneficiaries.............................77
Section 11.4 Entire Agreement.........................................77
Section 11.5 Succession and Assignment................................77
Section 11.6 Counterparts.............................................77
Section 11.7 Interpretation...........................................77
Section 11.8 Notices..................................................79
Section 11.9 Governing Law............................................80
Section 11.10 Amendments and Waivers...................................80
Section 11.11 Severability.............................................80
Section 11.12 Expenses.................................................80
Section 11.13 Incorporation of Exhibits and Schedules..................81
Section 11.14 Time of Essence..........................................81
Section 11.15 Enforcement..............................................81
Schedule I - Company Affiliates......................................I-1
Exhibit A - Voting Agreement........................................A-1
Exhibit B-1 - Form of Aries Merger Agreement.........................B1-1
Exhibit B-2 - Certificate of Merger..................................B2-1
Exhibit C - Form of Escrow Agreement................................C-1
Exhibit D - Form of Appointment and Acknowledgment..................D-1
Exhibit E - Articles of Incorporation of the Surviving
Corporation...........................................E-1
Exhibit F - Bylaws of the Surviving Corporation.....................F-1
Exhibit G - Form of Affiliate Letter................................G-1
Exhibit H-1 - Form of Opinion of Wilson, Sonsini, Xxxxxxxx &
Xxxxxx...............................................H1-1
Exhibit H-2 - Form of Opinion of Law & Xxxxxx........................H2-1
Exhibit H-3 - Form of Wyoming Counsel Opinion........................H3-1
Exhibit I - Employment Agreements Executed on Signing...............I-1
Exhibit J-1 - Form of Representation Letter Regarding
Reorganization Qualification From
Network Device Inc...................................J1-1
Exhibit J-2 - Form of Representation Letter Regarding
Reorganization Qualification From Alpha
Industries, Inc......................................J2-1
Exhibit K - Form of Certificate Confirming Company
not a U.S. Real Property Holding Company..............K-1
AGREEMENT AND PLAN OF MERGER
Agreement and Plan of Merger entered into as of February 10,
2000 by and among Alpha Industries, Inc., a Delaware corporation (the
"Parent"), Aries Acquisition Corporation, a Delaware corporation and a
wholly owned subsidiary of the Parent (the "Transitory Subsidiary") and
Network Device Inc., a California corporation (the "Company"). The Parent,
the Transitory Subsidiary and the Company are referred to collectively
herein as the "Parties."
WHEREAS, the Board of Directors of the Parent has determined
that it is advisable and in the best interests of Parent and its
stockholders to acquire the Company upon the terms and subject to the
conditions set forth in this Agreement, and the Board of Directors of the
Company (the "Company Board") has determined that it is in the best
interests of the Company and its shareholders to be acquired by the Parent
upon the terms and subject to the conditions set forth in this Agreement;
and
WHEREAS, concurrently with the execution and delivery of
this Agreement and as a condition and inducement to the Parent's
willingness to enter into this Agreement, certain holders of shares of
common stock, no par value of the Company (the "Company Common Stock") and
certain holders of shares of preferred stock of the Company, no par value
(the "Company Preferred Stock" and together with the Company Common Stock,
collectively the "Company Stock"), are entering into an agreement with the
Parent in the form attached hereto as Exhibit A (the "Voting Agreement") to
vote such shares according to the terms set forth in the Voting Agreement;
and
WHEREAS, concurrently with the execution and delivery of
this Agreement and as a condition to the Parent's willingness to enter into
this Agreement, certain key executives of the Company are entering into
employment agreements with the Company attached hereto as Exhibit I; and
WHEREAS, for United States federal income tax purposes, it
is intended that the Merger (as defined herein) will qualify as a
reorganization within the meaning of Section 368(a) of the Internal Revenue
Code of 1986, as amended (the "Code"), and that this Agreement will
constitute a "plan of reorganization"; and
WHEREAS, it is intended that the Merger shall be treated for
accounting purposes as a pooling of interests:
NOW, therefore, in consideration of the foregoing and the
representations, warranties and covenants herein contained and for other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Parties, intending to be legally bound, agree as
follows.
ARTICLE 1
THE MERGER
1.1 The Merger. At the Effective Time (as defined below),
upon and subject to the terms and conditions of this Agreement, the form of
Agreement of Merger attached hereto as Exhibit B-1 (the "Aries Merger
Agreement") and the form of Certificate of Merger attached hereto as
Exhibit B-2 (the "Certificate of Merger"), the Transitory Subsidiary shall
merge with and into the Company (the "Merger") in accordance with the
provisions of this Agreement, the California General Corporation Law
("CGCL") and the Delaware General Corporation Law ("DGCL"), and thereupon
the separate corporate existence of the Transitory Subsidiary shall cease
and the Company shall continue its corporate existence under the CGCL under
the name Network Device Inc. as the surviving corporation in the Merger and
a wholly owned subsidiary of the Parent (the "Surviving Corporation"). The
parties hereto shall file the Aries Merger Agreement (together with the
officer's certificate of each of the Transitory Subsidiary and the Company
required under Section 1103 of the CGCL) with the Secretary of State of the
State of California on the day of the Closing (as defined below).
Concurrently with the filing of the Aries Merger Agreement with the
Secretary of State of the State of California and upon the terms and
subject to the conditions set forth in this Agreement, the parties hereto
shall file the Certificate of Merger with the Secretary of State of the
State of Delaware in accordance with the relevant provisions of the DGCL.
The parties hereto shall make all other filings, recordings or publications
required by the CGCL and the DGCL in connection with the Merger. The
"Effective Time" shall be the date and time at which the Merger becomes
effective, as set forth in the Aries Merger Agreement and the Certificate
of Merger, which specified time shall be a time on the Closing Date (as
defined below) and shall be the same in each of the Merger Agreement and
the Certificate of Merger. At the Effective Time, the Merger shall have the
effect provided for in Section 1107 of the CGCL and Section 259 of the
DGCL.
1.2 The Closing. Subject to the satisfaction or waiver of
each of the conditions set forth in Article 5 hereof, the closing of the
transactions contemplated by this Agreement, including without limitation
the filing of the Aries Merger Agreement with the Secretary of State of the
State of California and the filing of the Certificate of Merger with the
Secretary of State of the State of Delaware (the "Closing"), shall take
place at the offices of Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP, Xxx
Xxxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx commencing at 1:00 p.m. local time on
the later of (a) April 3, 2000 and (b) the date on which all of the
conditions set forth in Article 5 hereof have been satisfied or waived as
provided in Article 5 hereof, or at such other place and time as may be
agreed upon by the Parties in writing (the date on which the closing occurs
is referred to herein as the "Closing Date").
1.3 Actions at the Closing. At the Closing: (a) the Company
shall deliver to the Parent and the Transitory Subsidiary the various
certificates, instruments and documents referred to in Section 5.2 hereof;
(b) the Parent and the Transitory Subsidiary shall deliver to the Company
the various certificates, instruments and documents referred to in Section
5.3 hereof; (c) the Company and the Transitory Subsidiary shall execute and
file with the Secretary of State of the State of California the Aries
Merger Agreement (together with the officer's certificates for each of the
Transitory Subsidiary and the Company required under Section 1103 of the
CGCL); (d) the Company shall execute and file the Certificate of Merger
with the Secretary of State of the State of Delaware; and (e) the Parent,
the Representative (as defined below) and American Stock Transfer & Trust
Company, as Escrow Agent (the "Escrow Agent"), shall execute and deliver
the Escrow Agreement substantially in the form attached hereto as Exhibit C
(the "Escrow Agreement"), and the Parent shall deliver to the Escrow Agent
a certificate for the Escrow Shares (as defined below) being placed in
escrow at the Effective Time pursuant to Section 1.9.
1.4 Additional Action. The Surviving Corporation may, at any
time after the Effective Time, take any action, including executing and
delivering any document, in the name and on behalf of either the Company or
the Transitory Subsidiary, in order to consummate the transactions
contemplated by this Agreement.
1.5 Conversion of Shares. At the Effective Time, in
accordance with the Aries Merger Agreement, by virtue of the Merger and
without any action on the part of any Party or the holder of any securities
of the Company or the Transitory Subsidiary, shares of Company Stock, and
shares of common stock of the Transitory Subsidiary shall be converted as
set forth in this Section 1.5.
(a) Each share of Company Common Stock issued and
outstanding immediately prior to the Effective Time, other than Dissenting
Shares (as defined below), shall be converted into and represent the right
to receive (subject to the provisions of this Section 1.5 and Sections 1.8
and 1.9 hereof) a fraction (the "Conversion Ratio") of a share of common
stock, $.25 par value per share, of the Parent ("Parent Common Stock")
determined by dividing 1,460,000 by the Aggregate Number of Fully Diluted
Company Common Shares (as defined below) immediately prior to the Effective
Time (as such ratio is adjusted pursuant to Section 1.5(c) or 1.5(d)
hereof).
(b) Each share of Company Preferred Stock issued and
outstanding immediately prior to the Effective Time, other than Dissenting
Shares (as defined below), shall be converted into and represent the right
to receive (subject to the provisions of this Section 1.5 and Sections 1.8
and 1.9 hereof) the number of shares of Parent Common Stock that the holder
of the Company Preferred Stock would have received pursuant to Section
1.5(a) hereof had such holder converted such shares of Company Preferred
Stock into shares of Company Common Stock immediately prior to the
Effective Time.
(c) If the Average Closing Price (as defined herein) of
Parent Common Stock is less than $56.10, then the Conversion Ratio shall
equal the result obtained by dividing (A) the quotient of (x) $ 81,906,000
divided by (y) the Average Closing Price of Parent Common Stock by (B) the
Aggregate Number of Fully Diluted Company Common Shares (as defined
herein); provided, however, that in no event shall the Conversion Ratio
equal an amount that would cause the total number of shares of Parent
Common Stock issued to the holders of Company Stock at the Effective Time,
plus the total number of shares of Parent Common Stock issuable upon
exercise of Options assumed by the Parent pursuant to Section 1.10 hereof,
to equal or exceed 20% of the number of shares of Parent Common Stock
issued and outstanding on the date that is four business days immediately
preceding the date hereof (with any shares of Parent Common Stock that are
treasury shares or are held by a Subsidiary of the Parent being excluded
from such number of shares of Parent Common Stock issued and outstanding on
such date).
(d) If the Average Closing Price of Parent Common Stock
is greater than $75.90, then the Conversion Ratio shall equal the result
obtained by dividing (A) the quotient of (1) the Adjusted Total Value (as
defined below) divided by (2) the Average Closing Price of Parent Common
Stock by (B) the Aggregate Number of Fully Diluted Company Common Shares;
(e) If between the date of this Agreement and the
Effective Time the outstanding shares of the Parent Common Stock shall have
been changed into a different number of shares or a different class, by
reason of any stock dividend, subdivision, reclassification,
recapitalization, split, conversion, consolidation, combination or exchange
of shares, the Conversion Ratio will be correspondingly adjusted to reflect
such stock dividend, subdivision, reclassification, recapitalization,
split, conversion, consolidation, combination or exchange of shares.
(f) Each option to purchase Company Stock outstanding
immediately prior to the Effective Time (each, an "Option") shall be
assumed by the Parent as more specifically provided in Section 1.10 hereof.
(g) At the Effective Time, subject to and in accordance
with this Section 1.5 and Section 1.6 hereof, holders of Company Stock
shall be entitled to receive certificates representing 90% of the shares of
Parent Common Stock into which their shares of Company Stock have been
converted pursuant to this Section 1.5 (the "Closing Shares"). The
remaining 10% of the shares of Parent Common Stock into which their shares
of Company Stock have been converted pursuant to this Section 1.5 (the
"Escrow Shares") shall be deposited into escrow at the Closing in
accordance with the provisions of Section 1.9 hereof. The Closing Shares
and the Escrow Shares are collectively referred to herein as the "Merger
Shares".
(h) Each share of common stock of the Transitory
Subsidiary issued and outstanding immediately prior to the Effective Time
shall be converted into and shall thereafter evidence one fully paid and
nonassessable share of common stock, no par value, of the Surviving
Corporation. From and after the Effective Time, the outstanding certificate
theretofore representing shares of common stock of the Transitory
Subsidiary shall be deemed for all purposes to evidence ownership of and to
represent the one share of common stock of the Surviving Corporation into
which such common stock of the Transitory Subsidiary shall have been
converted. Promptly after the Effective Time, the Surviving Corporation
shall issue to Parent a stock certificate or certificates representing one
share of common stock of the Surviving Corporation in exchange for the
certificate or certificates which formerly represented shares of common
stock of the Transitory Subsidiary (which shall be cancelled).
(i) No dividends or other distributions declared or made
after the Effective Time with respect to Parent Common Stock with a record
date after the Effective Time shall be paid to the holder of any
unsurrendered Certificate (as defined below) with respect to the shares of
Parent Common Stock which such holder is entitled to receive upon the
surrender thereof in accordance with this Section 1.5. Subject to the
effect of applicable laws and Section 1.9, 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, (i) at the time of such surrender, the amount
of dividends or other distributions with a record date after the Effective
Time theretofore paid with respect to such whole shares of Parent Common
Stock, and (ii) at the appropriate payment date, the amount of dividends or
other distributions with a record date after the Effective Time but prior
to such surrender and a payment date subsequent to surrender payable with
respect to such whole shares of Parent Common Stock.
(j) As used in this Agreement:
(i) "Adjusted Total Value" shall equal the result
obtained by adding $110,814,000 to the amount obtained by
dividing (A) $110,814,000 multiplied by 50% of the
difference between the Average Closing Price of Parent
Common Stock and $75.90 by (B) $75.90;
(ii) the "Aggregate Number of Fully Diluted Company
Common Shares" shall be the sum of:
(1) the aggregate number of Company Common
Stock outstanding immediately prior to the Effective
Time;
(2) the aggregate number of shares of Company
Common Stock issuable upon the conversion of any
shares of Company Preferred Stock outstanding
immediately prior to the Effective Time;
(3) the aggregate number of shares of Company
Common Stock issuable upon the exercise of any Options
outstanding immediately prior to the Effective Time
(whether or not such Options are then exercisable);
(4) the number of shares of Company Common
Stock issuable upon the exercise of any Warrants (as
defined below) outstanding immediately prior to the
Effective Time (whether or not such Warrants are then
exercisable); and
(5) the number of shares of Company Common
Stock issuable upon the exercise of, and, if
applicable, subsequent conversion of, any other rights
to acquire any securities of the Company of any nature
whatsoever; and
(iii) "Average Closing Price" shall mean the average
of the daily closing sale prices per share of Parent Common
Stock for the three trading days immediately preceding the
date ending on the third trading day immediately preceding
the Effective Time.
(k) At the Closing, the Company shall deliver to the
Parent a certificate, in form and substance satisfactory to the Parent and
signed by the Company's Chief Executive Officer, certifying (i) the number
of outstanding shares of Company Common Stock immediately prior to the
Effective Time, (ii) by reference to a schedule to such certificate, a list
of all the holders of shares of Company Common Stock as such names appear
on the stock transfer books of the Company and the number of shares of
Company Common Stock held by each such holder, in each case, immediately
prior to the Effective Time, (iii) the number of outstanding shares of
Company Preferred Stock immediately prior to the Effective Time and the
aggregate number of Company Common Stock issuable on conversion of such
shares of Company Preferred Stock, (iv) by reference to a schedule to such
certificate, a list of all the holders of shares of Company Preferred Stock
as such names appear on the stock transfer books of the Company, the number
of shares of Company Preferred Stock held by each such holder and the
number of shares of Company Common Stock issuable on conversion of the
shares of Company Preferred Stock held by such holder, in each case,
immediately prior to the Effective Time, (vi) the number of shares of
Company Stock which underlie Options outstanding immediately prior to the
Effective Time, and (vi) by reference to a schedule to such certificate, a
list of all the holders of Options outstanding immediately prior to the
Effective Time, the number of Options held by each such holder, the
exercise price for each Option and the aggregate exercise price for the
Options.
1.6 Exchange of Company Stock.
(a) As soon as practicable after the Effective Time, the
Parent shall prepare and set aside stock certificates representing the
Closing Shares (and together with any dividends or distributions with
respect thereto contemplated by Section 1.5(g) being hereinafter referred
to as the "Exchange Fund"), which shares of Parent Common Stock shall be
deemed to have been issued at the Effective Time.
(b) As soon as practicable, but in any event no later
than fourteen (14) calendar days after the Effective Time, Parent shall
mail to each holder of record of a certificate or certificates which
immediately prior to the Effective Time represented outstanding shares of
Company Stock (the "Certificates") that were converted pursuant to Section
1.5 hereof into the right to receive shares of Parent Common Stock: (i) a
form of letter of transmittal specifying that delivery shall be effected,
and risk of loss and title to the Certificates shall pass, only upon proper
delivery of the Certificates to the Parent and (ii) instructions for use in
surrendering such Certificates in exchange for certificates representing
shares of Parent Common Stock. Subject to the provisions of this Section
1.6 and Section 1.9 hereof, upon surrender of a Certificate for
cancellation to the Parent (or, in the case of a lost certificate, delivery
of a lost certificate affidavit and indemnity in form and substance
reasonably satisfactory to the Parent), together with such letter of
transmittal, duly executed, the holder of such Certificate shall be
entitled to receive in exchange therefor a certificate representing that
number of whole shares of Parent Common Stock which such holder has the
right to receive pursuant to the provisions of this Article 1 and the
Certificate so surrendered shall forthwith be cancelled. As a condition of
the delivery of any such certificate representing Parent Common Stock, the
Parent may, at its option, require such holder to acknowledge in writing,
in substantially the form attached hereto as Exhibit D (the "Appointment
and Acknowledgment"), the approval by such holder of the Escrow Agreement
and of all of the arrangements relating thereto, including without
limitation the deposit of the Escrow Shares into escrow, the
indemnification obligations set forth in Article 8 hereof and the
appointment and sole authority of the Representative (as defined below) to
act on behalf of such holder as an Indemnitor (as defined below), as
provided for herein, in the Aries Merger Agreement and in the Escrow
Agreement. In the event of a transfer of ownership of Company Stock which
is not registered in the transfer records of the Company, a certificate
representing the proper number of shares of Parent Common Stock may be
issued to a transferee if the Certificate representing such Company Stock
is presented to the Parent, accompanied by all documents required to
evidence and effect such transfer, by evidence that any applicable stock
transfer taxes have been paid, and, if required by Parent, by the
Appointment and Acknowledgment. Parent shall be entitled to deduct and
withhold from the consideration otherwise payable pursuant to this
Agreement to any holder of Company Stock such amounts as Parent is required
to withhold or deduct under the Code or any provision of state, local or
foreign tax law with respect to the making of such payment. To the extent
that amounts are so withheld by Parent, such withheld amounts shall be
treated for all purposes of this Agreement as having been paid to the
holder of the Company Stock in respect of whom such deduction and
withholding were made by Parent. Until surrendered as contemplated by this
Section 1.6(b), each Certificate shall be deemed at any time after the
Effective Time to represent only the right to receive upon such surrender a
certificate representing share(s) of Parent Common Stock.
(c) Neither the Parent nor the Company shall be liable
to any holder of shares of Company Stock or Parent Common Stock, as the
case may be, for such shares (or dividends or distributions with respect
thereto) delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law.
1.7 Dissenting Shares.
(a) For purposes of this Agreement, "Dissenting Shares"
means shares of Company Stock held as of the Effective Time by a
shareholder who has not voted such shares of Company Stock in favor of the
Merger and with respect to which demand on the Company has been made for
purchase of such shares from the holder thereof pursuant to Section 1300 of
Chapter 13 of the CGCL ("Section 1300") and such demand shall not have been
effectively withdrawn, forfeited or lost prior to the Effective Time.
Notwithstanding anything to the contrary in this Agreement, Dissenting
Shares shall not be converted into or represent the right to receive Merger
Shares, unless the holder thereof shall have forfeited or lost (through
failure to perfect or otherwise) his or her right to have the Company
purchase his or her Dissenting Shares pursuant to Section 1300 or
withdrawn, with the consent of the Company, his or her demand to have the
Company purchase his or her Dissenting Shares pursuant to Section 1300. If
such shareholder has so forfeited, lost or withdrawn his right to have the
Company purchase his or her Dissenting Shares pursuant to Section 1300,
then (i) as of the occurrence of such event, such holder's Dissenting
Shares shall cease to be Dissenting Shares and shall automatically be
converted into and represent the right to receive, subject to clause
(ii)(B) immediately below, the number of Merger Shares which would have
been issuable in respect of such shares of Company Stock pursuant to
Section 1.5 hereof had such shares of Company Stock not been Dissenting
Shares, and (ii) promptly following the occurrence of such event, the
Parent shall deliver (A) to such shareholder a certificate representing the
number of Closing Shares into which such shares of Company Stock have been
converted as provided in clause (i) immediately above and (B) to the Escrow
Agent a certificate representing the number of Escrow Shares which, had
such shares of Company Stock not been Dissenting Shares, would have been
delivered to and deposited with the Escrow Agent in accordance with Section
1.9(a) hereof, in each such case, against delivery by such shareholder to
the Parent of the stock certificate or certificates representing his or her
shares of Company Stock.
(b) The Company shall give the Parent (i) prompt notice
of any written demands given pursuant to Section 1300 to have the Company
purchase Dissenting Shares, withdrawals of such demands and any other
instruments that relate to such demands received by the Company and (ii)
the opportunity to participate in all negotiations and proceedings with
respect to such demands under the CGCL. The Company shall not, except with
the prior written consent of the Parent or in satisfaction of a judgment
under Section 1305(d) of the CGCL therefor, make any payment with respect
to any demands for purchase of Dissenting Shares or offer to settle or
settle any such demands.
1.8 Fractional Shares. No certificates or scrip representing
fractional shares of Parent Common Stock shall be issued to former holders
of shares of Company Stock upon the surrender for exchange of stock
certificates formerly representing shares of Company Stock, and such
holders shall not be entitled to any voting rights, rights to receive any
dividends or distributions or other rights as a shareholder of the Parent
with respect to any fractional shares of Parent Common Stock that would
otherwise be issued to such holders. In lieu of fractional shares of Parent
Common Stock that would otherwise be issued, each such holder that would
have been entitled to receive a fractional share of Parent Common Stock
shall receive such whole number of shares of Parent Common Stock as is
equal to the precise number of shares of Parent Common Stock to which such
shareholder would be entitled, rounded up or down to the nearest whole
number (with a fractional interest of .5 rounded to the nearest odd whole
number).
1.9 Escrow.
(a) At the Effective Time, the Parent shall deliver to
and deposit with the Escrow Agent a certificate (issued in the name of the
Escrow Agent or its nominee) representing the Escrow Shares for the purpose
of securing the indemnification obligations set forth in Article 8 of this
Agreement. The Escrow Shares shall be held by the Escrow Agent under the
Escrow Agreement pursuant to the terms thereof. The Escrow Shares shall be
held as a trust fund and shall not be subject to any lien, attachment,
trustee process or any other judicial process of any creditor of any person
and shall be held and disbursed solely for the purposes and in accordance
with the terms of the Escrow Agreement.
(b) The terms and provisions of Article 8 hereof and of
the Escrow Agreement and the transactions contemplated thereby are
essential terms and provisions of the Merger, and the adoption of this
Agreement and the approval of the Merger by the holders of securities of
the Company shall constitute the express approval, as essential terms and
provisions of the Merger, of Article 8 hereof and of the Escrow Agreement
and of all of the arrangements relating thereto, including without
limitation the deposit of the Escrow Shares into escrow, the
indemnification obligations set forth in Article 8 hereof and the
appointment and sole authority to act on behalf of the Indemnitors (as
defined below) of the Representative, as provided for herein, in the Aries
Merger Agreement and in the Escrow Agreement.
1.10 Options.
(a) As of the Effective Time, each Option that is
outstanding under any stock option plan of the Company or otherwise (each
such stock option plan being referred to herein as a "Plan") shall (i)
cease being exercisable for Company Common Stock, (ii) be assumed by the
Parent and (iii) become an option to purchase such number of shares of
Parent Stock as is equal to the number of shares of Company Common Stock
subject to the unexercised portion of such Option as of the Effective Time
multiplied by the Conversion Ratio (with any fraction resulting from such
multiplication to be rounded down to the nearest whole number). As of the
Effective Time, the exercise price per share of Parent Common Stock of such
Option shall be equal to the exercise price per share of the Option it is
replacing as of the Effective Time, divided by the Conversion Ratio
(rounded up to the nearest whole cent). All other terms of the Options
shall remain unchanged and after the Effective Time, each Option shall be
exercisable and shall vest upon the same terms and conditions as were
applicable to such Option immediately prior to the Effective Time, except
that all (y) references to the Company shall be deemed to be references to
the Parent, and (z) the adjustment provided herein with respect to any
Options which are "incentive stock options" (as defined in Section 422 of
the Code) shall be effected in a manner which is consistent with Section
424(a) of the Code.
(b) The Company has duly adopted all amendments to the
Plans, and any other documents, and has taken all other actions, if any,
necessary to effect the changes in the Options set forth in this Section
1.10. As soon as practicable after the Effective Time, the Parent or the
Surviving Corporation shall deliver to holders of Options appropriate
notices setting forth such holders' rights pursuant to such Options, as
revised pursuant to this Section 1.10.
(c) Except as may be otherwise agreed to by Parent and
the Company, all Plans established by the Company shall terminate as of the
Effective Time and the provisions in any other plan, program or arrangement
providing for the issuance or grant of any other interest in respect of the
capital stock of the Company shall be deleted, terminated and of no further
force or effect as of the Effective Time.
(d) The Parent shall take all corporate action necessary
to reserve for issuance a sufficient number of shares of Parent Common
Stock for delivery upon exercise of the Options, as such Options are
revised pursuant to this Section 1.10, and assumed by the Parent in
accordance therewith. If necessary, the Parent shall not later than thirty
(30) calendar days following the Effective Time, prepare and file with the
Securities and Exchange Commission (the "SEC") a Registration Statement on
Form S-8 under the Securities Act of 1933, as amended (the "Securities
Act"), with respect to the shares of the Parent Common Stock subject to
such Options that may be registered on a Form S-8.
1.11 Organizational Documents.
(a) At the Effective Time of the Merger, the articles of
incorporation of the Surviving Corporation shall be as set forth in Exhibit
E to this Agreement, and such articles of incorporation shall be the
articles of incorporation of the Surviving Corporation until thereafter
amended as provided by law and such articles of incorporation of the
Surviving Corporation.
(b) At the Effective Time of the Merger, the bylaws of
Surviving Corporation shall be as set forth in Exhibit F to this Agreement,
and such by-laws shall be the bylaws of the Surviving Corporation until
thereafter amended as provided by law and such bylaws of the Surviving
Corporation.
1.12 Directors and Officers. The directors and officers of
the Surviving Corporation shall consist of the directors and officers of
the Transitory Subsidiary immediately prior to the Effective Time, each to
hold office in accordance with the CGCL, the Articles of Incorporation of
the Surviving Corporation and the By-laws of the Surviving Corporation.
1.13 No Further Rights. From and after the Effective Time,
no shares of Company Stock shall be deemed to be outstanding and holders of
Certificates shall cease to have any rights with respect thereto, except as
provided herein or by law.
1.14 Closing of Transfer Books. At the Effective Time, the
stock transfer books of the Company shall be closed and no transfers of
shares of Company Stock shall thereafter be made. If, after the Effective
Time, Certificates are presented to the Surviving Corporation for transfer,
they shall be cancelled and exchanged for the consideration set forth in
Section 1.5 and in accordance with Section 1.6, subject to applicable law
in the case of Dissenting Shares.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the disclosure schedule prepared and
signed by the Company and delivered to Parent simultaneously with the
execution hereof (the "Disclosure Schedule"), the Company represents and
warrants to Parent and the Transitory Subsidiary that all of the statements
contained in this Article 2 are true and correct as of the date of this
Agreement (or, if made as of a specified date, as of such date), and will
be true and correct as of the Closing Date as though made on the Closing
Date. Each exception set forth in the Disclosure Schedule and each other
response to this Agreement set forth in the Disclosure Schedule is
identified by reference to, or has been grouped under a heading referring
to, a specific individual section of this Agreement and relates only to
such section, except to the extent that one portion of the Disclosure
Schedule specifically refers to another portion thereof, identifying such
other portion by section reference or similar specific cross reference.
2.1 Organization, Qualification and Corporate Power.
(a) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of California.
The Company is duly qualified or licensed as a foreign corporation to
conduct business and is in good standing under the laws of each
jurisdiction listed under its name in Section 2.1(a) of the Disclosure
Schedule, which jurisdictions collectively constitute every jurisdiction
where the nature of the Company's business or the ownership or leasing of
its properties requires such qualification, except for failures, if any, to
be so qualified or licensed which, in the aggregate, have not had and would
not reasonably be likely to have a Material Adverse Effect (as defined
below). The Company has all requisite corporate power and authority to
carry on its business as it is now being conducted and as it is presently
proposed to be conducted and to own, lease and use the properties owned,
leased and used by it.
(b) The Company has furnished to the Parent prior to the
execution and delivery of this Agreement true and complete copies of its
Restated Articles of Incorporation, as amended (the "Restated Articles of
Incorporation"), and By-laws, as amended (the "Amended By-laws"), each as
currently in effect. The Company is not in default under or in violation of
any provision of its Restated Articles of Incorporation or Amended By-laws.
(c) As used in this Agreement, any reference to any
event, change or effect having a "Material Adverse Effect" shall mean that
such event, change or effect would reasonably be likely to be, or is,
materially adverse to the assets (including intangible assets), properties,
business, condition (financial or other), liabilities (including contingent
liabilities), operations, prospects or results of operations of the
Company, taken as a whole, or would reasonably be likely to, or will,
prevent or impair in any material respect the ability of the Company to
perform its obligations hereunder or to consummate the transactions
contemplated by this Agreement.
2.2 Capitalization.
(a) The authorized capital stock of the Company consists
of (i) 70,000,000 shares of Company Common Stock and (ii) 30,000,000 shares
of Company Preferred Stock, of which 20,000,000 are designated as Series A
Preferred Stock (the "Series A Company Preferred Stock") and 3,500,000 are
designated as Series B Preferred Stock (the "Series B Company Preferred
Stock"). As of the date hereof, 3,000,000 shares of Company Common Stock,
15,660,000 shares of Series A Company Preferred Stock and 3,295,000 shares
of Series B Company Preferred Stock are issued and outstanding and
2,680,000 shares of Company Common Stock are authorized and reserved for
issuance pursuant to Plans, of which 1,482,144 shares of Company Common
Stock underlie currently outstanding Options. No more than 1,482,144 shares
of Company Common Stock, plus the number of shares of Company Common Stock
underlying Options granted after the date hereof in compliance with Section
4.1(d) hereof, will underlie Options outstanding immediately prior to the
Effective Time. There has not occurred any event which would cause any
adjustment or readjustment in the applicable Conversion Prices (as defined
in the Restated Articles of Incorporation) of any of the Company Preferred
Stock. Each share of Company Preferred Stock is convertible into one share
of Company Common Stock. Section 2.2(a) of the Disclosure Schedule sets
forth a true and complete list of all shareholders of the Company,
completely and accurately indicating the number, class and series of shares
of Company Stock held by each such shareholder.
(b) As of the date hereof, 105,000 shares of Company
Common Stock are authorized and reserved for issuance pursuant to
outstanding warrants or other rights to purchase any shares of capital
stock of the Company other than Options (each, a "Warrant"). Section 2.2(b)
of the Disclosure Schedule also sets forth a true and complete list of all
holders of Options and Warrants, completely and accurately indicating the
number of shares and class of stock subject to each such Option or Warrant,
any vesting schedules applicable thereto and under which Plan, if any, each
such Option or Warrant was granted.
(c) There is no outstanding indebtedness having general
voting rights or debt convertible into securities having such rights
("Voting Debt") of the Company issued and outstanding. Except as set forth
in Section 2.2(a) or (b) hereof, and except for the transactions
contemplated hereby, (i) there are no shares of capital stock of the
Company authorized, issued or outstanding; (ii) there are no existing
options, warrants, calls, pre-emptive rights, subscriptions or other
rights, agreements, arrangements or commitments of any character, relating
to the issued or unissued capital stock of the Company obligating the
Company to issue, transfer or sell or cause to be issued, transferred or
sold any shares of capital stock or Voting Debt of, or other equity
interest in, the Company or securities convertible into or exchangeable for
such shares or equity interests, or obligating the Company to grant, extend
or enter into, or accelerate the vesting of, any such option, warrant,
call, subscription or other right, agreement, arrangement or commitment and
(iii) there are no outstanding contractual obligations of the Company to
repurchase, redeem or otherwise acquire any of the capital stock of the
Company or any Affiliate (as defined below) of the Company or to provide
funds to or make any investment (in the form of a loan, capital
contribution or otherwise) in any person. There are no outstanding or
authorized stock appreciation, phantom stock or similar rights with respect
to the Company.
(d) All of the issued and outstanding shares of Company
Stock are, and all shares of Company Stock that may be issued upon
conversion of the Company Preferred Stock and exercise of Options or
Warrants will be, outstanding upon issuance, duly authorized, validly
issued, fully paid, nonassessable and free of preemptive or similar rights
of any person. All of the issued and outstanding shares of capital stock of
the Company were issued in compliance with applicable federal and state
securities laws and with any preemptive or similar rights or rights to
subscribe for or purchase securities of any person.
(e) Except for (i)(A) the Common Stock Purchase
Agreement entered into as of February 8, 1997, (B) the Series A Preferred
Stock Purchase Agreement entered into as of January 31, 1997, as amended,
(C) the Series B Preferred Stock Purchase Agreement entered into as of
October 29, 1999, and (D) the four Common Stock Transfer Agreements entered
into as of October 31, 1997, (collectively, such agreements are referred to
as the "Company Shareholder Agreements"), (ii) this Agreement and (iii) the
Voting Agreement, there are no agreements, commitments, voting trusts,
proxies or understandings of any character with respect to the voting, the
registration under the Securities Act, or the sale or delivery, of any
capital stock or other securities of the Company.
(f) The terms of each Plan permit the treatment of
Options as set forth in Section 1.10 without the consent of any Option
holder. The Company has not in any manner accelerated or provided for the
acceleration of the vesting or exercisability of, or otherwise modified the
terms and conditions applicable to, any of the Options, whether set forth
in the Plans or otherwise, or the Warrants. None of the awards, grants or
other agreements pursuant to which Options were issued have provisions
which accelerate the vesting or right to exercise such Options upon the
execution of this Agreement or any of the agreements contemplated hereby,
the consummation of the transactions contemplated hereby or thereby, or any
other "change of control" events.
(g) As used herein, an "Affiliate" of a specified person
means any other person that controls, is controlled by, or is under common
control with the specified person and includes, without limitation, any
partnership or joint venture in which the specified person has, directly or
indirectly, an interest of 5% or more. As used herein, "control" (including
the terms "controlled," "controlled by," and "under common control with")
will mean the possession, directly or indirectly or as trustee or executor,
of the power to direct or cause the direction of the management or policies
of a person, whether through the ownership of stock or as a trustee or
executor, by contract or credit arrangement or otherwise.
2.3 Authority. The Company has all requisite corporate power
and authority to execute and deliver this Agreement and each instrument
required hereby to be executed and delivered by it, to perform its
obligations hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby. The execution and delivery by the Company
of this Agreement and each instrument required hereby to be executed and
delivered by it, the performance by the Company of its obligations
hereunder and thereunder and, subject to the Requisite Shareholder Approval
(as defined below), the consummation by the Company of the transactions
contemplated hereby and thereby have been duly and validly authorized by
all necessary corporate action on the part of the Company and no other
corporate proceedings on the part of the Company are required to authorize
this Agreement or any of the instruments required hereby or for the Company
to consummate the transactions contemplated hereby or thereby. This
Agreement has been, and upon execution thereof by the Company, each
instrument required hereby to be executed and delivered by the Company,
will be, duly and validly executed and delivered by the Company and,
assuming the due and valid authorization, execution and delivery by the
other parties thereto, constitutes, or, in the case of each such
instrument, will constitute a valid and binding obligation of the Company,
enforceable against the Company in accordance with their respective terms,
except that (i) such enforcement may be subject to applicable bankruptcy,
insolvency or other similar laws, now or hereafter in effect, affecting
creditors' rights generally, and (ii) the remedy of specific performance
and injunctive relief may be subject to equitable defenses and to the
discretion of the court before which any proceeding therefor may be
brought.
2.4 Vote Required. The action by written consent of (i) the
holders of at least a majority of the votes represented by the outstanding
shares of the Company Common Stock, voting as a separate class, (ii) the
holders of a majority of the outstanding shares of the Series A Company
Preferred Stock, voting as a separate class, and (iii) the holders of a
majority of the outstanding shares of the Series B Company Preferred Stock,
voting as a separate class, is the only action required by the holders of
any class or series of the capital stock of the Company that is necessary
to approve this Agreement, the Merger and the transactions contemplated by
this Agreement (the "Requisite Shareholder Approval"). The shares of
Company Stock held by the shareholders of the Company that have signed the
Voting Agreement represent as of the date hereof, and will represent as of
the record date fixed by the Company Board to determine the shareholders
entitled to consent to this Agreement, the Merger and the transactions
contemplated hereby, at least a majority of the issued and outstanding
shares of Company Common Stock, at least a majority of the issued and
outstanding shares of the Series A Company Preferred Stock and at least a
majority of the issued and outstanding shares of the Series B Company
Preferred Stock.
2.5 Noncontravention. Subject to any required compliance
with the applicable provisions of the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), the hearing (the
"Fairness Hearing") to be held pursuant to Section 25142 of the California
Corporate Securities Law of 1968, as amended (the "CSL") and the filing of
the Aries Merger Agreement and Certificate of Merger as required by the
CGCL and DGCL, respectively, neither the execution and delivery by the
Company of this Agreement or any instrument required hereby to be executed
and delivered by it, the performance by the Company of its obligations
hereunder or thereunder, the consummation by the Company of the
transactions contemplated hereby or thereby, or the compliance by the
Company with any of the provisions hereof or thereof, will: (a) conflict
with or violate any provision of the Restated Articles of Incorporation or
Amended By-laws; (b) require on the part of the Company any notice or
filing with, or any permit, authorization, consent, order, approval or
other authorization of, or any exemption by, any federal, state or foreign
court, arbitrator, administrative agency, registration authority or
commission or other governmental or regulatory authority or agency,
including any authority having governmental or quasi-governmental powers (a
"Governmental Entity"); (c) conflict with, result in a violation or breach
of, constitute (with or without due notice or lapse of time or both) a
default under, result in the acceleration of, give rise to any right to
accelerate, terminate, modify or cancel, or require any notice, consent,
authorization, approval or waiver under, any contract, lease, sublease,
license, sublicense, franchise, permit, indenture, agreement, mortgage,
Security Interest (as defined below), instrument or other arrangement or
obligation to which the Company is a party or by which the Company is bound
or to which any of the assets of the Company is subject; (d) result in the
imposition of any Security Interest upon any assets of the Company; (e)
violate or breach the terms of or cause any default under any order, writ,
injunction, decree, judgment, permit, license, approval, authorization,
law, statute, ordinance, rule or regulation or code or any requirements,
directives, consents, and obligations of or imposed by any Governmental
Entity applicable to the Company or any of its properties, assets or
securities; or (f) with the passage of time, the giving of notice or the
taking of any action by another person, have any of the effects described
in clause (a) through (e) of this Section 2.5. As used in this Agreement,
"Security Interest" shall mean any mortgage, pledge, security interest,
encumbrance, charge, or other lien of any kind (including any agreement to
give any of the foregoing), any conditional sale or other title retention
agreement, any lease in the nature thereof or the filing of an agreement to
give any financing statement under the Uniform Commercial Code or similar
laws of any jurisdiction, in any case, whether arising by contract or by
operation of law.
2.6 Company Subsidiaries.
(a) The Company has no Subsidiaries. In addition, the
Company does not own directly or indirectly any equity or similar interest
in, or any interest convertible into or exchangeable or exercisable for any
equity or similar interest in, any other corporation, partnership, limited
liability company, joint venture, trust, association or other organization
or entity.
(b) As used in this Agreement, "Subsidiary" shall mean,
with respect to any party, any corporation or other organization, whether
incorporated or unincorporated, of which (a) at least a majority of the
securities or other interests having by their terms ordinary voting power
to elect a majority of the Board of Directors or others performing similar
functions with respect to such corporation or other organization is,
directly or indirectly, owned or controlled by such party or by any one or
more of its Subsidiaries, or by such party and one or more of its
Subsidiaries, (b) at least a majority of the economic interests of which
is, directly or indirectly, owned or controlled by such party or by any one
or more of its Subsidiaries, or by such party and one or more of its
Subsidiaries or (c) such party or any other Subsidiary of such party is a
general partner (excluding any such partnership where such party or any
Subsidiary of such party does not have a majority of the voting interest in
such partnership).
2.7 Financial Statements. The Company has provided to the
Parent true and complete copies of (a) the audited statements of financial
position of the Company as at September 30, 1999 and September 30, 1998,
and the related audited consolidated statements of income, changes in
shareholders' equity and cash flow for each of the fiscal periods then
ended, including the notes thereto, together with the report of Chen & Fan,
independent auditors, (b) the audited statements of financial position of
the Company as at September 30, 1997, and the related audited consolidated
statements of income, changes in shareholders' equity and cash flow for
each of the fiscal periods then ended, including the notes thereto,
together with the report of Coopers & Xxxxxxx, independent auditors, and
(c) the unaudited consolidated balance sheet of the Company as at December
31, 1999 (the "Balance Sheet") and the related consolidated statements of
income, changes in shareholders' equity and cash flows as at and for the
three-month period ended as of the date of the Balance Sheet and for the
corresponding period in the prior year. Such financial statements
(collectively, the "Financial Statements") have been prepared in accordance
with United States generally accepted accounting principles ("GAAP")
applied on a consistent basis throughout the periods covered thereby,
fully, fairly and accurately present the consolidated financial position,
results of operations, changes in shareholders' equity and cash flow of the
Company as at the respective dates thereof and for the periods referred to
therein and are consistent with the books and records of the Company. Since
September 30, 1999, there has been no significant change in any of the
accounting (including tax accounting) policies, practices or procedures of
the Company.
2.8 No Undisclosed Liabilities. Except as set forth in
Section 2.8 of the Disclosure Schedule, the Company has no liability,
whether absolute, contingent, fixed, matured, unmatured, threatened,
liquidated, unliquidated, xxxxxx, inchoate, secured, unsecured or otherwise
and whether due or to become due, except for (a) liabilities as to the
extent of the amounts specifically shown or reserved on the Balance Sheet,
which reflects all liabilities required to be reflected thereon in
accordance with GAAP; and (b) liabilities arising after the date of the
Balance Sheet which satisfy all of the following criteria: (i) such
liabilities were incurred by the Company in the ordinary course of business
consistent with past custom and practice ("Ordinary Course of Business")
and not in excess of current requirements, and (ii) such liabilities,
either individually or in the aggregate, have not had and would not
reasonably be likely to have a Material Adverse Effect. The reserves
reflected in the Financial Statements are adequate and appropriate in light
of the foregoing and have been calculated in a consistent manner.
2.9 Tax Matters. Except as specifically identified in the
appropriate subsection of Section 2.9 of the Disclosure Schedule:
(a) Filing of Timely Tax Returns. The Company has timely
filed (or there has been timely filed on its behalf), taking into account
all extensions, all Tax Returns (as defined below) required to be filed by
it under applicable law. All such Tax Returns were and are true, complete
and correct. No claim has been made within the past ten years by a Taxing
Authority (as defined below) in a jurisdiction where the Company does not
file Tax Returns to the effect that the Company is or may be subject to
Taxation by that jurisdiction.
(b) Payment of Taxes. The Company has, within the time
and in the manner prescribed by law, paid all Taxes (as defined below) that
are due and payable from it.
(c) Tax Reserves. The accrual for Taxes on the Financial
Statements is an amount at least equal to the sum of the Company's
liability for Taxes (other than Taxes previously paid over to the
appropriate Taxing Authority) for all Tax periods (and portions thereof)
ending on or before the date of such financial statements plus its deferred
Tax liability. Since the date of the most recent Financial Statements, the
Company has not incurred any liability for Taxes other than in the Ordinary
Course of Business.
(d) Tax Liens. There are no Tax liens upon the assets,
properties or business of the Company except liens for Taxes not yet due or
being contested in good faith through appropriate proceedings and for which
adequate reserves have been established in the Financial Statements.
(e) Withholding Taxes. The Company has complied in all
material respects with the provisions of the Code and all other applicable
laws relating to information reporting and returns and the payment and
withholding of Taxes, including, without limitation, the withholding and
reporting requirements under Code Sections 1441 through 1464, 3401 through
3406, and 6041 through 6060, as well as similar provisions under any other
laws, and have, within the time and in the manner prescribed by law,
withheld and paid over to the proper Taxing Authority all Taxes required to
have been withheld and paid in connection with amounts paid or owing to any
employee, independent contractor, creditor, stockholder, or other third
party.
(f) Waivers of Statute of Limitations. The Company has
not executed any outstanding waivers or comparable consents regarding the
application of the statute of limitations with respect to any Taxes or Tax
Returns.
(g) Audit, Administrative and Court Proceedings. No
audits or other proceedings by any Taxing Authority are presently pending,
or, to the Knowledge (as defined below) of the Company, threatened, with
regard to any Taxes or Tax Returns of the Company. No deficiency for taxes
has been proposed, asserted or assessed against the Company with notice
that has not been resolved and paid in full. To the Knowledge of the
Company, no facts exist which would reasonably be likely to result in the
assessment of any liability for Taxes against the Company.
(h) Tax Ruling. The Company has not received or
requested a Tax Ruling (as defined below) or entered into a Closing
Agreement (as defined below) with any Taxing Authority that would have a
continuing adverse effect after the Closing Date. For purposes of this
Agreement, "Tax Ruling" shall mean any written ruling of (or other written
guidance from) a Taxing Authority relating to Taxes; and "Closing
Agreement" shall mean a written and legally binding agreement with a Taxing
Authority relating to Taxes.
(i) Availability of Tax Returns. Prior to the execution
of this Agreement, the Company has made available to the Parent complete
and accurate copies of (i) all Tax Returns for open years, and any
amendments thereto, filed by or on behalf of the Company, (ii) all audit
reports or written proposed adjustments (whether formal or informal)
received from any Taxing Authority relating to any Tax Return filed by or
on behalf of the Company and (iii) any Tax Ruling or request for a Tax
Ruling applicable to the Company and Closing Agreements entered into by the
Company.
(j) Tax Sharing Agreements. The Company is not a party
to, is not bound by, and has no obligation under, any agreement relating to
the allocation or sharing of Taxes and has no liability for the Taxes of
any person other than the Company as a transferee, or successor or
otherwise (including, without limitation, any liability under Treasury
Regulation Section 1.1502-6 or any similar provision of state, local or
foreign law).
(k) Code Section 341(f). The Company has not filed (and
will not file prior to the Closing) a consent pursuant to Code Section
341(f) and has not agreed to have Code Section 341(f)(2) apply to any
disposition of a subsection (f) asset (as that term is defined in Code
Section 341(f)(4)) owned by Company.
(l) Code Section 168. No property of the Company is
property that the Company or any party to this transaction is or will be
required to treat as being owned by another person pursuant to the
provisions of Code Section 168(f)(8) (as in effect prior to its amendment
by the Tax Reform Act of 1986) or is "tax-exempt use property" within the
meaning of Code Section 168(h).
(m) Code Section 481 Adjustments. The Company is not
required to include in income for any Tax period ending after the date
hereof any adjustment pursuant to Code Section 481(a) by reason of a
voluntary change in accounting method of the Company, nor has the IRS (as
defined below) proposed to the Company any such adjustment or change in
accounting method.
(n) Acquisition Indebtedness. No indebtedness of the
Company is "corporate acquisition indebtedness" within the meaning of Code
Section 279(b) or an "applicable high yield discount obligation" within the
meaning of Code Section 163(i).
(o) Consolidated Tax Returns. The Company has never been
a member of an affiliated group of corporations (within the meaning of Code
Section 1504(a)) filing consolidated Tax Returns.
(p) United States Real Property Holding Company. The
Company has not been a United States real property holding company within
the meaning of Code Section 897(c)(2) during the applicable period
specified in Code Section 897(c)(1)(A)(ii).
(q) S Corporation. The Company is not and has never been
an "S Corporation" within the meaning of Section 1361 of the Code.
(r) For purposes of this Agreement: (i) "Taxes" shall
include any and all federal, state, county, local, foreign or other taxes,
charges, imposts, rates, fees, levies or other assessments, including,
without limitation, all net income, gross income, sales and use, ad
valorem, transfer, gains, profits, excise, franchise, real and personal
property, gross receipt, capital stock, production, business and
occupation, disability, employment, payroll, license, estimated, stamp,
custom duties, severance, withholding or other taxes, fees, assessments or
charges of any kind whatsoever, together with any interest and penalties on
or additions to any such taxes and any expenses incurred in connection with
the determination, settlement or litigation of any tax liability, (ii)
"Taxing Authority" means any government authority or any subdivision,
agency, court commission, instrumentality or official thereof or any
quasi-governmental or private body having jurisdiction over the assessment,
determination, collection, imposition or administration of any Tax
(including the Internal Revenue Service (the "IRS)), (iii) "Tax Return"
includes any return, report, declaration, form, claim for refund, or
statement relating to Taxes, including any schedule or attachment thereto,
and including any amendment thereof, (iv) an individual will be deemed to
have "Knowledge" of a particular fact or other matter if such individual is
actually aware of such fact or other matter, such fact or other matter is
reflected in one or more documents (including e-mails) in such individual's
files or a prudent individual would be expected to discover or otherwise
become aware of such fact or other matter in the course of conducting a
reasonable investigation concerning the existence of such fact or other
matter, and (v) a person (other than an individual), including the Company,
will be deemed to have "Knowledge" of a particular fact or other matter if
any individual who is currently serving as a director or officer (or who
serves in any similar capacity) has Knowledge of such fact or other matter.
2.10 Assets.
(a) The Company has good and marketable title to or a
leasehold interest in, all properties and assets (real, personal and mixed,
tangible and intangible), wherever located, which are used in or necessary
for the conduct of its business as presently conducted, including without
limitation all of the properties and assets reflected in the Balance Sheet,
other than any properties or assets not in excess of $100,000 in aggregate
that have been disposed of in the Ordinary Course of Business. To the
Knowledge of the Company, all properties and assets reflected in the
Balance Sheet have a fair market or realizable value at least equal to the
value thereof as reflected therein. All such owned properties and assets
are held free and clear of all Security Interests other than (i) Security
Interests the existence of which is reflected in the Balance Sheet, and
(ii) minor imperfections of title, if any, which, individually or in the
aggregate, are not and are not reasonably likely to have a Material Adverse
Effect and each of which has arisen only in the Ordinary Course of Business
since the date of the Balance Sheet; and (iii) liens for current taxes not
yet due. None of such properties or assets are pledged for interest rate
swap, cap or floor contracts. The Company holds under valid and enforceable
lease agreements all real and personal properties being held under
capitalized leases and all real and personal property that is subject to
operating leases and enjoys peaceful and undisturbed possession of such
properties under such leases, and there exists no default or event which,
with notice or lapse of time or both, would constitute a default under such
leases, other than defaults which, individually or in the aggregate, have
not had and would not reasonably be likely to have a Material Adverse
Effect. The Company has not received any written notice of any adverse
claim to the title to any properties owned by them or with respect to any
lease under which any properties are held by them, other than any claims
that, individually or in the aggregate, have not had and would not
reasonably be likely to have a Material Adverse Effect.
(b) Except as disclosed on Section 2.10(b) of the
Disclosure Schedule, to the knowledge of the Company, the buildings,
plants, structures and equipment of the Company are structurally sound, are
in good operating condition and repair, and are adequate for the uses to
which they are being put, and none of such buildings, plants, structures,
or equipment is in need of maintenance or repairs except for ordinary,
routine maintenance and repairs that are not material in nature or cost.
The building, plants, structures and equipment of the Company are
sufficient for the continued conduct of the Companies' businesses after the
Closing in the same manner as conducted prior to Closing.
2.11 Owned Real Property. The Company does not own any real
property and does not have any options or contractual obligations to
purchase or acquire any real property.
2.12 Intellectual Property.
(a) Section 2.12(a) of the Disclosure Schedule sets
forth, for the Intellectual Property (as defined below) owned by the
Company, a true and complete list of all United States and foreign (i)
patents and patent applications; (ii) Trademark (as defined below)
registrations (including Internet domain registrations), Trademark
applications, and material unregistered Trademarks; (iii) copyright and
mask work registrations, copyright and mask work applications, and material
unregistered copyrights. Section 2.12(a) of the Disclosure Schedule lists
all Software (as defined below) (other than readily available commercial
software programs having an acquisition price of less than $50,000) which
are owned, licensed, leased, by the Company, and identifies which such
Software is owned, licensed, or leased, as the case may be.
(b) Section 2.12(b) of the Disclosure Schedule sets
forth a true and complete list of all material agreements (whether oral or
written, and whether between the Company and third parties or
inter-corporate) to which the Company is a party or otherwise bound, (i)
granting or obtaining any right to use or practice any rights under any
Intellectual Property, other than licenses for readily available commercial
Software programs having an acquisition price of less than $50,000, or (ii)
restricting the Company's rights to use any Intellectual Property,
including license agreements, development agreements, distribution
agreements, settlement agreements, consent to use agreements,
non-competition agreements, confidentiality agreements and covenants not to
xxx (collectively, the "License Agreements"). The License Agreements are
valid and binding obligations of the Company and, to the Knowledge of the
Company, of all other parties thereto, enforceable against the Company and,
to the Knowledge of the Company, against all other parties thereto, in
accordance with their terms, and there exists no event or condition which
will result in a violation or breach of, or constitute (with or without due
notice of lapse of time or both) a default by the Company or, to the
Knowledge of the Company, any other party under any such License Agreement.
The Company has not licensed or sublicensed its rights in any Intellectual
Property other than pursuant to the License Agreements. No royalties,
honoraria or other fees are payable by the Company to any third parties
under any agreement or, to the Knowledge of the Company, otherwise, for the
use of or right to use any Intellectual Property except pursuant to the
License Agreements.
(c) Except as set forth on Section 2.12(c) of the
Disclosure Schedule:
(i) The Company owns, or has a valid right to use,
free and clear of all Security Interests, all of the
Intellectual Property. The Company is listed in the records
of the appropriate United States, state, or foreign registry
as the sole current owner of record for each application and
registration listed on Section 2.12(a) of the Disclosure
Schedule.
(ii) The Intellectual Property owned by the Company
and, to the Knowledge of the Company, any Intellectual
Property used by the Company, is subsisting, in full force
and effect, and has not been cancelled, expired, or
abandoned, and is valid and enforceable.
(iii) There is no pending or, to the Knowledge of
the Company, threatened claim, suit, arbitration or other
adversarial proceeding before any Governmental Entity in any
jurisdiction involving the Intellectual Property owned by
the Company, or, to the Knowledge of the Company, the
Intellectual Property licensed to the Company, alleging that
the activities or the conduct of the Company's businesses
infringe upon, violate or constitute the unauthorized use of
the intellectual property rights of any third party or
challenging the Company's ownership, use, validity,
enforceability or registrability of any Intellectual
Property. There are no settlements, forebearances to xxx,
consents, judgments, or orders or similar obligations other
than the License Agreements which (i) restrict the Company's
rights to use any Intellectual Property, (ii) restrict the
Company's businesses in order to accommodate a third party's
intellectual property rights or (iii) permit third parties
to use any Intellectual Property owned or controlled by the
Company.
(iv) The conduct of the Company's businesses as
currently conducted or planned to be conducted does not
infringe upon (either directly or indirectly such as through
contributory infringement or inducement to infringe) any
intellectual property rights owned or controlled by any
third party. To the Knowledge of the Company, no third party
is misappropriating, infringing, diluting or violating any
Intellectual Property owned or used by the Company and no
such claims, suits, arbitrations or other adversarial
proceedings have been brought against any third party by the
Company.
(v) The Company has taken all reasonable measures to
protect the confidentiality of Trade Secrets (as defined
below), including requiring its employees and other parties
having access thereto to execute written non-disclosure
agreements. To the Knowledge of the Company, no Trade Secret
has been disclosed or authorized to be disclosed to any
third party other than pursuant to a non-disclosure
agreement. To the Knowledge of the Company, no party to any
non-disclosure agreement relating to its Trade Secrets is in
breach or default thereof.
(vi) No current or former partner, director,
officer, or employee of the Company (or any of its
respective predecessors in interest) will, after giving
effect to the transactions contemplated herein, own or
retain any rights to use any of the Intellectual Property
owned or used by the Company.
(vii) Except as disclosed in Section 2.12 (c)(vii)
of the Disclosure Schedule, neither the Company nor any
employee of the Company has any agreements or arrangements
with any persons other than the Company related to
confidential information or trade secrets of such persons or
restricting the Company's or any such employee's ability to
engage in business activities of any nature. To the
Knowledge of the Company the activities of the Company's
present employees on behalf of the Company do not violate
any such agreements or arrangements.
(viii) The consummation of the transaction
contemplated hereby will not result in the loss or
impairment of the right of the Company to own or use any of
the Intellectual Property, nor will it require the consent
of any Governmental Entity or third party in respect of any
such Intellectual Property.
(d) As used herein, "Intellectual Property" shall mean
trademarks, service marks, trade names, Internet domain names, designs,
logos, slogans, and general intangibles of like nature, together with all
goodwill, registrations and applications related to the foregoing
(collectively, "Trademarks"); patents and industrial designs (including any
continuations, divisionals, continuations-in-part, renewals, reissues, and
applications for any of the foregoing); copyrights (including any
registrations and applications for any of the foregoing); Software; "mask
works" (as defined under 17 USC ss. 901) and any registrations and
applications for "mask works"; technology, trade secrets and other
confidential information, know-how, proprietary processes, formulae,
algorithms, models, and methodologies (collectively, "Trade Secrets");
rights of publicity and privacy relating to the use of the names,
likenesses, voices, signatures and biographical information of real
persons; in each case used in or necessary for the conduct of the
businesses of the Company as currently conducted or and as presently
proposed to be conducted.
(e) As used herein, "Software" means any and all (a)
computer programs, including any and all software implementation of
algorithms, models and methodologies, whether in source code or object code
form, (b) databases and compilations, including any and all data and
collections of data, and (c) all documentation, including user manuals and
training materials, relating to any of the foregoing.
2.13 Year 2000. To the Knowledge of the Company, all
Software and systems used by the Company are Year 2000 Compliant. As used
herein, "Year 2000 Compliant" and "Year 2000 Compliance" mean for all dates
and times, including, without limitation, dates and times after December
31, 1999 and in the multi-century scenario, when used on a stand-alone
system or in combination with other software or systems: (i) the
application system functions and receives and processes dates and times
correctly without abnormal results; (ii) all date related calculations are
correct (including, without limitation, age calculations, duration
calculations and scheduling calculations); (iii) all manipulations and
comparisons of date-related data produce correct results for all valid date
values within the scope of the application; (iv) there is no century
ambiguity; (v) all reports and displays are sorted correctly; and (vi) leap
years are accounted for and correctly identified (including, without
limitation, that 2000 is recognized as a leap year
2.14 Inventory. All of the inventories of the Company
consist of a quality and quantity usable and saleable in the Ordinary
Course of Business and are fit for the purposes for which they were
procured or manufactured, except for items of obsolete materials and
materials of below-standard quality, all of which items have been
written-off or written-down on the Financial Statements to fair market
value, or for which adequate reserves have been provided therein. All
inventories not written-off have been priced at the lower of average cost
or market. All work in process and finished goods inventory is free of any
defect or other deficiency. The quantities of each type of inventory
(whether raw materials, work-in-process, or finished goods) are not
excessive, but are reasonable and warranted in the present circumstances of
the Company. All items included in the inventory of the Company are the
property of the Company, free and clear of any Security Interests, have not
been pledged as collateral, are not held by the Company on consignment from
others and conform in all material respects to all standards applicable to
such inventory or its use or sale imposed by any Governmental Entity.
2.15 Real Property Leases. Section 2.15 of the Disclosure
Schedule lists all written leases or subleases, and agreements to lease or
sublease, and describes all oral leases or subleases, pursuant to which the
Company leases or subleases or has agreed to lease or sublease any real
property. With respect to each lease and sublease listed or described in
Section 2.15 of the Disclosure Schedule except as may be made applicable
solely by the operation of applicable law as a result of the Merger:
(a) to the Knowledge of the Company, the lease or
sublease is legal, valid, binding, enforceable against the Company and in
full force and effect;
(b) the lease or sublease will not automatically
terminate, nor will the other party thereto have the right to terminate it,
as a result of the Merger, except if the lessor of the property leased by
the Company at 0000 Xxxxxxx Xxxxxxxxx, Xxxxxxxx, Xxxxxxxxxx (the "Gateway
Property") properly withholds its consent to the change of control of the
Company effected by the Merger and thereupon exercises a right of
termination under the lease for such property;
(c) neither the Company nor, to the Knowledge of the
Company, the other party to the lease or sublease is in breach or default,
and no event has occurred which, with notice or lapse of time, would
constitute a breach or default by the Company or, to the Knowledge of the
Company, the other party thereto or permit termination, modification, or
acceleration thereunder by the other party thereto;
(d) there are no material oral agreements or forbearance
programs in effect as to the lease or sublease and the Company has not
received any notice of, nor has any Knowledge of, a dispute with another
party to the lease or sublease which has not been resolved or waived;
(e) the Company has not assigned, transferred, conveyed,
mortgaged, deeded in trust or encumbered any interest in the leasehold or
subleasehold, except for the two subleases by the Company of the Gateway
Property listed on Section 2.15(e) of the Disclosure Schedule;
(f) all facilities leased or subleased thereunder are
supplied with access, utilities and other services necessary for the
operation of such facilities and such operations are in conformity with any
certificate of occupancy (or the equivalent thereof) issued for the
property underlying the leases or subleases; and
(g) without having made any inquiry, the Company has no
reason to believe that the owner of the facility leased or subleased does
not have good title to the parcel of real property, subject to any Security
Interest, easement, covenant or other restriction of record.
2.16 Contracts.
(a) Section 2.16(a) of the Disclosure Schedule (with
paragraph references corresponding to those set forth below) contains a
true and complete list of all of the following bonds, mortgages, notes,
indentures, contracts, agreements, instruments, commitments, licenses, or
other binding arrangements, whether written or oral, to which the Company
is a party or by which any of its assets, properties or securities are
bound, together with all amendments and supplements thereto and all waivers
or modifications of any terms thereof, and, if oral, an accurate and
complete summary of the terms and conditions thereof (each, a "Contract"):
(i) any agreement or series of related agreements
requiring aggregate payments by or to the Company of more
than $100,000;
(ii) (A) all Contracts with current officers, other
employees, consultants, agents, contractors, advisors or
sales representatives (excluding any Employee Benefit Plan
(as defined below)) providing for a commitment of employment
or consultation services for a specified or unspecified term
or otherwise relating to employment or the termination of
employment, together with the name, position and rate of
compensation of each person party to such a contract and the
expiration date of each such contract; and (B) any written
or unwritten representations, commitments, promises,
communications or courses of conduct (excluding any Employee
Benefit Plan and any such Contracts referred to in clause
(A)), involving in the case of either clause (A) or clause
(B) an obligation of the Company to make payments in any
year to any person exceeding $100,000 or any group of
persons exceeding $200,000 in the aggregate or involving
severance or termination pay liabilities or obligations;
(iii) any agreement for the grant to any person of
any options, rights of first refusal, or preferential or
similar rights to purchase any assets, properties or
securities of the Company;
(iv) all Contracts with any person containing any
provision or covenant prohibiting or limiting the ability of
the Company to engage in any business activity or compete in
any geographic area or with any person, or prohibiting or
limiting the ability of any person to compete with the
Company or in any line of business with the Company;
(v) all partnership, joint venture, shareholders' or
other similar Contracts with any person;
(vi) all Contracts relating to or evidencing
indebtedness of the Company for borrowed money (including,
without limitation, capitalized lease obligations, interest
rate or currency swaps, xxxxxx or straddles or similar
transactions) to which the Company is a party or by which
any of its assets or properties are bound, restricted or
encumbered;
(vii) all Contracts relating to marketing and all
Contracts (A) with distributors, dealers, manufacturer's
representatives, sales agencies or franchisees for or of the
Company or (B) pursuant to which the Company has agreed to
act as a distributor, dealer, manufacturer's representative,
sales agent or franchisee for or of another person, setting
forth, where applicable, any termination fees or other
penalties which may be assessed against the Company as a
result of the termination of any such Contract;
(viii) all Contracts relating to (A) any past (if
any of the terms thereof remain in effect) or future
disposition or acquisition of any assets and properties by
or to the Company other than dispositions or acquisitions in
the Ordinary Course of Business or (B) any merger,
consolidation or combination to which the Company is a
party, any sale, dividend, split or other disposition of
capital stock or other equity interests of the Company or
any sale, dividend or other disposition of all or
substantially all of the assets of the Company
(collectively, a "Business Combination") involving the
Company or to which the Company is a party;
(ix) all Contracts (excluding Employee Benefit Plans
and Contracts described under Section 2.16(a)(ii)) between
or among the Company, on the one hand, and any holder of
securities of the Company, any past or present officer,
director, Affiliate (as defined below) or associate of the
Company or any Affiliate or associate of such holder,
officer or director, on the other hand;
(x) all Contracts that (A) limit or contain
restrictions on the ability of the Company to declare or pay
dividends on, to make any other distribution in respect of
or to issue or purchase, redeem or otherwise acquire its
capital stock, to incur indebtedness, to incur or suffer to
exist any Security Interest, to purchase or sell any assets
and properties or to change the lines of business in which
it participates or engages or to engage in any Business
Combination or (B) require the Company to maintain specified
financial ratios or levels of net worth or other
quantitative indicia of financial condition;
(xi) all customer Contracts (A) that would
reasonably be likely to generate revenues for the Company in
excess of $100,000 over the term of such Contract (assuming
the exercise of all unexercised options to extend the term
of such Contract), (B) that cannot be terminated or
cancelled by the Company within twelve weeks after the
giving of notice of termination without resulting in any
cost or penalty to the Company; or (C) that entitle any
customer to a rebate or right of set-off, to return any
product after acceptance thereof or to delay the acceptance
thereof, or which vary in any material respect from
Company's standard form contracts, forms of which have been
delivered to Parent;
(xii) any agreement obligating the Company to
deliver maintenance services or future product enhancements;
(xiii) all Contracts under which the Company has or has
agreed to lease any personal property as lessee or lessor
which involve annual lease payments exceeding $50,000;
(xiv) any agreement requiring the payment to any
person of a brokerage or sales commission or a finder's or
referral fee (other than arrangements to pay commissions or
fees to employees in the Ordinary Course of Business);
(xv) all Contracts involving any obligation or
liability of the Company (whether absolute, accrued,
contingent or otherwise), as surety, co-signer, endorser,
co-maker, indemnitor or otherwise in respect of the
obligation of any person;
(xvi) all other Contracts (other than any real
property leases, Employee Benefit Plan and insurance
policies listed in Section 2.18 of the Disclosure Schedule,
customer Contracts not required to be disclosed pursuant to
clause (xi) above and Contracts with vendors, suppliers or
subcontractors entered into in the Ordinary Course of
Business) that (A) involve the payment pursuant to the terms
of any such Contract, by the Company of more than $100,000
annually or to the Company of more than $100,000 annually,
(B) cannot be terminated by the Company within twelve weeks
after giving notice of termination without resulting in any
cost or penalty to the Company, (C) contain an escalation
clause, or (D) require the Company to purchase all or
substantially all of its requirements for a particular
product or service from a supplier or to make periodic
minimum purchases of a particular product or service from a
supplier; and
(xvii) any other material Contract whether or not
made in the Ordinary Course of Business.
(b) Each Contract required to be listed in Section
2.16(a) of the Disclosure Schedule (for purposes hereof, such Contracts,
together with the Contracts relating to Intellectual Property listed in
Section 2.12 and the Contracts relating to Real Property Leases listed in
Section 2.15, are hereinafter collectively called, "Material Contracts") is
in full force and effect and constitutes a legal, valid and binding
agreement of the Company, and, to the Knowledge of the Company, of each
other party thereto; and neither the Company nor, to the Knowledge of the
Company, any other party to such Contract is, or 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) nor, to the Knowledge of the Company, is
there any valid basis for any claim of default under or violation of or a
right to terminate, any such Contract. True and complete copies of all
Material Contracts have been delivered to the Parent.
(c) Section 2.16(c) of the Disclosure Schedule sets
forth the backlog of the Company as of the date hereof to the extent
specified therein.
2.17 Bank Accounts and Powers of Attorney. Section 2.17 of
the Disclosure Schedule identifies all bank and brokerage accounts of the
Company, whether or not such accounts are held in the name of the Company,
and lists the respective signatories therefor. There are no outstanding
powers of attorney given by the Company, other than any included in the
list of Material Contracts or contained in the provisions of Material
Contracts.
2.18 Insurance. Section 2.18 of the Disclosure Schedule
contains an accurate and complete description of all material policies of
fire, liability, workmen's compensation and other forms of insurance owned
or held by the Company. All such policies are in full force and effect, all
premiums with respect thereto covering all periods up to and including the
date of the Closing have been and will, prior to the Closing, be paid, and
no notice of cancellation or termination has been received with respect to
any such policy. Such policies are sufficient for compliance with all
material requirements of law and of all agreements to which the Company is
a party; to the Knowledge of the Company are valid, outstanding and
enforceable policies; provide adequate insurance coverage for the assets
and operations of the Company; will remain in full force and effect through
the respective dates set forth in Section 2.18 of the Disclosure Schedule
without the payment of additional premiums; and will not in any way be
affected by, or terminate or lapse by reason of, any of the transactions
contemplated hereby. Section 2.18 of the Disclosure Schedule identifies all
risks which the Company, the Company's Board or officers of the Company
have designated as being self insured. The Company has not been refused any
insurance with respect to its assets or operations, and its coverage has
not been limited, by any insurance carrier to which it has applied for any
such insurance or with which it has carried insurance during the last three
years.
2.19 Litigation. There is no action, suit, inquiry,
proceeding or investigation by or before any court, arbitrator, or
governmental or other regulatory or administrative agency or commission
pending or, to the Knowledge of the Company, threatened against or
involving the Company or any of its assets, properties or securities, or
which questions or challenges the validity of this Agreement or any action
taken or to be taken by the Company pursuant to this Agreement or in
connection with any of the transactions contemplated hereby; nor to the
Knowledge of the Company is there any valid basis for any such action,
suit, inquiry, proceeding or investigation that would, if brought,
individually or in the aggregate, have or be reasonably likely to have a
Material Adverse Effect. There is no outstanding directive, memorandum of
understanding, order, injunction, decree, award, judgment of any court,
arbitrator or governmental or other regulatory or administrative agency or
commission against the Company or any of its assets, properties or
securities.
2.20 Employees. Section 2.20 of the Disclosure Schedule
contains a true and complete list of all officers and directors of the
Company and all employees of the Company whose annualized salary exceeds
$100,000, along with the current position and salary of each such person,
the number of shares of Company Stock owned beneficially or of record by
such person and the family relationships, if any, among such persons.
Section 2.20 of the Disclosure Schedule contains an accurate summary of all
group insurance programs in effect for directors, officers or employees of
the Company. Each officer and employee has entered into a Confidential and
Proprietary Information Agreement with the Company, a form of which has
previously been provided to the Parent. As of the date hereof, no key
employee or group of employees has informed the Company of their intention
to terminate employment with the Company. The Company is not delinquent in
payments to any of its employees or consultants for any wages, salaries,
commissions, bonuses or other direct compensation for any services
performed by them or amounts required to be reimbursed to such employees.
Except pursuant to agreements listed in Section 2.20 of the Disclosure
Schedule, true and complete copies of which have been delivered by the
Company to the Parent, upon termination of the employment of any employees,
neither the Company nor the Parent or the Surviving Corporation will be
liable to any of such employees for severance pay or any other payments
(other than accrued salary, vacation or sick pay in accordance with the
Company's normal policies) as a result of any oral or written agreements
made by the Company prior to the Closing. The Company is not a party to, or
bound by, any collective bargaining or similar labor agreement, and the
Company has not experienced any strikes, grievances, claims of unfair labor
practices or other collective bargaining disputes. The Company has no
Knowledge of any organizational effort presently being made or threatened
by or on behalf of any labor union with respect to employees of the
Company.
2.21 Employee Benefits.
(a) Section 2.21(a) of the Disclosure Schedule contains
a true and complete list of, (i) each deferred compensation and each bonus
or other incentive compensation, stock purchase, stock option and other
equity compensation plan, program, agreement or arrangement; (ii) each
severance or termination pay, medical, surgical, hospitalization, life
insurance and other "welfare" plan, fund or program (within the meaning of
Section 3(1) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA")); (iii) each profit-sharing, stock bonus or other
"pension" plan, fund or program (within the meaning of Section 3(2) of
ERISA); (iv) each employment, termination or severance agreement; and (v)
each other employee benefit plan, fund, program, agreement or arrangement,
in each case, that is sponsored, maintained or contributed to or required
to be contributed to by the Company or by any trade or business, whether or
not incorporated (an "ERISA Affiliate"), that together with the Company
would be deemed a "single employer" within the meaning of Section 4001(b)
of ERISA, or to which the Company or an ERISA Affiliate is party, whether
written or oral, for the benefit of any employee or former employee of the
Company (collectively, the "Employee Benefit Plans"). No Employee Benefit
Plan is subject to Section 302 or Title IV of ERISA or Section 412 of the
Code. Neither the Company nor any ERISA Affiliate has any commitment or
formal plan, whether legally binding or not, to create any additional
employee benefit plan or modify or change any existing Employee Benefit
Plan that would affect any employee or former employee of the Company.
(b) With respect to each Employee Benefit Plan, the
Company has heretofore delivered or made available to the Parent true and
complete copies of each of the following documents: (i) a copy of the
Employee Benefit Plan and any amendments thereto (or if the Employee
Benefit Plan is not a written plan, a description thereof); (ii) a copy of
the two most recent annual reports and actuarial reports, if required under
ERISA; (iii) a copy of the most recent Summary Plan Description required
under ERISA with respect thereto; (iv) if the Employee Benefit Plan is
funded through a trust or any third party funding vehicle, a copy of the
trust or other funding agreement and the latest financial statements
thereof; and (v) the most recent determination letter received from the IRS
with respect to each Employee Benefit Plan intended to qualify under
Section 401 of the Code.
(c) No liability under Title IV or Section 302 of ERISA
has been incurred by the Company or any ERISA Affiliate that has not been
satisfied in full, and no condition exists that presents a material risk to
the Company or any ERISA Affiliate of incurring any such liability, other
than liability for premiums due to the Pension Benefit Guaranty Corporation
(which premiums have been paid when due).
(d) All contributions required to be made with respect
to any Employee Benefit Plan on or prior to the Effective Time have been
timely made or are reflected on the Company's balance sheet.
(e) Neither the Company nor any Employee Benefit Plan or
trust created thereunder has engaged in a transaction in connection with
which the Company or any Employee Benefit Plan could be subject to either a
civil penalty assessed pursuant to Section 409 or 502(i) of ERISA or a tax
imposed pursuant to Section 4975 or 4976 of the Code.
(f) Each Employee Benefit Plan has been operated and
administered in all material respects in accordance with its terms and
applicable law, including but not limited to ERISA and the Code. There are
no pending, threatened or anticipated claims by or on behalf of any Plan,
by any employee or beneficiary covered under any such Employee Benefit
Plan, or otherwise involving any such Employee Benefit Plan (other than
routine claims for benefits).
(g) Each Employee Benefit Plan intended to be
"qualified" within the meaning of Section 401(a) of the Code and each trust
intended to qualify under Section 501(a) of the Code: (i) has either
obtained a favorable determination, notification, advisory and/or opinion
letter, as applicable, as to its tax-qualified status from the IRS or still
has a remaining period of time under applicable Treasury Regulations or IRS
pronouncements in which to apply for such letter and to make any amendments
necessary to obtain a favorable determination, and (ii) incorporates or has
been amended to incorporate all provisions required to comply with the Tax
Reform Act of 1986 and subsequent legislation.
(h) No Employee Benefit Plan provides medical, surgical,
hospitalization, death or similar benefits (whether or not insured) for
employees or former employees of the Company for periods extending beyond
their retirement or other termination of service, other than (i) coverage
mandated by applicable law, (ii) death benefits under any "pension plan,"
or (iii) benefits the full cost of which is borne by the current or former
employee (or his beneficiary). No condition exists that would prevent the
Company from amending or terminating any Employee Benefit Plan providing
health or medical benefits in respect of any active employee of the
Company.
(i) No amounts payable under the Employee Benefit Plans
will fail to be deductible for U.S. federal income tax purposes by virtue
of Section 162(a)(1), Section 162(m) or Section 280G of the Code.
(j) Except pursuant to agreements listed in Section
2.21(j) of the Disclosure Schedule, true and complete copies of which have
been delivered by the Company to the Parent, the consummation of the
transactions contemplated by this Agreement will not, either alone or in
combination with another event, (i) entitle any current or former employee
or officer of the Company or any ERISA Affiliate to severance pay,
unemployment compensation or any other payment, except as expressly
provided in this Agreement, or (ii) accelerate the time of payment or
vesting, or increase the amount of compensation due any such employee or
officer.
2.22 Environmental Matters.
(a) The Company is in compliance with all federal,
state, local and foreign laws and regulations relating to pollution or
protection of human health or the environment, including, without
limitation, ambient air, surface water, ground water, land surface or
subsurface strata, and natural resources (together "Environmental Laws" and
including, without limitation, laws and regulations relating to emissions,
discharges, releases or threatened releases of chemicals, pollutants,
contaminants, wastes, toxic or hazardous substances or wastes, petroleum
and petroleum products, asbestos or asbestos-containing materials,
polychlorinated biphenyls, lead or lead-based paints or materials, or radon
("Materials of Environmental Concern")), or otherwise relating to the
manufacture, generation, processing, distribution, use, treatment, storage,
disposal, transport or handling of Materials of Environmental Concern, or
the preservation of the environment or mitigation of adverse effects
thereon and each law and regulation with regard to record keeping,
notification, disclosure, and reporting requirements respecting Materials
of Environmental Concern. Such compliance includes, but is not limited to,
the possession by the Company of all Permits (as defined herein) required
under all applicable Environmental Laws, and compliance with the terms and
conditions thereof. All Permits currently held by the Company pursuant to
the Environmental Laws are identified in Section 2.22(a) of the Disclosure
Schedule.
(b) The Company has not received any communication
(written or oral), whether from a governmental authority, citizens group,
employee or otherwise, that alleges that the Company is not in full
compliance with any Environmental Laws. The Company has provided or made
available to Parent for review and copying all information that is in the
possession or control of the Company regarding environmental matters
pertaining to, or the environmental condition of, the business, assets or
properties owned, leased or operated by the Company, or the compliance (or
noncompliance) by the Company with any Environmental Laws.
(c) There is no claim, action, cause of action,
investigation or notice (written or oral) (together, "Environmental Claim")
that has been brought, or, to the Knowledge of the Company, threatened by
any person alleging potential liability (including, without limitation,
potential liability for investigatory costs, cleanup costs, governmental
response costs, natural resources damages, property damages, personal
injuries, or penalties) arising out of, based on or resulting from (i) the
presence, or release into the environment, of any Material of Environmental
Concern at any location owned, leased or operated by the Company, or to the
Knowledge of the Company at any location where Materials of Environmental
Concern have been stored or disposed of by the Company or by a contractor
for the Company, or (ii) circumstances forming the basis of any violation,
or alleged violation, of any Environmental Law, in either case against the
Company or against any person whose liability for any Environmental Claim
the Company has retained or assumed either contractually or by operation of
law.
(d) To the Knowledge of the Company, there are no past
or present actions, activities, circumstances, conditions, events or
incidents concerning any Material of Environmental Concern, including,
without limitation, the release, emission, discharge, presence or disposal
of any Material of Environmental Concern, with respect to any property
owned, leased or operated by the Company that have not been disclosed to
the Parent by the Company.
(e) Without in any way limiting the generality of the
foregoing, (i) all locations where the Company has stored, disposed or
arranged for the disposal of Materials of Environmental Concern at
properties owned, leased or operated by the Company are identified in
Section 2.22(e) of the Disclosure Schedule, (ii) all contractors with whom
the Company has contracted for the transportation, storage or disposal of
Materials of Environmental Concern are identified in Section 2.22(e) of the
Disclosure Schedule, (iii) all underground storage tanks, and the capacity
and contents of such tanks, located on any property owned, leased or
operated by the Company are identified in Section 2.22(e) of the Disclosure
Schedule, (iv) except as set forth in Section 2.22(e) of the Disclosure
Schedule, to the Knowledge of the Company, there is no asbestos contained
in or forming part of any building, building component, structure or office
space owned, leased or operated by the Company, and (v) except as set forth
in Section 2.22(e) of the Disclosure Schedule, no PCBs or PCB-containing
items are used or stored at any property owned, leased or operated by the
Company.
(f) The Company has provided or made available to Parent
for review and copying all assessments, reports, data, results of
investigations or audits, and other information that is in the possession
or control of the Company regarding environmental matters pertaining to, or
the environmental condition of, the businesses of the Company, or the
compliance (or noncompliance) by the Company with any Environmental Laws.
(g) The Company has not received any order or other
notice from any Governmental Entity requiring the Company (i) to perform
any site assessment for Materials of Environmental Concern, (ii) to remove
or remediate any of Materials of Environmental Concern, or (iii) to record
or deliver to other persons any disclosure document or statement pertaining
to environmental matters by virtue of the transactions set forth herein and
contemplated hereby, or as a condition to the effectiveness of any
transactions contemplated hereby.
2.23 Compliance.
(a) The Company and the conduct and operations of its
businesses, are in compliance with each law (including rules and
regulations thereunder) of any federal, state, local or foreign government,
or any Governmental Entity, which (a) affects or relates to this Agreement
or the transactions contemplated hereby or (b) is applicable to the Company
or its businesses, properties, assets or securities, or to the products and
services sold by it, except for violations which, individually or together
with other violations, have not had and would not reasonably be likely to
have a Material Adverse Effect.
(b) (i) No investigation or review by any Governmental
Entity with respect to the Company is pending or, to the Knowledge of the
Company, threatened and (ii) no Governmental Entity has, to the Knowledge
of the Company, indicated an intention to conduct the same.
(c) The businesses of the Company are being and have
been conducted in compliance in all material respects with the Restated
Articles of Incorporation and the Amended By-Laws, and, to the Knowledge of
the Company there is no condition or state of facts which could give rise
to a violation thereof or liability or default thereunder which,
individually or together with other conditions or facts would reasonably be
likely to have a Material Adverse Effect.
2.24 Permits. Section 2.24 of the Disclosure Schedule sets
forth a true and complete list of all franchises, permits, licenses,
registrations, certificates, orders, approvals, authorizations or other
rights and privileges of or from any Governmental Entity ("Permits"),
(including without limitation those relating to the occupancy or use of
real property) issued to or held by the Company that are used in the
business of the Company as presently conducted and as currently proposed to
be conducted, and all pending applications for any such Permits, setting
forth the grantor, the grantee, the function and the expiration and renewal
date of each. The Company has provided the Parent with true and complete
copies of all such Permits. Each such Permit is in full force and effect,
except for failures to be in full force and effect which, individually or
together with other such failures, have not had and would not reasonably be
likely to have a Material Adverse Effect. The businesses of the Company
have been and are being conducted in compliance in all material respects
with all such Permits. To the Knowledge of the Company, there is no
condition or state of facts which could give rise to a violation thereof
which, individually or together with other violations of Permits, would
reasonably be likely to have a Material Adverse Effect, no suspension or
cancellation of such Permit is threatened, and, the Company is not aware of
any basis for believing that such Permit may not be renewable upon
expiration or may be revoked, terminated, suspended, restricted or
otherwise materially impaired. Each such Permit will be in full force and
effect immediately following the Closing and will not expire or terminate
as a result of the Merger, except for failures to be in full force and
effect which, individually or together with other such failures, would not
reasonably be likely to have a Material Adverse Effect.
2.25 Certain Business Relationships With Affiliates. The
persons set forth on Schedule I hereto are the only Affiliates of the
Company. Except as described in Section 2.25 of the Disclosure Schedule, to
the Knowledge of the Company, no Affiliate, officer or director of the
Company (i) owns any property or right, tangible or intangible, which is
used in the business of the Company, (ii) has any claim or cause of action
against the Company, (iii) owes any money to the Company, or (iv) owns an
interest, other than as a holder of less than 1% of a class of securities
of a publicly traded company, in any competitor, supplier or customer of
the Company.
2.26 Broker's Fees. The Company has no liability or
obligation to pay any fees or commissions to any broker, finder or agent
with respect to the transactions contemplated by this Agreement.
2.27 Books and Records. The books of account, minute books
and other similar records of the Company are true and complete in all
material respects and have been maintained in accordance with sound
business practice. The Company has made and kept books, records and
accounts which, in reasonable detail, accurately and fairly reflect its
transactions and the dispositions of its assets. The Company maintains a
system of accounting controls sufficient to provide reasonable assurances
that (a) transactions are executed in accordance with management's general
or specific authorization; (b) transactions are recorded as necessary (i)
to permit preparation of financial statements in conformity with GAAP, and
(ii) to maintain accountability for assets; (c) access to assets is
permitted only in accordance with management's general or specific
authorization; and (d) the recorded accountability for assets is compared
with the existing assets at reasonable intervals and appropriate action is
taken with respect to any differences. The stock ledgers of the Company,
true and complete copies of which have been delivered to Parent, are
complete and correct. The minute books of the Company, true and complete
copies of which have been delivered to the Parent, contain true and
complete records of all meetings held of, and corporate action taken by,
the Company's shareholders, Board of Directors or any committee thereof and
of all written consents executed in lieu of the holding of any such
meeting. No meeting of any such shareholders, Board of Directors or
committee has been held for which minutes have been prepared and are not
contained in such minute books. At the Closing the Company will have
possession of all of its books and records, except to the extent that its
books and records are in the possession of its representatives.
2.28 Pooling; Tax Matters. Neither the Company nor any
Affiliate, director, officer, employee or agent of the Company has taken or
agreed to take any action or failed to take any action that would prevent
the Merger (i) from being treated for financial accounting purposes as a
"pooling of interests" in accordance with GAAP and the rules, regulations
and interpretations of the SEC or (ii) from constituting a reorganization
within the meaning of Section 368(a) of the Code. All of the written
factual statements and representations made by holders of Company Stock,
the Company, any Company Affiliates, and any of their respective
Affiliates, to KPMG LLP or Chen & Fan in connection with the rendering by
such accounting firms of their respective letters referred to in Sections
5.2(k) and (l), respectively, are true, complete and correct, and do not
omit to state a material fact required to make any such statement or
representation not misleading.
2.29 Company Action. The Company Board, at a meeting duly
called and held, by the unanimous vote of all directors present, or by
unanimous written consent, in each case in accordance with the CGCL, (i)
determined that the Merger and the transactions contemplated by this
Agreement are advisable and in the best interests of the Company and its
shareholders and are on terms that are fair to such shareholders, (ii)
approved this Agreement, the Merger and the transactions contemplated
hereby in accordance with the provisions of the CGCL, (iii) directed that
this Agreement and the Merger be submitted to the shareholders of the
Company for their approval and (iv) resolved to recommend that shareholders
of the Company vote in favor of the adoption and approval of this Agreement
and the Merger.
2.30 Information in Certain Documents. None of the
information supplied by the Company for inclusion or incorporation by
reference in, or otherwise provided by or on behalf of the Company to its
shareholders in connection with (a) the application for a permit to issue
securities to be filed with the Commissioner of Corporations of the State
of California (the "Commissioner") pursuant to Section 25142 of the CSL in
connection with the issuance of Parent Common Stock pursuant to the
transactions contemplated hereby (such application and the disclosure
documents relating thereto being herein collectively referred to as the
"Permit Application") will, at the time the Permit Application is filed
with the Commissioner and at the time the Fairness Hearing is held (as such
application may be supplemented or amended as of such time), contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein
not misleading, (b) if applicable, the registration statement on Form S-4
to be filed with the SEC in connection with the issuance of Parent Common
Stock pursuant to Article 6 of this Agreement and the transactions
contemplated hereby (the "S-4") will, at the time the S-4 is filed with the
SEC and at the time it becomes effective under the Securities Act (as the
S-4 may be supplemented or amended as of such time), contain any untrue
statement of material fact or omit to state any material fact required to
be stated therein or necessary to make the statements therein not
misleading or (c) any materials provided to any shareholders of the Company
relating to (i) any meeting of shareholders of the Company to be held in
connection with the Merger or (ii) any written consent of shareholders of
the Company in connection with the Merger (the "Company Consent
Solicitation Statement"), will, at the time it is so mailed or otherwise
delivered to shareholders, at the time of any meeting of shareholders to be
held in connection with the Merger and at the date any written consent of
shareholders of the Company concerning this Agreement, the Merger or the
transactions contemplated hereby is effective (as such information may be
supplemented or amended as of such time), 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 are made, not misleading, except that no
representation is made by the Company with respect to statements made
therein based on information supplied in writing by the Parent for
inclusion or incorporation by reference therein. The Permit Application and
the Company Consent Solicitation Statement will comply in all material
respects with the provisions of the CSL and all other applicable law (as
the case may be), and the rules and regulations thereunder, except that no
representation is made by the Company with respect to statements made
therein based on information supplied in writing by the Parent for
inclusion or incorporation by reference therein.
2.31 Absence of Certain Changes. Since the date of the
Balance Sheet, (a) the Company has not conducted its business and
operations other than in the Ordinary Course of Business, (b) the Company
has not taken any actions that, if this Agreement had been in effect, would
have violated or been inconsistent with the provisions of Article 4 hereof,
(c) there has not been any fact, event, circumstance or change affecting or
relating to the Company which, individually or together with other events,
has had or would reasonably be likely to have a Material Adverse Effect,
and (d) the assets of the Company have not been affected in any way as a
result of flood, fire, explosion or other casualty (whether or not covered
by insurance). The transactions contemplated by this Agreement will not
constitute a change of control under or require the consent from or the
giving of notice to a third party pursuant to the terms, conditions or
provisions of any Contract to which the Company is a party or by which its
assets, properties or securities are bound. To the Knowledge of the
Company, there are no presently existing facts, circumstances or events
which would reasonably be likely to cause it to suffer any Material Adverse
Effect.
2.32 Certain Business Practices. Neither the Company nor, to
the Knowledge of the Company, any director, officer, employee or agent of
the Company has (i) used any funds for unlawful contributions, gifts,
entertainment or other unlawful payments related to a political activity,
(ii) made any unlawful payment to any foreign or domestic government
official or employee or to any foreign or domestic political party or
campaign or violated any provision of the Foreign Corrupt Practices Act of
1977, as amended, (iii) consummated any transaction or made any payment or
entered into any agreement or arrangement or taken any other action in
violation of Section 1128B(b) of the Social Security Act, as amended, or
(iv) made any other unlawful payment.
2.33 Agreements with Holders of Company Stock. No person has
any preemptive right or right of first refusal in the exchange of shares of
Company Stock for shares of Parent Company Stock or the exchange of capital
stock of the Transitory Subsidiary for shares of the capital stock of the
Surviving Company pursuant to the Merger, under, and such the shares of
Parent Company Stock issued in the Merger will not be "Registrable
Securities" or "New Securities" for the purposes of, any agreements or
instruments between or among the Company and any shareholders of the
Company or agreements with respect to the Company among any shareholders of
the Company, including without limitation the Common Stock Purchase
Agreement entered into as of February 18, 1997, the Series A Preferred
Stock Purchase Agreement entered into as of January 31, 1997, as amended,
the Series B Preferred Stock Purchase Agreement entered into as of October
29, 1999, and the four Common Stock Transfer Agreements entered into as of
October 31, 1997, and such shareholders have no registration rights,
pre-emptive rights or rights of first refusal with respect to such Parent
Company Stock thereunder.
2.34 Disclosure. The Company has not failed to disclose to
the Parent any facts within the Knowledge of the Company which are material
to the business, results of operations, assets, liabilities, condition
(financial or other) or prospects of the Company, taken as a whole. No
representation or warranty contained in this Agreement, and no statement
contained in the Disclosure Schedule or in any certificate, list or other
writing furnished to the Parent pursuant to any provision of this Agreement
or in connection with the transactions contemplated hereby, contains or
will contain any untrue statement of a material fact or omits or will omit
to state any material fact necessary in order to make the statements
contained herein and therein, in light of the circumstances in which they
were made, not misleading.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE PARENT
The Parent represents and warrants to the Company that:
3.1 Organization. The Parent is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Delaware. The Transitory Subsidiary is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Delaware, and all of the outstanding capital stock of Transitory
Subsidiary is owned by Parent. Each of the Parent and the Transitory
Subsidiary is duly qualified to conduct business and is in corporate good
standing under the laws of each jurisdiction in which the nature of its
business or the ownership or leasing of its properties requires such
qualification, except where the failure to so qualify would not (a) have a
material adverse effect on the assets, properties, business, financial
condition or results of operation of the Parent and the Subsidiaries of the
Parent, taken together as a whole, or (b) prevent or impair in any material
respect the ability of the Parent and the Transitory Subsidiary to perform
their respective obligations hereunder or to consummate the transactions
contemplated by this Agreement. Each of the Parent and the Transitory
Subsidiary has all requisite corporate power and authority to carry on its
businesses as they are now being conducted and to own, lease and use the
properties owned, leased and used by it.
3.2 Capitalization. The authorized capital stock of the
Parent consists of: (i) 30,000,000 shares of Parent Common Stock, $0.25 par
value per share of which 19,887,482 shares were issued and outstanding as
of January 30, 2000. All of the issued and outstanding shares of Parent
Common Stock are duly authorized, validly issued, fully paid and
nonassessable. All of the Merger Shares will be, when issued in accordance
with this Agreement, duly authorized, validly issued, fully paid and
nonassessable.
3.3 Authority. Each of the Parent and the Transitory
Subsidiary has all requisite corporate power and authority to execute and
deliver this Agreement and each instrument required hereby to be executed
and delivered by it, to perform their respective obligations hereunder and
thereunder and to consummate the transactions contemplated hereby and
thereby. The execution and delivery by the Parent and the Transitory
Subsidiary of this Agreement and each instrument required hereby to be
executed and delivered by it, the performance by the Parent and the
Transitory Subsidiary of their respective obligations hereunder and
thereunder and the consummation by the Parent and the Transitory Subsidiary
of the transactions contemplated hereby and thereby have been duly and
validly authorized by all necessary corporate action on the part of the
Parent and the Transitory Subsidiary and no other corporate proceedings on
the part of the Parent or the Transitory Subsidiary are required to
authorize this Agreement or any of the instruments required hereby or for
the Parent and the Transitory Subsidiary to consummate the transactions
contemplated hereby or thereby. No approval by any shareholders of Parent
of this Agreement or any of the transactions contemplated hereby is
required to be obtained for the Parent to enter into and perform its
obligations under this Agreement or the Aries Merger Agreement or to cause
the Transitory Subsidiary to do the same. This Agreement has been, and,
upon execution thereof by the Parent and the Transitory Subsidiary, each
instrument required hereby to be executed and delivered by the Parent or
the Transitory Subsidiary, will be, duly and validly executed and delivered
by the Parent and the Transitory Subsidiary and, assuming the due and valid
authorization, execution and delivery by the other parties thereto,
constitute, or in the case of each such instrument will constitute, a valid
and binding obligation of the Parent and the Transitory Subsidiary
enforceable against them in accordance with their respective terms, except
that (i) such enforcement may be subject to applicable bankruptcy,
insolvency or other similar laws, now or hereafter in effect, affecting
creditors' rights generally, and (ii) the remedy of specific performance
and injunctive relief may be subject to equitable defenses and to the
discretion of the court before which any proceeding therefor may be
brought.
3.4 Noncontravention. Subject to any required compliance
with the applicable provisions of the HSR Act, the Securities Act and any
applicable state securities or blue sky laws, the Fairness Hearing and the
filing of the Aries Merger Agreement as required by the CGCL and the filing
of a Certificate of Merger as required by the DGCL, neither the execution
and delivery by the Parent or the Transitory Subsidiary of this Agreement
or any instrument required hereby to be executed and delivered by it, the
consummation by the Parent and the Transitory Subsidiary of the
transactions contemplated hereby or thereby, or the compliance by the
Parent and the Transitory Subsidiary with any of the provisions hereof or
thereof, will: (a) conflict with or violate any provision of the charter
documents or by-laws of the Parent and the Transitory Subsidiary; (b)
require on the part of the Parent and the Transitory Subsidiary any notice
or filing with, or any permit, authorization, consent, order, approval or
other authorization of, or exemption by, any Governmental Entity; (c)
conflict with, result in a violation or breach of, constitute (with or
without due notice or lapse of time or both) a default under, result in the
acceleration of, give rise to any right to accelerate, terminate, modify or
cancel, or require any notice, consent or waiver under, any contract,
lease, sublease, license, sublicense, franchise, permit, indenture,
agreement, mortgage, Security Interest, instrument or other arrangement to
which the Parent or Transitory Subsidiary is a party or by which either is
bound or to which any of their assets are subject; (d) violate or breach
the terms of or cause a default under any order, writ, injunction, decree,
judgement, permit, license, approval, authorization, law, statute,
ordinance, rule or regulation or code or any requirements, directories,
consents and obligations of or imposed by any Governmental Entity
applicable to (i) the Parent or the Transitory Subsidiary or (ii) any
properties or assets of the Parent or the Transitory Subsidiary; or (e)
with the passage of time, the giving of notice or the taking of action by
another person, have any of the effects described in clause (a) through (d)
of this Section 3.4.
3.5 Reports and Financial Statements. The Parent has
previously furnished to the Company true and complete copies, as amended or
supplemented, (i) of its Annual Report on Form 10-K for the fiscal year
ended March 28, 1999, as filed with the SEC, (ii) its Proxy Statement
relating to its Annual Meeting of Shareholders held on September 13, 1999
and (iii) all other reports or registration statements, other than
Registration Statements on Form S-8, filed by the Parent with the SEC since
March 28, 1999 (such reports, registration statements and other filings,
together with any amendments or supplements thereto, are collectively
referred to herein as the "Parent Reports"). As of their respective dates,
the Parent Reports did not contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in the light of the circumstances under
which they were made, not misleading. The audited financial statements and
unaudited interim financial statements of the Parent included in the Parent
Reports have been prepared in accordance with GAAP applied on a consistent
basis throughout the periods covered thereby (except as may be indicated
therein or in the notes thereto, and in the case of quarterly financial
statements, as permitted by Form 10-Q under the Securities Exchange Act of
1934, as amended (the "Exchange Act")) and fairly present the consolidated
financial condition, results of operations and cash flows of the Parent as
of the respective dates thereof and for the periods referred to therein,
except that the unaudited interim financial statements were or are not
subject to normal recurring year-end adjustments.
3.6 Broker's Fees. Except in respect of their financial
advisor, Xxxxx, Xxxxxxxx & Xxxx, Inc., neither the Parent nor the
Transitory Subsidiary has any liability or obligation to pay any fees or
commissions to any broker, finder or agent with respect to the transactions
contemplated by this Agreement.
3.7 Information in Certain Documents. None of the
information supplied by or on behalf of the Parent for inclusion or
incorporation by reference in, or otherwise provided by Parent to
stockholders of the Company in connection with (a) the Permit Application
will, at the time the Permit Application is filed with the Commissioner and
at the time the Fairness Hearing is held (as such application may be
supplemented or amended as of such time), contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading, (b) if
applicable, the S-4 will, at the time the S-4 is filed with the SEC and at
the time it becomes effective under the Securities Act (as the S-4 may be
supplemented or amended as of such time), contain any untrue statement of
material fact or omit to state any material fact required to be stated
therein or necessary to make the statement therein not misleading or (c)
any materials prepared for and provided by the Parent to any shareholders
of the Company in connection with (i) any meeting of shareholders of the
Company to be held in connection with the Merger or (ii) any written
consent of shareholders of the Company in connection with the Merger (a
"Parent Disclosure Document") will, at the time it is so mailed or
otherwise delivered to shareholders of the Company, at the time of any
meeting of shareholders to be held in connection with the Merger and at the
date any written consent of shareholders of the Company concerning this
Agreement, the Merger or the transactions contemplated hereby is effective
(as such information may be supplemented or amended as of such time),
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 are
made, not misleading, except that no representation is made by the Parent
with respect to statements made therein based on information supplied by
the Company for inclusion or incorporation by reference therein. The Permit
Application and, if applicable, the S-4 and any Parent Disclosure Document
will comply in all material respects with the provisions of the CSL and the
Securities Act (as the case may be), and the rules and regulations
thereunder, except that no representation is made by the Parent with
respect to statements made therein based on information supplied by the
Company for inclusion or incorporation by reference therein.
3.8 No Material Adverse Change. Since the date of the
balance sheet included in the Parent's most recently filed report on Form
10Q or 10K to the date of this Agreement, there has not occurred any
material adverse change in the financial condition, liabilities, assets or
business of the Parent and its Subsidiaries, taken as a whole.
ARTICLE 4
COVENANTS
4.1 Interim Operations of the Company. The Company covenants
and agrees that prior to the Effective Time, except (i) as expressly
contemplated by this Agreement, (ii) as set forth in Section 4.1 of the
Disclosure Schedule, or (iii) as agreed in writing by Parent, after the
date hereof:
(a) the business of the Company shall be conducted only
in the Ordinary Course or Business and substantially in the same manner as
heretofore conducted and in compliance with all applicable laws and
regulations, and the Company shall use its reasonable best efforts to
preserve its business organization intact to the end that its goodwill and
ongoing business shall be unimpaired at the Effective Time, keep available
the services of its current officers and employees and, in light of the
fact that the Company has heretofore operated as an open foundry and in
light of the covenants contained in Subsections 4.1(b) and (c), maintain
its existing relations with franchisees, customers, suppliers, creditors,
business partners and others having business dealings with it;
(b) the Company (i) shall maintain available and
uncommitted capacity at its operations in an amount sufficient to support
the forecasted demand of the Parent as set forth in Section 4.1(b) of the
Disclosure Schedule and (ii) use its reasonable best efforts to maintain
appropriate engineering resources and personnel to support the ongoing
production of metal semi-conductor field effect transistor (MESFET)
switches, pseudomorphic high electron mobility transistor (PHEMT) for
switches and MESFET for PA transfer and to support AIGaP and InGaP
heterojunction bipolar transistor (HBT) engineering and development;
(c) the Company shall not enter into any commitment of
its capacity to customers other than the Parent that cannot be terminated
or cancelled by the Company within twelve weeks after the giving of notice
of such termination without resulting in any material cost or penalty to
the Company;
(d) the Company shall not: (i) amend its certificate of
incorporation or by-laws or similar organizational documents, (ii) issue,
sell, transfer, pledge, dispose of or encumber any shares of any class or
series of its capital stock or Voting Debt, or securities convertible into
or exchangeable for, or options, warrants, calls, commitments or rights of
any kind to acquire, any shares of any class or series of its capital stock
or any Voting Debt, other than (A) issue shares of common stock upon the
exercise of Options or Warrants outstanding on the date hereof (to the
extent then exercisable) and (B) during the period from the date of this
agreement to and including the date that is four business days prior to the
Effective Time, grant Options to purchase up to 50,000 shares of Company
Common Stock per month to newly hired employees of the Company, who are not
also officers, directors or Affiliates of the Company; provided, that, (x)
each such grant of Options is made in the Ordinary Course of Business under
Plans in existence on the date hereof pursuant to Option agreements that
are in a form substantially similar to the forms under which Options
outstanding on the date hereof were issued to employees, (y) the exercise
price of each Option so granted is the then fair market value for the
Company Common Stock, and (z) no such grant adversely affects the
qualification of the Merger for "pooling of interests" accounting, (iii)
amend any of the terms, or accelerate or change the period of
exercisability, of any Options; (iv) declare, set aside or pay any dividend
or other distribution payable in cash, stock or property with respect to
any shares of any class or series of its capital stock; (v) split, combine
or reclassify any shares of any class or series of its stock; or (vi)
redeem, purchase or otherwise acquire directly or indirectly any shares of
any class or series of its capital stock, or any instrument or security
which consists of or includes a right to acquire such shares;
(e) the Company shall not take (or permit any of its
Affiliates over which it has control to take) any action that would
adversely affect the qualification of the Merger for "pooling of interests"
accounting treatment and the Company shall use its reasonable best efforts
so that each other of its Affiliates does not take or permit to be taken
any action that would adversely affect the qualification of the Merger for
"pooling of interests" accounting treatment;
(f) the Company shall not (i) incur or modify any
indebtedness or other liability, other than in the Ordinary Course of
Business; or (ii) enter into, modify, amend or terminate, or take or omit
to take any action that would constitute a violation of or default under,
any Material Contract or waive, release or assign any material rights or
claims, except in the Ordinary Course of Business and in any event not in
excess of $100,000;
(g) the Company shall not: (i) incur or assume any
long-term debt, or except in the Ordinary Course of Business and in any
event not in excess of $100,000, incur or assume any short-term
indebtedness in amounts not consistent with past practice; (ii) assume,
guarantee, endorse or otherwise become liable or responsible (whether
directly, contingently or otherwise) for the obligations of any other
person; (iii) make any loans, advances or capital contributions to, or
investments in, any other person; or (iv) enter into any material
commitment or transaction (including, but not limited to, any capital
expenditure or purchase, sale or lease of assets or real estate) other than
in the Ordinary Course of Business and which would not, individually or in
the aggregate, have or reasonably be likely to have a Material Adverse
Effect;
(h) the Company shall not (i) amend its lease of the
property located at 0000 Xxxxxxxx Xxxxx in Sunnyvale, California, or (ii)
transfer, lease, license, sell, mortgage, pledge, dispose of, encumber or
otherwise dispose of any assets or subject any such assets to any Security
Interest other than in the Ordinary Course of Business;
(i) the Company shall not amend any of the employment
agreements included in Exhibit I and, except as otherwise specifically
provided in this Agreement, the Company shall not make any change in the
compensation payable or to become payable to any of its officers,
directors, employees, agents or consultants (other than normal recurring
increases in wages or normal recurring performance-based compensation, in
each case made in the Ordinary Course of Business to employees who are not
officers or directors or Affiliates) or to persons providing management
services, or enter into or amend any employment, severance, consulting,
termination or other agreement or Employee Benefit Plan or make any loans
to any of its officers, directors, employees, Affiliates, agents or
consultants or make any change in its existing borrowing or lending
arrangements for or on behalf of any of such persons pursuant to an
employee benefit plan or otherwise;
(j) except as otherwise specifically contemplated by
this Agreement, the Company shall not (i) pay or make any accrual or
arrangement for payment of any pension, retirement allowance or other
employee benefit pursuant to any existing Employee Benefit Plan, agreement
or arrangement to any officer, director, employee or Affiliate or pay or
agree to pay or make any accrual or arrangement for payment to any
officers, directors, employees or Affiliates of the Company of any amount
relating to unused vacation days, except payments and accruals made in the
Ordinary Course of Business; (ii) adopt or pay, grant, issue, accelerate or
accrue salary or other payments or benefits pursuant to any pension,
profit-sharing, bonus, extra compensation, incentive, deferred
compensation, stock purchase, stock option, stock appreciation right, group
insurance, severance pay, retirement or other employee benefit plan,
agreement or arrangement, or any employment or consulting agreement with or
for the benefit of any director, officer, employee, agent or consultant,
whether past or present; or (iii) amend in any material respect any such
existing plan, agreement or arrangement in a manner inconsistent with the
foregoing;
(k) the Company shall not permit any insurance policy
naming it as a beneficiary or a loss payable payee to be cancelled or
terminated without notice to Parent, except policies providing coverage for
losses not in excess of $50,000 ;
(l) the Company shall not enter into any Contract or
transaction relating to the purchase or sale of assets other than in the
Ordinary Course of Business;
(m) the Company shall not pay, repurchase, discharge or
satisfy any of its claims, liabilities, Security Interests or other
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction in the
Ordinary Course of Business, of claims, liabilities or obligations
reflected or reserved against in, or contemplated by, the consolidated
financial statements (or the notes thereto) of the Company;
(n) the Company shall not adopt a plan of complete or
partial liquidation, dissolution, merger, consolidation, restructuring,
recapitalization or other reorganization of the Company (other than the
Merger);
(o) the Company shall not sell, assign, transfer,
license, or modify or amend any rights to any Intellectual Property;
(p) the Company shall not initiate any litigation or
arbitration proceeding or settle any litigation or arbitration proceeding,
other than in the Ordinary Course of Business; and
(q) the Company shall not enter into an agreement,
contract, commitment or arrangement to do any of the foregoing, or to
authorize, recommend, propose or announce an intention to do any of the
foregoing.
4.2 Reasonable Best Efforts.
(a) Prior to the Closing, upon the terms and subject to
the conditions hereof, each of the Parties shall use all their reasonable
best efforts to take, or cause to be taken, all actions and to do, or cause
to be done, all things necessary, proper or advisable (subject to
applicable law) to consummate and make effective the transactions
contemplated by this Agreement as promptly as possible, including, but not
limited to (i) the preparation and filing of all forms, registrations and
notices required to consummate the transactions contemplated by this
Agreement and the taking of all such actions as are necessary to obtain any
requisite waiver, consent, permit, authorization, qualification, order or
approval of, or any exemption by, any Governmental Entity or other third
party, required to be obtained or made by the Company, the Parent or the
Transitory Subsidiary in connection with the transactions contemplated
hereby, including, without limitation, making the Permit Application and
all filings, applications and submissions under the CSL or the CGCL as may
be reasonably required to be made in connection with this Agreement and the
transactions contemplated hereby (any of the foregoing waivers, consents,
permits, authorizations, qualifications, orders, approvals or exemptions,
an "Approval") and (ii) the satisfaction of the other Parties' conditions
to Closing. In addition, no Party hereto shall take any action after the
date hereof that would reasonably be likely to materially delay the
obtaining of, or result in not obtaining, any Approval from any
Governmental Entity or other third party necessary to be obtained prior to
Closing or any letter that is required to be obtained from any third party
prior to Closing. Notwithstanding anything to the contrary contained
herein, neither the Parent nor the Company shall be required to agree, as a
condition to any Approval, to divest itself or hold separate any
Subsidiary, division or business unit and the Company shall not be entitled
to divest or hold separate or otherwise take or commit to take any action
that limits Parent's or Transitory Subsidiary's freedom of action with
respect of, or their ability to retain, the Company or any material
portions thereof or any of the businesses, product lines, properties or
assets of the Company, without Parent's prior written consent.
(b) Prior to the Closing, each Party shall promptly
consult with the other Parties hereto with respect to, provide any
necessary information with respect to, and provide the other Parties (or
their respective counsel) with copies of, all filings made by such Party
with any Governmental Entity or any other information supplied by such
Party to a Governmental Entity in connection with this Agreement and the
transactions contemplated hereby. Each Party hereto shall promptly inform
the other of any communication from any Governmental Entity regarding any
of the transactions contemplated hereby. If any Party hereto or Affiliate
thereof receives a request for additional information or documentary
material from any such Governmental Entity with respect to any of the
transactions contemplated hereby, then such Party shall endeavor in good
faith to make, or cause to be made, as soon as reasonably practicable and
after consultation with the other Parties, an appropriate response in
compliance with such request. To the extent that transfers, amendments or
modifications of Permits (including environmental Permits) are required as
a result of the execution of this Agreement or consummation of the
transactions contemplated hereby, the Company shall use its reasonable best
efforts to effect such transfers, amendments or modifications.
(c) The Company and Parent shall (and if applicable the
Company shall cause its officers and directors, and to the extent under the
control of the Company, its shareholders and Affiliates to, and the Company
shall use its reasonable best efforts so that its other shareholders and
Affiliates) file as soon as practicable notifications under the HSR Act and
respond as promptly as practicable to any inquiries received from the
Federal Trade Commission or the Antitrust Division of the Department of
Justice for additional information or documentation and respond as promptly
as practicable to all inquiries and requests received from any State
Attorney General or other Governmental Entity in connection with antitrust
matters. Concurrently with the filing of notifications under the HSR Act,
the Company and Parent shall each request early termination of the HSR Act
waiting period.
(d) Notwithstanding the foregoing, nothing in this
Agreement shall be deemed to require Parent, Transitory Subsidiary or the
Company to commence any litigation against any person in order to
facilitate the consummation of any of the transactions contemplated hereby
or to defend against any litigation brought by any Governmental Entity
seeking to prevent the consummation of any of the transactions contemplated
hereby.
(e) No Party shall take, or agree to commit to take, any
action that results, or would reasonably be likely to result, in any of the
conditions to the Merger set forth in Article 5 not being satisfied, or
would make any representation or warranty of such Party contained herein
inaccurate in any respect at, or as of any time prior to, the Effective
Time, or that would materially impair the ability of such Party to
consummate the Merger in accordance with the terms hereof or materially
delay such consummation.
4.3 Shareholder Approval. The Company, acting through the
Company Board, shall as soon as practicable after the date of this
Agreement (i) except as otherwise requested by the Parent, promptly and
duly mail to the holders of Company Stock the notice of the Fairness
Hearing required to be mailed to shareholders under CSL, (ii) promptly
prepare the Company Consent Solicitation Statement in accordance with
applicable federal and state law and include therein the recommendation of
the Company Board that shareholders of the Company vote in favor of the
Merger and the adoption of this Agreement, (iii) promptly and duly, as soon
as practicable following the earlier of (A) the date upon which the S-4
becomes effective or (B) the issuance by the Commissioner of the CSL Permit
(as defined below), or such other time as the Parent and the Company
mutually agree, cause the Company Consent Solicitation Statement and, in
the case of the issuance by the Commissioner of the CSL Permit, a Parent
Disclosure Document prepared or approved by the Parent, to be mailed or
otherwise delivered to the Company's shareholders and take such other
action as is necessary in accordance with CGCL, the DGCL, the Restated
Articles of Incorporation and the Amended By-laws to cause the Company's
shareholders to consider and act upon this Agreement and the Merger,
including without limitation, setting a record date for shareholders
entitled to consent in writing to this Agreement and the Merger and
soliciting the written consent of the shareholders of the Company, (iv) use
its reasonable best efforts to obtain adoption and approval by the
shareholders of the Company of the Merger, and (v) unless this Agreement,
the Merger and the other transactions and agreements contemplated hereby
are adopted and approved by a unanimous written consent of all holders of
capital stock of the Company, promptly after the approval of the Merger by
the Company's shareholders, mail to the Company's shareholders notice of
such approval in accordance with the CGCL (including without limitation
Section 603 of Chapter 6 and Section 1301 of Chapter 13 thereof), the
Restated Articles of Incorporation and Amended By-Laws (the "Approval
Notice"). The Company agrees that the Company Consent Solicitation
Statement and all other materials to be provided to the shareholders of the
Company in connection with obtaining approval and adoption of this
Agreement, the Merger and the transactions contemplated hereby, including
the notice of the Fairness Hearing and the Parent Disclosure Document,
shall be subject to the prior review of and approval by the Parent and its
counsel. The Company shall promptly notify the Parent upon obtaining the
Requisite Shareholder Approval.
4.4 Full Access; Information. Prior to the Effective Time,
the Company shall afford to the officers, employees, accountants, counsel,
financing sources and other representatives of Parent, full access to all
the Company's properties, books, contracts, commitments and records and to
all employees, financial advisors, legal advisors and accountants of the
Company and, during such period, the Company shall furnish promptly to the
Parent (a) a copy of each report, schedule, registration statement and
other document filed or received by it during such period pursuant to the
requirements of federal or state securities or blue sky laws or the CGCL
and (b) all other information concerning its business, properties and
personnel as Parent may reasonably request. Access shall include the right
to conduct at its cost such environmental studies as Parent, in its
discretion, shall deem appropriate. Unless otherwise required by law or in
order to comply with disclosure requirements applicable to the Company
Consent Solicitation Statement, Parent Disclosure Document, Permit
Application, or S-4, each Party agrees to hold in confidence all material
non-public information so acquired in accordance with the confidentiality
terms of the Non-Disclosure and Lock-up Agreement dated December 17, 1999
between the Parent and the Company (the "Non-Disclosure Agreement").
4.5 Exercise of Warrants. Not less than twenty (20) days
prior to the Effective Date, the Company shall give the holders of Warrants
notice of the transactions contemplated hereby and request that such
holders exercise their Warrants in full prior to the Effective Time in
accordance with the terms thereof.
4.6 Notification of Certain Matters. Each Party shall
promptly deliver to the other Party written notice of (i) the occurrence or
non-occurrence of any event the occurrence or non-occurrence of which would
cause any representation or warranty of such Party contained in this
Agreement to be untrue or inaccurate in any material respect at or prior to
the Effective Time and (ii) any material failure of such Party, 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 4.6 shall not limit or otherwise affect the
remedies available hereunder to the Party receiving such notice. Without
limiting the generality of the foregoing, the Company shall update the
shareholder information set forth in Section 2.2 of the Disclosure Schedule
promptly upon any change in such information (such as due to an Option or
Warrant exercise).
4.7 No Other Negotiations.
(a) The Company shall not (and the Company shall (x)
cause its officers, directors, employees, representatives, and agents,
including, but not limited to, its investment bankers, attorneys and
accountants, not to, (y) cause, to the extent under the control of the
Company, its Affiliates and the officers, directors, employees,
representatives and agents thereof not to, and (z) use its best efforts so
that its other Affiliates and the officers, directors, employees,
representatives and agents thereof do not), directly or indirectly, (i)
encourage, solicit, initiate, facilitate or engage or participate in
inquiries, discussions or negotiations with any person or take any other
action intended or designed to facilitate the efforts of any person, other
than the Parent, concerning or that could lead to any merger,
consolidation, sale of assets, tender offer, recapitalization, liquidation,
dissolution, accumulation of shares of capital stock of the Company or
other business combination involving the Company or any transaction that
may result in a person beneficially owning (as defined in Rule 13d-3 of the
Exchange Act) 15% or more of any class of equity securities of the Company
or that could lead to any such transaction (with such efforts by any such
person, including a firm proposal to enter into such a business combination
transaction, being referred to as an "Alternative Acquisition"), (ii)
provide any non-public information concerning the business, properties,
assets or securities of the Company to any person, other than the Parent,
(iii) enter into any letter of intent, agreement in principle, acquisition
agreement or any other agreement with any person, other than the Parent,
with respect to a possible Alternative Acquisition, (iv) withdraw, or
modify or propose to withdraw or modify in any manner adverse to the
Parent, the approval or recommendation by the Company Board of this
Agreement or the Merger, (v) approve, recommend, accept or consummate or
agree to approve, recommend, accept or consummate an Alternative
Transaction or (v) make or authorize any statement, recommendation or
solicitation in support of any possible Alternative Acquisition by any
person, other than by the Parent. The Company shall immediately notify the
Parent of, and shall disclose to the Parent all principal terms of, any
inquiries, discussions or negotiations of the nature described in this
Section 4.7 and the identity of such other person or persons.
(b) If the Company, or, to the Knowledge of the Company,
any Affiliate, officer, director, employee, representative or agent of the
Company or of any Affiliate of the Company, receives any offer or proposal
to enter into discussions or negotiations relating to an Alternative
Acquisition, the Company shall notify the Parent thereof within 24 hours of
the receipt thereof by such person, including information as to the
identity of the party making any such offer or proposal and the specific
principal terms of such offer or proposal.
4.8 Affiliates.
(a) The Company shall use its reasonable best efforts to
cause each Affiliate to deliver to Parent within twenty days of the date
hereof a written agreement in the form attached as Exhibit G hereto (each
an "Affiliate Letter").
(b) If any Affiliate refuses to provide an Affiliate
Letter, the Parent may place appropriate legends on the certificates
evidencing the shares of Parent Common Stock to be received by such
Affiliate pursuant to the terms of this Agreement and issue appropriate
stop transfer instructions to the transfer agent for shares of Parent
Common Stock to the effect that the shares of Parent Common Stock received
by such Affiliate pursuant to this Agreement may be sold, transferred or
otherwise conveyed only (i) pursuant to an effective registration statement
under the Securities Act, (ii) in compliance with Rule 145 promulgated
under the Securities Act, or (iii) pursuant to another exemption under the
Securities Act.
4.9 Employment Agreements. The Company shall use its
reasonable best efforts to cause such employees of the Company who may be
identified by the Parent to enter into an employment agreement with the
Parent or the Company containing reasonable terms and conditions.
4.10 Appointment and Acknowledgment. The Company shall use
its reasonable best efforts to cause each holder of Company Stock to
deliver to Parent an executed Appointment and Acknowledgment.
4.11 Letter of Accountant. If, in accordance with Article 6,
the Parent determines to withdraw the Permit Application and to file the
S-4, the Company shall use its reasonable best efforts to cause to be
delivered to the Parent a letter of Chen & Fan, the Company's independent
auditors, dated a date within two business days before the date on which
the S-4 shall become effective and addressed to the Parent, in form and
substance reasonably satisfactory to the Parent and customary in scope and
substance for letters delivered by independent public accountants in
connection with registration statements similar to the S-4, which letter
shall be brought down to the Effective Time (the "Comfort Letter").
4.12 Directors' and Officers' Insurance and Indemnification.
(a) For six years after the Effective Time, Parent and
the Surviving Corporation shall jointly and severally indemnify, defend and
hold harmless each present and former officer and director of the Company
and each person who becomes an officer or director of the Company prior to
the Effective Time (each, a "Former Officer or Director") against all
losses, claims, damages, liabilities, costs, fees and expenses, including
reasonable fees and disbursements of counsel and judgments, fines, losses,
claims, liabilities and amounts paid in settlement (provided that any such
settlement is effected with the written consent of the Parent or the
Surviving Corporation, which consent shall not be unreasonably withheld)
arising out of actions or omissions occurring prior to the Effective Time
to the full extent required under applicable CGCL, the terms of the
Restated Certificate of Incorporation or the Amended By-Laws, as in effect
at the date hereof; provided, 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 until
disposition of any and all such claims.
(b) Parent or the Surviving Corporation shall maintain
the Company's existing officers' and directors' liability insurance for a
period of not less than six years after the Effective Date; provided, that
Parent may substitute therefor policies of substantially equivalent
coverage and amounts containing terms no less favorable to the Former
Officers or Directors to which such insurance applies; provided, further,
that in no event shall the Parent or the Surviving Company be required to
pay aggregate premiums for insurance under this Section 4.12(b) in excess
of 150% of the aggregate premiums paid by the Company in 1999 on an
annualized basis for such purpose; and provided, further, that if the
Parent or the Surviving Corporation is unable to obtain the amount of
insurance required by this Section 4.12(b) for such aggregate premium,
Parent or the Surviving Corporation shall obtain as much insurance as can
be obtained for an annual premium not in excess of 150% of the aggregate
premiums paid by the Company in 1999 on an annualized basis for such
purpose.
4.13 Welfare Plans. Parent shall provide or to cause to be
provided to each active employee of the Company as of the Closing Date who
continues employment with Parent or the Surviving Corporation (the "Company
Employees"), for a period of twelve (12) months following the Closing Date,
with employee benefit plans or arrangements that are substantially
comparable to those provided to employees of the Parent (or its
Subsidiaries). For a period of eighteen (18) months following the Closing
Date, the Company shall comply in all material respects with the provisions
of Section 4980B of the Code with respect to Company Employees. With
respect to each plan ("Parent Welfare Plan") of Parent or the Surviving
Corporation in which any Company Employee participates following the
Closing Date that is an "employee benefit plan," (as defined in Section
3(3)of ERISA), for purposes of determining eligibility to participate,
vesting, and entitlement to benefits and vacation (but not for accrual of
pension benefits), service with the Company (or predecessor employers to
the extent the Company provides past service credit) shall be treated as
service with Parent or the Surviving Corporation, as applicable; provided
however, that such service shall not be recognized to the extent that such
recognition would result in a duplication of benefits. Such service also
shall apply for purposes of satisfying any waiting periods, evidence of
insurability requirements, or the application of any preexisting condition
limitations. Each Parent Welfare Plan shall waive pre-existing condition
limitations to the same extent waived under the applicable Employee Benefit
Plan. Company Employees shall be given credit for amounts paid under a
corresponding benefit plan during the same period for purposes of applying
deductibles, co-payments and out-of-pocket maximums as though such amounts
had been paid in accordance with the terms and conditions of the Parent
Plan.
ARTICLE 5
CONDITIONS TO CONSUMMATION OF MERGER
5.1 Conditions to Each Party's Obligation. The respective
obligations of the Parent, the Transitory Subsidiary and the Company to
consummate the Merger shall be subject to satisfaction at or prior to the
Effective Time of each of the following conditions, any of which may be
waived in whole or in part by the Parent, the Transitory Subsidiary or the
Company, as the case may be, to the extent permitted by applicable law:
(a) the Requisite Shareholder Approval shall have been
obtained;
(b) either (i) the Commissioner shall have issued a
permit authorizing the issuance and sale of Parent Common Stock pursuant to
the Permit Application (the "CSL Permit") and the qualification thereunder
shall not be the subject of any stop order or proceedings seeking a stop
order or (ii) in accordance with Article 6 of this Agreement, the S-4 shall
have become effective under the Securities Act and shall not be the subject
of any stop order or proceedings seeking a stop order;
(c) the shares of Parent Common Stock issuable to the
holders of Company Stock pursuant to this Agreement in the Merger shall
have been authorized for quotation on the Nasdaq National Market System,
subject to official notice of issuance;
(d) no Government Entity (including a federal or state
court) of competent jurisdiction shall have enacted, issued, promulgated,
enforced or entered any statute, rule, regulation, executive order, decree,
injunction or other order (whether temporary, preliminary or permanent)
which is in effect and which materially restricts, prevents or prohibits
consummation of the Merger or any transaction contemplated by this
Agreement; and
(e) any waiting period applicable to the consummation of
the Merger under the HSR Act shall have expired or been terminated, and no
action shall have been instituted by the Department of Justice or Federal
Trade Commission challenging or seeking to enjoin the consummation of this
transaction, which action shall have not been withdrawn or terminated.
5.2 Conditions to Obligations of the Parent and the
Transitory Subsidiary. The obligation of each of the Parent and the
Transitory Subsidiary to consummate the Merger shall be subject to
satisfaction at or prior to the Effective Time of each of the following
conditions, any of which may be waived in whole or in part by Parent and
the Transitory Subsidiary to the extent permitted by applicable law:
(a) the Parent, Transitory Subsidiary and the Company
shall have obtained all required Approvals and effected all required
registrations and filings, necessary to consummate the Merger (including to
enable the Surviving Corporation to conduct its business and to own or
lease its properties and assets in substantially the same manner in which
such business was previously conducted and such assets and properties were
previously owned or leased and to continue to lease the property leased by
the Company at 0000 Xxxxxxx Xxxxxxxxx, Xxxxxxxx, Xxxxxxxxxx for the
remaining term of any sublease thereof, unless such lease shall have been
terminated without liability or cost to the Company and evidence thereof
reasonably satisfactory to Parent shall have been furnished to Parent), of
Governmental Entities and of third parties, except where the failure to
obtain or effect any such waiver, permit, consent, approval, authorization,
registration, filing or notice of third parties would not have a Material
Adverse Effect or a material adverse effect on the Parent;
(b) the representations and warranties of the Company
set forth in Article 2 shall be true and correct on the date hereof and
shall be true and correct in all material respects (without giving effect,
for these purposes, to any qualifications in such representations and
warranties that require a fact or event to be material, have a Material
Adverse Effect or meet a certain minimum dollar threshold in order for such
fact or event to constitute a misrepresentation or a breach of warranty) as
of the Closing Date as if made as of the Closing Date, except for
representations and warranties made as of a specific date, which shall be
true and correct as of such date;
(c) the Company shall have performed or complied with
its covenants set forth in Section 4.3 and shall have performed or complied
in all material respects with its other agreements and covenants required
to be performed or complied with under this Agreement as of or prior to the
Effective Time;
(d) no change, event, occurrence (or development or
threat with respect to a prospective change, event or occurrence) shall
have occurred which, individually or in the aggregate, has had or would
reasonably be likely to have a Material Adverse Effect;
(e) unless the holders of greater than 95% of the issued
and outstanding shares of Company Stock have executed a written consent
adopting and approving this Agreement, the Merger and the other
transactions and agreements contemplated hereby, the period during which
shareholders of the Company may assert rights under Chapter 13 of the CGCL
shall have ended and not greater than 5% of the issued and outstanding
shares of Company Stock as of the Effective Time shall be Dissenting Shares
in respect of which the holder thereof has not forfeited, lost or withdrawn
his or her right to have the Company repurchase such shares pursuant to
Chapter 13 of the CGCL;
(f) there shall not be pending any suit, action or
proceeding by any Governmental Entity or other person (i) seeking to
prevent the consummation of the Merger or seeking significant damages in
connection therewith or (ii) which otherwise is reasonably likely to have a
Material Adverse Effect;
(g) the Company shall have delivered to the Parent a
certificate (without qualification as to knowledge or materiality or
otherwise, except insofar as it relates to knowledge of actions, suits or
proceedings threatened against the Company) to the effect that the
conditions specified in clause (a) of Section 5.1 and clauses (a) (with
respect to Approvals and any registrations and filings for which it is
responsible), (b), (c), (d), (e) and (f) of this Section 5.2 are satisfied;
(h) the Parent shall have received from each Affiliate
an executed Affiliate Letter;
(i) the holders of not less than 95% of the issued and
outstanding shares of Company Stock as of the Effective Time, shall have
executed either the Voting Agreement or the Appointment and Acknowledgment
and the Parent shall have received from each such holder an executed copy
of such Voting Agreement or Appointment and Acknowledgment;
(j) the Parent shall have received the certificate
provided for in Section 1.5(k) hereof;
(k) the Company shall have received (and the Parent
shall have received a copy of) a letter, dated the Closing Date, from Chen
& Fan, auditors for the Company, with respect to the treatment of the
Merger as a pooling-of-interests, which letter shall be in form and
substance reasonably satisfactory to the Parent;
(l) the Parent shall have received a letter, dated the
Closing Date, from KPMG LLP, auditors for the Parent, with respect to the
treatment of the Merger as a pooling of interests, which letter shall be in
form and substance reasonably satisfactory to the Parent;
(m) if, in accordance with Article 6, the Parent has
determined to withdraw the Permit Application and to file the S-4, the
Parent shall have received the Comfort Letter of Chen & Fan, the Company's
independent auditors, dated a date within two business days before the date
on which the S-4 became effective, and a bring down of the Comfort Letter,
dated a date within two business days before the Effective Time, each of
which shall be addressed to the Parent, in form and substance reasonably
satisfactory to the Parent and customary in scope and substance for letters
delivered by independent public accountants in connection with registration
statements similar to the S-4;
(n) the Parent shall have received from Wilson, Sonsini,
Xxxxxxxx & Xxxxxx, special counsel to the Company, an opinion addressed to
the Parent and dated the Closing Date as to each of the matters set forth
in Exhibit H-1 and from Law & Xxxxxx, corporate counsel to the Company, an
opinion addressed to the Parent and dated the Closing Date as to each of
the matters set forth in Exhibit H-2;
(o) the Parent, the Representative and the Escrow Agent
shall have executed and delivered the Escrow Agreement;
(p) all officers, employees or consultants of the
Company who have developed or participated in the development of the
Company's GaAs HBT process or products shall have entered into an
Assignment of Inventions Agreement with the Company, such agreement to be
in form and substance reasonably satisfactory to the Parent;
(q) each of the Company Shareholder Agreements shall
have been terminated;
(r) the Parent shall have received an opinion of
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP, special tax counsel to the
Parent, in form and substance reasonably satisfactory to the Parent, dated
as of the Effective Time, substantially to the effect that the Merger will
qualify as a reorganization for United States federal income tax purposes
within the meaning of Section 368(a) of the Code. The issuance of such
opinion shall be conditioned upon the receipt by such tax counsel of
representation letters from each of the Parent, the Transitory Subsidiary
and the Company, in each case, in substantially the form and substance as
attached hereto as Exhibit J-1 and Exhibit J-2 and in form and substance
reasonably satisfactory to such counsel, which letters shall not have been
modified or withdrawn;
(s) the Parent shall have received from the Company a
certification, in a form substantially similar to that attached as Exhibit
K, certifying under penalties of perjury that the Company has not been a
United States real property holding company within the meaning of Code
Section 897(c)(2) during the applicable period specified in Code Section
897(c)(1)(A)(ii);
(t) the Parent shall have received from Taiunion
Investment Limited ("Taiunion") such evidence of Taiunion's commitment to
confer upon the Parent an equal sharing of the rights and benefits of
Taiunion under the Guaranty dated April 10, 1998 (the "Guaranty") by DII
Group, Inc. for the benefit of the Company, previously assigned by the
Company to Taiunion, such evidence to be in form satisfactory to the
Parent, acting reasonably;
(u) each of the employment agreements included in
Exhibit I shall be in full force and effect, and no employee that is a
party to any such employment agreement shall be in material breach or
default thereof;
(v) the Parent shall have received from Wyoming counsel
to Taiunion Investment LLC, a shareholder of the Company, such counsel to
be reasonably acceptable to the Parent, an opinion addressed to the Parent
and dated the Closing Date as to each of the matters set forth in Exhibit
H-3; and (w) all certificates, opinions, instruments and other documents
required to effect the transactions contemplated hereby shall be in form
and substance reasonably satisfactory to the Parent.
5.3 Conditions to Obligations of the Company. The obligation
of the Company to consummate the Merger shall be subject to satisfaction at
or prior to the Effective Time of each of the following conditions, any of
which may be waived in whole or in part by the Company to the extent
permitted by applicable law:
(a) the representations and warranties of the Parent and
the Transitory Subsidiary set forth in Article 3 shall be true and correct
as of the date hereof and shall be true and correct in all material
respects (without giving effect, for these purposes, to any qualifications
in such representations and warranties that require a fact or event to be
material or to meet a minimum dollar threshold in order for such fact or
event to constitute a misrepresentation or a breach of warranty) as of the
Closing Date as if made as of the Closing Date, except for representations
and warranties made as of a specific date, which shall be true and correct
as of such date;
(b) each of the Parent and the Transitory Subsidiary
shall have performed or complied in all material respects with its
agreements and covenants required to be performed or complied with under
this Agreement as of or prior to the Effective Time;
(c) the Parent shall have delivered to the Company a
certificate (without qualification as to knowledge or materiality or
otherwise, except insofar as it relates to knowledge of actions, suits or
proceedings threatened against the Parent or the Transitory Subsidiary) to
the effect that each of the conditions specified in clause (b) of Section
5.1 and clauses (a) and (b) of this Section 5.3 is satisfied;
(d) the Company shall have received an opinion of
Wilson, Sonsini, Xxxxxxxx & Xxxxxx, special tax counsel to the Company, in
form and substance reasonably satisfactory to the Company, dated as of the
Effective Time, substantially to the effect that the Merger will qualify as
a reorganization for United States federal income tax purposes within the
meaning of Section 368(a) of the Code. The issuance of such opinion shall
be conditioned upon the receipt by such tax counsel of representation
letters from each of the Parent, the Transitory Subsidiary and the Company,
in each case, in substantially the form and substance as attached hereto as
Exhibit J-1 and Exhibit J-2 and in form and substance reasonably
satisfactory to such tax counsel, which letters shall not have been
modified or withdrawn; and
(e) all certificates, opinions, instruments and other
documents required to effect the transactions contemplated hereby shall be
in form and substance reasonably satisfactory to the Company.
ARTICLE 6
FAIRNESS HEARING; REGISTRATION
The Company and the Parent agree to cooperate in the
preparation of, and the Parent agrees to file with the Commissioner as soon
as reasonably practicable after the date of this Agreement, the Permit
Application. Subject to the following, each of the Parent and the Company
shall use all reasonable best efforts to obtain the CSL Permit. At any time
prior to the issuance by the Commissioner of the CSL Permit, the Parent
may, in its sole discretion, withdraw the Permit Application. In such
event, (a) the Parties shall use all reasonable best efforts to prepare and
file with the SEC, and make effective under the Securities Act, the S-4
(including, without limitation, the preparation of all audited or unaudited
consolidated financial statements of the Company and the preparation of all
pro forma financial information required to be included in the S-4) and (b)
the date set forth in Sections 9.1(b) hereof shall be extended by 60 days.
The Company shall furnish to the Parent all information concerning the
Company and its shareholders and shall take such other action as the Parent
may reasonably request in connection with the Permit Application, the S-4
and the issuance of shares of Parent Common Stock. If at any time prior to
the Effective Time any event or circumstance relating to the Parent, the
Company, any Shareholder or their respective officers, directors or
employees should be discovered by such Party which should be set forth in
an amendment or a supplement to the Permit Application, Company Consent
Solicitation Statement or S-4, such Party shall promptly inform the other
thereof and take appropriate action in respect thereof.
ARTICLE 7
TAX MATTERS COVENANTS
7.1 Cooperation. The Parties shall cooperate fully at such
time and to the extent reasonably requested by the other Party, in
connection with the preparation and filing of any Tax Returns or the
conduct of any audit, dispute, proceeding, suit or action concerning any
Tax. Such cooperation shall include (i) the retention and (upon the other
Party's request) the provision of records, documentation and other
information which are reasonably relevant to the preparation of any Tax
Return until the expiration of the applicable statute of limitation (giving
effect to any extension, waiver, or mitigation thereof); (ii) the provision
of additional information and explanation of any material provided
hereunder; (iii) the execution of any document that may be necessary or
reasonably helpful in connection with the filing of any Tax Return or in
connection with any audit, dispute, proceeding, suit or action respecting
any Tax; and (iv) the use of the Parties' reasonable best efforts to obtain
any documentation from a Governmental Entity or a third party that may be
necessary or helpful in connection with the foregoing.
7.2 Taxes Relating to the Transactions Contemplated by this
Agreement. All sales, use, transfer, filing, conveyance, recording, stamp
registration and other such similar Taxes and fees, including all
applicable real estate transfer Taxes and recording fees and stock transfer
Taxes (collectively, "Transfer Taxes"), imposed in connection with the
Merger, regardless of against whom such Transfer Taxes are assessed, shall
be borne equally, on the one hand, by the holders of Company Stock
immediately prior to effectiveness of the Merger and the Company, on the
other hand. The Parent will prepare and file all Tax Returns and other
documentation with respect to all such transfer taxes, and, if required by
applicable law, the Company will join in the execution of such Tax Returns
and other documentation.
7.3 Tax Administration. Except as provided in Section 7.2,
the Company shall prepare and file, or cause to be prepared and filed, in
accordance with the Company's past practice, all of its Tax Returns that
are required to be filed on or before the Closing Date for which the filing
time has not been extended under applicable law, and the Company shall
timely pay all Taxes shown to be due on such Tax Returns and any other
Taxes required to be paid on or before the Closing Date that have not been
paid prior to the Closing. The Parent shall be entitled to review and
comment on each such Tax Return prior to its filing. The Parent or
Surviving Corporation shall prepare and file, or cause to be prepared and
filed, all Tax Returns of the Company for Tax periods including or ending
on or before the Closing Date which are due after the Closing Date.
7.4 Tax Consequences. Unless otherwise required by
applicable law, the Parties will (i) report the Merger as a reorganization
within the meaning of Section 368(a) of the Code and comply in all material
respects with all applicable reporting requirements, and (ii) not knowingly
take any action that would reasonably be likely to cause the Merger to fail
to qualify as such a reorganization.
7.5 Tax or Accounting Changes. The Company will not, prior
to the Closing Date and without the consent of the Parent (i) change any of
the accounting methods used by it unless required by GAAP or (ii) make any
material election relating to Taxes, change any material election relating
to Taxes already made, change any material accounting method relating to
Taxes unless required by GAAP, enter into any Closing Agreement relating to
Taxes, settle any claim or assessment relating to Taxes or consent to any
claim or assessment relating to Taxes or any waiver of the statute of
limitations for any such claim or assessment.
ARTICLE 8
INDEMNIFICATION
8.1 Indemnification.
(a) The Company, on behalf of each holder of Company
Stock immediately prior to the Effective Time (all such holders being
herein collectively called the "Indemnitors"), hereby agrees that the
Indemnitors shall jointly and severally indemnify the Surviving Corporation
and the Parent, and their respective officers, directors, employees,
agents, representatives and Affiliates (the "Indemnitees"), from and in
respect of, and hold the Indemnitees harmless against, any and all damages,
fines, penalties, losses, liabilities (including any liabilities for
Taxes), judgments, deficiencies, costs and expenses (including without
limitation amounts paid in settlement, interest, court costs, costs of
investigators, reasonable fees and expense of attorneys and accountants and
other expenses of litigation) incurred or suffered by any of the
Indemnitees ("Damages") resulting from, relating to or in connection with
(i) any misrepresentation, breach of warranty or failure to perform any
covenant or agreement of the Company or any holder of Company Stock
contained in this Agreement, the Aries Merger Agreement, the Voting
Agreement or in any schedule, instrument or other document delivered
pursuant to this Agreement, the Aries Merger Agreement or the Voting
Agreement (without giving effect, for purposes of determining the existence
of a misrepresentation or breach of warranty for this Section 8.1(a)(i), to
any qualification in any representation or warranty that requires an event
or fact to be material, have a Material Adverse Effect or meet a certain
minimum dollar threshold in order for such event or fact to constitute a
misrepresentation or breach of warranty), (ii) all liability for Taxes of,
or payable by or with respect to, the Company for all Taxable periods
ending on or before the close of business on the Closing Date (the
"Pre-Closing Period") to the extent that such Taxes exceed the reserve set
forth on the Balance Sheet or are not reserved for on the Company's
Financial Statements in accordance with GAAP for the Tax period between the
date of the Balance Sheet and the Closing Date, or (iii) (A) any
misrepresentation, breach of warranty or failure to perform any covenant or
agreement set forth in Section 2.22 (a) hereof (without giving effect, for
purposes of determining the existence of a misrepresentation or breach of
warranty for this Section 8.1 (a)(iii), to any qualification in any
representation or warranty that requires an event or fact to be material,
have a Material Adverse Effect or meet a certain minimum dollar threshold
in order for such event or fact to constitute a misrepresentation or breach
of warranty); (B) any of the events, circumstances or conditions described
in Section 2.22(e) of the Disclosure Schedule; (C) any pollution or threat
to human health or the environment related to the business, assets or
properties owned, leased, controlled or operated by the Company (or any
other owner's or operator's management, use, control, ownership or
operation of such business, assets or properties), including, without
limitation, all on-site and off-site activities involving Materials of
Environmental Concern to the extent they occurred, existed, arise out of
conditions or circumstances that occurred or existed, or were caused on or
before the Closing Date; or (D) any Environmental Claim against any person
or entity whose liability for such Environmental Claim the Company or any
Company Subsidiary has assumed or retained either contractually or by
operation of law.
(b) To secure the indemnification obligations of the
Indemnitors to the Indemnitees, the Escrow Shares will be deposited into
escrow with the Escrow Agent in accordance with Section 1.9 hereof and the
Escrow Agreement. Such deposit of the Escrow Shares shall be made on behalf
of the holders of Company Stock with the same force and effect as if such
shares of Parent Common Stock had been delivered by the Parent directly to
the holders of Company Stock and subsequently delivered by such holders to
the Escrow Agent. The Escrow Shares shall not be evidenced by separate
certificates and shall not be assignable or transferable except as provided
in Section 1.9 hereof and the Escrow Agreement. The Escrowed Materials (as
defined in the Escrow Agreement), including without limitation the Escrow
Shares, will be subject to redelivery to the Parent, upon the terms and
subject to the conditions set forth in the Escrow Agreement.
(c) As a term of the Merger, the Indemnitors acknowledge
that their indemnification obligations hereunder are solely in their
capacity as former holders of shares of capital stock of the Company, and,
accordingly, the indemnification obligations in this Article 8 shall not
entitle any current or former officer, director or employee of the Company
to any indemnification from the Company pursuant to the Restated Articles
of Incorporation, Amended By-laws or any Agreement with the Company.
8.2 Method of Asserting Claims.
(a) An Indemnitee shall give prompt written notice to
the Representative, as agent for the Indemnitors, with a copy to the Escrow
Agent of any claim or event known to it which gives rise or, in its
reasonable judgment, may give rise to a claim for indemnification hereunder
by the Indemnitee against the Indemnitors; provided that the failure of any
Indemnitee to give notice as provided in this Section 8.2 on or before the
Escrow Release Date (as defined in the Escrow Agreement) shall not relieve
the Indemnitors of their obligations under this Article 8, except to the
extent that such failure has materially and adversely affected the rights
of the Indemnitors. In the case of any claim for indemnification hereunder
arising out of a claim, action, suit or proceeding brought by any person
who is not a Party to this Agreement (a "Third-Party Claim"), the
Indemnitee shall also give the Representative, as agent for the
Indemnitors, copies of any written claims, process or legal pleadings with
respect to such Third-Party Claim promptly after such documents are
received by the Indemnitee.
(b) Except as otherwise provided in paragraph (c) below,
the Indemnitees shall be entitled to control the defense of any Third-Party
Claim; provided, however, that the Representative, as agent for the
Indemnitors, may elect, at the Indemnitors' own cost and expense, to
participate in any Third-Party Claim; provided further, however, that
neither the Representative nor any Indemnitor shall take any action with
respect to such Third-Party Claim before consulting with, and receiving the
consent of, each Indemnitee involved. If the Representative, as agent for
the Indemnitors, elects to participate in a Third-Party Claim, the
Representative shall, within 30 days of its receipt of the notice provided
pursuant to Section 8.2(a) hereof (or sooner, if the nature of such
Third-Party Claim so requires), notify the related Indemnitee of its intent
to do so. The Representative and each Indemnitor shall reasonably cooperate
in the compromise of, or defense against, such Third-Party Claim. The
Indemnitee shall not consent to entry of any judgement or enter into any
settlement without the prior written consent of the Representative, as
agent for the Indemnitors, which consent shall not be unreasonably
withheld.
(c) If the Indemnitee elects not to compromise or defend
against a Third-Party Claim, the Representative, on behalf of the
Indemnitors shall pay, compromise or defend such Third-Party Claim at the
Indemnitors own cost and expense. The Representative shall, within ten days
(or sooner, if the nature of such Third-Party Claim so requires), notify
the Indemnitee of its intent to pay, compromise or defend such Third-Party
Claim, and such Indemnitee shall reasonably cooperate in the compromise of,
or defense against, such Third-Party Claim. The Indemnitors shall be
responsible for the payment of the Indemnitees' costs and expenses incurred
in connection with such cooperation, and such costs and expenses shall
constitute Damages incurred or suffered by Parent within the meaning of
Section 8.1(a) hereof. Neither the Representative nor any Indemnitor shall
consent to entry of any judgment or enter into any settlement without the
prior written consent of each related Indemnitee (which consent shall not
be unreasonably withheld), unless such judgment or settlement provides
solely for money damages or other money payments for which such Indemnitee
is entitled to indemnification hereunder and includes as an unconditional
term thereof the giving by the claimant or plaintiff to such Indemnitee of
a release from all liability in respect of such Third-Party Claim; provided
that the Representative shall not be entitled to settle any claim, action,
suit or proceeding brought by a Taxing Authority in respect of Taxes for
any Pre-Closing Period that would have the effect of materially decreasing
the Company's deductions for credits or materially increasing the Company's
taxable income for any taxable year or period subsequent to the Pre-Closing
Period without the prior written consent of the Parent, which consent shall
not be unreasonably withheld. After notice from the Representative, as
agent for the Indemnitors, to an Indemnitee of its election to assume the
defense of a Third-Party Claim, the Indemnitors shall not be liable to such
Indemnitee under this Article 8 for any legal expenses subsequently
incurred by such Indemnitee in connection with the defense thereof;
provided that such Indemnitee shall have the right to employ one counsel of
its choice to represent such Indemnitee if, in such Indemnitee's reasonable
judgment, a conflict of interest between such Indemnitee and the
Indemnitors exists in respect of such claim, or if there is a reasonable
likelihood that a Third-Party Claim may have a material adverse effect on
an Indemnitee, and in that event the reasonable fees and expenses of such
separate counsel shall be the responsibility of the Indemnitors (and shall
constitute Damages incurred or suffered by the Parent within the meaning of
Section 8.1(a) hereof).
8.3 Survival. The representations, warranties, covenants and
agreements of the Company set forth in this Agreement, the Aries Merger
Agreement, or in any schedule, instrument or other document delivered
pursuant to this Agreement, and the representations, warranties, covenants
and agreements set forth in the Voting Agreement of those holders of
Company Stock that are parties to the Voting Agreement shall survive the
Closing and shall continue until the earlier to occur of (a) the first
anniversary of the Effective Time or (b) the date of issuance of the first
independent audit report on the Parent's financial statements after the
Effective Time, which financial statements include the financial results of
the Company. This Section 8.3 shall not limit, terminate or impair any
covenant or agreement of the Parties which by its terms contemplates
performance after the Closing. The representations and warranties set forth
in this Agreement, the Aries Merger Agreement or the Voting Agreement, or
in any schedule, instrument or other document delivered pursuant to this
Agreement shall not be affected by any examination or investigation made
for or on behalf of the Parent or the Transitory Subsidiary or the
knowledge of the Parent or the Transitory Subsidiary or any of the
officers, directors, employees, auditors, agents, financial advisors, legal
counsel, accountants, consultants and other representatives of the Parent
or the Transitory Subsidiary. Notwithstanding anything to the contrary
herein, if a claim for indemnification is made before the expiration of the
periods of survival set forth above in this Section 8.3, then
(notwithstanding the expiration of such time period) the representation,
warranty, covenant or agreement applicable to such claim shall survive for
purposes of the resolution of such claim.
8.4 Limitations.
(a) Except as otherwise expressly provided herein, the
Indemnitors shall not be liable under this Article 8 in respect of matters
for which indemnification is provided under clause (a)(i) of Section 8.1
unless and until the aggregate amount of Damages incurred or suffered by
Indemnitees exceeds $500,000 (at which point the Indemnitors shall become
liable for the entire amount of such Damages); provided that Damages for
which indemnification is provided to the Indemnitees pursuant to clauses
(a) (ii) or (iii) of Section 8.1 shall not be counted for purposes of
determining whether the $500,000 amount has been exceeded. In no event,
however, shall the Indemnitors in the aggregate be liable to indemnify the
Indemnitees for an aggregate amount exceeding the value of the Escrow
Shares (determined as set forth in the Escrow Agreement), and Parent's sole
recourse in respect of a claim for indemnification under this Article 8 in
respect of matters for which indemnification is provided under Section
8.1(a) shall be to the Escrow Shares; provided, that, nothing in this
Article 8 shall limit, in any manner (whether by time, amount, procedure or
otherwise), any liability under this Article 8 in respect of any remedy at
law or in equity to which Parent may be entitled as a result of fraud by
any officer, director or shareholder of the Company.
(b) Except as set forth below, no claim for
indemnification pursuant to Section 8.1 shall be made unless asserted by a
written notice given to the Representative on or before the earlier to
occur of (i) the first anniversary of the Effective Time and (ii) the date
of the issuance of the first independent audit report on the Parent's
financial statements after the Effective Time, which financial statements
include the financial statements of the Company.
(c) Notwithstanding any other provision of this
Agreement to the contrary, Indemnitees' sole recourse following the Closing
for any breach of the representations, warranties, covenants and agreements
of the Company set forth in this Agreement, the Aries Merger Agreement, or
in any schedule, instrument or other document delivered pursuant to this
Agreement, and the indemnity pursuant to Section 8.1 of this Agreement,
shall be the recovery of the Escrowed Materials pursuant to the Escrow
Agreement. Following the Closing, and in the absence of fraud, the
Indemnitees shall have no other recourse against the Company or its
officers, directors or affiliates for any breach of the representations,
warranties, covenants and agreements of the Company set forth in this
Agreement, the Aries Merger Agreement, or in any schedule, instrument or
other document delivered pursuant to this Agreement, the indemnity pursuant
to Section 8.1 of this Agreement or any other losses suffered as a result
of or in connection with the transactions contemplated by this Agreement.
8.5 The Representative.
(a) The Company, on behalf of each Indemnitor, hereby
authorizes, directs and appoints Xx. Xxxx-Xxxx S. Day, Ph.D., to act as
sole and exclusive agent, attorney-in-fact and representative of the
Indemnitors for purposes of this Agreement, the Aries Merger Agreement and
the Escrow Agreement (the "Representative"), and authorizes and directs the
Representative to (i) take any and all actions (including without
limitation executing and delivering any documents, incurring any costs and
expenses for the account of the Indemnitors (which will constitute Damages
incurred or suffered by the Parent within the meaning of Section 8.1(a)
hereof) and making any and all determinations) which may be required or
permitted by this Agreement, the Aries Merger Agreement or the Escrow
Agreement to be taken by the Indemnitors or the Representative, (ii)
exercise such other rights, power and authority as are authorized,
delegated and granted to the Representative hereunder and under the Aries
Merger Agreement and the Escrow Agreement in connection with the
transactions contemplated hereby and thereby and (iii) exercise such
rights, power and authority as are incidental to the foregoing. Any such
actions taken, exercises of rights, power or authority, and any decision or
determination made by the Representative consistent therewith, shall be
absolutely and irrevocably binding on each Indemnitor as if such Indemnitor
personally had taken such action, exercised such rights, power or authority
or made such decision or determination in such Indemnitor's individual
capacity. Notwithstanding any other provision of this Agreement, if the
Closing occurs, then with respect to the matters covered by Article 8, (x)
each of the Indemnitors irrevocably relinquishes such Indemnitor's right to
act independently and other than through the Representative, except with
respect to the removal of the Representative or appointment of a successor
Representative as provided in Section 8.5(b) below, and (y) no Indemnitor
shall have any right under this Agreement or otherwise to institute any
suit, action or proceeding against the Company, the Parent or the Escrow
Agent with respect to any such matter, any such right being irrevocably and
exclusively delegated to the Representative. The Representative hereby
acknowledges and accepts the foregoing authorization and appointment and
agrees to serve as the Representative in accordance with this Agreement,
the Aries Merger Agreement and the Escrow Agreement.
(b) The Representative shall serve as Representative
until his resignation, removal from office, incapacity or death; provided,
however, that the Representative shall not have the right to resign without
(A) prior written notice to the Indemnitors and (B) picking a successor
reasonably satisfactory to the Parent to serve until a successor thereto is
elected by the Indemnitors. The Representative may be removed at any time,
and a successor representative, reasonably satisfactory to the Parent, may
be appointed, pursuant to written action by Indemnitors who, immediately
prior to the Effective Time, held shares of Company Stock constituting 66
2/3% or more of all such shares then outstanding. Any successor to the
Representative shall, for purposes of this Agreement, the Aries Merger
Agreement and the Escrow Agreement, be deemed to be, from the time of the
appointment thereof in accordance with the terms hereof, the
Representative, and from and after such time, the term "Representative" as
used herein and therein shall be deemed to refer to such successor. No
appointment of a successor shall be effective unless such successor agrees
in writing to be bound by the terms of this Agreement, the Aries Merger
Agreement and the Escrow Agreement.
(c) The Representative shall be permitted to retain
counsel, consultants and other advisors and shall promptly notify the
Parent after retaining any such person. The Representative shall be
entitled to reimbursement by the Parent of the reasonable out-of-pocket
expenses incurred by the Representative in connection with the retention of
such counsel, consultants or other advisors, not to exceed $250,000 in the
aggregate, incurred in the performance of his duties under this Agreement,
the Aries Merger Agreement and the Escrow Agreement, respectively. All
expense reimbursements provided to the Representative by the Parent shall
constitute Damages incurred or suffered by the Parent within the meaning of
Section 8.1(a) hereof, provided that such out-of-pocket expenses are
incurred by the Representative in connection with a matter for which the
Parent is compensated from the Escrowed Materials for other Damages.
(d) The provisions of this Section 8.5 shall in no way
impose any obligations on the Parent (other than those set forth in
paragraph (c) above). In particular, notwithstanding any notice received by
the Parent to the contrary (except any notice of the appointment of a
successor Representative approved by the Parent in accordance with
paragraph (b) of this Section 8.5), the Parent (i) shall be fully protected
in relying upon and shall be entitled to rely upon, shall have no liability
to the Indemnitors with respect to, and shall be indemnified by the
Indemnitors from and against all liability arising out of (any such
indemnifiable amounts constituting Damages within the meaning of Section
8.1(a) hereof) actions, decisions and determinations of the Representative
and (ii) shall be entitled to assume that all actions, decisions and
determinations of the Representative are fully authorized by the
Indemnitors.
(e) The Representative shall not be liable to the
Indemnitors for the performance of any act or the failure to act so long as
he acted or failed to act in good faith in what he reasonably believed to
be the scope of his authority and for a purpose which he reasonably
believed to be in the best interests of the Indemnitors.
ARTICLE 9
TERMINATION
9.1 Termination of Agreement. This Agreement may be
terminated at any time prior to the Effective Time (whether before or after
Requisite Shareholder Approval) as provided below:
(a) this Agreement may be terminated by the mutual
written consent of the Parent and the Company;
(b) this Agreement may be terminated by either the
Parent or the Company, if the Effective Time shall not have occurred on or
before July 15, 2000 (provided that the Party seeking to terminate this
Agreement is not in breach of any representation, warranty, covenant or
Agreement set forth in this Agreement);
(c) the Parent may terminate this Agreement by giving
written notice to the Company (i) in the event the Company shall have
breached Section 4.3 or Section 4.7 hereof or (ii) in the event the Company
shall have breached any representation, warranty, covenant or agreement set
forth herein which would permit the Parent, pursuant to Section 5.2(b) or
(c), not to consummate the Merger and the Company fails to cure such breach
within ten (10) business days after notice of such breach is given by the
Parent;
(d) the Company may terminate this Agreement by giving
written notice to the Parent in the event the Parent or the Transitory
Subsidiary shall have breached any representation, warranty, covenant or
Agreement set forth herein which would permit the Company, pursuant to
Section 5.3(a) or (b), not to consummate the Merger, and the Parent fails
to cure such breach by ten (10) business days after notice of such breach
is given by the Company;
(e) the Parent may terminate this Agreement by giving
written notice to the Company, if within twenty (20) days after the earlier
of (i) the issuance of the CSL Permit and (ii) effectiveness of the S-4,
the Parent has not been advised in writing by the Company that the
Requisite Shareholder Approval has been obtained;
(f) the Parent or the Company may terminate this
Agreement by giving written notice to the other at any time after the
shareholders of the Company have held a shareholders meeting and voted on
whether to approve this Agreement and the Merger if this Agreement and the
Merger failed to receive the Requisite Shareholder Approval;
(g) the Parent or the Company may terminate this
Agreement by giving written notice to the other if any permanent injunction
or action by any Governmental Entity of competent jurisdiction preventing,
restraining, enjoining, restricting or otherwise prohibiting the
consummation of the Merger and such injunction or action shall become final
and nonappealable; or
(h) the Parent may terminate this Agreement by giving
written notice to the Company if (i) any holder of Company Stock that is a
party to the Voting Agreement shall have breached any material
representation, warranty, covenant or agreement set forth in the Voting
Agreement, (ii) the Company's Board shall have failed to recommend approval
by the Company's shareholders of (or withdrawn, amended or modified in a
manner adverse to the Parent its recommendation that the Company's
shareholders approve) this Agreement or the Merger, or (iii) the Company or
any of its Affiliates or shareholders shall have taken any action or permit
any action to be taken that is prohibited by Section 4.1(e) that the
Parent's auditors shall have advised Parent will cause the failure of the
condition set forth in Section 5.2(k) and the Company shall have been
notified in writing of such advice.
9.2 Effect of Termination. If the Parent or the Company
terminates this Agreement pursuant to Section 9.1, the Merger shall be
deemed abandoned and all obligations of the Parties hereunder shall
terminate without any liability of any Party to any other Party (except (i)
for liability of a Party for fraud or for any breach of this Agreement or
the Voting Agreement prior to such termination, this Section 9.2, Section
9.4 or Section 11.12, it being agreed that the Company shall only be liable
for a breach of the Voting Agreement by it, and (ii) the Non-Disclosure
Agreement, which shall survive any such termination and the Parties'
respective rights and obligations in respect thereof shall remain in full
force and effect).
9.3 Option to Elect Certain Remedies.
(a) Without limitation of the Parent's right to
terminate this Agreement as provided in Section 9.1, Parent's right to
obtain specific performance and other equitable relief under applicable law
or the Parent's rights under Section 11.12, if the Parent is entitled to
terminate this Agreement pursuant to Section 9.1, the Parent shall have the
option either (i) to terminate this Agreement, or (ii) subject to
satisfaction or waiver of the conditions set forth in Article 5, proceed
with the consummation of the Merger; and, in the event the Parent elects to
proceed under clause (ii) of this Section 9.3(a), the Company hereby agrees
that, subject to satisfaction or waiver of the conditions set forth in
Article 5, the Parent shall be entitled to specific performance and other
appropriate equitable relief to effect the Merger; provided, however, that
this Section 9.3 shall have no effect on the Parent's rights to
indemnification under Article 8.
(b) Without limitation of the Company's right to
terminate this Agreement as provided in Section 9.1, the Company's right to
obtain specific performance and other equitable relief under applicable law
or the Company's rights under Section 11.12, if the Company is entitled to
terminate this Agreement pursuant to Section 9.1(d), the Company shall have
the option either (i) to terminate this Agreement or (ii) subject to
satisfaction or waiver of the conditions set forth in Article 5, proceed
with the consummation of the Merger; and, in the event the Company elects
to proceed under clause (ii) of this Section 9.3(b), the Parent hereby
agrees that, subject to satisfaction or waiver of the conditions set forth
in Article 5, the Company shall be entitled to specific performance and
other appropriate equitable relief to effect the Merger; provided, however,
that this Section 9.3 shall have no effect on the Parent's rights to
indemnification under Article 8.
9.4 Bust-up Payments and Purchase Orders.
(a) Subject to Section 9.4(c), in the event that this
Agreement is terminated by the Parent (i) under and in accordance with
Section 9.1(b) and a condition set forth in Section 5.1(b), Section 5.1(c),
Section 5.1(e) or Section 5.2(k) has not been satisfied as of the date of
such termination, and, if the unsatisfied condition is Section 5.1(b),
provided the failure to satisfy such condition is not as a result of
actions taken by the Company or its shareholders, or (ii) under and in
accordance with Section 9.1(g) as a result of actions taken by the Federal
Trade Commission ("FTC") or the antitrust Division of the Department of
Justice (the "DOJ"), the Parent shall, within 30 days of such termination:
(i) pay to the Company, without request or demand
therefor, $3,000,000 in cash; or
(ii) place with the Company new and additional,
non-cancelable orders for the purchase and delivery, on or
before July 15, 2001, of one or more of the Company's
products (each such order, a "Firm Order"), which Firm
Orders have an aggregate purchase price to the Parent of not
less than $10,000,000; or
(iii) make a combination of a cash payment to the
Company and Firm Orders which have an aggregate total value
to the Company of $3,000,000.
(b) For purposes of Section 9.4(a)(iii), the value to
the Company of (i) a cash payment shall equal the amount of the cash
payment and (ii) a Firm Order shall equal 30% of the purchase price of the
Firm Order.
(c) Notwithstanding anything contained in Section 9.4(a)
above to the contrary, the Parent shall not be obligated to make any
payment or to provide any Firm Orders under Section 9.4(a) above, unless
all of the following are satisfied:
(i) the Company is not in breach of any
representation, warranty, covenant or agreement of the
Company contained in this Agreement; and
(ii) all conditions set forth in Sections 5.1 and
5.2 of this Agreement have been satisfied, excluding (A)
Section 5.1(b), (B) Section 5.1(c), (C) Section 5.1(e), (D)
Section 5.1(d), if the failure to satisfy such condition is
as a result of actions taken by the FTC or DOJ, (E) Section
5.2(a), if the failure to satisfy such condition arises from
a failure of the Parent or the Transitory Subsidiary to
obtain an Approval or to effect a registration or filing
necessary for it to consummate the Merger, and (F) Section
5.2(k), unless the failure to satisfy such condition results
from a failure of the Company to disclose information that
was material to the satisfaction of the condition.
(d) Upon payment by the Parent of the amount pursuant to
Section 9.4, the Parent and the Transitory Subsidiary shall have no further
liability to the Company or its shareholders in respect of this Agreement,
including in respect of any representation, warranty, covenant or agreement
provided herein or in respect of the transactions contemplated hereby;
provided that the terms of Section 9.2, Section 11.2 and Section 11.12 and
the Non-Disclosure Agreement shall survive any such termination.
ARTICLE 10
DEFINITIONS
For purposes of this Agreement, each of the following
defined terms is defined in the Section of this Agreement indicated below.
Defined Term Section
Adjusted Total Value 1.5(j)(i)
Affiliate Agreement 4.8(a)
Affiliate 2.2(g)
Aggregate Number of
Fully Diluted Company Common Shares 1.5(j)(ii)
Agreement 11.7(e)
Alternative Acquisition 4.7(a)
Amended By-laws 2.1(b)
Appointment and Acknowledgment 1.6(b)
Approval Notice 4.3
Approval 4.2(a)
Aries Merger Agreement 1.1
Average Closing Price 1.5(j)(iii)
Balance Sheet 2.7
Business Combination 2.16(a)(viii)
Certificate of Merger 1.1
Certificates 1.6(b)
CGCL 1.1
Closing Agreement 2.9(h)
Closing Date 1.2
Closing Shares 1.5(g)
Closing 1.2
Code Introduction
Comfort Letter 4.11
Commissioner 2.30
Company Board Introduction
Company Common Stock Introduction
Company Consent Solicitation Statement 2.30
Company Employees 4.13
Company Preferred Stock Introduction
Company Shareholder Agreements 2.2(e)
Company Stock Introduction
Company Introduction
Contract 2.16(a)
Conversion Ratio 1.5(a)
CSL Permit 5.1(b)
CSL 2.5
Damages 8.1(a)
DGCL 1.1
Disclosure Schedule Article 2
Dissenting Shares 1.7(a)
DOJ 9.4(a)
Effective Time 1.1
Employee Benefit Plans 2.21(a)
Environmental Claim 2.22(c)
Environmental Laws 2.22(a)
ERISA Affiliate 2.21(a)
ERISA 2.21(a)
Escrow Agent 1.3
Escrow Agreement 1.3
Escrow Shares 1.5(g)
Exchange Act 3.5
Exchange Fund 1.6(a)
Fairness Hearing 2.5
Financial Statements 2.7
Firm Order 9.4(a)(ii)
Former Officer or Director 4.12(a)
FTC 9.4(a)
GAAP 2.7
Gateway Property 2.15(b)
Governmental Entity 2.5
Guaranty 5.2(t)
HSR Act 2.5
Indemnitees 8.1(a)
Indemnitors 8.1(a)
Intellectual Property 2.12(d)
IRS 2.10
Knowledge 2.10
License Agreements 2.12(b)
Material Adverse Effect 2.1(c)
Material Contracts 2.16(b)
Materials of Environmental Concern 2.22(a)
Merger Shares 1.5(g)
Merger 1.1
Non-Disclosure Agreement 4.4
Option 1.5(f)
Ordinary Course of Business 2.8
Parent Common Stock 1.5(a)
Parent Disclosure Statement 3.7
Parent Reports 3.5
Parent Welfare Plan 4.13
Parent Introduction
Parties Introduction
Permit Application 2.30
Permits 2.24
Plan 1.10(a)
Pre-Closing Period 8.1(a)
Representative 8.5(a)
Requisite Shareholder Approval 2.4
Restated Articles of Incorporation 2.1(b)
S-4 2.30
SEC 1.10(d)
Section 1300 1.7(a)
Securities Act 1.10(d)
Security Interest 2.5
Series A Company Preferred Stock 2.2(a)
Series B Company Preferred Stock 2.2(a)
Software 2.12(e)
Subsidiary 2.6(b)
Surviving Corporation 1.1
Taiunion 5.2(t)
Tax and Taxes 2.10
Tax Return 2.10
Tax Ruling 2.9(h)
Taxing Authority 2.10
Third Party Claim 8.2(a)
Trade Secrets 2.12(d)
Trademarks 2.12(d)
Transfer Taxes 7.2
Transitory Subsidiary Introduction
Voting Agreement Introduction
Voting Debt 2.2(c)
Warrant 2.2(b)
Year 2000 Compliance 2.13
Year 2000 Compliant 2.13
ARTICLE 11
MISCELLANEOUS
11.1 Further Assurances. Each of the Parties agrees to use
all reasonable best efforts to take or cause to be taken all actions and to
do or cause to be done all other things necessary, proper or advisable to
consummate and make effective the transactions contemplated hereby and to
enable the Parent to enjoy after the Closing the rights and benefits
currently enjoyed by the Company in the operation of the business conducted
by or in respect of the Company prior to the Closing.
11.2 Press Releases and Announcements. No Party shall issue
any press release or announcement or make any disclosure to any other
person (other than its counsel, financial advisors and accountants)
relating to the subject matter of this Agreement without the prior written
approval of the Parent and the Company; provided, however, that the Parent
may make any public disclosure it believes in good faith is required by
applicable law, regulation, legal process or the requirements of any stock
market on which the Parent's Common Stock are listed or quoted (in which
case the Parent shall advise the Company of such disclosure and provide it
with a copy of such disclosure).
11.3 No Third Party Beneficiaries. This Agreement shall not
confer any rights or remedies upon any person other than the Parties, the
Representative (with respect only to Article 8) and the Indemnitees (with
respect to Article 8) and their respective successors and permitted
assigns; provided, however, that the provisions in Article 1 concerning
issuance of the Merger Shares are intended for the benefit of the
shareholders of the Company.
11.4 Entire Agreement. This Agreement (including the
Schedules and other documents referred to herein), together with the Voting
Agreement and the Non-Disclosure Agreement, constitute the entire Agreement
among the Parties and supersedes all other prior understandings, agreements
or representations by or among the Parties, both written or oral, that may
have related in any way to the subject matter hereof.
11.5 Succession and Assignment. This Agreement shall be
binding upon and inure to the benefit of the Parties named herein and their
respective successors and permitted assigns. No Party may assign either
this Agreement or any of its rights, interests or obligations hereunder
without the prior written approval of the other Parties; provided, however,
that the Transitory Subsidiary may assign its rights, interests and
obligations hereunder to another affiliate (as defined in Rule 12b-2 under
the Exchange Act) of the Parent.
11.6 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original but all of
which together shall constitute one and the same instrument.
11.7 Interpretation.
(a) The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning
or interpretation of this Agreement.
(b) When a reference is made in this Agreement to a
section or article, such reference shall be to a section or article of this
Agreement unless otherwise clearly indicated to the contrary.
(c) Whenever the words "include", "includes" or
"including" are used in this Agreement they shall be deemed to be followed
by the words "without limitation."
(d) The words "hereof", "herein" and "herewith" and
words of similar import shall, unless otherwise stated, be construed to
refer to this Agreement as a whole and not to any particular provision of
this Agreement, and article, section, paragraph, exhibit and schedule
references are to the articles, sections, paragraphs, exhibits and
schedules of this Agreement unless otherwise specified.
(e) As used herein, the term "Agreement" of "this
Agreement" shall mean this Agreement and Plan of Merger, together with the
Schedules and Exhibits hereto.
(f) The plural of any defined term shall have a meaning
correlative to such defined term, and words denoting any gender shall
include all genders. Where a word or phrase is defined herein, each of its
other grammatical forms shall have a corresponding meaning.
(g) A reference to any Party to this Agreement or any
other Agreement or document shall include such Party's successors and
permitted assigns.
(h) A reference to any legislation or to any provision
of any legislation shall include any modification or re-enactment thereof,
any legislative provision substituted therefor and all regulations and
statutory instruments issued thereunder or pursuant thereto.
(i) The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be
construed as if drafted jointly by the Parties, and no presumption or
burden of proof shall arise favoring or disfavoring any Party by virtue of
the authorship of any provisions of this Agreement.
(j) As used herein, the term "person" shall mean any
individual, corporation, limited liability company, partnership, joint
venture, trust, association, organization or Governmental Entity.
11.8 Notices. All notices, requests, demands, claims and
other communications hereunder shall be in writing. Any notice, request,
demand, claim, or other communication hereunder shall be deemed duly
delivered two business days after it is sent by registered or certified
mail, return receipt requested, postage prepaid, one business day after it
is sent via a reputable nationwide overnight courier service, or upon
receipt of confirmation of delivery of a telecopy, in each case to the
intended recipient as set forth below:
If to the Parent or the
Transitory Subsidiary: Copy to:
--------------------- -------
Alpha Industries, Inc. Skadden, Arps, Slate,
00 Xxxxxx Xxxx Xxxxxxx & Xxxx XXX
Xxxxxx, XX 00000 One Beacon Street
Attn: President Xxxxxx, XX 00000
Telecopy: (000) 000-0000 Attn: Xxxxxxxx X. Xxxxx
Telecopy: (000) 000-0000
If to the Company: Copy to:
----------------- -------
Network Device Inc. Wilson, Sonsini, Xxxxxxxx & Xxxxxx
0000 Xxxxxxxx Xxxxx 000 Xxxx Xxxx Xxxx
Xxxxxxxxx, XX 00000-0000 Xxxx Xxxx, XX 00000-0000
Attn: President Attn: Xxxxxx Xxxxx
Telecopy: (000) 000-0000 Telecopy: (000) 000-0000
If to the Representative:
------------------------
Xx. Xxxx-Xxxx S. Day
c/o Network Device Inc.
0000 Xxxxxxxx Xxxxx
Xxxxxxxxx, XX 00000-0000
Attn: President
Telecopy (000) 000-0000
Any Party may give any notice, request, demand, claim or other
communication hereunder using any other means (including personal delivery,
expedited courier, messenger service, telex, ordinary mail or electronic
mail), but no such notice, request, demand, claim or other communication
shall be deemed to have been duly given unless and until it actually is
received by the individual for whom it is intended. Any Party may change
the address to which notices, requests, demands, claims and other
communications hereunder are to be delivered by giving the other Parties
notice in the manner herein set forth. Nothing in this Section 11.8 shall
be deemed to constitute consent to the manner and address for service of
process in connection with any legal proceeding (including litigation
arising out of or in connection with this Agreement), which service shall
be effected as required by applicable law.
11.9 Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws (and not the law of
conflicts) of the State of Delaware, except that the Merger shall be
governed by the CGCL.
11.10 Amendments and Waivers. The Parties may mutually amend
any provision of this Agreement at any time prior to the Effective Time;
provided, however, that any amendment effected subsequent to the Requisite
Shareholder Approval shall be subject to the restrictions contained in the
CGCL. No amendment of any provision of this Agreement shall be valid unless
the same shall be in writing and signed by all of the Parties. No waiver by
any Party of any default, misrepresentation or breach of warranty or
covenant hereunder, whether intentional or not, shall be deemed to extend
to any prior or subsequent default, misrepresentation or breach of warranty
or covenant hereunder or affect in any way rights arising by virtue of any
prior or subsequent such occurrence.
11.11 Severability. Any term or provision of this Agreement
that is invalid or unenforceable in any situation in any jurisdiction shall
not affect the validity or enforceability of the remaining terms and
provisions hereof or the validity or enforceability of the offending term
or provision in any other situation or in any other jurisdiction. If the
final judgment of a court of competent jurisdiction declares that any term
or provision hereof is invalid or unenforceable, the Parties agree that the
court making the determination of invalidity or unenforceability shall have
the power to reduce the scope, duration or area of the term or provision,
to delete specific words or phrases or to replace any invalid or
unenforceable term or provision with a term or provision that is valid and
enforceable and that comes closest to expressing the intention of the
invalid or unenforceable term or provision, and this Agreement shall be
enforceable as so modified after the expiration of the time within which
the judgment may be appealed.
11.12 Expenses.
(a) Except as set forth in the Escrow Agreement, Article
8 and this Section 11.12, the Parent and the Transitory Subsidiary shall
bear their own costs and expenses (including all investment banking fees
and all legal fees and expenses) incurred in connection with this Agreement
hereby. Except as set forth in the Escrow Agreement, Article 8 and this
Section 11.12, the Company shall bear its own costs and expenses (including
legal fees and expenses) incurred by or on its behalf in connection with
this Agreement hereby.
(b) If this Agreement is terminated by the Parent
pursuant to Section 9.1(c), (e), (f) or (h), then (i) immediately upon such
termination the Company shall reimburse the Parent and the Transitory
Subsidiary in immediately available funds for all out-of-pocket expenses
(including, without limitation, reasonable legal and accounting fees and
expenses) incurred by or on behalf of Parent or the Transitory Subsidiary
in connection with this Agreement and the transactions contemplated hereby
and (ii) the Parent and Transitory Subsidiary shall have any other remedies
which may be available to them at law or in equity.
(c) If this Agreement is terminated pursuant to Section
9.1(d), then (i) immediately upon such termination the Parent shall
reimburse the Company in immediately available funds for all out-of-pocket
expenses (including, without limitation, reasonable legal and accounting
fees and expenses) incurred by or on behalf of the Company in connection
with this Agreement and (ii) the Company shall have any other remedies
which may be available to it at law or in equity.
11.13 Incorporation of Exhibits and Schedules. The Exhibits
and Schedules identified in this Agreement are incorporated herein by
reference and made a part hereof.
11.14 Time of Essence. Each of the Parties hereto hereby
agrees that, with regard to all dates and time periods set forth or
referred to in this Agreement, time is of the essence.
11.15 Enforcement. The Parties 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. It is accordingly 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 of this Agreement in any
court of the United States with proper jurisdiction, this being in addition
to any other remedy to which they are entitled at law or in equity.
IN WITNESS WHEREOF, the Parties hereto have executed this
Agreement as of the date first above written.
ALPHA INDUSTRIES, INC.
By: /s/ Xxxxx Xxxxxxx
----------------------------------
Xxxxx Xxxxxxx
President and Chief Operating Officer
ARIES ACQUISITION CORPORATION
By: /s/ Xxxxx Xxxxxxx
----------------------------------
Xxxxx Xxxxxxx
President
NETWORK DEVICE INC.
By: /s/ Ding-Yuan S. Day
----------------------------------
Ding-Yuan S. Day, Ph. D.
President
SOLELY FOR PURPOSES OF ARTICLE 8:
/s/ Ding-Yuan S. Day
-----------------------------------
Ding-Yuan S. Day, Ph.D., solely
in his capacity as Representative
SCHEDULE I
LIST OF COMPANY
AFFILIATES
Taiunion Investment LLC
Ding-Yuan Day
Wu-Xxxx Xx
C.H. Xxxx Xxx
Xxxxx-Xxxx Xxxxx
Keiun Kodo
Sheng-Xxxx Xxxxx
Chin-Xxx Xxxxx
Chuan-Xxxxx Xxxxx
Shin-Xxxxx Xxx
Winter Wen-Yen Yeh
