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EXHIBIT 10.6
AGREEMENT
This Agreement is made as of the 1st day of December, 1999 by and among
Xxxx Xxxxxx and Xxxxx Xxxxxx (the "Founders"), Stanford Microdevices, Inc., a
Delaware corporation (the "Company") and at least a majority of the holders of
the Company's Series A Preferred Stock (the "Series A Investors").
WHEREAS, the Series A Investors purchased an aggregate of 5,647,839
shares of Series A Preferred Stock of the Company pursuant to a Series A
Preferred Stock Purchase Agreement dated as of September 30, 1999 (the "Series A
Agreement");
WHEREAS, the Company paid to the holders of record of the Common Stock
of the Company on September 30, 1999, a cash dividend in the amount of
$4,000,000 (the "Dividend");
WHEREAS, pursuant to the Disclosure Schedule attached as Exhibit C to
the Series A Agreement, the Company and the Founders disclosed that the Company
had an obligation to (i) pay the Founders an amount of cash equal to that dollar
amount which would equal the federal and state income taxes payable by the
Founders as a result of the S-corporation earnings of the Company for 1998 and
1999 (the "Original Tax Payment") and (ii) to "gross-up" the Tax Payment for any
taxes payable by the Founders as a result of the receipt of such Tax Payment
(the "Original Gross-Up Amount");
WHEREAS, the Tax Payment and the Gross-Up Amount were to be determined
in the reasonable discretion of Ernst & Young, the Company's auditors (the
"Auditors"); and
WHEREAS, the Auditors have determined the Tax Payment and Gross-Up
Amount and the parties hereto wish to memorialize their agreement to such amount
in writing and to provide for the payment of any taxes due by the Founders as a
result of receipt by the Founders of the Dividend.
NOW, THEREFORE, in consideration of the mutual covenants set forth
herein, the parties agree as follows:
1. DETERMINATION OF TAX PAYMENT AND GROSS-UP AMOUNT.
(a) Payment of Tax Payment. Based on the Auditors' determination, the
Company, the Founders and the undersigned, on behalf of all Series A Investors,
agree that the Original Tax Payment is equal to $1,371,781, which amount shall
be paid to the Founders by the Company within 30 days following the date of
this Agreement.
(b) Payment of Gross-Up Amount. Based on the Auditors' determination,
the Company, the Founders and the undersigned, on behalf of all Series A
Investors, agree that Original Gross-Up Amount is equal to $1,200,334 which
amount shall be paid to the Founders by the Company within 30 days following the
date of this Agreement.
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(c) Payment of Additional Gross-Up Amount. In addition to the Original
Gross-Up Amount and the Original Tax Payment, the Company, the Founders and the
undersigned, on behalf of all Series A Investors, agree that the Company shall
pay the Founders an additional amount equal to $137,684 which amount represents
the tax due on the taxable portion of the Dividend paid to the Founders (the
"Additional Tax Payment") and an amount equal to $120,476 which amount
represents a "gross-up" for tax purposes of the Additional Tax Payment paid to
the Founders (the "Additional Gross-Up Amount"). The Additional Tax Payment and
Additional Gross-Up Amount shall be paid to the Founders by the Company within
30 days following the date of this Agreement.
(d) Tax Penalty Payment. Based on the Auditor's determination, the
Company, the Founders and the undersigned, on behalf of all Series A Investors,
agree that the Company shall pay within 30 days following the date of this
Agreement, an amount equal to $85,387 which represents late payment penalties
payable by the Founders to taxing authorities, and an amount equal to $74,296
which represents a "gross-up" for tax purposes of these penalties.
(e) Good Faith Estimate. The parties hereto acknowledge that the amounts
payable by the Company to the Founders hereunder are based on certain estimates
used to project the Company's taxable earnings prior to October 1, 1999. The
parties acknowledge that such amounts may need to be adjusted following a final
calculation once the Company's tax returns are prepared and finalized. The
parties agree that the Auditor's final determination after such returns are
filed shall be binding and agree to reimburse the relevant party any overpayment
or pay any additional amounts required.
2. EFFECT ON SERIES A AGREEMENT. The Series A Investors acknowledge and agree
that this Agreement shall modify and update the Disclosure Schedule attached as
Exhibit C to the Series A Agreement, effective as of the date of such Disclosure
Schedule, and the payment of the amounts described above shall not be a basis of
liability of the Company or the Founders under the Series A Agreement.
3. MISCELLANEOUS.
(a) Governing Law; Dispute Resolution; Attorneys' Fees.
(i) This Agreement shall be governed by and construed under the
laws of the State of California as applied to agreements among California
residents entered into and to be performed entirely within California.
(ii) To the extent that any misunderstanding or dispute cannot
be resolved agreeably in a friendly manner, the dispute will be mediated by a
mutually acceptable mediator to be chosen by the Company and such Founders as
may be involved, within forty-five (45) days after written notice by one of the
parties demanding mediation. No party may unreasonably withhold consent to the
selection of a mediator, however, by mutual agreement the Company and such
Founders as may be involved may postpone mediation until each has completed
specified but limited discovery with respect to a dispute. The parties may also
agree to attempt some other
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form of alternative dispute resolution ("ADR") in lieu of mediation, including
by way of example and without limitation neutral fact-finding or a mini-trial.
Any dispute which the parties cannot resolve through
negotiation, mediation or other form of ADR within six months of the date of the
initial demand for it by one of the parties may then be submitted to the courts
within California for resolution. The use of any ADR procedures will not be
construed under the doctrines of laches, waiver or estoppel to affect adversely
the rights of either party. Nothing in this Section 3 will prevent either party
from resorting to judicial proceedings if (i) good faith efforts to resolve the
dispute under these procedures have been unsuccessful or (ii) interim relief
from a court is necessary to prevent serious and irreparable injury to one party
or to others.
(iii) In the event that any dispute among the parties to this
Agreement should result in litigation, the prevailing party in such dispute
shall be entitled to recover from the losing party all fees, costs and expenses
of enforcing any right of such prevailing party under or with respect to this
Agreement, including without limitation, such reasonable fees and expenses of
attorneys and accountants, which shall include, without limitation, all fees,
costs and expenses of appeals.
(b) Amendment. Any provision may be amended and the observance thereof
may be waived (either generally or in a particular instance and either
retroactively or prospectively), only by the written consent of (i) as to the
Company, only by the Company, (ii) as to each Founder, by such Founder and (iii)
as to the Series A Investors, by a majority of the shares of Common Stock
issuable or issued upon conversion of the Series A Preferred Stock held by such
Series A Investors. Any amendment or waiver effected in accordance with clauses
(i), (ii) and (iii) of this paragraph shall be binding upon the Company, the
Founder in question and the Series A Investors, as the case may be.
(c) Assignment of Rights. This Agreement and the rights and obligations
of the parties hereunder shall inure to benefit of, and be binding upon, the
parties' respective successors, assigns and legal representatives.
(d) Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if (and then two
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as forth
below their signature on the signature page hereto.
Any party may send any notice, request, demand, claim, or other
communication hereunder to the intended recipient at the address set forth above
using any other means (including personal delivery, expedited courier, messenger
service, telecopy, telex, ordinary mail, or electronic mail), but not 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 intended
recipient. 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.
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(e) Delays or Omissions. No delay or omission to exercise any right,
power or remedy accruing to a party, upon any breach or default of another party
under this Agreement shall impair any such right, power or remedy of the
non-defaulting party nor shall it be construed to be a waiver of any such breach
or default, or an acquiescence therein, or of or in any similar breach or
default thereafter occurring; nor shall any waiver of any single breach or
default be deemed a waiver of any other breach or default therefore or
thereafter occurring. Any waiver, permit, consent or approval of any kind or
character on the part of a party of any breach or default under this Agreement
or any waiver on the part of a party of any provisions or conditions of this
Agreement must be made in writing and shall be effective only to the extent
specifically set forth in such writing. All remedies, either under this
Agreement or by law or otherwise afforded, shall be cumulative and not
alternative.
(f) Severability. In the event one or more of the provisions of this
Agreement should, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provisions of this Agreement, and this Agreement
shall be construed as if such invalid, illegal or unenforceable provision had
never been contained herein.
(g) Counterparts. This Agreement may be executed in one or more
counterparts, including counterparts transmitted by telecopier or facsimile, all
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument. Facsimile copies with signatures of the parties to
this Agreement, or their duly authorized representatives, shall be legally
binding and enforceable. All such facsimile copies are declared as originals and
accordingly admissible in any jurisdiction, tribunal or ADR forum having
jurisdiction over any matter relating to this Agreement.
(h) Entire Agreement. This Agreement constitutes the entire agreement
between the parties relative to the specific subject matter hereof. Any previous
agreement among the parties relative to the specific subject matter hereof is
superseded by this Agreement.
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The foregoing agreement is hereby executed as of the date first above
written.
STANFORD MICRODEVICES, INC.
By: /s/ XXXXXX XXX XXXXXXX
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Xxxxxx Xxx Xxxxxxx
President and Chief Executive Officer
FOUNDERS:
/s/ XXXX XXXXXX
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Xxxx Xxxxxx
Address:
/s/ XXXXX XXXXXX
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Xxxxx Xxxxxx
Address:
SERIES A INVESTORS:
INVESTORS:
SUMMIT VENTURES V, L.P.
By: Summit Partners V, L.P.,
Its General Partner
By: Summit Partners, LLC,
Its General Partner
By: /s/ XXXXX XXXXX
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Member
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SUMMIT V COMPANION FUND, L.P.
By: Summit Partners V, L.P.
Its General Partner
By: Summit Partners, LLC
Its General Partner
By: /s/ XXXXX XXXXX
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Member
SUMMIT V ADVISORS FUND, L.P.
By: Summit Partners, LLC
Its General Partner
By: /s/ XXXXX XXXXX
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Member
SUMMIT V ADVISORS FUND (QP), L.P.
By: Summit Partners, LLC
Its General Partner
By: /s/ XXXXX XXXXX
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Member
SUMMIT INVESTORS III, L.P.
By: /s/ XXXXX XXXXX
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General Partner
