APPENDIX A
AGREEMENT AND PLAN OF REORGANIZATION AND MERGER
On August 22, 1996, Castelle ("Castelle"), Ibex Technologies, Inc.
("Ibex") and certain shareholders of Ibex executed an Agreement and Plan of
Merger, dated as of August 22, 1996, pursuant to which Ibex will be merged with
and into Castelle (the "Acquisition"). Upon the Acquisition, approximately
790,000 shares of Castelle Common Stock will be issued to the former
shareholders of Ibex and approximately 60,000 shares of Castelle Common Stock
will be reserved for issuance upon the exercise of Ibex options assumed by
Castelle. The transaction is intended to be tax-free under Section 368 of the
Internal Revenue Code of 1986, as amended, and to be accounted for as a
pooling-of-interests. The transaction remains subject to Castelle and Ibex
shareholder approval and other closing conditions.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(c) The following exhibits are furnished in accordance with the provisions
of Item 601 of Regulation S-K:
Exhibit Number Exhibit
2.1 Agreement and Plan of Merger, dated as of August
22, 1996, among Castelle, Ibex Technologies, Inc.
and Certain Shareholders of Ibex Technologies, Inc.
20.1 Press Release issued August 23, 1996
2
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
CASTELLE
Dated: August 30, 1996 By: /s/ Xxxxxxx X. Xxxxxxxxx
------------------------
Xxxxxxx X. Xxxxxxxxx
Vice President of Finance
and Chief Financial Officer
3
INDEX TO EXHIBITS
Page number in
sequentially
Exhibit No. Description numbered version
2.1 Agreement and Plan of Reorganization 5
dated as of August 22, 1996 among Castelle,
Ibex Technologies, Inc. and Certain
Shareholders of Ibex Technologies, Inc.
(incorporated herein by reference to Exhibit
2.01 to the Registrant's Registration
Statement on Form S-4, File No. 33-85840).
20.1 Press Release dated August 23, 1996 139
4
AGREEMENT AND PLAN OF REORGANIZATION
among:
CASTELLE,
a California corporation;
IBEX TECHNOLOGIES, INC.,
a California corporation;
and
CERTAIN SHAREHOLDERS OF IBEX TECHNOLOGIES, INC.
---------------------------
Dated as of August 22, 1996
---------------------------
5
TABLE OF CONTENTS
SECTION 1. DESCRIPTION OF TRANSACTION.................................................................... 11
1.1 Merger of Ibex into Castelle.................................................................. 11
1.2 Effect of the Merger.......................................................................... 12
1.3 Closing; Effective Time....................................................................... 12
1.4 Articles of Incorporation and Bylaws; Directors and Officers.................................. 12
1.5 Conversion of Shares.......................................................................... 12
1.6 Employee Stock Options........................................................................ 13
1.7 Closing of Ibex's Transfer Books.............................................................. 14
1.8 Exchange of Certificates...................................................................... 14
1.9 Dissenting Shares............................................................................. 15
1.10 Tax Consequences.............................................................................. 16
1.11 Accounting Treatment.......................................................................... 16
1.12 Further Action................................................................................ 16
SECTION 2. REPRESENTATIONS AND WARRANTIES OF IBEX AND THE DESIGNATED SHAREHOLDERS........................ 16
2.1 Due Organization; No Subsidiaries; Etc........................................................ 16
2.2 Articles of Incorporation and Bylaws; Records................................................. 17
2.3 Capitalization, Etc........................................................................... 17
2.4 Financial Statements.......................................................................... 18
2.5 Absence of Changes............................................................................ 19
2.6 Title to Assets............................................................................... 20
2.7 Bank Accounts; Receivables.................................................................... 21
2.8 Equipment; Leasehold.......................................................................... 21
2.9 Proprietary Assets............................................................................ 21
2.10 Contracts..................................................................................... 23
2.11 Liabilities................................................................................... 25
2.12 Compliance with Legal Requirements............................................................ 26
2.13 Governmental Authorizations................................................................... 26
2.14 Tax Matters................................................................................... 26
2.15 Employee and Labor Matters; Benefit Plans..................................................... 27
2.16 Environmental Matters......................................................................... 30
2.17 Insurance..................................................................................... 30
2.18 Related Party Transactions.................................................................... 31
2.19 Legal Proceedings; Orders..................................................................... 31
2.20 Authority; Binding Nature of Agreement........................................................ 32
2.21 Non-Contravention; Consents................................................................... 32
2.22 Full Disclosure............................................................................... 33
SECTION 3. REPRESENTATIONS AND WARRANTIES OF CASTELLE.................................................... 33
3.1 Due Organization; No Subsidiaries; Etc........................................................ 34
6
TABLE OF CONTENTS
(continued)
3.2 SEC Filings; Financial Statements............................................................. 34
3.3 Capitalization, Etc........................................................................... 35
3.4 Authority; Binding Nature of Agreement........................................................ 36
3.5 Absence of Changes............................................................................ 36
3.6 Title to Assets............................................................................... 38
3.7 Proprietary Assets............................................................................ 38
3.8 Liabilities................................................................................... 39
3.9 Compliance with Legal Requirements............................................................ 39
3.10 Governmental Authorizations................................................................... 40
3.11 Tax Matters................................................................................... 40
3.12 Employee and Labor Matters; Benefit Plans..................................................... 41
3.13 Environmental Matters......................................................................... 41
3.14 Legal Proceedings; Orders..................................................................... 41
3.15 Non-Contravention; Consents................................................................... 42
3.16 Full Disclosure............................................................................... 43
3.17 Valid Issuance................................................................................ 43
SECTION 4. CERTAIN COVENANTS OF IBEX AND THE DESIGNATED SHAREHOLDERS..................................... 44
4.1 Access and Investigation...................................................................... 44
4.2 Operation of Ibex's Business.................................................................. 44
4.3 Notification; Updates to Disclosure Schedule.................................................. 46
SECTION 5. ADDITIONAL COVENANTS OF THE PARTIES........................................................... 47
5.1 Filings and Consents.......................................................................... 47
5.2 California Permit; Fairness Hearing........................................................... 47
5.3 Ibex Shareholders' Meeting.................................................................... 47
5.4 Public Announcements.......................................................................... 47
5.5 Pooling of Interests.......................................................................... 48
5.6 Affiliate Agreements.......................................................................... 48
5.7 Best Efforts.................................................................................. 48
5.8 Tax Matters................................................................................... 48
5.9 Employment and Noncompetition Agreements...................................................... 48
5.10 FIRPTA Matters................................................................................ 48
SECTION 6. CONDITIONS PRECEDENT TO OBLIGATIONS OF CASTELLE............................................... 49
6.1 Satisfactory Completion of Pre-Acquisition Review............................................. 49
6.2 Accuracy of Representations................................................................... 50
6.3 Performance of Covenants...................................................................... 50
6.4 Shareholder Approval.......................................................................... 50
7
TABLE OF CONTENTS
(continued)
6.5 Consents...................................................................................... 50
6.6 Agreements and Documents...................................................................... 50
6.7 FIRPTA Compliance............................................................................. 51
6.8 Securities Compliance......................................................................... 51
6.9 No Restraints................................................................................. 52
6.10 Comfort Letter................................................................................ 52
6.11 No Legal Proceedings.......................................................................... 52
6.12 Amendment of Fourth Amended and Restated Registration......................................... 52
SECTION 7. CONDITIONS PRECEDENT TO OBLIGATIONS OF IBEX................................................... 52
7.1 Accuracy of Representations................................................................... 52
7.2 Performance of Covenants...................................................................... 53
7.3 Documents..................................................................................... 53
7.4 Shareholder Approval.......................................................................... 53
7.5 No Restraints................................................................................. 53
7.6 Consents...................................................................................... 53
7.7 Securities Compliance......................................................................... 53
7.8 No Legal Proceedings.......................................................................... 54
SECTION 8. TERMINATION................................................................................... 54
8.1 Termination Events............................................................................ 54
8.2 Termination Procedures........................................................................ 55
8.3 Effect of Termination......................................................................... 55
SECTION 9. INDEMNIFICATION, ETC.......................................................................... 55
9.1 Survival of Representations, Etc.............................................................. 55
9.2 Indemnification by Designated Shareholders.................................................... 56
9.3 Threshold; Ceiling............................................................................ 56
9.4 Escrow Fund................................................................................... 56
9.5 No Contribution............................................................................... 57
9.6 Interest...................................................................................... 57
9.7 Defense of Third Party Claims................................................................. 57
9.8 Exercise of Remedies by Indemnitees Other Than Castelle....................................... 58
9.9 Claims Against Consideration.................................................................. 58
9.10 Objections to Claims.......................................................................... 58
9.11 Resolution of Conflicts; Arbitration.......................................................... 58
SECTION 10. MISCELLANEOUS PROVISIONS...................................................................... 61
8
TABLE OF CONTENTS
(continued)
10.1 Designated Shareholders' Agent................................................................ 61
10.2 Further Assurances............................................................................ 62
10.3 Fees and Expenses............................................................................. 62
10.4 Attorneys' Fees............................................................................... 62
10.5 Notices....................................................................................... 62
10.6 Confidentiality............................................................................... 64
10.7 Time of the Essence........................................................................... 64
10.8 Headings...................................................................................... 64
10.9 Counterparts.................................................................................. 64
10.10 Governing Law................................................................................. 64
10.11 Successors and Assigns........................................................................ 64
10.12 Remedies Cumulative; Specific Performance..................................................... 64
10.13 Waiver........................................................................................ 65
10.14 Amendments.................................................................................... 65
10.15 Severability.................................................................................. 65
10.16 Parties in Interest............................................................................65
10.17 Entire Agreement.............................................................................. 65
10.18 Construction.................................................................................. 65
9
EXHIBITS
Exhibit A-1 - Designated Shareholders
Exhibit A-2 - Signing Shareholders
Exhibit B - Certain Definitions
Exhibit C-1 - Form of Affiliate Agreement
Exhibit C-2 - Persons to Execute Affiliate Agreements
Exhibit D - Forms of Tax Representation Letters
Exhibit E - Form of Continuity of Interest Certificate
Exhibit F - Persons to Sign Employment and Noncompetition Agreements
Exhibit G - Forms of Employment Agreements
Exhibit H - Forms of Noncompetition Agreements
Exhibit I - Form of Legal Opinion of Xxxxxx & Xxxxx LLP
Exhibit J - Form of Legal Opinion of Xxxxxx Godward Xxxxxx Xxxxxxxxx & Xxxxx
Exhibit K - Not Used
Exhibit L - Escrow Agreement
Exhibit M - Form of Irrevocable Proxy
10
AGREEMENT AND
PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION ("Agreement") is made and
entered into as of August 22, 1996, by and among: CASTELLE, a California
corporation ("Castelle"); IBEX TECHNOLOGIES, INC., a California corporation (the
"Ibex"); the parties identified on Exhibit A-1 (which are referred to herein as
the "Designated Shareholders") and the parties identified on Exhibit A-2
(collectively, the parties identified on Exhibit A-1 and on Exhibit A-2 are
referred to herein as the "Signing Shareholders"). Certain other capitalized
terms used in this Agreement are defined in Exhibit B.
RECITALS
X. Xxxxxxxx and Ibex intend to effect a merger of Ibex into Castelle in
accordance with this Agreement and the California General Corporation Law
("CGCL") (the "Merger").
B. It is intended that the Merger qualify as a tax-free reorganization
within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as
amended (the "Code"). For accounting purposes, it is intended that the Merger be
treated as a "pooling of interests."
C. This Agreement has been approved by the respective boards of directors
of Castelle and Ibex.
D. The Designated Shareholders own a total of 96,000 shares of the Common
Stock (with no par value) of Ibex ("Ibex Common Stock"); and the Signing
Shareholders own a total of 96,000 shares of Ibex Common Stock and a total of
48,035 shares of the Series A Convertible Preferred Stock of Ibex ("Series A
Preferred Stock"), constituting all of the outstanding preferred stock of Ibex.
Contemporaneously with the execution and delivery of this Agreement, each
Signing Shareholder is executing and delivering to Castelle a Proxy of even date
herewith.
AGREEMENT
The parties to this Agreement agree as follows:
SECTION 1. DESCRIPTION OF TRANSACTION
1.1 Merger of Ibex into Castelle. Upon the terms and subject to the
conditions set forth in this Agreement, at the Effective Time (as defined in
Section 1.3), Ibex shall be merged with and into Castelle, and the separate
existence of Ibex shall cease. Castelle will continue as the surviving
corporation in the Merger (the "Surviving Corporation").
11
1.2 Effect of the Merger. The Merger shall have the effects set forth in
this Agreement and in the applicable provisions of the California General
Corporation Law.
1.3 Closing; Effective Time. The consummation of the transactions
contemplated by this Agreement (the "Closing") shall take place at the offices
of Xxxxxx Godward Xxxxxx Xxxxxxxxx & Xxxxx, Xxx Xxxxxxxx Xxxxx, Xxx Xxxxxxxxx,
Xxxxxxxxxx 00000 at 10:00 a.m. on September __, 1996, or at such other time and
date during the period from August 15, 1996 through December 30, 1996 as
Castelle may designate upon not less than five days' prior notice to Ibex (the
"Scheduled Closing Time"). (The date on which the Closing actually takes place
is referred to in this Agreement as the "Closing Date.") Contemporaneously with
or as promptly as practicable after the Closing, a properly executed agreement
of merger conforming to the requirements of Chapter 11 of the California General
Corporation Law shall be filed with the Secretary of State of the State of
California. The Merger shall become effective at the time such agreement of
merger is filed with and accepted by the Secretary of State of the State of
California (the "Effective Time").
1.4 Articles of Incorporation and Bylaws; Directors and Officers. Unless
otherwise determined by Castelle prior to the Effective Time:
(a) the Articles of Incorporation of the Surviving Corporation shall be
those of Castelle;
(b) the Bylaws of the Surviving Corporation shall be those of Castelle; and
(c) the directors and officers of the Surviving Corporation immediately
after the Effective Time shall be those of Castelle with the addition of
Xxx Xxxxx as President of the Ibex Division of Castelle.
1.5 Conversion of Shares.
(a) Subject to Sections 1.8(c) and 1.9, at the Effective Time, by virtue of
the Merger and without any further action on the part of Castelle, Ibex or
any shareholder of Ibex:
(i) If the closing market price of a share of the common stock (no par
value per share) of Castelle ("Castelle Common Stock") on the business
day immediately prior to the Closing (the "Preference Price") is $9.42
or greater, each share of Ibex Common Stock and each share of Series A
Preferred Stock outstanding immediately prior to the Effective Time
shall be converted into the right to receive 4.171124044 shares of
Castelle Common Stock.
(ii) If the Preference Price is less than $9.42, (i) the aggregate
shares of Series A Preferred Stock outstanding immediately prior to
the Effective Time shall be converted into a number of shares of
Castelle Common Stock equal to $180,000 divided by the Preference
Price (the "Preferred Bonus Shares"), and (ii) each share of Ibex
Common Stock and each share of Series A Preferred Stock outstanding
immediately prior to the Effective Time shall be converted into a
number of shares of Castelle Common Stock equal to (x) 850,000 less
12
the number of Preferred Bonus Shares divided by (y) the aggregate
number of shares of Ibex Common Stock and Series A Preferred Stock
outstanding, on a fully diluted basis, immediately prior to the
Effective Time.
(b) If any shares of Ibex Common Stock outstanding immediately prior to the
Effective Time are unvested or are subject to a repurchase option, risk of
forfeiture or other condition under any applicable restricted stock
purchase agreement or other agreement with Ibex, then the shares of
Castelle Common Stock issued in exchange for such shares of Ibex Common
Stock will also be unvested and subject to the same repurchase option, risk
of forfeiture or other condition, and the certificates representing such
shares of Castelle Common Stock may accordingly be marked with appropriate
legends.
1.6 Employee Stock Options. At the Effective Time, each stock option that
is then outstanding under Ibex's 1992 Stock Option Plan, whether vested or
unvested (a "Ibex Option"), shall be assumed by Castelle in accordance with the
terms (as in effect as of the date of this Agreement) of Ibex's 1992 Stock
Option Plan and the stock option agreement by which such Ibex Option is
evidenced. All rights with respect to Ibex Common Stock under outstanding Ibex
Options shall thereupon be converted into rights with respect to Castelle Common
Stock. Accordingly, from and after the Effective Time, (a) each Ibex Option
assumed by Castelle may be exercised solely for shares of Castelle Common Stock,
(b) the number of shares of Castelle Common Stock subject to each such assumed
Ibex Option shall be equal to the number of shares of Ibex Common Stock that
were subject to such Ibex Option immediately prior to the Effective Time
multiplied by the Applicable Fraction (as hereinafter defined), rounded down to
the nearest whole number of shares of Castelle Common Stock, (c) the per share
exercise price for the Castelle Common Stock issuable upon exercise of each such
assumed Ibex Option shall be determined by dividing the exercise price per share
of Ibex Common Stock subject to such Ibex Option, as in effect immediately prior
to the Effective Time, by the Applicable Fraction (as hereinafter defined), and
rounding the resulting exercise price up to the nearest whole cent, and (d) all
restrictions on the exercise of each such assumed Ibex Option shall continue in
full force and effect, and the term, exercisability, vesting schedule and other
provisions of such Ibex Option shall otherwise remain unchanged; provided,
however, that each such assumed Ibex Option shall, in accordance with its terms,
be subject to further adjustment as appropriate to reflect any stock split,
reverse stock split, stock dividend, recapitalization or other similar
transaction effected by Castelle after the Effective Time. Ibex and Castelle
shall take all action that may be necessary (under Ibex's 1992 Stock Option Plan
and otherwise) to effectuate the provisions of this Section 1.6. Following the
Closing, Castelle will send to each holder of an assumed Ibex Option a written
notice setting forth (i) the number of shares of Castelle Common Stock subject
to such assumed Ibex Option, and (ii) the exercise price per share of Castelle
Common Stock issuable upon exercise of such assumed Ibex Option. For purposes of
this Section 1.6, the "Applicable Fraction" shall mean the exchange ratio
identified in Section 1.5 which is utilized to convert each share of Ibex Common
Stock outstanding immediately prior to the Merger into Castelle Common Stock.
13
1.7 Closing of Ibex's Transfer Books. At the Effective Time, holders of
certificates representing shares of Ibex's capital stock that were outstanding
immediately prior to the Effective Time shall cease to have any rights as
shareholders of Ibex, and the stock transfer books of Ibex shall be closed with
respect to all shares of such capital stock outstanding immediately prior to the
Effective Time. No further transfer of any such shares of Ibex's capital stock
shall be made on such stock transfer books after the Effective Time. If, after
the Effective Time, a valid certificate previously representing any of such
shares of Ibex's capital stock (a "Ibex Stock Certificate") is presented to the
Surviving Corporation, such Ibex Stock Certificate shall be canceled and shall
be exchanged as provided in Section 1.8.
1.8 Exchange of Certificates.
(a) At or as soon as practicable after the Effective Time, Castelle will
send to the holders of Ibex Stock Certificates (i) a letter of transmittal
in customary form and containing such provisions as Castelle may reasonably
specify, and (ii) instructions for use in effecting the surrender of Ibex
Stock Certificates in exchange for certificates representing Castelle
Common Stock. Upon surrender of a Ibex Stock Certificate to Castelle for
exchange, together with a duly executed letter of transmittal and such
other documents as may be reasonably required by Xxxxxxxx, the holder of
such Ibex Stock Certificate shall be entitled to receive in exchange
therefor a certificate representing the number of whole shares of Castelle
Common Stock that such holder has the right to receive pursuant to the
provisions of this Section 1, and Ibex Stock Certificate so surrendered
shall be canceled. Until surrendered as contemplated by this Section 1.8,
each Ibex Stock Certificate shall be deemed, from and after the Effective
Time, to represent only the right to receive upon such surrender a
certificate representing shares of Castelle Common Stock (and cash in lieu
of any fractional share of Castelle Common Stock) as contemplated by this
Section 1.8. If any Ibex Stock Certificate shall have been lost, stolen or
destroyed, Castelle may, in its discretion and as a condition precedent to
the issuance of any certificate representing Castelle Common Stock, require
the owner of such lost, stolen or destroyed Ibex Stock Certificate to
provide an appropriate affidavit and to deliver a bond (in such sum as
Castelle may reasonably direct) as indemnity against any claim that may be
made against the Surviving Corporation with respect to such Ibex Stock
Certificate.
(b) No dividends or other distributions declared or made with respect to
Castelle Common Stock with a record date after the Effective Time shall be
paid to the holder of any unsurrendered Ibex Stock Certificate with respect
to the shares of Castelle Common Stock represented thereby, and no cash
payment in lieu of any fractional share shall be paid to any such holder,
until such holder surrenders such Ibex Stock Certificate in accordance with
this Section 1.8 (at which time such holder shall be entitled to receive
all such dividends and distributions and such cash payment).
(c) No fractional shares of Castelle Common Stock shall be issued in
connection with the Merger, and no certificates for any such fractional
shares shall be issued. In lieu of such fractional shares, any holder of
capital stock of Ibex who would otherwise be entitled to receive a fraction
of a share of Castelle Common Stock (after aggregating all fractional
shares of Castelle Common Stock issuable to such holder) shall, upon
14
surrender of such holder's Ibex Stock Certificate(s), be paid in cash the
dollar amount (rounded to the nearest whole cent), without interest,
determined by multiplying such fraction by the Designated Castelle Stock
Price. For purposes of this paragraph, the "Designated Castelle Stock
Price" shall be eight dollars ($8.00) per share of Castelle Common Stock.
(d) The Surviving Corporation shall be entitled to deduct and withhold from
any consideration payable or otherwise deliverable to any holder or former
holder of capital stock of Ibex pursuant to this Agreement such amounts as
the Surviving Corporation may be required to deduct or withhold therefrom
under the Code or under any provision of state, local or foreign tax law.
To the extent such amounts are so deducted or withheld, such amounts shall
be treated for all purposes under this Agreement as having been paid to the
Person to whom such amounts would otherwise have been paid.
(e) The Surviving Corporation shall not be liable to any holder or former
holder of capital stock of Ibex for any shares of Castelle Common Stock (or
dividends or distributions with respect thereto), or for any cash amounts,
delivered to any public official pursuant to any applicable abandoned
property, escheat or similar law.
1.9 Dissenting Shares.
(a) Notwithstanding anything to the contrary contained in this Agreement,
any shares of capital stock of Ibex that, as of the Effective Time, are or
may become "dissenting shares" within the meaning of Section 1300(b) of the
California Corporations Code shall not be converted into or represent the
right to receive Castelle Common Stock in accordance with Section 1.5 (or
cash in lieu of fractional shares in accordance with Section 1.8(c)), and
the holder or holders of such shares shall be entitled only to such rights
as may be granted to such holder or holders in Chapter 13 of the California
General Corporation Law; provided, however, that if the status of any such
shares as "dissenting shares" shall not be perfected, or if any such shares
shall lose their status as "dissenting shares," then, as of the later of
the Effective Time or the time of the failure to perfect such status or the
loss of such status, such shares shall automatically be converted into and
shall represent only the right to receive (upon the surrender of the
certificate or certificates representing such shares) Castelle Common Stock
in accordance with Section 1.5 (and cash in lieu of fractional shares in
accordance with Section 1.8(c)).
(b) Ibex shall give Castelle (i) prompt notice of any written demand
received by Ibex prior to the Effective Time to require Ibex to purchase
shares of capital stock of Ibex pursuant to Chapter 13 of the California
General Corporation Law and of any other demand, notice or instrument
delivered to Ibex prior to the Effective Time pursuant to the California
General Corporation Law, and (ii) the opportunity to participate in all
negotiations and proceedings with respect to any such demand, notice or
instrument. Ibex shall not make any payment or settlement offer prior to
the Effective Time with respect to any such demand unless Castelle shall
have consented in writing to such payment or settlement offer.
15
1.10 Tax Consequences. For federal income tax purposes, the Merger is
intended to constitute a reorganization within the meaning of Section 368 of the
Code. The parties to this Agreement hereby adopt this Agreement as a "plan of
reorganization" within the meaning of Sections 1.368-2(g) and 1.368-3(a) of the
United States Treasury Regulations.
1.11 Accounting Treatment. For accounting purposes, the Merger is intended
to be treated as a "pooling of interests."
1.12 Further Action. If, at any time after the Effective Time, any further
action is determined by Castelle to be necessary or desirable to carry out the
purposes of this Agreement or to vest the Surviving Corporation with full right,
title and possession of and to all rights and property of Ibex, the officers and
directors of the Surviving Corporation shall be fully authorized (in the name of
Ibex and otherwise) to take such action.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF IBEX AND THE DESIGNATED
SHAREHOLDERS
Ibex and the Designated Shareholders severally represent and warrant, to
and for the benefit of the Indemnitees, as follows:
2.1 Due Organization; No Subsidiaries; Etc.
(a) Ibex is a corporation duly organized, validly existing and in good
standing under the laws of the State of California and has all necessary
power and authority: (i) to conduct its business in the manner in which its
business is currently being conducted; (ii) to own and use its assets in
the manner in which its assets are currently owned and used; and (iii) to
perform its obligations under all Ibex Contracts.
(b) Except as set forth in Part 2.1 of the Disclosure Schedule, Ibex has
not conducted any business under or otherwise used, for any purpose or in
any jurisdiction, any fictitious name, assumed name, trade name or other
name, other than the name "Ibex Technologies, Inc."
(c) Ibex is not and has not been required to be qualified, authorized,
registered or licensed to do business as a foreign corporation in any
jurisdiction other than the jurisdictions identified in Part 2.1 of the
Disclosure Schedule, except where the failure to be so qualified,
authorized, registered or licensed has not had and will not have a Material
Adverse Effect on Ibex. Ibex is in good standing as a foreign corporation
in each of the jurisdictions identified in Part 2.1 of the Disclosure
Schedule.
(d) Part 2.1 of the Disclosure Schedule accurately sets forth (i) the names
of the members of Ibex's board of directors, (ii) the names of the members
of each committee of Ibex's board of directors, and (iii) the names and
titles of Ibex's officers.
16
(e) Ibex does not own any controlling interest in any Entity and, except
for the equity interests identified in Part 2.1 of the Disclosure Schedule,
Ibex has never owned, beneficially or otherwise, any shares or other
securities of, or any direct or indirect equity interest in, any Entity.
Ibex has not agreed and is not obligated to make any future investment in
or capital contribution to any Entity. Ibex has not guaranteed and is not
responsible or liable for any obligation of any of the Entities in which it
owns or has owned any equity interest.
2.2 Articles of Incorporation and Bylaws; Records. Ibex has delivered to
Castelle accurate and complete copies of: (1) Ibex's articles of incorporation
and bylaws, including all amendments thereto; (2) the stock records of Ibex; and
(3) except as set forth in Part 2.2 of the Disclosure Schedule, the minutes and
other records of the meetings and other proceedings (including any actions taken
by written consent or otherwise without a meeting) of the shareholders of Ibex,
the board of directors of Ibex and all committees of the board of directors of
Ibex. There have been no formal meetings or other proceedings of the
shareholders of Ibex, the board of directors of Ibex or any committee of the
board of directors of Ibex that are not fully reflected in such minutes or other
records. There has not been any violation of any of the provisions of Ibex's
articles of incorporation or bylaws, and Ibex has not taken any action that is
inconsistent in any material respect with any resolution adopted by Ibex's
shareholders, Ibex's board of directors or any committee of Ibex's board of
directors. The books of account, stock records, minute books and other records
of Ibex are accurate, up-to-date and complete in all material respects, and have
been maintained in accordance with prudent business practices.
2.3 Capitalization, Etc.
(a) The authorized capital stock of Ibex consists of: (i) ten million
(10,000,000) shares of Common Stock (with no par value), of which one
hundred forty-one thousand sixteen (141,016) shares have been issued and
are outstanding as of the date of this Agreement; and (ii) five million
(5,000,000) shares of Preferred Stock (with no par value), forty-eight
thousand thirty-five (48,035) of which have been designated "Series A
Preferred Stock," of which all of such shares have been issued and are
outstanding as of the date of this Agreement. Each outstanding share of
Series A Preferred Stock is convertible into one share of Ibex Common
Stock. All of the outstanding shares of Ibex Common Stock and Series A
Preferred Stock have been duly authorized and validly issued, and are fully
paid and non-assessable. Part 2.3 of the Disclosure Schedule provides an
accurate and complete description of the terms of each repurchase option
which is held by Ibex and to which any of such shares is subject.
(b) Ibex has reserved 20,000 shares of Ibex Common Stock for issuance under
its 1992 Stock Option Plan, of which options to purchase 14,731 shares are
outstanding as of the date of this Agreement. Part 2.3 of the Disclosure
Schedule accurately sets forth, with respect to each Ibex Option that is
outstanding as of the date of this Agreement: (i) the name of the holder of
such Ibex Option; (ii) the total number of shares of Ibex Common Stock that
are subject to such Ibex Option and the number of shares of Ibex Common
Stock with respect to which such Ibex Option is immediately exercisable;
(iii) the date on which such Ibex Option was granted and the term of such
Ibex Option; (iv) the vesting schedule for such Ibex Option; (v) the
17
exercise price per share of Ibex Common Stock purchasable under such Ibex
Option; and (vi) whether such Ibex Option has been designated an "incentive
stock option" as defined in Section 422 of the Code. Except as set forth in
Part 2.3 of the Disclosure Schedule, there is no: (i) outstanding
subscription, option, call, warrant or right (whether or not currently
exercisable) to acquire any shares of the capital stock or other securities
of Ibex; (ii) outstanding security, instrument or obligation that is or may
become convertible into or exchangeable for any shares of the capital stock
or other securities of Ibex; (iii) Contract under which Ibex is or may
become obligated to sell or otherwise issue any shares of its capital stock
or any other securities; or (iv) to the best of the knowledge of Ibex and
the Designated Shareholders, condition or circumstance that may give rise
to or provide a basis for the assertion of a claim by any Person to the
effect that such Person is entitled to acquire or receive any shares of
capital stock or other securities of Ibex.
(c) All outstanding shares of Ibex Common Stock and Series A Preferred
Stock, and all outstanding Ibex Options, have been issued and granted in
compliance with (i) all applicable securities laws and other applicable
Legal Requirements, and (ii) all requirements set forth in applicable
Contracts.
(d) Except as set forth in Part 2.3 of the Disclosure Schedule, Ibex has
never repurchased, redeemed or otherwise reacquired any shares of capital
stock or other securities of Ibex. All securities so reacquired by Ibex
were reacquired in compliance with (i) the applicable provisions of the
California General Corporation Law and all other applicable Legal
Requirements, and (ii) all requirements set forth in applicable restricted
stock purchase agreements and other applicable Contracts.
2.4 Financial Statements.
(a) Ibex has delivered to Castelle the following financial statements and
notes (collectively, the "Ibex Financial Statements"):
(i) The audited balance sheets of Ibex as of December 31, 1995 and
1994, and the related audited income statements, statements of
shareholders' equity and statements of cash flows of Ibex for the
years then ended, together with the notes thereto and the unqualified
report and opinion of Xxxxxxx & Xxxxxxx LLP relating thereto; and
(ii) the unaudited balance sheet of Ibex as of June 30, 1996 (the
"Unaudited Interim Balance Sheet"), and the related unaudited income
statement of Ibex for the six months then ended.
(b) Ibex Financial Statements are accurate and complete in all material
respects and present fairly the financial position of Ibex as of the
respective dates thereof and the results of operations and (in the case of
the financial statements referred to in Section 2.4(a)(i)) cash flows of
Ibex for the periods covered thereby. Ibex Financial Statements have been
prepared in accordance with generally accepted accounting principles
applied on a consistent basis throughout the periods covered (except that
18
the financial statements referred to in Section 2.4(a)(ii) do not contain
footnotes and are subject to normal and recurring year-end audit
adjustments, which will not, individually or in the aggregate, be material
in magnitude).
2.5 Absence of Changes. Except as set forth in Part 2.5 of the Disclosure
Schedule, since June 30, 1996:
(a) there has not been any material adverse change in Ibex's business,
condition, assets, liabilities, operations, financial performance or
prospects, and, to the best of the knowledge of Ibex and the Designated
Shareholders, no event has occurred that will, or could reasonably be
expected to, have a Material Adverse Effect on Ibex;
(b) there has not been any material loss, damage or destruction to, or any
material interruption in the use of, any of Ibex's assets (whether or not
covered by insurance);
(c) Ibex has not declared, accrued, set aside or paid any dividend or made
any other distribution in respect of any shares of capital stock, and has
not repurchased, redeemed or otherwise reacquired any shares of capital
stock or other securities;
(d) Ibex has not sold, issued or authorized the issuance of (i) any capital
stock or other security (except for Ibex Common Stock issued upon the
exercise of outstanding Ibex Options), (ii) any option or right to acquire
any capital stock or any other security (except for Ibex Options described
in Part 2.3 of the Disclosure Schedule), or (iii) any instrument
convertible into or exchangeable for any capital stock or other security;
(e) Ibex has not amended or waived any of its rights under, or permitted
the acceleration of vesting under, (i) any provision of its 1992 Stock
Option Plan, (ii) any provision of any agreement evidencing any outstanding
Ibex Option, or (iii) any restricted stock purchase agreement;
(f) there has been no amendment to Ibex's articles of incorporation or
bylaws, and Ibex has not effected or been a party to any Acquisition
Transaction, recapitalization, reclassification of shares, stock split,
reverse stock split or similar transaction;
(g) Ibex has not formed any subsidiary or acquired any equity interest or
other interest in any other Entity;
(h) Ibex has not made any capital expenditure which, when added to all
other capital expenditures made on behalf of Ibex since June 30, 1996,
exceeds $10,000;
(i) Ibex has not (i) entered into or permitted any of the assets owned or
used by it to become bound by any Contract that is or would constitute a
Material Contract (as defined in Section 2.10(a)), or (ii) amended or
prematurely terminated, or waived any material right or remedy under, any
such Contract;
19
(j) Ibex has not (i) acquired, leased or licensed any right or other asset
from any other Person, (ii) sold or otherwise disposed of, or leased or
licensed, any right or other asset to any other Person, or (iii) waived or
relinquished any right, except for immaterial rights or other immaterial
assets acquired, leased, licensed or disposed of in the ordinary course of
business and consistent with Ibex's past practices;
(k) Ibex has not written off as uncollectible, or established any
extraordinary reserve with respect to, any account receivable or other
indebtedness;
(l) Ibex has not made any pledge of any of its assets or otherwise
permitted any of its assets to become subject to any Encumbrance, except
for pledges of immaterial assets made in the ordinary course of business
and consistent with Ibex's past practices;
(m) Ibex has not (i) lent money to any Person (other than pursuant to
routine travel advances made to employees in the ordinary course of
business), or (ii) incurred or guaranteed any indebtedness for borrowed
money;
(n) Ibex has not (i) established or adopted any Employee Benefit Plan, (ii)
paid any bonus or made any profit-sharing or similar payment to, or
increased the amount of the wages, salary, commissions, fringe benefits or
other compensation or remuneration payable to, any of its directors,
officers or employees, or (iii) hired any new employee;
(o) Ibex has not changed any of its methods of accounting or accounting
practices in any respect;
(p) Ibex has not made any Tax election;
(q) Ibex has not commenced or settled any Legal Proceeding;
(r) Ibex has not entered into any material transaction or taken any other
material action outside the ordinary course of business or inconsistent
with its past practices; and
(s) Xxxx has not agreed or committed to take any of the actions referred to
in clauses "(c)" through "(r)" above.
2.6 Title to Assets.
(a) Ibex owns, and has good, valid and marketable title to, all assets
purported to be owned by it, including: (i) all assets reflected on the
Unaudited Interim Balance Sheet; (ii) all assets referred to in Parts 2.1,
2.7, 2.8 and 2.9 of the Disclosure Schedule and all of Ibex's rights under
the Contracts identified in Part 2.10 of the Disclosure Schedule; and (iii)
all other assets reflected in Ibex's books and records as being owned by
Ibex. Except as set forth in Part 2.6 of the Disclosure Schedule, all of
said assets are owned by Ibex free and clear of any liens or other
20
Encumbrances, except for (x) any lien for current taxes not yet due and
payable, and (y) minor liens that have arisen in the ordinary course of
business and that do not (in any case or in the aggregate) materially
detract from the value of the assets subject thereto or materially impair
the operations of Ibex.
(b) Part 2.6 of the Disclosure Schedule identifies all assets that are
material to the business of Ibex and that are being leased or licensed to
Ibex.
2.7 Bank Accounts; Receivables.
(a) Part 2.7(a) of the Disclosure Schedule provides accurate information
with respect to each account maintained by or for the benefit of Ibex at
any bank or other financial institution.
(b) Part 2.7(b) of the Disclosure Schedule provides an accurate and
complete breakdown and aging of all accounts receivable, notes receivable
and other receivables of Ibex as of June 30, 1996. Except as set forth in
Part 2.7(b) of the Disclosure Schedule, all existing accounts receivable of
Ibex (including those accounts receivable reflected on the Unaudited
Interim Balance Sheet that have not yet been collected and those accounts
receivable that have arisen since June 30, 1996 and have not yet been
collected) (i) represent valid obligations of customers of Ibex arising
from bona fide transactions entered into in the ordinary course of
business, (ii) are current and to the best of the knowledge of Ibex and the
Designated Shareholders will be collected in full when due, without any
counterclaim or set off (net of an allowance for doubtful accounts as set
forth in the Ibex Financial Statements).
2.8 Equipment; Leasehold.
(a) All material items of equipment and other tangible assets owned by or
leased to Ibex are adequate for the uses to which they are being put, are
in good condition and repair (ordinary wear and tear excepted) and are
adequate for the conduct of Ibex's business in the manner in which such
business is currently being conducted.
(b) Ibex does not own any real property or any interest in real property,
except for the leasehold created under the real property lease identified
in Part 2.10 of the Disclosure Schedule.
2.9 Proprietary Assets.
(a) Part 2.9(a)(i) of the Disclosure Schedule sets forth, with respect to
each Ibex Proprietary Asset registered with any Governmental Body or for
which an application has been filed with any Governmental Body, (i) a brief
description of such Proprietary Asset, and (ii) the names of the
jurisdictions covered by the applicable registration or application. Part
2.9(a)(ii) of the Disclosure Schedule identifies and provides a brief
description of all other Ibex Proprietary Assets owned by Ibex. Part
2.9(a)(iii) of the Disclosure Schedule identifies and provides a brief
description of each Proprietary Asset licensed to Ibex by any Person
21
(except for any Proprietary Asset that is licensed to Ibex under any third
party software license generally available to the public at a cost of less
than $10,000), and identifies the license agreement under which such
Proprietary Asset is being licensed to Ibex. Except as set forth in Part
2.9(a)(iv) of the Disclosure Schedule, Ibex has good, valid and marketable
title to all of Ibex Proprietary Assets identified in Parts 2.9(a)(i) and
2.9(a)(ii) of the Disclosure Schedule, free and clear of all liens and
other Encumbrances, and has a valid right to use all Proprietary Assets
identified in Part 2.9(a)(iii) of the Disclosure Schedule. Except as set
forth in Part 2.9(a)(v) of the Disclosure Schedule, Ibex is not obligated
to make any payment to any Person for the use of any Ibex Proprietary
Asset. Except as set forth in Part 2.9(a)(vi) of the Disclosure Schedule,
Ibex has not developed jointly with any other Person any Ibex Proprietary
Asset with respect to which such other Person has any rights.
(b) Ibex has taken all reasonable measures and precautions necessary to
protect and maintain the confidentiality and secrecy of all Ibex
Proprietary Assets (except Ibex Proprietary Assets whose value would be
unimpaired by public disclosure) and otherwise to maintain and protect the
value of all Ibex Proprietary Assets. Except as set forth in Part 2.9(b) of
the Disclosure Schedule, to the best of the knowledge of Ibex and the
Designated Shareholders after inquiry of Ibex's officers, directors and
advisors, Ibex has not (other than pursuant to license agreements
identified in Part 2.10 of the Disclosure Schedule) disclosed or delivered
to any Person, or permitted the disclosure or delivery to any Person of,
(i) the source code, or any portion or aspect of the source code, of any
Ibex Proprietary Asset, or (ii) the object code, or any portion or aspect
of the object code, of any Ibex Proprietary Asset.
(c) To the best of the knowledge of Ibex and the Designated Shareholders
after inquiry of Ibex's officers, directors and advisors, none of Ibex
Proprietary Assets infringes or conflicts with any Proprietary Asset owned
or used by any other Person. To the best of the knowledge of Ibex and the
Designated Shareholders after inquiry of Ibex's officers, directors and
advisors, Ibex is not infringing, misappropriating or making any unlawful
use of, and Ibex has not at any time infringed, misappropriated or made any
unlawful use of, or received any notice or other communication (in writing
or otherwise) of any actual, alleged, possible or potential infringement,
misappropriation or unlawful use of, any Proprietary Asset owned or used by
any other Person. To the best of the knowledge of Ibex and the Designated
Shareholders, no other Person is infringing, misappropriating or making any
unlawful use of, and no Proprietary Asset owned or used by any other Person
infringes or conflicts with, any Ibex Proprietary Asset.
(d) Except as set forth in Part 2.9(d) of the Disclosure Schedule: (i) each
Ibex Proprietary Asset conforms in all material respects with any
specification, documentation, performance standard, representation or
statement made or provided with respect thereto by or on behalf of Ibex;
and (ii) there has not been any claim by any customer or other Person
alleging that any Ibex Proprietary Asset (including each version thereof
that has ever been licensed or otherwise made available by Ibex to any
Person) does not conform in all material respects with any specification,
documentation, performance standard, representation or statement made or
provided by or on behalf of Ibex, and, to the best of the knowledge of Ibex
and the Designated Shareholders, there is no basis for any such claim. Ibex
has established adequate reserves on the Unaudited Interim Balance Sheet to
22
cover all costs associated with any obligations that Ibex may have with
respect to the correction or repair of programming errors or other defects
in Ibex Proprietary Assets.
(e) Ibex Proprietary Assets constitute all the Proprietary Assets necessary
to enable Ibex to conduct its business in the manner in which such business
has been and is being conducted. Except as set forth in Part 2.9(e) of the
Disclosure Schedule, (i) Ibex has not licensed any of Ibex Proprietary
Assets to any Person on an exclusive basis, and (ii) Ibex has not entered
into any covenant not to compete or Contract limiting its ability to
exploit fully any of its Proprietary Assets or to transact business in any
market or geographical area or with any Person.
(f) Except as set forth in Part 2.9(f) of the Disclosure Schedule, (i) all
current and former employees of Ibex have executed and delivered to Ibex an
agreement (containing no exceptions to or exclusions from the scope of its
coverage) that is substantially identical to the form of Confidential
Information and Invention Assignment Agreement previously delivered to
Castelle, and (ii) all current and former consultants and independent
contractors to Ibex have executed and delivered to Ibex an agreement
(containing no exceptions to or exclusions from the scope of its coverage)
that is substantially identical to the standard form of proprietary rights
agreement previously delivered to Castelle.
2.10 Contracts.
(a) Part 2.10 of the Disclosure Schedule identifies:
(i) each Ibex Contract relating to the employment of, or the
performance of services by, any employee, consultant or independent
contractor;
(ii) each Ibex Contract relating to the acquisition, transfer, use,
development, sharing or license of any technology or any Proprietary
Asset;
(iii) each Ibex Contract imposing any restriction on Ibex's right or
ability (A) to compete with any other Person, (B) to acquire any
product or other asset or any services from any other Person, to sell
any product or other asset to or perform any services for any other
Person or to transact business or deal in any other manner with any
other Person, or (C) develop or distribute any technology;
(iv) each Ibex Contract creating or involving any agency relationship,
distribution arrangement or franchise relationship;
(v) each Ibex Contract relating to the acquisition, issuance or
transfer of any securities;
(vi) each Ibex Contract relating to the creation of any Encumbrance
with respect to any asset of Ibex;
23
(vii) each Ibex Contract involving or incorporating any guaranty, any
pledge, any performance or completion bond, any indemnity or any
surety arrangement;
(viii) each Ibex Contract creating or relating to any partnership or
joint venture or any sharing of revenues, profits, losses, costs or
liabilities;
(ix) each Ibex Contract relating to the purchase or sale of any
product or other asset by or to, or the performance of any services by
or for, any Related Party (as defined in Section 2.18);
(x) each Ibex Contract constituting or relating to a Government
Contract or Government Bid;
(xi) any other Ibex Contract that was entered into outside the
ordinary course of business or was inconsistent with Ibex's past
practices;
(xii) any other Ibex Contract that has a term of more than 60 days and
that may not be terminated by Ibex (without penalty) within 60 days
after the delivery of a termination notice by Xxxx; and
(xiii) any other Ibex Contract that contemplates or involves (A) the
payment or delivery of cash or other consideration in an amount or
having a value in excess of $10,000 in the aggregate, or (B) the
performance of services having a value in excess of $10,000 in the
aggregate.
(Contracts in the respective categories described in clauses "(i)" through
"(xiii)" above are referred to in this Agreement as "Material Contracts.")
(b) Ibex has delivered to Castelle accurate and complete copies of all
written Contracts identified in Part 2.10 of the Disclosure Schedule,
including all amendments thereto. Part 2.10 of the Disclosure Schedule
provides an accurate description of the terms of each Ibex Contract that is
not in written form. Each Contract identified in Part 2.10 of the
Disclosure Schedule is valid and in full force and effect, and, to the best
of the knowledge of Ibex and the Designated Shareholders, is enforceable by
Ibex in accordance with its terms, subject to (i) laws of general
application relating to bankruptcy, insolvency and the relief of debtors,
and (ii) rules of law governing specific performance, injunctive relief and
other equitable remedies.
(c) Except as set forth in Part 2.10 of the Disclosure Schedule:
(i) Ibex has not violated or breached, or committed any default under,
any Ibex Contract, and, to the best of the knowledge of Ibex and the
Designated Shareholders, no other Person has violated or breached, or
committed any default under, any Ibex Contract;
24
(ii) to the best of the knowledge of Ibex and the Designated
Shareholders, no event has occurred, and no circumstance or condition
exists, that (with or without notice or lapse of time) will, or could
reasonably be expected to, (A) result in a violation or breach of any
of the provisions of any Ibex Contract, (B) give any Person the right
to declare a default or exercise any remedy under any Ibex Contract,
(C) give any Person the right to accelerate the maturity or
performance of any Ibex Contract, or (D) give any Person the right to
cancel, terminate or modify any Ibex Contract;
(iii) since December 31, 1992, Ibex has not received any notice or
other communication regarding any actual or possible violation or
breach of, or default under, any Ibex Contract; and
(iv) Ibex has not waived any of its material rights under any Material
Contract.
(d) No Person is renegotiating, or has a right pursuant to the terms of any
Ibex Contract to renegotiate, any amount paid or payable to Ibex under any
Material Contract or any other material term or provision of any Material
Contract.
(e) The Contracts identified in Part 2.10 of the Disclosure Schedule
collectively constitute all of the Contracts necessary to enable Ibex to
conduct its business in the manner in which its business is currently being
conducted.
(f) Part 2.10 of the Disclosure Schedule identifies and provides a brief
description of each proposed Contract as to which any bid, offer, award,
written proposal, term sheet or similar document has been submitted or
received by Ibex since January 1, 1996.
(g) Part 2.10 of the Disclosure Schedule provides an accurate description
and breakdown of Ibex's backlog under Ibex Contracts.
(h) Except as set forth in Part 2.10(h) of the Disclosure Schedule, Ibex
has not entered into and is not negotiating any Government Contract or
Government Bid, and Ibex is not and will not be required to make any filing
with or give any notice to, or to obtain any Consent from, any Governmental
Body under or in connection with any Government Contract or Government Bid
as a result of or by virtue of (A) the execution, delivery of performance
of this Agreement or any of the other agreements referred to in this
Agreement, or (B) the consummation of the Merger or any of the other
transactions contemplated by this Agreement.
2.11 Liabilities. Ibex has no accrued, contingent or other liabilities of
any nature, either matured or unmatured (whether or not required to be reflected
in financial statements in accordance with generally accepted accounting
principles, and whether due or to become due), except for: (a) liabilities
identified as such in the "liabilities" column of the Unaudited Interim Balance
Sheet; (b) accounts payable or accrued salaries that have been incurred by Ibex
since June 30, 1996 in the ordinary course of business and consistent with
Ibex's past practices; (c) liabilities under Ibex Contracts identified in Part
25
2.10 of the Disclosure Schedule, to the extent the nature and magnitude of such
liabilities can be specifically ascertained by reference to the text of such
Ibex Contracts; and (d) the liabilities identified in Part 2.11 of the
Disclosure Schedule.
2.12 Compliance with Legal Requirements. To the best of the knowledge of
Ibex and the Designated Shareholders, Ibex is, and has at all times since
December 31, 1992 been, in compliance with all applicable Legal Requirements,
except where the failure to comply with such Legal Requirements has not had and
will not have a Material Adverse Effect on Ibex. Except as set forth in Part
2.12 of the Disclosure Schedule, since December 31, 1992, Ibex has not received
any notice or other communication from any Governmental Body regarding any
actual or possible violation of, or failure to comply with, any Legal
Requirement.
2.13 Governmental Authorizations. Part 2.13 of the Disclosure Schedule
identifies each material Governmental Authorization held by Xxxx, and Xxxx has
delivered to Castelle accurate and complete copies of all Governmental
Authorizations identified in Part 2.13 of the Disclosure Schedule. The
Governmental Authorizations identified in Part 2.13 of the Disclosure Schedule
are valid and in full force and effect, and collectively constitute all
Governmental Authorizations necessary to enable Ibex to conduct its business in
the manner in which its business is currently being conducted. Ibex is, and at
all times since December 31, 1992 has been, in substantial compliance with the
material terms and requirements of the respective Governmental Authorizations
identified in Part 2.13 of the Disclosure Schedule. Since December 31, 1992,
Ibex has not received any notice or other communication from any Governmental
Body regarding (a) any actual or possible violation of or failure to comply with
any term or requirement of any Governmental Authorization, or (b) any actual or
possible revocation, withdrawal, suspension, cancellation, termination or
modification of any Governmental Authorization.
2.14 Tax Matters.
(a) All Tax Returns required to be filed by or on behalf of Ibex with any
Governmental Body with respect to any taxable period ending on or before
the Closing Date (the "Ibex Returns") (i) have been or will be filed on or
before the applicable due date (including any extensions of such due date),
and (ii) have been, or will be when filed, accurately and completely
prepared in all material respects in compliance with all applicable Legal
Requirements. All amounts shown on Ibex Returns to be due on or before the
Closing Date have been or will be paid on or before the Closing Date. Ibex
has delivered to Castelle accurate and complete copies of all Ibex Returns
filed since December 31, 1992 which have been requested by Xxxxxxxx.
(b) Ibex Financial Statements fully accrue all actual and contingent
liabilities for Taxes with respect to all periods through the dates thereof
in accordance with generally accepted accounting principles. Ibex will
establish, in the ordinary course of business and consistent with its past
practices, reserves adequate for the payment of all Taxes for the period
from June 30, 1996 through the Closing Date, and Ibex will disclose the
dollar amount of such reserves to Castelle on or prior to the Closing Date.
26
(c) No Ibex Return relating to income Taxes has ever been examined or
audited by any Governmental Body. Except as set forth in Part 2.14 of the
Disclosure Schedule, there have been no examinations or audits of any Ibex
Return. Ibex has delivered to Castelle accurate and complete copies of all
audit reports and similar documents (to which Ibex has access) relating to
Ibex Returns. Except as set forth in Part 2.14 of the Disclosure Schedule,
no extension or waiver of the limitation period applicable to any of Ibex
Returns has been granted (by Ibex or any other Person), and no such
extension or waiver has been requested from Ibex.
(d) Except as set forth in Part 2.14 of the Disclosure Schedule, no claim
or Proceeding is pending or has been threatened against or with respect to
Ibex in respect of any Tax. There are no unsatisfied liabilities for Taxes
(including liabilities for interest, additions to tax and penalties thereon
and related expenses) with respect to any notice of deficiency or similar
document received by Ibex with respect to any Tax (other than liabilities
for Taxes asserted under any such notice of deficiency or similar document
which are being contested in good faith by Ibex and with respect to which
adequate reserves for payment have been established). There are no liens
for Taxes upon any of the assets of Ibex except liens for current Taxes not
yet due and payable. Ibex has not entered into or become bound by any
agreement or consent pursuant to Section 341(f) of the Code. Ibex has not
been, and Ibex will not be, required to include any adjustment in taxable
income for any tax period (or portion thereof) pursuant to Section 481 or
263A of the Code or any comparable provision under state or foreign Tax
laws as a result of transactions or events occurring, or accounting methods
employed, prior to the Closing.
(e) There is no agreement, plan, arrangement or other Contract covering any
employee or independent contractor or former employee or independent
contractor of Ibex that, considered individually or considered collectively
with any other such Contracts, will, or could reasonably be expected to,
give rise directly or indirectly to the payment of any amount that would
not be deductible pursuant to Section 280G or Section 162 of the Code. Ibex
is not, and has never been, a party to or bound by any tax indemnity
agreement, tax sharing agreement, tax allocation agreement or similar
Contract.
2.15 Employee and Labor Matters; Benefit Plans.
(a) Part 2.15(a) of the Disclosure Schedule identifies each salary, bonus,
deferred compensation, incentive compensation, stock purchase, stock
option, severance pay, termination pay, hospitalization, medical, life or
other insurance, supplemental unemployment benefits, profit-sharing,
pension or retirement plan, program or agreement (collectively, the
"Plans") sponsored, maintained, contributed to or required to be
contributed to by Ibex for the benefit of any employee of Ibex
("Employee"), except for Plans which would not require Ibex to make
payments or provide benefits having a value in excess of $10,000 in the
aggregate.
(b) Except as set forth in Part 2.15(a) of the Disclosure Schedule, Ibex
does not maintain, sponsor or contribute to, and, to the best of the
knowledge of Ibex and the Designated Shareholders, has not at any time in
27
the past maintained, sponsored or contributed to, any employee pension
benefit plan (as defined in Section 3(2) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), whether or not excluded from
coverage under specific Titles or Merger Subtitles of ERISA) for the
benefit of Employees or former Employees (a "Pension Plan").
(c) Ibex maintains, sponsors or contributes only to those employee welfare
benefit plans (as defined in Section 3(1) of ERISA, whether or not excluded
from coverage under specific Titles or Merger Subtitles of ERISA) for the
benefit of Employees or former Employees which are described in Part
2.15(c) of the Disclosure Schedule (the "Welfare Plans"), none of which is
a multiemployer plan (within the meaning of Section 3(37) of ERISA).
(d) With respect to each Plan, Ibex has delivered to Castelle:
(i) an accurate and complete copy of such Plan (including all
amendments thereto);
(ii) an accurate and complete copy of the annual report, if required
under ERISA, with respect to such Plan for the last two years;
(iii) an accurate and complete copy of the most recent summary plan
description, together with each Summary of Material Modifications, if
required under ERISA, with respect to such Plan, and all material
employee communications relating to such Plan;
(iv) if such Plan is funded through a trust or any third party funding
vehicle, an accurate and complete copy of the trust or other funding
agreement (including all amendments thereto) and accurate and complete
copies the most recent financial statements thereof;
(v) accurate and complete copies of all Contracts relating to such
Plan, including service provider agreements, insurance contracts,
minimum premium contracts, stop-loss agreements, investment management
agreements, subscription and participation agreements and
recordkeeping agreements; and
(vi) an accurate and complete copy of the most recent determination
letter received from the Internal Revenue Service with respect to such
Plan (if such Plan is intended to be qualified under Section 401(a) of
the Code).
(e) Ibex is not required to be, and, to the best of the knowledge of Ibex
and the Designated Shareholders, has never been required to be, treated as
a single employer with any other Person under Section 4001(b)(1) of ERISA
or Section 414(b), (c), (m) or (o) of the Code. Ibex has never been a
member of an "affiliated service group" within the meaning of Section
414(m) of the Code. To the best of the knowledge of Ibex and the Designated
Shareholders, Ibex has never made a complete or partial withdrawal from a
multiemployer plan, as such term is defined in Section 3(37) of ERISA,
28
resulting in "withdrawal liability," as such term is defined in Section
4201 of ERISA (without regard to subsequent reduction or waiver of such
liability under either Section 4207 or 4208 of ERISA).
(f) Ibex does not have any plan or commitment to create any additional
Welfare Plan or any Pension Plan, or to modify or change any existing
Welfare Plan or Pension Plan (other than to comply with applicable law) in
a manner that would affect any Employee.
(g) Except as set forth in Part 2.15(g) of the Disclosure Schedule, no
Welfare Plan provides death, medical or health benefits (whether or not
insured) with respect to any current or former Employee after any such
Employee's termination of service (other than (i) benefit coverage mandated
by applicable law, including coverage provided pursuant to Section 4980B of
the Code, (ii) deferred compensation benefits accrued as liabilities on the
Unaudited Interim Balance Sheet, and (iii) benefits the full cost of which
are borne by current or former Employees (or the Employees'
beneficiaries)).
(h) With respect to each of the Welfare Plans constituting a group health
plan within the meaning of Section 4980B(g)(2) of the Code, the provisions
of Section 4980B of the Code ("COBRA") have been complied with in all
material respects.
(i) Each of the Plans has been operated and administered in all material
respects in accordance with applicable Legal Requirements, including but
not limited to ERISA and the Code.
(j) Each of the Plans intended to be qualified under Section 401(a) of the
Code has received a favorable determination from the Internal Revenue
Service, and neither Ibex nor any of the Designated Shareholders is aware
of any reason why any such determination letter should be revoked.
(k) Except as set forth in Part 2.15(k) of the Disclosure Schedule, neither
the execution, delivery or performance of this Agreement, nor the
consummation of the Merger or any of the other transactions contemplated by
this Agreement, will result in any payment (including any bonus, golden
parachute or severance payment) to any current or former Employee or
director of Ibex (whether or not under any Plan), or materially increase
the benefits payable under any Plan, or result in any acceleration of the
time of payment or vesting of any such benefits.
(l) Part 2.15(l) of the Disclosure Schedule contains a list of all salaried
employees of Ibex as of the date of this Agreement, and correctly reflects,
in all material respects, their salaries, any other compensation payable to
them (including compensation payable pursuant to bonus, deferred
compensation or commission arrangements), their dates of employment and
their positions. Ibex is not a party to any collective bargaining contract
or other Contract with a labor union involving any of its Employees. All of
Ibex's employees are "at will" employees.
29
(m) Part 2.15(m) of the Disclosure Schedule identifies each Employee who is
not fully available to perform work because of disability or other leave
and sets forth the basis of such leave and the anticipated date of return
to full service.
(n) Ibex is in compliance in all material respects with all applicable
Legal Requirements and Contracts relating to employment, employment
practices, wages, bonuses and terms and conditions of employment, including
employee compensation matters.
(o) Except as set forth in Part 2.15(o) of the Disclosure Schedule, Ibex
has good labor relations, and none of the Designated Shareholders has any
reason to believe that (i) the consummation of the Merger or any of the
other transactions contemplated by this Agreement will have a material
adverse effect on Ibex's labor relations, or (ii) any of Ibex's employees
intends to terminate his or her employment with Ibex.
2.16 Environmental Matters. Ibex is in compliance in all material respects
with all applicable Environmental Laws, which compliance includes the possession
by Ibex of all permits and other Governmental Authorizations required under
applicable Environmental Laws, and compliance with the terms and conditions
thereof. Ibex has not received any notice or other communication (in writing or
otherwise), whether from a Governmental Body, citizens group, employee or
otherwise, that alleges that Ibex is not in compliance with any Environmental
Law, and, to the best of the knowledge of Ibex and Designated Shareholders,
there are no circumstances that may prevent or interfere with Ibex's compliance
with any Environmental Law in the future. To the best of the knowledge of Ibex
and the Designated Shareholders, no current or prior owner of any property
leased or controlled by Ibex has received any notice or other communication (in
writing or otherwise), whether from a Government Body, citizens group, employee
or otherwise, that alleges that such current or prior owner or Ibex is not in
compliance with any Environmental Law. All Governmental Authorizations currently
held by Ibex pursuant to Environmental Laws are identified in Part 2.16 of the
Disclosure Schedule. (For purposes of this Section 2.16: (i) "Environmental Law"
means any federal, state, local or foreign Legal Requirement relating to
pollution or protection of human health or the environment (including ambient
air, surface water, ground water, land surface or subsurface strata), including
any law or regulation relating to emissions, discharges, releases or threatened
releases of Materials of Environmental Concern, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Materials of Environmental Concern; and (ii) "Materials
of Environmental Concern" include chemicals, pollutants, contaminants, wastes,
toxic substances, petroleum and petroleum products and any other substance that
is now regulated by any Environmental Law or that is otherwise a danger to
health, reproduction or the environment.)
2.17 Insurance. Part 2.17 of the Disclosure Schedule identifies all
insurance policies maintained by, at the expense of or for the benefit of Ibex
and identifies any material claims made thereunder, and Ibex has delivered to
Castelle accurate and complete copies of the insurance policies identified on
Part 2.17 of the Disclosure Schedule. Each of the insurance policies identified
in Part 2.17 of the Disclosure Schedule is in full force and effect. Since
30
December 31, 1992, Ibex has not received any notice or other communication
regarding any actual or possible (a) cancellation or invalidation of any
insurance policy, (b) refusal of any coverage or rejection of any claim under
any insurance policy, or (c) material adjustment in the amount of the premiums
payable with respect to any insurance policy.
2.18 Related Party Transactions. Except as set forth in Part 2.18 of the
Disclosure Schedule: (a) no Related Party has, and no Related Party has at any
time since December 31, 1992 had, any direct or indirect interest in any
material asset used in or otherwise relating to the business of Ibex; (b) no
Related Party is, or has at any time since December 31, 1992 been, indebted to
Ibex; (c) since December 31, 1992, no Related Party has entered into, or has had
any direct or indirect financial interest in, any material Contract, transaction
or business dealing involving Ibex; (d) no Related Party is competing, or has at
any time since December 31, 1992 competed, directly or indirectly, with Ibex;
and (e) no Related Party has any claim or right against Ibex (other than rights
under company Options and rights to receive compensation for services performed
as an employee of Ibex). (For purposes of the Section 2.18 each of the following
shall be deemed to be a "Related Party": (i) each of the Designated
Shareholders; (ii) each individual who is, or who has at any time since December
31, 1992 been, an officer of Ibex; (iii) each member of the immediate family of
each of the individuals referred to in clauses "(i)" and "(ii)" above; and (iv)
any trust or other Entity (other than Ibex) in which any one of the individuals
referred to in clauses "(i)", "(ii)" and "(iii)" above holds (or in which more
than one of such individuals collectively hold), beneficially or otherwise, a
material voting, proprietary or equity interest.)
2.19 Legal Proceedings; Orders.
(a) Except as set forth in Part 2.19 of the Disclosure Schedule, there is
no pending Legal Proceeding, and (to the best of the knowledge of Ibex and
the Designated Shareholders) no Person has threatened to commence any Legal
Proceeding: (i) that involves Ibex or any of the assets owned or used by
Ibex or any Person whose liability Ibex has or may have retained or
assumed, either contractually or by operation of law; or (ii) that
challenges, or that may have the effect of preventing, delaying, making
illegal or otherwise interfering with, the Merger or any of the other
transactions contemplated by this Agreement. To the best of the knowledge
of Ibex and the Designated Shareholders, except as set forth in Part 2.19
of the Disclosure Schedule, no event has occurred, and no claim, dispute or
other condition or circumstance exists, that will, or that could reasonably
be expected to, give rise to or serve as a basis for the commencement of
any such Legal Proceeding.
(b) Except as set forth in Part 2.19 of the Disclosure Schedule, no Legal
Proceeding has ever been commenced by or has ever been pending against
Ibex.
(c) There is no order, writ, injunction, judgment or decree to which Ibex,
or any of the assets owned or used by Ibex, is subject. None of the
Designated Shareholders is subject to any order, writ, injunction, judgment
or decree that relates to Ibex's business or to any of the assets owned or
used by Ibex. To the best of the knowledge of Ibex and the Designated
Shareholders, no officer or other employee of Ibex is subject to any order,
31
writ, injunction, judgment or decree that prohibits such officer or other
employee from engaging in or continuing any conduct, activity or practice
relating to Ibex's business.
2.20 Authority; Binding Nature of Agreement. Ibex has the right, power and
authority to enter into and to perform its obligations under this Agreement; and
the execution, delivery and performance by Ibex of this Agreement have been duly
authorized by all necessary action on the part of Ibex and its board of
directors. This Agreement constitutes the legal, valid and binding obligation of
Ibex, enforceable against Ibex in accordance with its terms, subject to (i) laws
of general application relating to bankruptcy, insolvency and the relief of
debtors, and (ii) rules of law governing specific performance, injunctive relief
and other equitable remedies.
2.21 Non-Contravention; Consents. Except as set forth in Part 2.21 of the
Disclosure Schedule, neither (1) the execution, delivery or performance of this
Agreement or any of the other agreements referred to in this Agreement, nor (2)
the consummation of the Merger or any of the other transactions contemplated by
this Agreement, will directly or indirectly (with or without notice or lapse of
time):
(a) contravene, conflict with or result in a violation of (i) any of the
provisions of Ibex's articles of incorporation or bylaws, or (ii) any
resolution adopted by Ibex's shareholders, Ibex's board of directors or any
committee of Ibex's board of directors;
(b) contravene, conflict with or result in a violation of, or give any
Governmental Body or other Person the right to challenge any of the
transactions contemplated by this Agreement or to exercise any remedy or
obtain any relief under, any Legal Requirement or any order, writ,
injunction, judgment or decree to which Ibex, or any of the assets owned or
used by Ibex, is subject;
(c) contravene, conflict with or result in a violation of any of the terms
or requirements of, or give any Governmental Body the right to revoke,
withdraw, suspend, cancel, terminate or modify, any Governmental
Authorization that is held by Ibex or that otherwise relates to Ibex's
business or to any of the assets owned or used by Ibex;
(d) contravene, conflict with or result in a violation or breach of, or
result in a material default under, any provision of any Ibex Contract that
is or would constitute a Material Contract, or give any Person the right to
(i) declare a default or exercise any remedy under any such Ibex Contract,
(ii) accelerate the maturity or performance of any such Ibex Contract, or
(iii) cancel, terminate or modify any such Ibex Contract; or
(e) result in the imposition or creation of any lien or other Encumbrance
upon or with respect to any asset owned or used by Ibex (except for minor
liens that will not, in any case or in the aggregate, materially detract
from the value of the assets subject thereto or materially impair the
operations of Ibex).
32
Except as set forth in Part 2.21 of the Disclosure Schedule, Ibex is not and
will not be required to make any filing with or give any notice to, or to obtain
any Consent from, any Person in connection with (x) the execution, delivery or
performance of this Agreement or any of the other agreements referred to in this
Agreement, or (y) the consummation of the Merger or any of the other
transactions contemplated by this Agreement.
2.22 Full Disclosure.
(a) This Agreement (including the Disclosure Schedule) does not, and the
Designated Shareholders' Closing Certificate will not, (i) contain any
representation, warranty or information that is false or misleading with
respect to any material fact, or (ii) omit to state any material fact
necessary in order to make the representations, warranties and information
contained and to be contained herein and therein (in the light of the
circumstances under which such representations, warranties and information
were or will be made or provided) not false or misleading.
(b) Should Castelle elect to file a permit application under Section 25121
of the California Corporations Code, including an Information Statement (as
defined in Section 5.2), the information supplied by Ibex for inclusion in
the Information Statement will not, as of the date of the Information
Statement or as of the date of the Ibex Shareholders' Meeting (as defined
in Section 5.3), (i) contain any statement that is inaccurate or misleading
with respect to any material fact, or (ii) omit to state any material fact
necessary in order to make such information (in the light of the
circumstances under which it is provided) not false or misleading.
(c) Should Castelle elect to prepare and file a registration statement on
Form S-4 to be filed with the SEC by Castelle in connection with the
issuance of the Castelle Common Stock in the Merger (the "S-4 Registration
Statement"), none of the information supplied or to be supplied by Ibex for
inclusion or incorporation by reference in the S-4 Registration Statement
will, at the time the S-4 Registration Statement is filed with the SEC or
at the time the S-4 Registration Statement becomes effective under the
Securities Act, 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. None of the information supplied or to be
supplied by Ibex for inclusion or incorporation by reference in the
Prospectus/Proxy Statement filed as a part of the S-4 Registration
Statement (the "Prospectus/Proxy Statement"), will, at the time mailed to
the shareholders of Castelle and Ibex, and as of the Effective 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.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF CASTELLE
Xxxxxxxx represents and warrants to Ibex and the Designated Shareholders as
follows:
33
3.1 Due Organization; No Subsidiaries; Etc.
(a) Castelle is a corporation duly organized, validly existing and in good
standing under the laws of the State of California and has all necessary
power and authority: (i) to conduct its business in the manner in which its
business is currently being conducted; (ii) to own and use its assets in
the manner in which its assets are currently owned and used; and (iii) to
perform its obligations under all Castelle Contracts.
(b) Except as set forth in Part 3.1 of the Castelle Disclosure Schedule,
Castelle has not conducted any business under or otherwise used, for any
purpose or in any jurisdiction, any fictitious name, assumed name, trade
name or other name, other than the name "Castelle."
(c) Castelle is not and has not been required to be qualified, authorized,
registered or licensed to do business as a foreign corporation in any
jurisdiction where the failure to be so qualified, authorized, registered
or licensed has not had and will not have a Material Adverse Effect on
Castelle.
(d) Xxxxxxxx's Form 10-KSB filed with the Securities and Exchange
Commission (the "SEC") on April 1, 1996 and its Form 10-KSB/A filed with
the SEC on April 29, 1996 accurately sets forth (i) the names of the
members of Castelle's board of directors, (ii) the names of the members of
each committee of Castelle's board of directors, and (iii) the names and
titles of Castelle's officers.
(e) Castelle does not own any controlling interest in any Entity and,
except for the equity interests identified in Part 3.1 of the Castelle
Disclosure Schedule, Castelle has never owned, beneficially or otherwise,
any shares or other securities of, or any direct or indirect equity
interest in, any Entity. Xxxxxxxx has not agreed and is not obligated to
make any future investment in or capital contribution to any Entity.
Castelle has not guaranteed and is not responsible or liable for any
obligation of any of the Entities in which it owns or has owned any equity
interest.
3.2 SEC Filings; Financial Statements.
(a) Castelle has delivered to Ibex accurate and complete copies (excluding
copies of exhibits) of each report, registration statement (on a form other
than Form S-8) and definitive proxy statement filed by Castelle with the
SEC between November 16, 1995 and the date of this Agreement (the "Castelle
SEC Documents"). As of the time it was filed with the SEC (or, if amended
or superseded by a filing prior to the date of this Agreement, then on the
date of such filing): (i) each of the Castelle SEC Documents complied in
all material respects with the applicable requirements of the Securities
Act or the Exchange Act (as the case may be); and (ii) none of the Castelle
SEC Documents contained any untrue statement of a material fact or omitted
to state a material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances
under which they were made, not misleading.
34
(b) The consolidated financial statements contained in the Castelle SEC
Documents: (i) complied as to form in all material respects with the
published rules and regulations of the SEC applicable thereto; (ii) were
prepared in accordance with generally accepted accounting principles
applied on a consistent basis throughout the periods covered, except as may
be indicated in the notes to such financial statements and (in the case of
unaudited statements) as permitted by Form 10-QSB of the SEC, and except
that unaudited financial statements may not contain footnotes and are
subject to year-end audit adjustments; and (iii) fairly present the
consolidated financial position of Castelle and its subsidiaries as of the
respective dates thereof and the consolidated results of operations of
Castelle and its subsidiaries for the periods covered thereby.
3.3 Capitalization, Etc.
(a) The authorized capital stock of Castelle consists of: (i) twenty-five
million (25,000,000) shares of Common Stock (with no par value), of which
three million six hundred twenty thousand eight hundred forty-four
(3,620,844) shares have been issued and are outstanding as of August 7,
1996; and (ii) two million (2,000,000) shares of Preferred Stock (with no
par value), none of which such shares have been issued as of the date of
this Agreement. All of the outstanding shares of Castelle Common Stock have
been duly authorized and validly issued, and are fully paid and
non-assessable.
(b) Castelle has reserved nine hundred forty-five thousand five hundred
eighty-three (945,583) shares of Castelle Common Stock for issuance under
its 1988 Incentive Stock Plan, of which options to purchase three hundred
sixty thousand four hundred twelve (360,412) shares are outstanding as of
August 13, 1996. In addition, the Company has reserved one hundred twenty
thousand (120,000) shares of Common Stock for issuance under the 1995
Outside Directors' Stock Option Plan, of which options to purchase ten
thousand (10,000) shares are outstanding as of the date of this Agreement.
The Company also has outstanding warrants for the purchase of two hundred
forty-eight thousand three hundred thirty-two (248,332) shares of the
Company's Common Stock. Except as set forth in Part 3.3 of the Castelle
Disclosure Schedule, there is no: (i) outstanding subscription, option,
call, warrant or right (whether or not currently exercisable) to acquire
any shares of the capital stock or other securities of Castelle; (ii)
outstanding security, instrument or obligation that is or may become
convertible into or exchangeable for any shares of the capital stock or
other securities of Castelle; (iii) Contract under which Castelle is or may
become obligated to sell or otherwise issue any shares of its capital stock
or any other securities; or (iv) to the best of the knowledge of Castelle,
condition or circumstance that may give rise to or provide a basis for the
assertion of a claim by any Person to the effect that such Person is
entitled to acquire or receive any shares of capital stock or other
securities of Castelle.
(c) All outstanding shares of Castelle Common Stock, and all outstanding
Castelle Options, have been issued and granted in compliance with (i) all
applicable securities laws and other applicable Legal Requirements, and
(ii) all requirements set forth in applicable Contracts.
35
3.4 Authority; Binding Nature of Agreement. Xxxxxxxx has the absolute and
unrestricted right, power and authority to perform their obligations under this
Agreement; and the execution, delivery and performance by Castelle of this
Agreement (including the contemplated issuance of Castelle Common Stock in the
Merger in accordance with this Agreement) have been duly authorized by all
necessary action on the part of Castelle and its respective boards of directors.
This Agreement constitutes the legal, valid and binding obligation of Castelle,
enforceable against it in accordance with its terms, subject to (i) laws of
general application relating to bankruptcy, insolvency and the relief of
debtors, and (ii) rules of law governing specific performance, injunctive relief
and other equitable remedies.
3.5 Absence of Changes. Except as set forth in Part 3.5 of the Castelle
Disclosure Schedule, since June 28, 1996:
(a) there has not been any material adverse change in Castelle's business,
condition, assets, liabilities, operations, financial performance or
prospects, and, to the best of the knowledge of Castelle, no event has
occurred that will, or could reasonably be expected to, have a Material
Adverse Effect on Castelle;
(b) there has not been any material loss, damage or destruction to, or any
material interruption in the use of, any of Castelle's assets (whether or
not covered by insurance);
(c) Castelle has not declared, accrued, set aside or paid any dividend or
made any other distribution in respect of any shares of capital stock, and
has not repurchased, redeemed or otherwise reacquired any shares of capital
stock or other securities;
(d) Castelle has not sold, issued or authorized the issuance of (i) any
capital stock or other security (except for Castelle Common Stock issued
upon the exercise of outstanding Castelle Options), (ii) any option or
right to acquire any capital stock or any other security (except for
Castelle Options identified in Section 3.3 of the Agreement), or (iii) any
instrument convertible into or exchangeable for any capital stock or other
security;
(e) Castelle has not amended or waived any of its rights under, or
permitted the acceleration of vesting under, (i) any provision of its 1988
Incentive Stock Plan or 1995 Outside Directors' Stock Option Plan, (ii) any
provision of any agreement evidencing any outstanding Castelle Option, or
(iii) any restricted stock purchase agreement;
(f) there has been no amendment to Xxxxxxxx's articles of incorporation or
bylaws, and Castelle has not effected or been a party to any Acquisition
Transaction, recapitalization, reclassification of shares, stock split,
reverse stock split or similar transaction;
(g) Castelle has not formed any subsidiary or acquired any equity interest
or other interest in any other Entity;
36
(h) Castelle has not made any capital expenditure which, when added to all
other capital expenditures made on behalf of Castelle since June 30, 1996,
exceeds $50,000;
(i) Castelle has not (i) entered into or permitted any of the assets owned
or used by it to become bound by any Contract that is or would constitute a
Material Contract (as defined in Section 2.10(a)), or (ii) amended or
prematurely terminated, or waived any material right or remedy under, any
such Contract;
(j) Castelle has not (i) acquired, leased or licensed any right or other
asset from any other Person, (ii) sold or otherwise disposed of, or leased
or licensed, any right or other asset to any other Person, or (iii) waived
or relinquished any right, except for immaterial rights or other immaterial
assets acquired, leased, licensed or disposed of in the ordinary course of
business and consistent with Castelle's past practices;
(k) Castelle has not written off as uncollectible, or established any
extraordinary reserve with respect to, any account receivable or other
indebtedness;
(l) Castelle has not made any pledge of any of its assets or otherwise
permitted any of its assets to become subject to any Encumbrance, except
for pledges of immaterial assets made in the ordinary course of business
and consistent with Castelle's past practices;
(m) Xxxxxxxx has not (i) lent money to any Person (other than pursuant to
routine travel advances made to employees in the ordinary course of
business), or (ii) incurred or guaranteed any indebtedness for borrowed
money;
(n) Castelle has not (i) established or adopted any Employee Benefit Plan,
(ii) paid any bonus or made any profit-sharing or similar payment to, or
increased the amount of the wages, salary, commissions, fringe benefits or
other compensation or remuneration payable to, any of its directors,
officers or employees, or (iii) hired any new employee;
(o) Castelle has not changed any of its methods of accounting or accounting
practices in any respect;
(p) Xxxxxxxx has not made any Tax election;
(q) Castelle has not commenced or settled any Legal Proceeding;
(r) Castelle has not entered into any material transaction or taken any
other material action outside the ordinary course of business or
inconsistent with its past practices; and
(s) Xxxxxxxx has not agreed or committed to take any of the actions
referred to in clauses "(c)" through "(r)" above.
37
3.6 Title to Assets. Castelle owns, and has good, valid and marketable
title to, all assets purported to be owned by it, including: (i) all assets
reflected in the financial statements included in the Castelle SEC Documents;
(ii) all assets referred to in Sections 3.1 and 3.7 of the Castelle Disclosure
Schedule; and (iii) all other assets reflected in Castelle's books and records
as being owned by Castelle. Except as set forth in Part 3.6 of the Castelle
Disclosure Schedule, all of said assets are owned by Castelle free and clear of
any liens or other Encumbrances, except for (x) any lien for current taxes not
yet due and payable, and (y) minor liens that have arisen in the ordinary course
of business and that do not (in any case or in the aggregate) materially detract
from the value of the assets subject thereto or materially impair the operations
of Castelle.
3.7 Proprietary Assets.
(a) Except as set forth in Part 3.7(a) of the Castelle Disclosure Schedule,
Castelle has good, valid and marketable title to all of Castelle
Proprietary Assets, free and clear of all liens and other Encumbrances, and
has a valid right to use all such Proprietary Assets. Except as set forth
in Part 3.7(a) of the Castelle Disclosure Schedule, Castelle is not
obligated to make any payment to any Person for the use of any Castelle
Proprietary Asset. Except as set forth in Part 3.7(a) of the Castelle
Disclosure Schedule, Castelle has not developed jointly with any other
Person any Castelle Proprietary Asset with respect to which such other
Person has any rights.
(b) Castelle has taken all reasonable measures and precautions necessary to
protect and maintain the confidentiality and secrecy of all Castelle
Proprietary Assets (except Castelle Proprietary Assets whose value would be
unimpaired by public disclosure) and otherwise to maintain and protect the
value of all Castelle Proprietary Assets. Except as set forth in Part
3.7(b) of the Castelle Disclosure Schedule, to the best of the knowledge of
Castelle after due inquiry of its officers, directors and advisors,
Xxxxxxxx has not (other than pursuant to license agreements) disclosed or
delivered to any Person, or permitted the disclosure or delivery to any
Person of, (i) the source code, or any portion or aspect of the source
code, of any Castelle Proprietary Asset, or (ii) the object code, or any
portion or aspect of the object code, of any Castelle Proprietary Asset.
(c) To the best of the knowledge of Castelle after due inquiry of its
officers, directors and advisors, none of the Castelle Proprietary Assets
infringes or conflicts with any Proprietary Asset owned or used by any
other Person. To the best of the knowledge of Castelle after due inquiry of
its officers, directors and advisors, Xxxxxxxx is not infringing,
misappropriating or making any unlawful use of, and Xxxxxxxx has not at any
time infringed, misappropriated or made any unlawful use of, or received
any notice or other communication (in writing or otherwise) of any actual,
alleged, possible or potential infringement, misappropriation or unlawful
use of, any Proprietary Asset owned or used by any other Person. To the
best of the knowledge of Castelle, no other Person is infringing,
misappropriating or making any unlawful use of, and no Proprietary Asset
owned or used by any other Person infringes or conflicts with, any Castelle
Proprietary Asset.
38
(d) Except as set forth in Part 3.7(d) of the Castelle Disclosure Schedule:
(i) each Castelle Proprietary Asset conforms in all material respects with
any specification, documentation, performance standard, representation or
statement made or provided with respect thereto by or on behalf of
Castelle; and (ii) there has not been any claim by any customer or other
Person alleging that any Castelle Proprietary Asset (including each version
thereof that has ever been licensed or otherwise made available by Castelle
to any Person) does not conform in all material respects with any
specification, documentation, performance standard, representation or
statement made or provided by or on behalf of Castelle, and, to the best of
the knowledge of Castelle, there is no basis for any such claim. Castelle
has established adequate reserves on its consolidated financial statements
contained in the Castelle SEC Documents to cover all costs associated with
any obligations that Castelle may have with respect to the correction or
repair of programming errors or other defects in Castelle Proprietary
Assets.
(e) Castelle Proprietary Assets constitute all the Proprietary Assets
necessary to enable Castelle to conduct its business in the manner in which
such business has been and is being conducted. Except as set forth in Part
3.7(e) of the Castelle Disclosure Schedule, (i) Castelle has not licensed
any of Castelle Proprietary Assets to any Person on an exclusive basis, and
(ii) Castelle has not entered into any covenant not to compete or Contract
limiting its ability to exploit fully any of its Proprietary Assets or to
transact business in any market or geographical area or with any Person.
(f) Except as set forth in Part 3.7(f) of the Castelle Disclosure Schedule,
(i) all current and former employees of Castelle have executed and
delivered to Castelle an agreement (containing no exceptions to or
exclusions from the scope of its coverage) that is substantially identical
to the form of Castelle Employee Agreement Concerning Inventions, Trade
Secrets and Confidential Information previously delivered to Ibex, and (ii)
all current and former consultants and independent contractors to Castelle
have executed and delivered to Castelle an agreement (containing no
exceptions to or exclusions from the scope of its coverage) that is
substantially identical to the form of Consultant Confidential Information
and Invention Assignment Agreements previously delivered to Ibex.
3.8 Liabilities. Xxxxxxxx has no accrued, contingent or other liabilities
of any nature, either matured or unmatured (whether or not required to be
reflected in financial statements in accordance with generally accepted
accounting principles, and whether due or to become due), except for: (a)
liabilities identified as such in the "liabilities" column of the consolidated
financial statements contained in the Castelle SEC Documents; (b) accounts
payable or accrued salaries that have been incurred by Castelle since June 30,
1996 in the ordinary course of business and consistent with Castelle's past
practices; and (c) the liabilities identified in Part 3.8 of the Castelle
Disclosure Schedule.
3.9 Compliance with Legal Requirements. To the best of Xxxxxxxx's
knowledge, Castelle is, and has at all times since December 31, 1992 been, in
compliance with all applicable Legal Requirements, except where the failure to
comply with such Legal Requirements has not had and will not have a Material
Adverse Effect on Castelle. Except as set forth in Part 3.9 of the Castelle
Disclosure Schedule, since December 31, 1992, Xxxxxxxx has not received any
39
notice or other communication from any Governmental Body regarding any actual or
possible violation of, or failure to comply with, any Legal Requirement.
3.10 Governmental Authorizations. Castelle holds all Governmental
Authorizations necessary to enable Castelle to conduct its business in the
manner in which its business is currently being conducted. Castelle is, and at
all times since December 31, 1992 has been, in substantial compliance with the
material terms and requirements of the respective Governmental Authorizations
necessary for its business. Since December 31, 1992, Xxxxxxxx has not received
any notice or other communication from any Governmental Body regarding (a) any
actual or possible violation of or failure to comply with any term or
requirement of any Governmental Authorization necessary for its business, or (b)
any actual or possible revocation, withdrawal, suspension, cancellation,
termination or modification of any Governmental Authorization necessary for its
business.
3.11 Tax Matters.
(a) All Tax Returns required to be filed by or on behalf of Castelle with
any Governmental Body with respect to any taxable period ending on or
before the Closing Date (the "Castelle Returns") (i) have been or will be
filed on or before the applicable due date (including any extensions of
such due date), and (ii) have been, or will be when filed, accurately and
completely prepared in all material respects in compliance with all
applicable Legal Requirements. All amounts shown on Castelle Returns to be
due on or before the Closing Date have been or will be paid on or before
the Closing Date.
(b) Castelle Financial Statements fully accrue all actual and contingent
liabilities for Taxes with respect to all periods through the dates thereof
in accordance with generally accepted accounting principles. Castelle will
establish, in the ordinary course of business and consistent with its past
practices, reserves adequate for the payment of all Taxes for the period
from June 30, 1996 through the Closing Date.
(c) No Castelle Return relating to income Taxes has ever been examined or
audited by any Governmental Body. Except as set forth in Part 3.11 of the
Castelle Disclosure Schedule, there have been no examinations or audits of
any Castelle Return.
(d) Except as set forth in Part 3.11 of the Castelle Disclosure Schedule,
no claim or Proceeding is pending or has been threatened against or with
respect to Castelle in respect of any Tax. There are no unsatisfied
liabilities for Taxes (including liabilities for interest, additions to tax
and penalties thereon and related expenses) with respect to any notice of
deficiency or similar document received by Castelle with respect to any Tax
(other than liabilities for Taxes asserted under any such notice of
deficiency or similar document which are being contested in good faith by
Xxxxxxxx and with respect to which adequate reserves for payment have been
established). There are no liens for Taxes upon any of the assets of
Castelle except liens for current Taxes not yet due and payable. Castelle
has not entered into or become bound by any agreement or consent pursuant
to Section 341(f) of the Code. Castelle has not been, and Castelle will not
40
be, required to include any adjustment in taxable income for any tax period
(or portion thereof) pursuant to Section 481 or 263A of the Code or any
comparable provision under state or foreign Tax laws as a result of
transactions or events occurring, or accounting methods employed, prior to
the Closing.
(e) There is no agreement, plan, arrangement or other Contract covering any
employee or independent contractor or former employee or independent
contractor of Castelle that, considered individually or considered
collectively with any other such Contracts, will, or could reasonably be
expected to, give rise directly or indirectly to the payment of any amount
that would not be deductible pursuant to Section 280G or Section 162 of the
Code. Castelle is not, and has never been, a party to or bound by any tax
indemnity agreement, tax sharing agreement, tax allocation agreement or
similar Contract.
3.12 Employee and Labor Matters; Benefit Plans. Each of Castelle's Plans
has been operated and administered in all material respects in accordance with
applicable Legal Requirements, including but not limited to ERISA and the Code.
3.13 Environmental Matters. Castelle is in compliance in all material
respects with all applicable Environmental Laws, which compliance includes the
possession by Castelle of all permits and other Governmental Authorizations
required under applicable Environmental Laws, and compliance with the terms and
conditions thereof. Castelle has not received any notice or other communication
(in writing or otherwise), whether from a Governmental Body, citizens group,
employee or otherwise, that alleges that Castelle is not in compliance with any
Environmental Law, and, to the best of the knowledge of Castelle, there are no
circumstances that may prevent or interfere with Xxxxxxxx's compliance with any
Environmental Law in the future. To the best of the knowledge of Castelle, no
current or prior owner of any property leased or controlled by Xxxxxxxx has
received any notice or other communication (in writing or otherwise), whether
from a Government Body, citizens group, employee or otherwise, that alleges that
such current or prior owner or Castelle is not in compliance with any
Environmental Law. (For purposes of this Section 3.13: (i) "Environmental Law"
means any federal, state, local or foreign Legal Requirement relating to
pollution or protection of human health or the environment (including ambient
air, surface water, ground water, land surface or subsurface strata), including
any law or regulation relating to emissions, discharges, releases or threatened
releases of Materials of Environmental Concern, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Materials of Environmental Concern; and (ii) "Materials
of Environmental Concern" include chemicals, pollutants, contaminants, wastes,
toxic substances, petroleum and petroleum products and any other substance that
is now regulated by any Environmental Law or that is otherwise a danger to
health, reproduction or the environment.)
3.14 Legal Proceedings; Orders.
(a) Except as set forth in Part 3.14 of the Castelle Disclosure Schedule,
there is no pending Legal Proceeding, and (to the best of the knowledge of
Castelle) no Person has threatened to commence any Legal Proceeding: (i)
that involves Castelle or any of the assets owned or used by Castelle or
41
any Person whose liability Castelle has or may have retained or assumed,
either contractually or by operation of law; or (ii) that challenges, or
that may have the effect of preventing, delaying, making illegal or
otherwise interfering with, the Merger or any of the other transactions
contemplated by this Agreement. To the best of the knowledge of Castelle,
except as set forth in Part 3.14 of the Castelle Disclosure Schedule, no
event has occurred, and no claim, dispute or other condition or
circumstance exists, that will, or that could reasonably be expected to,
give rise to or serve as a basis for the commencement of any such Legal
Proceeding.
(b) There is no order, writ, injunction, judgment or decree to which
Castelle, or any of the assets owned or used by Castelle, is subject. To
the best of the knowledge of Xxxxxxxx, no officer or other employee of
Castelle is subject to any order, writ, injunction, judgment or decree that
prohibits such officer or other employee from engaging in or continuing any
conduct, activity or practice relating to Castelle's business.
3.15 Non-Contravention; Consents. Except as set forth in Part 3.15 of the
Castelle Disclosure Schedule, neither (1) the execution, delivery or performance
of this Agreement or any of the other agreements referred to in this Agreement,
nor (2) the consummation of the Merger or any of the other transactions
contemplated by this Agreement, will directly or indirectly (with or without
notice or lapse of time):
(a) contravene, conflict with or result in a violation of (i) any of the
provisions of Xxxxxxxx's articles of incorporation or bylaws, or (ii) any
resolution adopted by Castelle's shareholders, Castelle's board of
directors or any committee of Castelle's board of directors;
(b) contravene, conflict with or result in a violation of, or give any
Governmental Body or other Person the right to challenge any of the
transactions contemplated by this Agreement or to exercise any remedy or
obtain any relief under, any Legal Requirement or any order, writ,
injunction, judgment or decree to which Castelle, or any of the assets
owned or used by Castelle, is subject;
(c) contravene, conflict with or result in a violation of any of the terms
or requirements of, or give any Governmental Body the right to revoke,
withdraw, suspend, cancel, terminate or modify, any Governmental
Authorization that is held by Xxxxxxxx or that otherwise relates to
Castelle's business or to any of the assets owned or used by Castelle;
(d) contravene, conflict with or result in a violation or breach of, or
result in a material default under, any provision of any Castelle Contract
that is or would constitute a Material Contract, or give any Person the
right to (i) declare a default or exercise any remedy under any such
Castelle Contract, (ii) accelerate the maturity or performance of any such
Castelle Contract, or (iii) cancel, terminate or modify any such Castelle
Contract; or
(e) result in the imposition or creation of any lien or other Encumbrance
upon or with respect to any asset owned or used by Castelle (except for
minor liens that will not, in any case or in the aggregate, materially
detract from the value of the assets subject thereto or materially impair
the operations of Castelle).
42
Except as set forth in Part 3.15 of the Castelle Disclosure Schedule or as may
be required by the Exchange Act, Securities Act, state securities or blue sky
laws, the CGCL and the NASD Bylaws (as they relate to the S-4 Registration
Statement and the Prospectus/Proxy Statement, or the Information Statement),
Castelle is not and will not be required to make any filing with or give any
notice to, or to obtain any Consent from, any Person in connection with (x) the
execution, delivery or performance of this Agreement or any of the other
agreements referred to in this Agreement, or (y) the consummation of the Merger
or any of the other transactions contemplated by this Agreement.
3.16 Full Disclosure.
(a) This Agreement (including the Castelle Disclosure Schedule) does not
(i) contain any representation, warranty or information that is false or
misleading with respect to any material fact, or (ii) omit to state any
material fact necessary in order to make the representations, warranties
and information contained and to be contained herein and therein (in the
light of the circumstances under which such representations, warranties and
information were or will be made or provided) not false or misleading.
(b) Should Castelle elect to file a permit application under Section 25121
of the California Corporations Code, including an Information Statement (as
defined in Section 5.2), the information supplied by Castelle for inclusion
in the Information Statement (as defined in Section 5.2) will not, as of
the date of the Information Statement or as of the date of Ibex
Shareholders' Meeting (as defined in Section 5.3), (i) contain any
statement that is inaccurate or misleading with respect to any material
fact, or (ii) omit to state any material fact necessary in order to make
such information (in the light of the circumstances under which it is
provided) not false or misleading.
(c) Should Castelle elect to prepare and file an S-4 Registration
Statement, none of the information supplied or to be supplied by Castelle
for inclusion or incorporation by reference in the S-4 Registration
Statement will, at the time the S-4 Registration Statement is filed with
the SEC or at the time the S-4 Registration Statement becomes effective
under the Securities Act, 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. None of the
information supplied or to be supplied by Castelle for inclusion or
incorporation by reference in the Prospectus/Proxy Statement will, at the
dates mailed to the shareholders of Castelle and Ibex, and as of the
Effective 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.
3.17 Valid Issuance. Subject to Section 1.5(b), the Castelle Common Stock
to be issued in the Merger will, when issued in accordance with the provisions
of this Agreement, be validly issued, fully paid and nonassessable.
43
SECTION 4. CERTAIN COVENANTS OF IBEX AND THE DESIGNATED SHAREHOLDERS
4.1 Access and Investigation. During the period from the date of this
Agreement through the Effective Time (the "Pre-Closing Period"), Ibex shall, and
shall cause its Representatives to: (a) provide Castelle and Castelle's
Representatives with reasonable access to Ibex's Representatives, personnel and
assets and to all existing books, records, Tax Returns, work papers and other
documents and information relating to Ibex; and (b) provide Castelle and
Castelle's Representatives with copies of such existing books, records, Tax
Returns, work papers and other documents and information relating to Ibex, and
with such additional financial, operating and other data and information
regarding Ibex, as Castelle may reasonably request.
4.2 Operation of Ibex's Business. During the Pre-Closing Period:
(a) Ibex shall conduct its business and operations in the ordinary course
and in substantially the same manner as such business and operations have
been conducted prior to the date of this Agreement;
(b) Ibex shall use reasonable efforts to preserve intact its current
business organization, keep available the services of its current officers
and employees and maintain its relations and good will with all suppliers,
customers, landlords, creditors, employees and other Persons having
business relationships with Ibex;
(c) Ibex shall keep in full force all insurance policies identified in Part
2.17 of the Disclosure Schedule;
(d) Ibex shall cause its officers to report regularly (but in no event less
frequently than weekly) to Castelle concerning the status of Ibex's
business;
(e) Ibex shall not declare, accrue, set aside or pay any dividend or make
any other distribution in respect of any shares of capital stock, and shall
not repurchase, redeem or otherwise reacquire any shares of capital stock
or other securities (except that Ibex may repurchase Ibex Common Stock from
former employees pursuant to the terms of existing restricted stock
purchase agreements);
(f) Ibex shall not sell, issue or authorize the issuance of (i) any capital
stock or other security, (ii) any option or right to acquire any capital
stock or other security, or (iii) any instrument convertible into or
exchangeable for any capital stock or other security (except that Ibex
shall be permitted, (x) to issue Ibex Common Stock to employees upon the
exercise of outstanding Ibex Options, and (y) to issue shares of Ibex
Common Stock upon the conversion of shares of Series A Preferred Stock);
(g) Ibex shall not amend or waive any of its rights under, or permit the
acceleration of vesting under, (i) any provision of its 1992 Stock Option
Plan, (ii) any provision of any agreement evidencing any outstanding Ibex
Option, or (iii) any provision of any restricted stock purchase agreement;
44
(h) neither Ibex nor any of the Designated Shareholders shall amend or
permit the adoption of any amendment to Ibex's articles of incorporation or
bylaws, or effect or permit Ibex to become a party to any Acquisition
Transaction, recapitalization, reclassification of shares, stock split,
reverse stock split or similar transaction (except that Ibex may issue
shares of Ibex Common Stock upon the conversion of shares of Series A
Preferred Stock);
(i) Ibex shall not form any subsidiary or acquire any equity interest or
other interest in any other Entity;
(j) Ibex shall not make any capital expenditure, except for capital
expenditures that, when added to all other capital expenditures made on
behalf of Ibex during the Pre-Closing Period, do not exceed $5,000 per
month;
(k) Ibex shall not (i) enter into, or permit any of the assets owned or
used by it to become bound by, any Contract that is or would constitute a
Material Contract, or (ii) amend or prematurely terminate, or waive any
material right or remedy under, any such Contract;
(l) Ibex shall not (i) acquire, lease or license any right or other asset
from any other Person, (ii) sell or otherwise dispose of, or lease or
license, any right or other asset to any other Person, or (iii) waive or
relinquish any right, except for assets acquired, leased, licensed or
disposed of by Ibex pursuant to Contracts that are not Material Contracts;
(m) Ibex shall not (i) lend money to any Person (except that Ibex may make
routine travel advances to employees in the ordinary course of business and
may, consistent with its past practices, allow employees to acquire Ibex
Common Stock in exchange for promissory notes upon exercise of Ibex
Options), or (ii) incur or guarantee any indebtedness for borrowed money;
(n) Ibex shall not (i) establish, adopt or amend any Employee Benefit Plan,
(ii) pay any bonus or make any profit-sharing payment, cash incentive
payment or similar payment to, or increase the amount of the wages, salary,
commissions, fringe benefits or other compensation or remuneration payable
to, any of its directors, officers or employees, or (iii) hire any new
employee;
(o) Ibex shall not change any of its methods of accounting or accounting
practices in any material respect;
(p) Ibex shall not make any Tax election;
(q) Ibex shall not commence or settle any material Legal Proceeding;
(r) Ibex shall not agree or commit to take any of the actions described in
clauses "(e)" through "(q)" above.
45
Notwithstanding the foregoing, Ibex may take any action described in clauses
"(e)" through "(r)" above if Castelle gives its prior written consent to the
taking of such action by Xxxx, which consent will not be unreasonably withheld
(it being understood that Xxxxxxxx's withholding of consent to any action will
not be deemed unreasonable if Castelle determines in good faith that the taking
of such action would not be in the best interests of Castelle or would not be in
the best interests of Ibex).
4.3 Notification; Updates to Disclosure Schedule.
(a) During the Pre-Closing Period, Ibex shall promptly notify Castelle in
writing of:
(i) the discovery by Ibex of any event, condition, fact or
circumstance that occurred or existed on or prior to the date of this
Agreement and that caused or constitutes a material inaccuracy in or
breach of any representation or warranty made by Ibex or any of the
Designated Shareholders in this Agreement;
(ii) any event, condition, fact or circumstance that occurs, arises or
exists after the date of this Agreement and that would cause or
constitute a material inaccuracy in or breach of any representation or
warranty made by Ibex or any of the Designated Shareholders in this
Agreement if (A) such representation or warranty had been made as of
the time of the occurrence, existence or discovery of such event,
condition, fact or circumstance, or (B) such event, condition, fact or
circumstance had occurred, arisen or existed on or prior to the date
of this Agreement;
(iii) any breach of any covenant or obligation of Ibex or any of the
Designated Shareholders; and
(iv) any event, condition, fact or circumstance that would make the
timely satisfaction of any of the conditions set forth in Section 6 or
Section 7 impossible or unlikely.
(b) If any event, condition, fact or circumstance that is required to be
disclosed pursuant to Section 4.3(a) requires any change in the Disclosure
Schedule, or if any such event, condition, fact or circumstance would
require such a change assuming the Disclosure Schedule were dated as of the
date of the occurrence, existence or discovery of such event, condition,
fact or circumstance, then Ibex shall promptly deliver to Castelle an
update to the Disclosure Schedule specifying such change. No such update
shall be deemed to supplement or amend the Disclosure Schedule for the
purpose of determining whether any of the conditions set forth in Section 6
has been satisfied.
46
SECTION 5. ADDITIONAL COVENANTS OF THE PARTIES
5.1 Filings and Consents. As promptly as practicable after the execution of
this Agreement, each party to this Agreement (a) shall make all filings (if any)
and give all notices (if any) required to be made and given by such party in
connection with the Merger and the other transactions contemplated by this
Agreement, and (b) shall use all commercially reasonable efforts to obtain all
Consents (if any) required to be obtained (pursuant to any applicable Legal
Requirement or Contract, or otherwise) by such party in connection with the
Merger and the other transactions contemplated by this Agreement. Ibex shall
(upon request) promptly deliver to Castelle a copy of each such filing made,
each such notice given and each such Consent obtained by Ibex during the
Pre-Closing Period.
5.2 California Permit; Fairness Hearing. Promptly after the execution of
this Agreement, Ibex and Castelle shall prepare and cause to be filed with the
California Commissioner of Corporations (the "California Commissioner") a permit
application under Section 25121 of the California Corporations Code, and a
related information statement or other disclosure document (the "Information
Statement"), and shall request a hearing on the fairness of the terms and
conditions of the Merger pursuant to Section 25142 of the California
Corporations Code. The parties to this Agreement shall use all commercially
reasonable efforts to cause the California Commissioner to approve the fairness
of the terms and conditions of the Merger at such a hearing; provided, however,
that Castelle shall not be required to modify any of the terms of the Merger in
order to cause the California Commissioner to approve the fairness of such terms
and conditions. Ibex shall provide and include in the Information Statement such
information relating to Ibex as may be required pursuant to the rules of the
California Commissioner. The Information Statement shall include the
recommendation of the board of directors of Ibex in favor of the Merger.
5.3 Ibex Shareholders' Meeting. Ibex shall, in accordance with its articles
of incorporation and bylaws and the applicable requirements of the CGCL, call
and hold a special meeting of its shareholders as promptly as practicable for
the purpose of permitting them to consider and to vote upon and approve the
Merger and this Agreement (the "Ibex Shareholders' Meeting"). As soon as
permissible under the rules of the California Commissioner or the SEC (as
applicable), Ibex shall cause a copy of the Information Statement or the
Prospectus/Proxy Statement (as applicable) to be delivered to each shareholder
of Ibex who is entitled to vote at the Ibex Shareholders' Meeting. Each Signing
Shareholder shall cause all shares of the capital stock of Ibex that are owned,
beneficially or of record, by such Signing Shareholder on the record date for
Ibex Shareholders' Meeting to be voted in favor of the Merger and this Agreement
at such meeting.
5.4 Public Announcements. During the Pre-Closing Period, (a) neither Ibex
nor any of the Designated Shareholders shall (and Ibex shall not permit any of
its Representatives to) issue any press release or make any public statement
regarding this Agreement or the Merger, or regarding any of the other
transactions contemplated by this Agreement, without Xxxxxxxx's prior written
consent, and (b) Castelle will use reasonable efforts to consult with Ibex prior
to issuing any press release or making any public statement regarding the
Merger.
47
5.5 Pooling of Interests. During the Pre-Closing Period, no party to this
Agreement shall take any action that could reasonably be expected to have an
adverse effect on the ability of Castelle to account for the Merger as a
"pooling of interests."
5.6 Affiliate Agreements. Each Signing Shareholder shall execute and
deliver to Castelle, and Ibex shall use all commercially reasonable efforts to
cause each other Person identified on Exhibit C-2 (and any other Person that
could reasonably be deemed to be an "affiliate" of Ibex for purposes of the
Securities Act), to execute and deliver to Castelle, as promptly as practicable
after the execution of this Agreement, an Affiliate Agreement in the form of
Exhibit C-1 and a Proxy in the form of Exhibit M.
5.7 Best Efforts. During the Pre-Closing Period, (a) Ibex and the
Designated Shareholders shall use their best efforts to cause the conditions set
forth in Section 6 to be satisfied on a timely basis, and (b) Castelle shall use
its best efforts to cause the conditions set forth in Section 7 to be satisfied
on a timely basis.
5.8 Tax Matters. Prior to the Closing, (a) Castelle and Ibex shall execute
and deliver, to Xxxxxx Godward Xxxxxx Xxxxxxxxx & Xxxxx and to Xxxxxx & Xxxxx
XXX, tax representation letters in substantially the form of Exhibit D (which
will be used in connection with the legal opinions contemplated by Sections
6.6(j) and 7.3(b), and (b) shareholders of Ibex receiving: (i) fifty percent
(50%) or more of the Castelle Common Stock issued in the Merger, and (ii) shares
of Castelle Common Stock with a fair market value greater than or equal to fifty
percent (50%) of the aggregate cash payments due under the Employment Agreements
and the Noncompetition Agreements executed by the persons identified on Exhibit
F (the "Continuity of Interest Shareholders") shall execute and deliver to
Xxxxxx Godward Xxxxxx Xxxxxxxxx & Xxxxx and Xxxxxx & Xxxxx XXX, Continuity of
Interest Certificates in the form of Exhibit E with respect to such shares. For
purposes of this Section, the fair market value of Castelle Common Stock shall
be the closing price on the Nasdaq National System on the business day
immediately preceding the Closing Date.
5.9 Employment and Noncompetition Agreements. At or prior to the Closing,
each of the persons identified on Exhibit F shall execute and deliver to
Castelle an Employment Agreement in the form of Exhibit G (an "Employment
Agreement") and (if indicated on Exhibit F) a Noncompetition Agreement in the
form of Exhibit H (a "Noncompetition Agreement").
5.10 FIRPTA Matters. At the Closing, (a) Ibex shall deliver to Castelle a
statement (in such form as may be reasonably requested by counsel to Castelle)
conforming to the requirements of Section 1.897 - 2(h)(1)(i) of the United
States Treasure Regulations, and (b) Ibex shall deliver to the Internal Revenue
Service the notification required under Section 1.897-2(h)(2) of the United
States Treasury Regulations.
5.11 Acquisition Proposals. From the date hereof until the earlier of the
termination of this Agreement or the consummation of the Merger, Castelle and
Ibex will not, and will cause their respective officers, directors, employees,
agents and representatives not to, directly or indirectly, encourage, solicit,
48
accept, initiate or conduct discussions or negotiations with, provide any
information to, or enter into any agreement with, any corporation, partnership,
limited liability company, person or other entity or group concerning the
acquisition of all or a substantial part of the assets, business or capital
stock of Castelle or Ibex, whether through purchase, merger, consolidation,
exchange or any other business combination (each of the foregoing, an
"Acquisition Proposal"). Notwithstanding anything to the contrary in the
preceding sentence, nothing herein shall prevent Castelle or Ibex and its
officers and directors, from responding to and considering unsolicited firm
offers for any such transaction from other persons if and to the extent that, in
the written opinion of Castelle or Ibex outside counsel, respectively, failure
to do so would be reasonably likely to constitute a violation of applicable law
or a breach of the fiduciary duties of that company's directors to its
shareholders. Each company shall immediately provide written notice to the other
company of the terms and other details of any such unsolicited inquiry or
proposal relating to an Acquisition Proposal. In the event that Castelle or Ibex
or any of their officers or directors enters into any such negotiations or
discussions for any reason which thereby constitute a breach of this Section
5.11, such company shall immediately reimburse the other company for all
expenses and costs incurred by that company in connection with the transactions
contemplated by this Agreement. In the event that Castelle or Ibex any of their
officers or directors shall enter into any letter of intent, understanding or
other agreement with another party relating to the acquisition of all or a
substantial part of the assets, business or capital stock of Castelle or Ibex,
as, applicable, whether through purchase, merger, consolidation, exchange or any
other business combination, either in violation of the no-shop agreement set
forth in this Section or within nine (9) months after termination of this
Agreement for any reason, then immediately upon entering into such letter of
intent, understanding or other agreement, such company shall pay to Castelle or
Ibex, as applicable, a termination fee in the amount of $250,000 (the
"Termination Fee"); provided, however, that such Termination Fee shall not be
payable if, prior to the entry by such company into such letter of intent,
understanding or other agreement, Castelle or Ibex, as applicable has
unilaterally declined to close the Merger. The parties acknowledge and agree
that the expense reimbursement obligation and Termination Fee described in this
Section shall not be the exclusive remedy to the injured party in the event of a
breach of this Agreement, and, in any such event, the injured party shall be
entitled, in addition to receiving such payments, to equitable remedies,
including, without limitation, specific performance and enjoining of any actions
determined to be in breach of this Agreement.
SECTION 6. CONDITIONS PRECEDENT TO OBLIGATIONS OF CASTELLE
The obligations of Castelle to effect the Merger and otherwise consummate
the transactions contemplated by this Agreement are subject to the satisfaction,
at or prior to the Closing, of each of the following conditions:
6.1 Satisfactory Completion of Pre-Acquisition Review. Castelle shall have
satisfactorily completed its pre-acquisition investigation and review of Ibex'
business, condition, assets, liabilities, operations, financial performance, net
income and prospects and shall be satisfied with the results of that
investigation and review.
49
6.2 Accuracy of Representations. Each of the representations and warranties
made by Ibex and the Designated Shareholders in this Agreement and in each of
the other agreements and instruments delivered to Castelle in connection with
the transactions contemplated by this Agreement shall have been accurate in all
material respects as of the date of this Agreement, and shall be accurate in all
material respects as of the Scheduled Closing Time as if made at the Scheduled
Closing Time (without giving effect to any update to the Disclosure Schedule).
6.3 Performance of Covenants. All of the covenants and obligations that
Ibex and the Designated Shareholders are required to comply with or to perform
at or prior to the Closing shall have been complied with and performed in all
respects.
6.4 Shareholder Approval. The principal terms of the Merger shall have been
duly approved by the affirmative vote of at least (a) 98% of the shares of Ibex
Common Stock entitled to vote with respect thereto, (b) all of the shares of
Series A Preferred Stock entitled to vote with respect thereto, and 51% of the
shares of Castelle Common Stock entitled to vote with respect thereto.
6.5 Consents. All Consents required to be obtained in connection with the
Merger and the other transactions contemplated by this Agreement (including the
Consents identified in Part 2.21 of the Disclosure Schedule) shall have been
obtained and shall be in full force and effect.
6.6 Agreements and Documents. Castelle shall have received the following
agreements and documents (referred to herein as the "Transactional Documents"),
each of which shall be in full force and effect:
(a) Affiliate Agreements in the form of Exhibit C-1 and Proxies in the form
of Exhibit M, executed by the Persons identified on Exhibit C-2 and by any
other Person who could reasonably be deemed to be an "affiliate" of Ibex
for purposes of the Securities Act;
(b) Employment Agreements in the form of Exhibit G, executed by the
individuals identified on Exhibit F;
(c) Noncompetition Agreements in the form of Exhibit H, executed by the
individuals identified on Exhibit F;
(d) confidential invention and assignment agreements, reasonably
satisfactory in form and content to Castelle, executed by all current
employees of Ibex and by all current consultants and independent
contractors to Ibex who have not already signed such agreements (including
the current employees, consultants and independent contractors identified
in Part 2.9(f) of the Disclosure Schedule);
(e) the statement referred to in Section 5.10(a), executed by Xxxx;
50
(f) Continuity of Interest Certificates in the form of Exhibit E, executed
by the Continuity of Interest Shareholders;
(g) an estoppel certificate, dated as of a date not more than five days
prior to the Closing Date and satisfactory in form and content to Castelle,
executed by Cameron & Associates, 000 X Xxxxxx, Xxxxxxxxxx, Xxxxxxxxxx
00000 and Shelter Bay Company, 000 Xxxxxxx Xxxxxxx, Xxxxx 000, Xxxx Xxxxxx,
Xxxxxxxxxx 00000.
(h) a legal opinion of Xxxxxx & Xxxxx XXX, dated as of the Closing Date, in
the form of Exhibit I;
(i) a legal opinion of Xxxxxx Godward Xxxxxx Xxxxxxxxx & Xxxxx, dated as of
the Closing Date, in the form of Exhibit J;
(j) a legal opinion of Xxxxxx Godward Xxxxxx Xxxxxxxxx & Xxxxx, dated as of
the Closing Date and reasonably satisfactory to Ibex and its counsel, to
the effect that the Merger will constitute a reorganization within the
meaning of Section 368 of the Code (it being understood that, in rendering
such opinion, such counsel may rely upon the tax representation letters
referred to in Section 5.8(a) and the Continuity of Interest Certificates
referred to in Section 5.8(b));
(k) a letter from Coopers & Xxxxxxx LLP, dated as of the Closing Date,
confirming that (a) Castelle may account for the Merger as a "pooling of
interests" in accordance with generally accepted accounting principles,
Accounting Principles Board Opinion No. 16 and all published rules,
regulations and policies of the SEC, and (b) confirming that no transaction
entered into by Ibex, and no other fact or circumstance relating to Ibex,
will prevent Castelle from accounting for the Merger as a "pooling of
interests" in accordance with generally accepted principles, Accounting
Principles Board Opinion No. 16 and all published rules, regulations and
policies of the SEC; and
(l) a certificate executed by the Designated Shareholders and containing
the representation and warranty of each Designated Shareholder that each of
the representations and warranties set forth in Section 2 is accurate in
all respects as of the Closing Date as if made on the Closing Date and that
the conditions set forth in Sections 6.2, 6.3, 6.4 and 6.5 have been duly
satisfied (the "Designated Shareholders' Closing Certificate").
6.7 FIRPTA Compliance. Ibex shall have filed with the Internal Revenue
Service the notification referred to in Section 5.10(b).
6.8 Securities Compliance. Either:
(a) the California Commissioner shall have issued a permit under Section
25121 of the California Corporations Code (following a hearing upon the
fairness of the terms and conditions of the Merger, conducted pursuant to
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Section 25142 of the California Corporations Code) for the issuance of the
Castelle Common Stock to be issued in the Merger, and all applicable
requirements of Section 3(a)(10) of the Securities Act shall have been
satisfied, or
(b) a registration statement on Form S-4 covering the Castelle Common Stock
to be issued in the Merger shall have been declared effective in accordance
with the provisions of the Securities Act, and no stop order shall have
been issued by the SEC with respect to the S-4 Registration Statement.
6.9 No Restraints. No temporary restraining order, preliminary or permanent
injunction or other order preventing the consummation of the Merger shall have
been issued by any court of competent jurisdiction and remain in effect, and
there shall not be any Legal Requirement enacted or deemed applicable to the
Merger that makes consummation of the Merger illegal.
6.10 Comfort Letter. Should Castelle elect to file an S-4 Registration
Statement, Castelle shall have received a letter from Coopers & Xxxxxxx LLP,
dated no more than two business days before the date on which the S-4
Registration Statement became effective (and reasonably satisfactory in form and
substance to Castelle), that is customary in scope and substance for letters
delivered by independent public accountants in connection with registration
statements similar to the S-4 Registration Statement.
6.11 No Legal Proceedings. No Person shall have commenced or threatened to
commence any Legal Proceeding challenging or seeking the recovery of a material
amount of damages in connection with the Merger or seeking to prohibit or limit
the exercise by Castelle of any material right pertaining to its acquisition of
Ibex.
6.12 Amendment of Fourth Amended and Restated Registration Rights
Agreement. Amendment of the Fourth Amended and Restated Registration Rights
Agreement to include the registration rights granted the Signing Shareholders
shall have been approved by Silicon Valley Bank and the holders of a majority of
the shares necessary to cause such amendment.
SECTION 7. CONDITIONS PRECEDENT TO OBLIGATIONS OF IBEX
The obligations of Ibex to effect the Merger and otherwise consummate the
transactions contemplated by this Agreement are subject to the satisfaction, at
or prior to the Closing, of the following conditions:
7.1 Accuracy of Representations. Each of the representations and warranties
made by Castelle in this Agreement shall have been accurate in all material
respects as of the date of this Agreement (without giving effect to any
materiality or similar qualifications contained in such representations and
warranties), and shall be accurate in all material respects as of the Scheduled
Closing Time as if made at the Scheduled Closing Time (without giving effect to
any materiality or similar qualifications contained in such representations and
warranties).
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7.2 Performance of Covenants. All of the covenants and obligations that
Castelle is required to comply with or to perform at or prior to the Closing
shall have been complied with and performed in all respects.
7.3 Documents. Ibex shall have received:
(a) a legal opinion of Xxxxxx Godward Xxxxxx Xxxxxxxxx & Xxxxx, dated as of
the Closing Date, in the form of Exhibit J;
(b) a legal opinion of Xxxxxx & Xxxxx LLC, dated as of the Closing Date and
reasonably satisfactory to Castelle and its counsel, to the effect that the
Merger will constitute a reorganization within the meaning of Section 368
of the Code (it being understood that, in rendering such opinion, such
counsel may rely upon the tax representation letters referred to in Section
5.8(a) and the Continuity of Interest Certificates referred to in Section
5.8(b);
(c) Continuity of Interest Certificates in the form of Exhibit E, executed
by the Continuity of Interest Shareholders.
7.4 Shareholder Approval. The principal terms of the Merger shall have been
duly approved by the affirmative vote of at least (a) 98% of the shares of Ibex
Common Stock entitled to vote with respect thereto, (b) all of the shares of
Series A Preferred Stock entitled to vote with respect thereto, and 51% of the
shares of Castelle Common Stock entitled to vote with respect thereto.
7.5 No Restraints. No temporary restraining order, preliminary or permanent
injunction or other order preventing the consummation of the Merger shall have
been issued by any court of competent jurisdiction and remain in effect, and
there shall not be any Legal Requirement enacted or deemed applicable to the
Merger that makes consummation of the Merger illegal.
7.6 Consents. All Consents required to be obtained in connection with the
Merger and the other transactions contemplated by this Agreement (including the
Consents identified in Part 3.15 of the Disclosure Schedule) shall have been
obtained and shall be in full force and effect.
7.7 Securities Compliance. Either:
(a) the California Commissioner shall have issued a permit under Section
25121 of the California Corporations Code (following a hearing upon the
fairness of the terms and conditions of the Merger, conducted pursuant to
Section 25142 of the California Corporations Code) for the issuance of the
Castelle Common Stock to be issued in the Merger, and all applicable
requirements of Section 3(a)(10) of the Securities Act have been satisfied,
or
53
(b) a registration statement on Form S-4 covering the Castelle Common Stock
to be issued in the Merger shall have been declared effective in accordance
with the provisions of the Securities Act, and no stop order shall have
been issued by the SEC with respect to the S-4 Registration Statement.
7.8 No Legal Proceedings. No Person shall have commenced or threatened to
commence any Legal Proceeding challenging or seeking the recovery of a material
amount of damages in connection with the Merger or seeking to prohibit or limit
the exercise by Castelle of any material right pertaining to its acquisition of
Ibex.
SECTION 8. TERMINATION
8.1 Termination Events. This Agreement may be terminated prior to the
Closing:
(a) by Castelle if Castelle reasonably determines that the timely
satisfaction of any condition set forth in Section 6 has become impossible
(other than as a result of any failure on the part of Castelle to comply
with or perform any covenant or obligation of Castelle set forth in this
Agreement);
(b) by Ibex if Ibex reasonably determines that the timely satisfaction of
any condition set forth in Section 7 has become impossible (other than as a
result of any failure on the part of Ibex or any of the Designated
Shareholders to comply with or perform any covenant or obligation set forth
in this Agreement or in any other agreement or instrument delivered to
Castelle);
(c) by Xxxxxxxx at or after the Scheduled Closing Time if any condition set
forth in Section 6 has not been satisfied by the Scheduled Closing Time;
(d) by Ibex at or after the Scheduled Closing Time if any condition set
forth in Section 7 has not been satisfied by the Scheduled Closing Time;
(e) by Castelle if the Closing has not taken place on or before December
30, 1996 (other than as a result of any failure on the part of Castelle to
comply with or perform any covenant or obligation of Castelle set forth in
this Agreement);
(f) by Ibex if the Closing has not taken place on or before December 30,
1996 (other than as a result of the failure on the part of Ibex or any of
the Designated Shareholders to comply with or perform any covenant or
obligation set forth in this Agreement or in any other agreement or
instrument delivered to Castelle); or
(g) by the mutual consent of Xxxxxxxx and Ibex.
54
8.2 Termination Procedures. If Castelle wishes to terminate this Agreement
pursuant to Section 8.1(a), Section 8.1(c) or Section 8.1(e), Castelle shall
deliver to Ibex a written notice stating that Castelle is terminating this
Agreement and setting forth a brief description of the basis on which Castelle
is terminating this Agreement. If Ibex wishes to terminate this Agreement
pursuant to Section 8.1(b), Section 8.1(d) or Section 8.1(f), Ibex shall deliver
to Castelle a written notice stating that Ibex is terminating this Agreement and
setting forth a brief description of the basis on which Ibex is terminating this
Agreement.
8.3 Effect of Termination. If this Agreement is terminated pursuant to
Section 8.1, all further obligations of the parties under this Agreement shall
terminate; provided, however, that: (a) neither Ibex nor Castelle shall be
relieved of any obligation or liability arising from any prior breach by such
party of any provision of this Agreement; (b) the parties shall, in all events,
remain bound by and continue to be subject to the provisions set forth in
Sections 5.11 and 10; and (c) Castelle and Ibex shall, in all events, remain
bound by and continue to be subject to Section 5.4.
SECTION 9. INDEMNIFICATION, ETC.
9.1 Survival of Representations, Etc.
(a) The representations and warranties made by the Designated Shareholders
(including the representations and warranties set forth in Section 2 and
the representations and warranties set forth in the Designated
Shareholders' Closing Certificate) shall survive the Closing and shall
expire on the first anniversary of the Closing Date; provided, however,
that the representations and warranties as to all items expected to be
encountered in the audit process shall terminate when Castelle publishes
its audited financial statements for its fiscal year which includes the
Closing Date, and further provided, however, that if, at any time prior to
the termination of a specific representation or warranty, any Indemnitee
(acting in good faith) delivers to Designated Shareholders a written notice
alleging the existence of an inaccuracy in or a breach of such
representation or warranty made by the Designated Shareholders (and setting
forth in reasonable detail the basis for such Indemnitee's belief that such
an inaccuracy or breach may exist) and asserting a claim for recovery under
Section 9.2 based on such alleged inaccuracy or breach, then the claim
asserted in such notice shall survive the termination of such specific
representation or warranty until such time as such claim is fully and
finally resolved. All representations and warranties made by Castelle shall
terminate and expire as of the Effective Time, and any liability of
Castelle with respect to such representations and warranties shall
thereupon cease.
(b) The representations, warranties, covenants and obligations of Ibex and
the Designated Shareholders, and the rights and remedies that may be
exercised by the Indemnitees, shall not be limited or otherwise affected by
or as a result of any information furnished to, or any investigation made
by or knowledge of, any of the Indemnitees or any of their Representatives.
55
(c) For purposes of this Agreement, each statement or other item of
information set forth in the Disclosure Schedule or in any update to the
Disclosure Schedule shall be deemed to be a representation and warranty
made by Ibex and the Designated Shareholders in this Agreement.
9.2 Indemnification by Designated Shareholders. From and after the
Effective Time (but subject to Section 9.1(a)), the Designated Shareholders,
severally, to the extent of each such shareholder's pro rata interest in the
Escrowed Shares, shall hold harmless and indemnify each of the Indemnitees from
and against, and shall compensate and reimburse each of the Indemnitees for, any
Damages which are directly or indirectly suffered or incurred by any of the
Indemnitees or to which any of the Indemnitees may otherwise become subject
(regardless of whether or not such Damages relate to any third-party claim) and
which arise from or as a result of, or are directly or indirectly connected
with: (i) any inaccuracy in or breach of any representation or warranty set
forth in Section 2 or in the Designated Shareholders' Closing Certificate
(without giving effect to any "Material Adverse Effect" or other materiality
qualification or any similar qualification contained or incorporated directly or
indirectly in such representation or warranty, but giving effect to any update
to the Disclosure Schedule delivered by Ibex to Castelle prior to the Closing);
(ii) any breach of any covenant or obligation of Ibex or any of the Designated
Shareholders (including the covenants set forth in Sections 4 and 5); or (iii)
any Legal Proceeding relating to any inaccuracy or breach of the type referred
to in clause "(i)" or "(ii)" above (including any Legal Proceeding commenced by
any Indemnitee for the purpose of enforcing any of its rights under this Section
9).
9.3 Threshold; Ceiling. The Designated Shareholders shall not be required
to make any indemnification payment pursuant to Section 9.2(a) for any
inaccuracy in or breach of any of their representations and warranties set forth
in Section 2 until such time as the total amount of all Damages (including the
Damages arising from such inaccuracy or breach and all other Damages arising
from any other inaccuracies in or breaches of any representations or warranties)
that have been directly or indirectly suffered or incurred by any one or more of
the Indemnitees, or to which any one or more of the Indemnitees has or have
otherwise become subject, exceeds $25,000 in the aggregate. (If the total amount
of such Damages exceeds $25,000, then the Indemnitees shall be entitled to be
indemnified against and compensated and reimbursed for the aggregate amount of
Damages, including the initial $25,000.)
9.4 Escrow Fund. Notwithstanding Section 1.9 of this Agreement and in
accordance with the provisions of the Escrow Agreement attached hereto as
Exhibit L (the "Escrow Agreement), the Designated Shareholders shall deposit
Castelle Common Stock equal to ten percent (10%) of the shares of Castelle
Common Stock to be received by the Ibex shareholders as a result of the
transactions contemplated by the Agreement (the "Escrowed Shares") with the
Escrow Agent to be held pursuant to the terms of the Escrow Agreement for a
period of one year from the date of the Closing. Upon compliance with the terms
56
of Section 9 of this Agreement and the Escrow Agreement, and subject to Section
9.3 above, the Indemnitees shall be entitled to obtain indemnity from the Escrow
Fund for Damages covered by Section 9.
9.5 No Contribution. Each Designated Shareholder waives, and acknowledges
and agrees that he shall not have and shall not exercise or assert (or attempt
to exercise or assert), any right of contribution, right of indemnity or other
right or remedy against the Surviving Corporation in connection with any
indemnification obligation or any other liability to which he may become subject
under or in connection with this Agreement or the Designated Shareholders'
Closing Certificate.
9.6 Interest. Any Designated Shareholder who is required to hold harmless,
indemnify, compensate or reimburse any Indemnitee pursuant to this Section 9
with respect to any Damages shall also be liable to such Indemnitee for interest
on the amount of such Damages (for the period commencing as of the date on which
such Designated Shareholder first received notice of a claim for recovery by
such Indemnitee and ending on the date on which the liability of such Designated
Shareholder to such Indemnitee is fully satisfied by such Designated
Shareholder) at a floating rate equal to the rate of interest publicly announced
by Bank of America, N.T. & S.A. from time to time as its prime, base or
reference rate.
9.7 Defense of Third Party Claims. In the event of the assertion or
commencement by any Person of any claim or Legal Proceeding (whether against
Castelle or against any other Person) with respect to which any of the
Designated Shareholders may become obligated to hold harmless, indemnify,
compensate or reimburse any Indemnitee pursuant to this Section 9, Castelle
shall have the right, at its election, to proceed with the defense of such claim
or Legal Proceeding on its own. If Castelle so proceeds with the defense of any
such claim or Legal Proceeding:
(a) all reasonable expenses relating to the defense of such claim or Legal
Proceeding shall be borne and paid exclusively by the Designated
Shareholders;
(b) each Designated Shareholder shall make available to Castelle any
documents and materials in his possession or control that may be necessary
to the defense of such claim or Legal Proceeding; and
(c) Castelle shall have the right to settle, adjust or compromise such
claim or Legal Proceeding with the consent of the Designated Shareholders'
Agent (as defined in Section 10.1); provided, however, that such consent
shall not be unreasonably withheld.
Castelle shall give the Designated Shareholders' Agent prompt notice of the
commencement of any such Legal Proceeding against Castelle; provided, however,
that any failure on the part of Castelle to so notify the Designated
Shareholders' Agent shall not limit any of the obligations of the Designed
Shareholders under this Section 9 (except to the extent such failure materially
prejudices the defense of such Legal Proceeding).
57
9.8 Exercise of Remedies by Indemnitees Other Than Castelle. No Indemnitee
(other than Castelle or any successor thereto or assign thereof) shall be
permitted to assert any indemnification claim or exercise any other remedy under
this Agreement unless Castelle (or any successor thereto or assign thereof)
shall have consented to the assertion of such indemnification claim or the
exercise of such other remedy. Such consent shall be evidenced by the submission
by Xxxxxxxx of such claim to the Designated Shareholders' Representative.
9.9 Claims Against Consideration. Upon delivery to the Designated
Shareholders' Agent (with a copy to Escrow Agent, as such term is defined in the
form of Escrow Agreement attached hereto as Exhibit L) of a certificate signed
by any officer of Castelle (an "Officer's Certificate"):
(a) stating that an Indemnitee has paid or properly accrued or reasonably
anticipates that it will have to pay or accrue Damages in an aggregate
stated amount to which an Indemnitee is entitled to indemnity pursuant to
this Agreement (the "Claim Amount"); and
(b) specifying in reasonable detail the individual items of Damages
included in the amount so stated, the date each such item was paid or
properly accrued, or the basis for such anticipated liability, and the
nature of the misrepresentation, breach of warranty, legal proceeding or
claim to which such item is related, the Indemnitee shall be entitled to
indemnification for such Damages.
(c) Xxxxxxxx and the Indemnitees shall use reasonable efforts to provide
such Officer's Certificate within a reasonable time following the date of
payment, accrual or reasonable anticipation of liability, as the case may
be.
9.10 Objections to Claims. For a period of twenty (20) business days after
delivery of any Officer's Certificate to the Designated Shareholders' Agent, the
Indemnitees shall not take further actions to seek indemnification. After the
expiration of such twenty (20 business day period, the Indemnitees shall become
irrevocably entitled to seek indemnification under the terms of this Agreement,
if the Designated Shareholders' Agent shall not have objected in writing to the
claim made in the Officer's Certificate, and shall not have delivered such
written objection to Castelle prior to the expiration of such ten day period.
9.11 Resolution of Conflicts; Arbitration
(a) In case the Designated Shareholders' Agent so objects in writing to the
indemnity of the Indemnitees in respect of any claim or claims made in any
Officer's Certificate, the Designated Shareholders' Agent and the
Indemnitees shall attempt in good faith to agree upon the rights of the
respective parties with respect to each of such claims. If the Designated
Shareholders' Agent and the Indemnitees so agree, a memorandum setting
forth such agreement shall be prepared and signed by the Indemnitees and
the Designated Shareholders' Agent, which agreement shall be binding and
conclusive on the Indemnitees and the Designated Shareholders (a "Response
Notice").
58
(b) If no such agreement can be reached after good faith negotiation,
either the Indemnitees or the Designated Shareholders' Agent may demand
arbitration of the matter by serving a written demand for arbitration on
the other (the "Demand for Arbitration"); provided, however, that if the
amount of the Damages is at issue in pending litigation with a third party,
arbitration shall not be commenced until such amount is ascertained or both
parties agree to arbitration. The decision of the arbitrator so selected as
to the validity and amount of any claim in such Officer's Certificate shall
be binding and conclusive upon the Indemnitees and the Designated
Shareholders.
(c) Any such arbitration shall be held in San Francisco, California before
the single arbitrator under the commercial arbitration rules then in effect
of the American Arbitration Association ("AAA"), except as modified herein.
(i) Selection. The single arbitrator shall have at least five years of
experience in commercial dispute resolution. The arbitrator shall be
selected by mutual agreement between the Indemnitees and the
Designated Shareholders' Agent, but if they cannot agree upon the
selection within ten days after Demand for Arbitration is given, the
selection shall occur as follows: (a) the party initiating arbitration
shall obtain a list of seven arbitrators, each of whom shall have the
requisite experience described above, from the San Francisco office of
the AAA and simultaneously give a copy thereof to the other party; (b)
each party alternately shall strike three names from the list, with
the other party striking first; and (c) the last remaining arbitrator
shall be deemed selected by the parties as a single arbitrator. If a
party refuses for ten or more days to complete this selection, the
other party shall select a name from the list to be the arbitrator at
the end of such ten day period.
(ii) Procedure. Arbitration shall be conducted in the following
manner:
(a) If the responding party desires to file a response and/or
counterclaim to the Demand for Arbitration, it must do so within
ten calendar days after service of the Demand for Arbitration.
Any response to a counterclaim shall be filed and served within
ten calendar days after service of the counterclaim, but no such
response shall be required. A failure to file a counterclaim or
response will not operate to delay the arbitration proceedings.
(b) After the filing of the Demand for Arbitration, any
counterclaim and any responses thereto, no further claims or
counterclaims may be made except by order of the arbitrator made
on a duly noticed motion to the arbitrator.
(c) The arbitration shall commence as soon as possible but in no
event earlier than ten days after selection of the arbitrator and
in no event later than 30 days following the filing of the last
response under (b) above, or if there is none, following the
Demand for Arbitration.
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(d) the Indemnitees and the Designated Shareholders'
Representative (acting on behalf of the Designated Shareholders
and being entitled to reimbursement under Section 10.1) shall
each pay an equal share of the fees and expenses of any person
serving as an arbitrator. The arbitrator, in his or her
discretion, shall be authorized to determine whether a party is
the prevailing party, and if so, to award that prevailing party
reimbursement for its share of the costs and fees of the
arbitrator, and reimbursement for its reasonable attorneys' fees,
disbursements and costs incurred in such arbitration.
(e) The arbitrator, upon application of any party, shall hold a
pre-hearing conference with the parties for the purpose of
narrowing the issues, establishing a discovery schedule,
arranging an acceptable procedure for any law and motion
proceedings and in all respects arranging for the most
expeditious hearing possible of the matters in dispute. Such
conference shall be held as soon as possible following selection
of the arbitrator, any counterclaim thereto and any response to
such counterclaim (if any), but in no event later than 20 days
following the filing of the last response under (b) above, or if
there is none, following the Demand for Arbitration.
(f) Discovery shall be conducted in accordance with Part 3, Title
9, Chapter 3 of the California Code of Civil Procedure, as
amended from time to time.
(g) Except as expressly provided in this Section 9.11.3, the
arbitration hearing shall be conducted according to the
discretion of the arbitrator. Judicial rules relating to the
order of proof, the conduct of the hearing and the presentation
and admissibility of evidence need not be followed. Any relevant
information, including hearsay, may be admitted by the arbitrator
regardless of its admissibility as evidence in court, but the
arbitrator also shall be authorized to exclude evidence. The
parties shall have the power to subpoena witnesses to attend the
arbitration hearing pursuant to California Code of Civil
Procedure Section 1282.6. The arbitrator shall have full power to
give such directions and to make such orders in the conduct of
the arbitration, including setting pre-arbitration procedures and
scheduling any motions to correct or amend the arbitration award,
as he or she deems just and appropriate, including specifically
the right to make such reasonable extensions of time as the
arbitrator determines are necessary to accommodate discovery,
prearbitration procedures, motions, settlement discussions, and
other such matters, but not in any event to exceed 30 days in the
aggregate, from the date the arbitration was otherwise scheduled
to commence as provided above.
(h) The arbitrator shall, within five days after the conclusion
of the arbitration hearing, issue a written decision and a brief
written statement of decision describing the reasons for the
decision, including the calculation of any compensatory damages
awarded.
(i) Absent the filing of an application to correct or vacate the
arbitration award as provided in section (j) below, each party
shall fully perform and satisfy the terms of the arbitration
decision within 15 days of the service of the decision.
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(j) The decision of the arbitrator shall be final and binding
upon the parties without appeal or review except as permitted by
California law; provided, however, that either party may, within
ten days of the service of the decision, file an application to
correct or vacate the arbitration award or an application for de
novo review on all questions of law based on the arbitrator's
finding of fact (which are deemed for such purpose to be
stipulated by the parties), in either case under California Code
of Civil Procedure Section 1285 et seq. Any party may apply to
any court of competent jurisdiction for confirmation and entry of
judgment based on said award. In connection with any application
to review questions of law or to confirm, correct or vacate the
arbitration award, any appeal of any order rendered pursuant to
any such application, or any other action required to enforce the
arbitration award, the prevailing party shall be entitled to
recover its reasonable attorneys' fees, disbursements and costs
incurred in such post-award activities.
(d) The arbitrator shall not have the power to vary the provisions of this
Agreement. The parties hereby irrevocably waive, and the arbitrator shall
have no power to award, any damages for pain and suffering or punitive
damages.
(e) By signing below, each party acknowledges that (a) the arbitration
provisions of this Agreement require the party to give up rights to have
the dispute litigated in a court or jury trial, and to give up rights to
discovery and most grounds for appeal, and (b) the party may be compelled
to arbitrate if the party refuses to do so.
SECTION 10. MISCELLANEOUS PROVISIONS
10.1 Designated Shareholders' Agent. The Designated Shareholders hereby
irrevocably appoint Xxx Xxxxx as their agent for purposes of Section 9 (the
"Designated Shareholders' Agent"), and Xxx Xxxxx hereby accepts his appointment
as the Designated Shareholders' Agent. Castelle shall be entitled to deal
exclusively with the Designated Shareholders' Agent on all matters relating to
Section 9, and shall be entitled to rely conclusively (without further evidence
of any kind whatsoever) on any document executed or purported to be executed on
behalf of any Designated Shareholder by the Designated Shareholders' Agent, and
on any other action taken or purported to be taken on behalf of any Designated
Shareholder by the Designated Shareholders' Agent, as fully binding upon such
Designated Shareholder. If the Designated Shareholders' Agent shall die, become
disabled or otherwise be unable to fulfill his responsibilities as agent of the
Designated Shareholders, then the Designated Shareholders shall, within ten days
after such death or disability, appoint a successor agent and, promptly
thereafter, shall notify Castelle of the identity of such successor. Any such
successor shall become the "Designated Shareholders' Agent" for purposes of
Section 9 and this Section 10.1. The Designated Shareholders' Agent shall
receive no compensation for his services, but shall be reimbursed for his
reasonable out-of-pocket expenses by the Designated Shareholders in proportion
to the number of shares of Castelle Common Stock received by each of them
pursuant to this Agreement. If for any reason there is no Designated
Shareholders' Agent at any time, all references herein to the Designated
Shareholders' Agent shall be deemed to refer to the Designated Shareholders.
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10.2 Further Assurances. Each party hereto shall execute and cause to be
delivered to each other party hereto such instruments and other documents, and
shall take such other actions, as such other party may reasonably request (prior
to, at or after the Closing) for the purpose of carrying out or evidencing any
of the transactions contemplated by this Agreement.
10.3 Fees and Expenses. Each party to this Agreement shall bear and pay all
fees, costs and expenses (including legal fees and accounting fees) that have
been incurred or that are incurred by such party in connection with the
transactions contemplated by this Agreement, including all fees, costs and
expenses incurred by such party in connection with or by virtue of (a) the
investigation and review conducted by Castelle and its Representatives with
respect to Ibex's business (and the furnishing of information to Castelle and
its Representatives in connection with such investigation and review), (b) the
negotiation, preparation and review of this Agreement (including the Disclosure
Schedule) and all agreements, certificates, opinions and other instruments and
documents delivered or to be delivered in connection with the transactions
contemplated by this Agreement, (c) the preparation and submission of any filing
or notice required to be made or given in connection with any of the
transactions contemplated by this Agreement, and the obtaining of any Consent
required to be obtained in connection with any of such transactions, and (d) the
consummation of the Merger; provided, however, that Castelle shall reimburse
Ibex for the first $25,000 of audit fees, costs and expenses invoiced by Xxxxxxx
& Xxxxxxx LLP and incurred by Ibex in the audit by Xxxxxxx & Xxxxxxx LLP of
Ibex's fiscal years ended December 31, 1995 and 1994, as well as one-half of any
additional audit fees, costs and expenses invoiced by Xxxxxxx & Xxxxxxx LLP.
10.4 Attorneys' Fees. If any action or proceeding relating to this
Agreement or the enforcement of any provision of this Agreement is brought
against any party hereto, the prevailing party shall be entitled to recover
reasonable attorneys' fees, costs and disbursements (in addition to any other
relief to which the prevailing party may be entitled).
10.5 Notices. Any notice or other communication required or permitted to be
delivered to any party under this Agreement shall be in writing and shall be
deemed properly delivered, given and received when delivered (by hand, by
registered mail, by courier or express delivery service or by facsimile) to the
address or facsimile telephone number set forth beneath the name of such party
below (or to such other address or facsimile telephone number as such party
shall have specified in a written notice given to the other parties hereto):
if to Castelle:
Attention: President
Castelle
0000-0 Xxxxx Xxxxxxxxx
Xxxxx Xxxxx, Xxxxxxxxxx 00000
Facsimile #: (000) 000-0000
62
with a copy to:
Xxxxxx X. Xxxxxxxxx
Xxxxxx Godward Xxxxxx Xxxxxxxxx & Xxxxx
Xxx Xxxxxxxx Xxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Facsimile #: (000) 000-0000
if to Ibex:
Attention: President
Ibex Technologies, Inc.
0000 X.X. Mathews Pkwy.
El Dorado Hills, California 95762
Facsimile #: (000) 000-0000
with a copy to:
Xxxxxx X. Xxxxx
Xxxxxx & Xxxxx LLP
000 Xxxxxxx Xxxx, 00xx Xxxxx
Xxxxxxxxxx, Xxxxxxxxxx 00000
Facsimile #: (000) 000-0000
if to any of the Designated Shareholders:
Xxx Xxxxx
0000 Xxxxx Xxxxxxxxx
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000
Facsimile #: (000) 000-0000
if to Xxxxxxx Xxxxxxx, Tucha Limited, or Newark Holding S.A.:
Xxxxxxx Xxxxx Xxxxxxx
Tecom Sistemas
Xxx Xxxxxxxx xx Xxxxx, 000
Xxx xx Xxxxxxx, XX
00000-000 Xxxxxx
Facsimile #: 011-55-21-577-1125
63
with a copy to:
Xxxxx X. Xxxxxx-Xxxxx
Xxxxx, Xxxxxx-Xxxxx & Xxxxxxxxx, P.C.
Reservoir Place
0000 Xxxxxxx Xxxx
Xxxxxxx, Xxxxxxxxxxxxx 00000
Facsimile #: (000) 000-0000
10.6 Confidentiality. Without limiting the generality of anything contained
in Section 5.4, on and at all times after the Closing Date, each Designated
Shareholder shall keep confidential, and shall not use or disclose to any other
Person, any non-public document or other non-public information in such
Designated Shareholder's possession that relates to the business of Ibex or
Castelle.
10.7 Time of the Essence. Time is of the essence of this Agreement.
10.8 Headings. The underlined headings contained in this Agreement are for
convenience of reference only, shall not be deemed to be a part of this
Agreement and shall not be referred to in connection with the construction or
interpretation of this Agreement.
10.9 Counterparts. This Agreement may be executed in several counterparts,
each of which shall constitute an original and all of which, when taken
together, shall constitute one agreement.
10.10 Governing Law. This Agreement shall be construed in accordance with,
and governed in all respects by, the internal laws of the State of California
(without giving effect to principles of conflicts of laws).
10.11 Successors and Assigns. This Agreement shall be binding upon: Ibex
and its successors and assigns (if any); the Designated Shareholders and their
respective personal representatives, executors, administrators, estates, heirs,
successors and assigns (if any); and Xxxxxxxx and its successors and assigns (if
any). This Agreement shall inure to the benefit of: Ibex; Ibex's shareholders
(to the extent set forth in Section 1.5); the holders of assumed Ibex Options
(to the extent set forth in Section 1.6); Castelle; the other Indemnitees
(subject to Section 9.8); and the respective successors and assigns (if any) of
the foregoing. Subsequent to the Closing Date, Castelle may freely assign any or
all of its rights under this Agreement (including its indemnification rights
under Section 9), in whole or in part, to any other Person without obtaining the
consent or approval of any other party hereto or of any other Person.
10.12 Remedies Cumulative; Specific Performance. The rights and remedies of
the parties hereto shall be cumulative (and not alternative). The parties to
this Agreement agree that, in the event of any breach or threatened breach by
any party to this Agreement of any covenant, obligation or other provision set
forth in this Agreement for the benefit of any other party to this Agreement,
64
such other party shall be entitled (in addition to any other remedy that may be
available to it) to (a) a decree or order of specific performance or mandamus to
enforce the observance and performance of such covenant, obligation or other
provision, and (b) an injunction restraining such breach or threatened breach.
10.13 Waiver.
(a) No failure on the part of any Person to exercise any power, right,
privilege or remedy under this Agreement, and no delay on the part of any
Person in exercising any power, right, privilege or remedy under this
Agreement, shall operate as a waiver of such power, right, privilege or
remedy; and no single or partial exercise of any such power, right,
privilege or remedy shall preclude any other or further exercise thereof or
of any other power, right, privilege or remedy.
(b) No Person shall be deemed to have waived any claim arising out of this
Agreement, or any power, right, privilege or remedy under this Agreement,
unless the waiver of such claim, power, right, privilege or remedy is
expressly set forth in a written instrument duly executed and delivered on
behalf of such Person; and any such waiver shall not be applicable or have
any effect except in the specific instance in which it is given.
10.14 Amendments. This Agreement may not be amended, modified, altered or
supplemented other than by means of a written instrument duly executed and
delivered on behalf of all of the parties hereto.
10.15 Severability. In the event that any provision of this Agreement, or
the application of any such provision to any Person or set of circumstances,
shall be determined to be invalid, unlawful, void or unenforceable to any
extent, the remainder of this Agreement, and the application of such provision
to Persons or circumstances other than those as to which it is determined to be
invalid, unlawful, void or unenforceable, shall not be impaired or otherwise
affected and shall continue to be valid and enforceable to the fullest extent
permitted by law.
10.16 Parties in Interest. Except for the provisions of Sections 1.5, 1.6
and 9, none of the provisions of this Agreement is intended to provide any
rights or remedies to any Person other than the parties hereto and their
respective successors and assigns (if any).
10.17 Entire Agreement. This Agreement and the other agreements referred to
herein set forth the entire understanding of the parties hereto relating to the
subject matter hereof and thereof and supersede all prior agreements and
understandings among or between any of the parties relating to the subject
matter hereof and thereof.
10.18 Construction.
(a) For purposes of this Agreement, whenever the context requires: the
singular number shall include the plural, and vice versa; the masculine
gender shall include the feminine and neuter genders; the feminine gender
shall include the masculine and neuter genders; and the neuter gender shall
include the masculine and feminine genders.
65
(b) The parties hereto agree that any rule of construction to the effect
that ambiguities are to be resolved against the drafting party shall not be
applied in the construction or interpretation of this Agreement.
(c) As used in this Agreement, the words "include" and "including," and
variations thereof, shall not be deemed to be terms of limitation, but
rather shall be deemed to be followed by the words "without limitation."
(d) Except as otherwise indicated, all references in this Agreement to
"Sections" and "Exhibits" are intended to refer to Sections of this
Agreement and Exhibits to this Agreement.
66
The parties hereto have caused this Agreement to be executed and delivered
as of August 22, 1996.
CASTELLE,
a California corporation
By: /s/ Xxxxxx X. Xxxxx
IBEX TECHNOLOGIES, INC.,
a California corporation
By: /s/ Xxx Xxxxx
/s/ Xxxxx Xxxx-Xxxxx
/s/ Xxxxxx Xxxxxx
/s/ Xxxxxx Xxxxxx
/s/ Xxxxxxx Xxxxx Xxxxxxx
/s/ on behalf of Newark Holdings S.A.
/s/ on behalf of Tucha Limited
67
EXHIBIT A-1
DESIGNATED SHAREHOLDERS
Name
Xxx Xxxxx and Xxxxx Xxxx-Xxxxx
Xxxxxx Xxxxxx
Xxxxxx Xxxxxx
68
EXHIBIT A-2
SIGNING SHAREHOLDERS
Tucha Limited
Newark Holding S.A.
Xxxxxxx Xxxxx Xxxxxxx
Includes those persons identified as Designated Shareholders on Exhibit
A-1.
69
EXHIBIT B
CERTAIN DEFINITIONS
For purposes of the Agreement (including this Exhibit B):
Acquisition Transaction. "Acquisition Transaction" shall mean any
transaction involving:
(a) the sale, license, disposition or acquisition of all or a material
portion of Ibex's business or assets;
(b) the issuance, disposition or acquisition of (i) any capital stock or
other equity security of Ibex (other than common stock issued to employees
of Ibex, upon exercise of Ibex Options or otherwise, in routine
transactions in accordance with Ibex's past practices), (ii) any option,
call, warrant or right (whether or not immediately exercisable) to acquire
any capital stock or other equity security of Ibex (other than stock
options granted to employees of Ibex in routine transactions in accordance
with Ibex's past practices), or (iii) any security, instrument or
obligation that is or may become convertible into or exchangeable for any
capital stock or other equity security of Ibex; or
(c) any merger, consolidation, business combination, reorganization or
similar transaction involving Ibex.
Agreement. "Agreement" shall mean the Agreement and Plan of Merger and
Reorganization to which this Exhibit B is attached (including the Disclosure
Schedule), as it may be amended from time to time.
Ibex Contract. "Ibex Contract" shall mean any Contract: (a) to which Ibex
is a party; (b) by which Ibex or any of its assets is or may become bound or
under which Ibex has, or may become subject to, any obligation; or (c) under
which Ibex has or may acquire any right or interest.
Ibex Proprietary Asset. "Ibex Proprietary Asset" shall mean any Proprietary
Asset owned by or licensed to Ibex or otherwise used by Ibex.
Consent. "Consent" shall mean any approval, consent, ratification,
permission, waiver or authorization (including any Governmental Authorization).
Contract. "Contract" shall mean any written, oral or other agreement,
contract, subcontract, lease, understanding, instrument, note, warranty,
insurance policy, benefit plan or legally binding commitment or undertaking of
any nature.
70
Damages. "Damages" shall include any loss, damage, injury, decline in
value, lost opportunity, liability, claim, demand, settlement, judgment, award,
fine, penalty, Tax, fee (including reasonable attorneys' fees), charge, cost
(including costs of investigation) or expense of any nature.
Disclosure Schedule. "Disclosure Schedule" shall mean the schedule (dated
as of the date of the Agreement) delivered to Castelle on behalf of Ibex and the
Designated Shareholders.
Encumbrance. "Encumbrance" shall mean any lien, pledge, hypothecation,
charge, mortgage, security interest, encumbrance, claim, infringement,
interference, option, right of first refusal, preemptive right, community
property interest or restriction of any nature (including any restriction on the
voting of any security, any restriction on the transfer of any security or other
asset, any restriction on the receipt of any income derived from any asset, any
restriction on the use of any asset and any restriction on the possession,
exercise or transfer of any other attribute of ownership of any asset).
Entity. "Entity" shall mean any corporation (including any non-profit
corporation), general partnership, limited partnership, limited liability
partnership, joint venture, estate, trust, company (including any limited
liability company or joint stock company), firm or other enterprise,
association, organization or entity.
Exchange Act. "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
Government Bid. "Government Bid" shall mean any quotation, bid or proposal
submitted to any Governmental Body or any proposed prime contractor or
higher-tier subcontractor of any Governmental Body.
Government Contract. "Government Contract" shall mean any prime contract,
subcontract, letter contract, purchase order or delivery order executed or
submitted to or on behalf of any Governmental Body or any prime contractor or
higher-tier subcontractor, or under which any Governmental Body or any such
prime contractor or subcontractor otherwise has or may acquire any right or
interest.
Governmental Authorization. "Governmental Authorization" shall mean any:
(a) permit, license, certificate, franchise, permission, clearance,
registration, qualification or authorization issued, granted, given or otherwise
made available by or under the authority of any Governmental Body or pursuant to
any Legal Requirement; or (b) right under any Contract with any Governmental
Body.
Governmental Body. "Governmental Body" shall mean any: (a) nation, state,
commonwealth, province, territory, county, municipality, district or other
jurisdiction of any nature; (b) federal, state, local, municipal, foreign or
other government; or (c) governmental or quasi-governmental authority of any
71
nature (including any governmental division, department, agency, commission,
instrumentality, official, organization, unit, body or Entity and any court or
other tribunal).
Indemnitees. "Indemnitees" shall mean the following Persons: (a) Castelle;
(b) Xxxxxxxx's current and future affiliates; (c) the respective Representatives
of the Persons referred to in clauses "(a)" and "(b)" above; and (d) the
respective successors and assigns of the Persons referred to in clauses "(a)",
"(b)" and "(c)" above; provided, however, that the Designated Shareholders shall
not be deemed to be "Indemnitees."
Legal Proceeding. "Legal Proceeding" shall mean any action, suit,
litigation, arbitration, proceeding (including any civil, criminal,
administrative, investigative or appellate proceeding), hearing, inquiry, audit,
examination or investigation commenced, brought, conducted or heard by or
before, or otherwise involving, any court or other Governmental Body or any
arbitrator or arbitration panel.
Legal Requirement. "Legal Requirement" shall mean any federal, state,
local, municipal, foreign or other law, statute, constitution, principle of
common law, resolution, ordinance, code, edict, decree, rule, regulation, ruling
or requirement issued, enacted, adopted, promulgated, implemented or otherwise
put into effect by or under the authority of any Governmental Body.
Material Adverse Effect. A violation or other matter will be deemed to have
a "Material Adverse Effect" on Ibex if such violation or other matter
(considered together with all other matters that would constitute exceptions to
the representations and warranties set forth in the Agreement or in the
Designated Shareholders' Closing Certificate but for the presence of "Material
Adverse Effect" or other materiality qualifications, or any similar
qualifications, in such representations and warranties) would have a material
adverse effect on Ibex's business, condition, assets, liabilities, operations,
financial performance or prospects.
Person. "Person" shall mean any individual, Entity or Governmental Body.
Proprietary Asset. "Proprietary Asset" shall mean any: (a) patent, patent
application, trademark (whether registered or unregistered), trademark
application, trade name, fictitious business name, service mark (whether
registered or unregistered), service mark application, copyright (whether
registered or unregistered), copyright application, maskwork, maskwork
application, trade secret, know-how, customer list, franchise, system, computer
software, computer program, invention, design, blueprint, engineering drawing,
proprietary product, technology, proprietary right or other intellectual
property right or intangible asset; or (b) right to use or exploit any of the
foregoing.
Representatives. "Representatives" shall mean officers, directors,
employees, agents, attorneys, accountants, advisors and representatives.
SEC. "SEC" shall mean the United States Securities and Exchange Commission.
72
Securities Act. "Securities Act" shall mean the Securities Act of 1933, as
amended.
Tax. "Tax" shall mean any tax (including any income tax, franchise tax,
capital gains tax, gross receipts tax, value-added tax, surtax, excise tax, ad
valorem tax, transfer tax, stamp tax, sales tax, use tax, property tax, business
tax, withholding tax or payroll tax), levy, assessment, tariff, duty (including
any customs duty), deficiency or fee, and any related charge or amount
(including any fine, penalty or interest), imposed, assessed or collected by or
under the authority of any Governmental Body.
Tax Return. "Tax Return" shall mean any return (including any information
return), report, statement, declaration, estimate, schedule, notice,
notification, form, election, certificate or other document or information filed
with or submitted to, or required to be filed with or submitted to, any
Governmental Body in connection with the determination, assessment, collection
or payment of any Tax or in connection with the administration, implementation
or enforcement of or compliance with any Legal Requirement relating to any Tax.
73
EXHIBIT C-1
FORM OF AFFILIATE AGREEMENT
74
AFFILIATE AGREEMENT
THIS AFFILIATE AGREEMENT ("Agreement") is being executed and delivered as
of August __, 1996, by the parties identified on Exhibit A (each, an "Affiliate"
and collectively, the "Affiliates") and CASTELLE, a California corporation
("Castelle").
RECITALS
A. The Affiliates are shareholders of IBEX TECHNOLOGIES, INC., a California
corporation (the "Company").
X. Xxxxxxxx, the Company, the Affiliates and certain other shareholders of
the Company have entered into an Agreement and Plan of Reorganization dated as
of August 22, 1996 (the "Reorganization Agreement") providing for the merger of
the Company with and into Castelle (the "Merger"). The Reorganization Agreement
contemplates that, upon consummation of the Merger, all outstanding shares of
capital stock of the Company will be converted into the right to receive shares
of common stock of Castelle ("Castelle Common Stock"). It is accordingly
contemplated that the Affiliates will receive shares of Castelle Common Stock in
the Merger.
C. Each Affiliate may be deemed to be an "affiliate" of the Company for
purposes of (i) the restrictions on resale imposed by interpretations of the
staff of the Securities and Exchange Commission (the "SEC") in transactions
exempted from registration under the Securities Act of 1933, as amended (the
"Securities Act"), and (ii) determining Castelle's eligibility to account for
the Merger as a "pooling of interests" under Accounting Series Releases 130 and
135, as amended, of the SEC.
AGREEMENT
1. Representations and Warranties. The Affiliates severally represent and
warrant to Castelle as follows:
(a) Each Affiliate is the holder and beneficial owner of the number of
shares of the Company's capital stock set forth under Affiliate's signature
below (the "Shares"), and Affiliate has good and valid title to the Shares,
free and clear of any liens, pledges, security interests, adverse claims,
equities, options, proxies, charges, encumbrances or restrictions of any
nature.
(b) Each Affiliate has carefully read this Agreement, and has discussed
with counsel to the extent Affiliate felt necessary the limitations imposed
on Affiliate's ability to sell, transfer or otherwise dispose of the
Shares, the shares of Castelle Common Stock that Affiliate is to receive in
the Merger (the "Castelle Shares") and other shares of the capital stock of
the Company or Castelle. Affiliate fully understands the limitations this
75
Agreement places upon Affiliate's ability to sell, transfer or otherwise
dispose of the Shares, and the Castelle Shares and other shares of capital
stock of the Company or Castelle.
(c) Each Affiliate understands that the representations, warranties and
covenants set forth herein will be relied upon by Xxxxxxxx and its counsel
and accountants for purposes of determining Castelle's eligibility to
account for the Merger as a "pooling of interests," for purposes of
determining whether to proceed with the Merger and for other purposes.
2. Prohibition Against Transfer. Each Affiliate agrees that:
(a) until such time as the Reorganization Agreement is validly terminated
in accordance with its terms, such Affiliate shall not sell, transfer or
otherwise dispose of, or reduce Affiliate's interest in or risk relating
to, (i) any capital stock of the Company (including the Shares and any
additional shares of capital stock of the Company acquired by Affiliate,
whether upon exercise of a stock option or otherwise), or (ii) any option
to purchase any capital stock of the Company, except pursuant to and upon
consummation of the Merger;
(b) during the period from the date on which the Merger is consummated
through the date on which financial results covering at least 30 days of
post-Merger combined operations of Castelle and the Company have been
published by Castelle (within the meaning of the applicable "pooling of
interests" accounting requirements), Affiliate shall not sell, transfer or
otherwise dispose of, or reduce Affiliate's interest in or risk relating
to, (i) any shares of Castelle Common Stock (including the Castelle Shares)
and any additional shares of Castelle Common Stock acquired by Affiliate,
whether upon exercise of a stock option or otherwise, or (ii) any option to
purchase shares of Castelle Common Stock; and
(c) without limiting the generality of the foregoing, or the effect of
clause (b) of this Section 2, Affiliate shall not effect any sale, transfer
or other disposition of the Castelle Shares unless:
(i) such sale, transfer or other disposition is made in conformity
with the volume and other requirements of Rule 145(d) under the
Securities Act, as evidenced by a broker's letter and a representation
letter executed by Affiliate, each stating that such requirements have
been met;
(ii) counsel reasonably satisfactory to Castelle shall have advised
Xxxxxxxx in a written opinion letter upon which Castelle may rely that
such sale, transfer or other disposition will be exempt from
registration under the Securities Act;
(iii) such sale, transfer or other disposition has been registered
under the Securities Act; or
(iv) an authorized representative of the SEC shall have rendered
written advice to Affiliate to the effect that the SEC would take no
76
action, or that the staff of the SEC would not recommend that the SEC
take action, with respect to such proposed sale, transfer or other
disposition, and a copy of such written advice and all other related
communications with the SEC shall have been delivered to Castelle.
For purposes of Section 2(c)(ii), counsel reasonably satisfactory to
Castelle shall include, in the case of sales, transfers or other dispositions by
Tucha Limited, Newark Holding S.A. and Xxxxxxx Xxxxx Xxxxxxx, the law firm of
Xxxxx, Xxxxxx-Xxxxx & Xxxxxxxxx, P.C., presently in Waltham, Massachusetts.
3. Stop Transfer Instructions.
(a) Each Affiliate acknowledges and agrees that stop transfer instructions
will be given to Xxxxxxxx's transfer agent with respect to the Castelle
Shares and with respect to any shares of Castelle Common Stock acquired by
Affiliate upon any exercise of any option to purchase shares of Castelle
Common Stock, and that there will be placed on the certificates
representing such shares of Castelle Common Stock or any substitutions
thereof a legend, stating in substance:
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE RESTRICTED AND MAY
ONLY BE TRANSFERRED IN ACCORDANCE WITH THE TERMS OF AN AGREEMENT
DATED AS OF AUGUST __, 1996, BETWEEN THE REGISTERED HOLDER HEREOF
AND CASTELLE, A COPY OF WHICH AGREEMENT IS ON FILE AT THE
PRINCIPAL OFFICES OF CASTELLE."
(b) Xxxxxxxx agrees that such stop transfer instructions and legends will
be removed with respect to shares of Castelle Common Stock at such time as
Castelle is reasonably satisfied that the restrictions on resale imposed by
interpretations of the staff of the Commission are no longer applicable to
such shares.
4. Specific Performance. Affiliate agrees that irreparable damages 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 Xxxxxxxx shall be entitled to injunctive relief
to prevent breaches of the provisions of this Agreement, and to enforce
specifically the terms and provisions hereof, in addition to any other remedy to
which Castelle may be entitled at law or in equity.
5. Notices. Any notice or other communication required or permitted to be
delivered to Castelle or Affiliate under this Agreement shall be in writing and
shall be deemed properly delivered, given and received when delivered (by hand,
by registered mail, by courier or express delivery service or by facsimile) to
the address or facsimile telephone number set forth beneath the name of such
party below (or to such other address or facsimile telephone number as such
party shall have specified in a written notice given to the other party):
77
if to Castelle: CASTELLE
0000-0 Xxxxx Xxxxxxxxx
Xxxxx Xxxxx, Xxxxxxxxxx 00000
Attn: President
Xxxxxxxxx: (000) 000-0000
if to Affiliate: ______________________________
------------------------------
------------------------------
------------------------------
6. Severability. In the event that any provision of this Agreement, or the
application of any such provision to any person, entity or set of circumstances,
shall be determined to be invalid, unlawful, void or unenforceable to any
extent, the remainder of this Agreement, and the application of such provision
to persons, entities or circumstances other than those as to which it is
determined to be invalid, unlawful, void or unenforceable, shall not be impaired
or otherwise affected and shall continue to be valid and enforceable to the
fullest extent permitted by law.
7. Governing Law. This Agreement shall be construed in accordance with, and
governed in all respects by, the laws of the State of California (without giving
effect to principles of conflicts of laws).
8. Waiver. No failure on the part of Castelle or an Affiliate to exercise
any power, right, privilege or remedy under this Agreement, and no delay on the
part of Castelle in exercising any power, right, privilege or remedy under this
Agreement, shall operate as a waiver of such power, right, privilege or remedy;
and no single or partial exercise of any such power, right, privilege or remedy
shall preclude any other or further exercise thereof or of any other power,
right, privilege or remedy. Neither Castelle nor an Affiliate shall be deemed to
have waived any claim arising out of this Agreement, or any power, right,
privilege or remedy under this Agreement, unless the waiver of such claim,
power, right, privilege or remedy is expressly set forth in a written instrument
duly executed and delivered on behalf of Castelle; and any such waiver shall not
be applicable or have any effect except in the specific instance in which it is
given.
9. Captions. The captions contained in this Agreement are for convenience
of reference only, shall not be deemed to be a part of this Agreement and shall
not be referred to in connection with the construction or interpretation of this
Agreement.
10. Further Assurances. Affiliate shall execute and/or cause to be
delivered to Castelle such instruments and other documents and shall take such
other actions as Castelle may reasonably request to effectuate the intent and
purposes of this Agreement.
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11. Entire Agreement. This Agreement, the Reorganization Agreement and the
other agreements referred to in the Reorganization Agreement set forth the
entire understanding of Affiliate and Castelle relating to the subject matter
hereof and thereof and supersede all prior agreements and understandings between
Affiliate and Castelle relating to the subject matter hereof and thereof.
12. Amendments. This Agreement may not be amended, modified, altered, or
supplemented other than by means of a written instrument duly executed and
delivered on behalf of Castelle and Affiliate.
13. Binding Nature. This Agreement will be binding upon Affiliate and
Affiliate's representatives, executors, administrators, estate, heirs,
successors and assigns, and shall inure to the benefit of Castelle and
Affiliates and their successors and assigns.
14. Attorneys' Fees and Expenses. If any legal action or other legal
proceeding relating to the enforcement of any provision of this Agreement is
brought against either Castelle or an Affiliate, the prevailing party shall be
entitled to recover reasonable attorneys' fees, costs and disbursements (in
addition to any other relief to which the prevailing party may be entitled).
15. Termination. This Agreement shall terminate and be of no force or
effect if the Reorganization Agreement is validly terminated in accordance with
its terms without the Merger having occurred. The representations, warranties,
covenants and other provisions contained in this Agreement shall survive the
Merger.
CASTELLE: AFFILIATE:
______________________________ _____________________________
(Signature) [name]
Stock Beneficially Owned by Affiliate:
______________________________
(Print Name) _____ shares of Common Stock
_____ shares of Preferred Stock
______________________________
(Print Title)
79
EXHIBIT A
AFFILIATES
Tucha Limited
Newark Holding S.A.
Xxxxxxx Xxxxx Xxxxxxx
Xxx Xxxxx and Xxxxx Xxxx-Xxxxx
Xxxxxx Xxxxxx
Xxxxxx Xxxxxx
80
EXHIBIT C-2
PERSONS TO EXECUTE AFFILIATE AGREEMENTS
Xxx Xxxxx and Xxxxx Xxxx-Xxxxx
Xxxxxx Xxxxxx
Xxxxxxx Xxxxx Xxxxxxx
Xxxxxx Xxxxxx
Newark Holdings S.A.
Tucha Limited
81
EXHIBIT D
FORM OF TAX REPRESENTATION LETTERS
82
____________, 1996
Xxxxxx Godward Xxxxxx Xxxxxxxxx & Xxxxx Xxxxxx & Xxxxx LLP
One Maritime Plaza, 20th Floor 000 Xxxxxxx Xxxx, 00xx Xxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000 Sacramento, California 95814
Re: Merger pursuant to that certain Agreement and Plan of Reorganization (the
"Agreement") dated August 22, 1996 by and among Castelle ("Castelle"), Ibex
Technology, Inc. ("Ibex") and the Signing Shareholders
Ladies and Gentlemen:
This letter is supplied to you in connection with your rendering of opinions
regarding certain United States federal income tax consequences of the Merger.
Unless otherwise indicated, capitalized terms not defined herein have the
meanings set forth in the Agreement.
Representations
The undersigned officer of Ibex, a California corporation, on behalf of the
management of Ibex, after consulting with legal counsel and financial auditors
regarding the meaning of and factual support for the following representations,
hereby represents, in connection with the proposed merger of Ibex, a California
corporation, with and into Castelle in a statutory merger (the "Merger")
pursuant to the Agreement and Exhibits thereto including but not limited to the
Agreement of Merger, that as of the time this letter is executed, the following
facts are true and will continue to be true as of the Effective Time and Closing
of the Merger and thereafter where relevant:
1. Ibex's principal reasons for participating in the Merger are bona fide
business reasons.
2. The total fair market value of all consideration other than Castelle
voting common stock received by Ibex shareholders in exchange for their Ibex
common and preferred stock in the Merger (including, without limitation, cash
paid to Ibex shareholders perfecting dissenters' rights and cash paid in lieu of
fractional shares) will be less than ten percent (10%) of the aggregate fair
market value of Ibex common and preferred stock outstanding immediately prior to
the Merger.
3. The liabilities of Ibex assumed by Xxxxxxxx and the liabilities to which
the transferred assets of Ibex are subject were incurred by Ibex in the ordinary
course of its business.
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4. The fair market value of Ibex's assets on the Effective Date which are
transferred to Castelle will exceed the aggregate liabilities of Ibex plus the
amount of liabilities, if any, to which such assets are subject, and the total
adjusted basis of the assets of Ibex transferred to Castelle will equal or
exceed the sum of the liabilities assumed by Castelle, plus the amount of
liabilities, if any, to which the transferred assets are subject.
5. Ibex is not and will not be on the Effective Date an "investment
company" within the meaning of ss. 368(a)(2)(F) of the Internal Revenue Code of
1986, as amended, (the "Code").
6. Ibex has no knowledge of any plan or intention on the part of any Ibex
shareholder (a "Plan") to engage in a sale, exchange, transfer, distribution,
pledge, disposition or any other transaction which would result in a direct or
indirect disposition (a "Sale") of shares of Castelle voting common stock to be
issued to Ibex shareholders in the Merger, which shares would have an aggregate
fair market value, as of the Effective Date of the Merger, in excess of
fifty-percent (50%) of the aggregate fair market value, immediately prior to the
Merger, of all outstanding shares of Ibex common and preferred stock. For
purposes of this representation, shares of Ibex common and preferred stock (or
the portion thereof) (i) with respect to which a Ibex shareholder receives
consideration in the Merger other than Castelle voting common stock (including,
without limitation, cash received pursuant to the exercise of dissenters' rights
or paid in lieu of issuing fractional shares) and/or (ii) with respect to which
a sale occurs during the Pre-Merger Period, shall be considered shares of
outstanding Ibex common and preferred stock exchanged for Castelle voting common
stock in the Merger and then disposed of pursuant to a Plan.
7. The payment of cash by Castelle in lieu issuing fractional shares of
Castelle voting common stock is solely for the purpose of avoiding the expense
and inconvenience to Castelle of issuing fractional shares and does not
represent separately bargained for consideration. The Castelle fractional share
interests to which each Ibex shareholder may be entitled in the Merger will be
aggregated so that no Ibex shareholder will receive cash in an amount which
would equal or exceed, in the aggregate, the value of one whole share of
Castelle voting common stock.
8. Except with respect to (1) payments of cash to Ibex shareholders
perfecting dissenters' rights, and (2) payments of cash in lieu of fractional
shares of Castelle voting common and preferred stock, one hundred percent (100%)
of the Ibex common and preferred stock outstanding immediately prior to the
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Merger will be exchanged solely for Castelle voting common stock. Thus, except
as set forth in the preceding sentence, Ibex intends that no consideration be
paid or received (directly or indirectly, actually or constructively) for Ibex
common and preferred stock other than Castelle voting common stock.
9. During the Pre-Merger Period, no indebtedness or other obligation of
Ibex has been or will be guaranteed by any shareholder of Ibex (or any person or
entity related to a shareholder of Ibex).
10. On the Effective Date of the Merger, the fair market value of the
Castelle voting common stock and other consideration received by each Ibex
shareholder will be approximately equal to the aggregate fair market value of
the Ibex common and preferred stock surrendered in exchange therefor.
11. Ibex and the shareholders of Ibex will each pay separately its or their
own expenses in connection with the Merger as contemplated by the Agreement;
provided, however, that to the extent any expenses relating to the Merger (or
the "plan of reorganization" within the meaning of Treas. Reg. ss. 1.368-1(c)
with respect to the Merger) are funded directly or indirectly by a party other
than the incurring party, such expenses will be within the guidelines
established in Rev. Rul. 73-54, 1973-1 C.B. 187.
12. There is no intercorporate indebtedness existing between Castelle and
Ibex that was issued, acquired, or will be settled at a discount, and to the
best knowledge of the management of Ibex, Castelle will assume no liabilities of
any Ibex shareholder in connection with the Merger.
13. The terms of the Agreement and all other agreements entered into
pursuant thereto are the product of arm's length negotiations.
14. None of the compensation payments received by any shareholder of Ibex
will be separate consideration for, or allocable to, any of their shares of Ibex
common or preferred stock. None of the shares of Castelle voting common stock
received by any shareholder of Ibex will be separate consideration for, or
allocable to, any employment agreement, consulting agreement, any covenants not
to compete or otherwise for the performance of services; and the compensation
paid to any shareholder of Ibex will be for services actually rendered and will
be commensurate with amounts paid to third parties bargaining at arm's length
for similar services.
15. Ibex is authorized to make all of the representations set forth herein.
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GENERAL
YOUR RELIANCE IN RENDERING OPINIONS
LIMITATIONS ON YOUR OPINIONS
1. The undersigned recognize that (i) your opinions will be based on, among
other things, the representations and statements set forth herein, in the
Agreement (including exhibits attached thereto), and in the documents related
thereto, and (ii) your opinions will be subject to certain limitations,
qualifications and assumptions including that the opinions may not be relied
upon if any such representations or statements are not accurate in all material
respects.
2. The undersigned recognize that your opinions will not address any tax
consequences of the Merger or any action taken in connection therewith except as
expressly set forth in such opinions.
Very truly yours,
IBEX TECHNOLOGY, INC.
a California Corporation
By:
Title:
86
______________, 1996
Xxxxxx Godward Xxxxxx Xxxxxxxxx & Xxxxx Xxxxxx & Xxxxx LLP
One Maritime Plaza 000 Xxxxxxx Xxxx, 00xx Xxxxx
00xx Xxxxx Xxxxxxxxxx, Xxxxxxxxxx 00000
Xxx Xxxxxxxxx, XX 00000
Re: Merger Transaction (the "Merger") Pursuant to that certain Agreement
and Plan of Reorganization (the "Agreement") Dated August 22, 1996
by and among Castelle ("Castelle"), Ibex Technologies, Inc. ("Ibex")
and the Signing Shareholders
Ladies and Gentlemen:
This letter is supplied to you in connection with your rendering of an
opinion regarding certain United States federal income tax consequences of the
Merger. Unless otherwise indicated, capitalized terms not defined herein have
the meanings set forth in the Agreement.
Representations
The undersigned officer of Castelle, a California corporation, on behalf of
the management of Castelle, after consulting with legal counsel and financial
auditors regarding the meaning of and the factual support for the following
representations, hereby represents, in connection with the proposed merger of
Ibex, a California corporation, with and into Castelle in a statutory merger
(the "Merger") pursuant to the Agreement and Exhibits thereto including but not
limited to the Agreement of Merger, with Castelle surviving the Merger, that as
of the time this letter is executed, the following facts are true and will
continue to be true as of the Effective Time and Closing of the Merger and
thereafter where relevant:
1. Xxxxxxxx's principal reasons for participating in the Merger are bona
fide business reasons.
2. Castelle has no plan or intention to reacquire any of its stock issued
in the Merger.
3. Castelle has no plan or intention to sell or otherwise dispose of any of
the assets of Ibex acquired in the Merger, except for dispositions made in the
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ordinary course of business or transfers described in section 368(a)(2)(C) of
the Internal Revenue Code of 1986, as amended (the "Code").
4. Following the Merger, Castelle will continue Ibex's historic trade or
business or use a significant portion of its historic business assets in a
business.
5. Castelle is not, and will not be on the Effective Date, an "investment
company" within the meaning of section 368(a)(2)(F) of the Code.
6. No shareholder of Ibex is acting as agent for Castelle in connection
with the Merger or approval thereof, and Xxxxxxxx will not reimburse any Ibex
shareholder for Ibex common stock or preferred stock such shareholder may have
purchased or for other obligations such shareholder may have incurred.
7. The payment of cash by Castelle in lieu of issuing fractional shares of
Castelle voting common stock is solely for the purpose of avoiding the expense
and inconvenience to Castelle of issuing fractional shares and does not
represent separately bargained for consideration. The Castelle fractional share
interests to which each Ibex shareholder may be entitled in the Merger will be
aggregated so that no Ibex shareholder will receive cash in an amount which
would equal or exceed, in the aggregate, the value of one whole share of
Castelle voting common stock.
8. Except with respect to (1) payments of cash to Ibex shareholders
perfecting dissenters' or appraisal rights and (2) payments of cash in lieu of
fractional shares of Castelle voting common stock or preferred stock, one
hundred percent (100%) of the Ibex common stock and preferred stock outstanding
immediately prior to the Merger will be exchanged solely for Castelle voting
common stock. Thus, except as set forth in the preceding sentence, Xxxxxxxx
intends that no consideration be paid or received (directly or indirectly,
actually or constructively) for Ibex common stock or preferred stock other than
Castelle voting common stock.
9. The total fair market value of all consideration other than Castelle
voting common stock received by Ibex shareholders in exchange for their Ibex
common stock or preferred stock in the Merger (including, without limitation,
cash paid to Ibex shareholders perfecting dissenters' or appraisal rights and
cash paid in lieu of fractional shares) will be less than ten percent (10%) of
the aggregate fair market value of Ibex common stock and preferred stock
outstanding immediately prior to the Merger. In addition, the total cash
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consideration that will be paid in the Merger to Ibex shareholders in lieu of
fractional shares of Castelle voting common stock will not exceed one percent
(1%) of the total consideration that will be issued in the Merger to the Ibex
shareholders in exchange for their shares of Ibex common stock and preferred
stock.
10. On the Effective Date of the Merger, the fair market value of the
Castelle voting common stock and other consideration received by each Ibex
shareholder will be approximately equal to the aggregate fair market value of
the Ibex common stock and preferred stock surrendered in exchange therefor.
11. Castelle will pay separately its own expenses in connection with the
Merger as contemplated by the Agreement; provided, however, that to the extent
any expenses relating to the Merger (or the "plan of reorganization" within the
meaning of Treas. Reg. ss. 1.368-1(c) with respect to the Merger) are funded
directly or indirectly by a party other than the incurring party, such expenses
will be within the guidelines established in Rev. Rul. 73-54, 1973-1 C.B. 187.
12. There is no intercorporate indebtedness existing between Castelle and
Ibex that was issued, acquired, or will be settled at a discount, and Castelle
will not assume any liabilities of Ibex's shareholders in connection with the
Merger.
13. The terms of the Agreement and all other agreements entered into
pursuant thereto are the product of arm's-length negotiations.
14. None of the compensation payments which might be received by any
shareholder of Ibex will be separate consideration for, or allocable to, any of
their shares of Ibex common stock or preferred stock; none of the shares of
Castelle voting common stock to be received by any shareholder of Ibex will be
separate consideration for, or allocable to, any employment agreement,
consulting agreement, any covenants not to compete or otherwise for the
performance of services; and the compensation which might be paid to any
shareholder of Ibex will be for services actually rendered and will be
commensurate with amounts paid to third parties bargaining at arm's length for
similar services.
15. Castelle is authorized to make all the representations set forth
herein.
GENERAL
Your Reliance In Rendering Opinions; Limitations On Your Opinions
1. The undersigned recognizes that (i) your opinions will be based on,
among other things, the representations and statements set forth herein, in the
Agreement (including exhibits attached thereto), and in the documents related
89
thereto, and (ii) your opinions will be subject to certain limitations,
qualification and assumptions including that the opinions may not be relied upon
if any such representations or statements are not accurate in all material
respects.
2. The undersigned recognizes that your opinions will not address any tax
consequences of the Merger or any action taken in connection therewith except as
expressly set forth in such opinions.
Very truly yours,
CASTELLE,
a California corporation
By:
Title:
90
EXHIBIT E
FORM OF CONTINUITY OF INTEREST CERTIFICATE
91
CONTINUITY OF INTEREST CERTIFICATE
The undersigned is aware that pursuant to an Agreement and Plan of
Reorganization, dated as of August 22, 1996 (the "Reorganization Agreement"),
made and entered into by and among CASTELLE, a California corporation
("Castelle") and IBEX TECHNOLOGIES, INC., a California corporation ("Ibex"), and
certain shareholders of Ibex, it is contemplated that Ibex will merge with and
into Castelle in a transaction (the "Merger") in which shares of the common
stock of Ibex ("Ibex Common Stock") and preferred stock of Ibex ("Ibex Prefered
Stock") will be exchanged for shares of the common stock of Castelle ("Castelle
Common Stock")
1. The undersigned represents, warrants and certifies as follows:
(a) The undersigned currently is the owner of that number and class of
shares of Ibex Common Stock and Ibex Preferred Stock set forth below (the
"Shares") and did not acquire any of the Shares in contemplation of the
Merger;
(b) The undersigned has not engaged in a Sale (as defined below) of any
shares of Ibex Common Stock or Ibex Preferred Stock in contemplation of the
Merger;
(c) The undersigned has, and will as of the Effective Date have, no plan or
intention (a "Plan") to engage in a sale, exchange, transfer, distribution
(including a distribution by a partnership to its partners or by a
corporation to its stockholders), redemption or reduction in any way of the
undersigned's risk of ownership (by short sale or otherwise), or other
disposition, directly or indirectly (such actions being collectively
referred to herein as a "Sale") of the shares of Castelle Common Stock to
be received by the undersigned in the Merger. For purposes of the preceding
sentence, shares of Ibex Common Stock or shares of Ibex Preferred Stock (or
the portion thereof) (i) with respect to which the undersigned will receive
consideration in the Merger other than shares of Castelle Common Stock
(including cash to be received in lieu of fractional shares of Castelle
Common Stock) and/or (ii) with respect to which a Sale (A) occurred in
contemplation of the Merger or (B) will occur prior to the Merger, shall be
considered shares of Ibex Common Stock or shares of Ibex Preferred Stock
exchanged for shares of Castelle Common Stock in the Merger and then
disposed of pursuant to a Plan;
(d) The undersigned has no Plan to exercise dissenters' rights in
connection with the Merger;
(e) The undersigned is not aware of, or participating in, any Plan on the
part of the holders of shares of Ibex Common Stock or shares of Ibex
Preferred Stock to engage in a Sale or Sales of the shares of Castelle
Common Stock to be received in the Merger such that the aggregate fair
market value, as of the Effective Time (as defined in the Reorganization
Agreement), of shares subject to such Sales would exceed fifty percent
(50%) of the aggregate fair market value of all shares of outstanding Ibex
Common Stock and Ibex Preferred Stock immediately prior to the Merger. For
purposes of the preceding sentence, shares of Ibex Common Stock (or the
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portion thereof) (i) with respect to which a shareholder of Ibex receives
consideration in the Merger other than shares of Castelle Common Stock
(including, without limitation, cash received pursuant to the exercise of
dissenters' rights or in lieu of a fractional share of Castelle Common
Stock) or (ii) with respect to which a Sale occurs prior to and in
contemplation of the Merger, shall be considered shares of outstanding Ibex
Common Stock or Ibex Preferred Stock exchanged for shares of Castelle
Common Stock in the Merger and then disposed of pursuant to a Plan;
(f) The undersigned waives any and all rights to seek damages or other
relief from Castelle or Ibex as a result of any losses incurred as a result
of the inaccuracy of any or all of the representations set forth in the
certificate dated August __, 1996 from Ibex to Xxxxxx Godward Xxxxxx
Xxxxxxxxx & Xxxxx and Xxxxxx & Xxxxx XXX, provided pursuant to Section
5.8(b) of the Reorganization Agreement.
(g) Except to the extent written notification to the contrary is received
by Ibex from the undersigned prior to the Merger, the representations and
warranties and certifications contained herein shall be true and correct at
all times from the date hereof through the date on which the Merger occurs.
2. The undersigned has consulted with such legal and financial counsel as
the undersigned has deemed appropriate in connection with the execution of this
Certificate.
3. The undersigned understands that Xxxxxxxx, Ibex, and their respective
shareholders, as well as legal counsel to Castelle and Ibex (in connection with
rendering of their opinions that the Merger will be a "reorganization" within
the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended)
will be relying on (a) the truth and accuracy of the representations contained
herein and (b) the undersigned's performance of the obligations set forth
herein.
IN WITNESS WHEREOF, the undersigned has executed this Certificate on
_____________________, 1996.
Signature:
Name:
Address:
Number of Shares of Ibex Common Stock Beneficially Owned:
Number of Shares of Ibex Preferred Stock Beneficially Owned:
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EXHIBIT F
PERSONS TO SIGN
EMPLOYMENT AND NONCOMPETITION AGREEMENTS
Xxx Xxxxx
Xxxxxx Xxxxxx
Xxxxxx Xxxxxx
Xxxxx Xxx (no noncompetition agreement)
Xxxxx Xxxxxx (no noncompetition agreement)
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EXHIBIT G
FORM OF EMPLOYMENT AGREEMENT
95
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is being entered into as of
August __, 1996 (the "Closing Date") by and between CASTELLE, a California
corporation (the "Corporation"), and ____________________ ("Employee").
RECITALS
X. Xxxxxxxx to an Agreement and Plan of Merger and Reorganization, dated as
of August 22, 1996, by and among the Corporation, Ibex Technologies, Inc., a
California corporation ("Ibex"), and certain shareholders of Ibex, as amended
(the "Reorganization Agreement"), Ibex is merging into the Corporation on the
Closing Date (the "Merger"). As a result of the Merger, Ibex shareholders are
receiving shares of Common Stock of the Corporation in exchange for their shares
of stock of Ibex.
B. Employee was a shareholder of Ibex prior to the Merger, and has been
serving as an employee of Ibex.
C. The Corporation has required, as a condition to consummating the
transactions contemplated by the Reorganization Agreement, that Employee execute
and deliver this Agreement.
D. Contemporaneously with the execution and delivery of this Agreement,
Employee is executing and delivering to the Corporation a Noncompetition
Agreement of even date herewith. The Reorganization Agreement, the
Noncompetition Agreement and the Proprietary Information Agreement previously
executed by Employee in favor of Ibex are referred to collectively in this
Agreement as the "Other Agreements."
AGREEMENT
In order to induce the Corporation to consummate the transactions
contemplated by the Reorganization Agreement, and in further consideration of
the mutual covenants and agreements contained herein, the parties agree as
follows:
1. EMPLOYMENT
1.1 Term; Duties.
(a) Term. Subject to Section 1.7 below, Employee agrees to serve as an
employee of the Corporation during the period commencing on the Closing
Date and ending on the date two years from the Closing Date (the
"Employment Term").
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(b) Duties. During the Employment Term, Employee shall serve in such
capacity as the Corporation's Chairman may specify from time to time, and
shall have such responsibilities as may be assigned to him by the
Corporation's Chairman. Employee agrees to serve the Corporation faithfully
and to the best of his ability, and to devote substantially all of his
working time, attention and efforts during the Employment Term to the
business and affairs of the Corporation. Employee represents and warrants
to the Corporation that he is under no contractual commitments inconsistent
with his obligations set forth in this Agreement.
1.2 Salary. In consideration of all services to be rendered by Employee to
the Corporation during the Employment Term, the Corporation shall pay to
Employee a salary of $__________ per annum, payable at such times as other
salaried employees of the Corporation receive their regular salary payments.
Employee's salary may be increased by the Corporation as a result of salary
reviews to be conducted by Xxxxxxxx's Chief Executive Officer periodically. The
Corporation shall be entitled to withhold from the salary payments otherwise
required to be made to Employee such amounts as the Corporation may be required
to withhold under applicable tax laws and other applicable legal requirements.
1.3 Stay-On Bonus Payments. Subject to Section 1.7(b), the Corporation
shall pay to Employee, as a stay-on bonus, $__________ per month on each of the
first 12 monthly anniversaries of the Closing Date.
1.4 Other Benefits. The Corporation shall provide to Employee, during the
Employment Term, the same benefits that the Corporation makes generally
available to all of its other employees during the Employment Term, subject to
Employee's satisfaction of the respective eligibility requirements for such
benefits.
1.5 Other Compensation Matters. Employee acknowledges and agrees that he
shall not be entitled to receive from the Corporation, or from Castelle or any
other affiliate of the Corporation, any salary, bonus or other compensation or
benefit of any nature (whether relating to any period prior to the Closing Date
or relating to any period after the Closing Date) except as expressly provided
in the Other Agreements or in Sections 1.2, 1.3 and 1.4 above. Employee
represents and warrants to the Corporation that he is not aware of any claims or
rights against the Corporation arising directly or indirectly from his past
employment with the Corporation, and Employee hereby releases and discharges the
Corporation and its affiliates from all claims, rights, causes of action,
demands and obligations relating to or arising directly or indirectly from his
past employment with the Corporation.
1.6 Expenses. Employee shall be entitled to reimbursement from the
Corporation for reasonable out-of-pocket business expenses reasonably incurred
by Employee during the Employment Term in the performance of Employee's duties
under this Agreement; provided, however, that the Corporation shall not be
required to reimburse Employee for any such expenses unless: (a) Employee
presents vouchers and receipts indicating in reasonable detail the amount and
business purpose of each of such expenses; and (b) Employee otherwise complies
with the Corporation's reimbursement policies established from time to time and
in effect during the Employment Term.
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1.7 Termination.
(a) Either the Corporation or the Employee shall have the right to
terminate this Agreement, with or without Cause (as defined in Section 1.8
below), at any time during the Employment Term by delivering written notice
of termination to the other. Upon the termination of this Agreement during
the Employment Term, Employee's employment with the Corporation shall
terminate and, except as provided in Section 1.7(b) below, the Corporation
shall have no further monetary obligation or other obligation of any nature
to Employee under this Agreement or with respect to his employment or the
termination of his employment.
(b) If (i) the Corporation terminates this Agreement without Cause (as
defined in Section 1.8 below) during the Employment Term, (ii) Employee
satisfies all of his obligations relating to the termination of his
employment under this Agreement (including his obligations under Section
3.2 below), and (iii) Employee executes and delivers to the Corporation a
general release of liability (satisfactory in form and substance to the
Corporation) in favor of the Corporation, then so long as Employee does not
breach Section 2 below or any of the material provisions of the Other
Agreements, Employee shall be entitled to continue to receive the salary
specified in Section 1.2 above for the remainder of the Employment Term and
the stay-on bonus payments specified in Section 1.3.
(c) The termination of this Agreement pursuant to this Section 1.7 or
otherwise shall not limit or otherwise affect any of Employee's obligations
under Section 2 or Section 3.2 below or under any of the Other Agreements,
all of which shall remain in full force and effect.
1.8 Definition of "Cause." Employee's employment with the Corporation shall
be deemed to have been terminated for "Cause" if such employment is terminated
following: (a) any intentional misconduct, fraud or bad faith on the part of
Employee in the performance of his duties as an employee of the Corporation; (b)
the conviction of Employee of, or the entry by Employee of a plea of guilty or
no contest to, any felony; (c) the breach by Employee of any material provision
in any of the Other Agreements; (d) the continued failure of Employee to perform
any reasonable duties assigned to him, if such breach or failure is not fully
cured by Employee within ten days after he receives written notice of such
failure; or (e) the inability of Employee to perform any of his material duties
as a result of illness or injury, if Employee remains unable to perform such
duties for a total of ten consecutive weeks.
2. CONFIDENTIAL INFORMATION
2.1 Proprietary Information Agreement. Employee acknowledges that Employee
has previously executed a Proprietary Information Agreement in favor of Xxxx and
agrees to continue to abide by the provisions of such agreement both during and
after the Employment Term as provided therein.
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2.2 Obligation to Keep Confidential. Employee agrees to keep all
Confidential Information (as defined in Section 2.3 below) strictly and
permanently confidential and, accordingly, agrees that he shall not at any time
(whether during or after the Employment Term) directly or indirectly use for any
purpose, or disclose or permit to be disclosed to any person or entity, any
Confidential Information. Employee acknowledges that the Confidential
Information constitutes unique and valuable assets of Ibex and the Corporation
acquired at great time and expense by Ibex and the Corporation, and that any
disclosure or other use of such Confidential Information, other than for the
sole benefit of Ibex and the Corporation, would be wrongful and would cause
irreparable harm to the Corporation.
2.3 Definition of "Confidential Information." The term "Confidential
Information" means any non-public information (whether or not in written form
and whether or not expressly designated as confidential) relating directly or
indirectly to the Corporation, Ibex or any of the Corporation's or Ibex'
subsidiaries or other affiliates or relating to the business, operations,
financial affairs, performance, assets, investments, technology, processes,
products, contracts, customers, licensees, sublicensees, suppliers, personnel,
plans or prospects of the Corporation or Ibex or any of the Corporation's or
Ibex subsidiaries or other affiliates, including any such information consisting
of or otherwise relating directly or indirectly to trade secrets, know-how,
technology, designs, drawings, processes, license or sublicense arrangements,
formulae, proposals, customer lists or preferences, pricing lists, referral
sources, marketing or sales techniques or plans, operations manuals, service
manuals, financial information, projections, lists of suppliers or distributors
or sources of supply; provided, however, that "Confidential Information" shall
not be deemed to include information which, at the time of initial disclosure to
Employee, is part of, or without violation of this Agreement or fault of
Employee becomes part of, the public knowledge or literature.
3. MISCELLANEOUS PROVISIONS
3.1 Other Agreements. Nothing in this Agreement shall limit Employee's or
the Corporation's obligations or the rights and remedies of Employee or the
Corporation under the Other Agreements, and nothing in any of the Other
Agreements shall limit Employee's or the Corporation's obligations or the rights
and remedies of the Employee or the Corporation under this Agreement.
3.2 Surrender of Records and Property. At such time as Employee no longer
serves as an employee of the Corporation, Employee shall deliver promptly to the
Corporation (a) all records, manuals, books, blank forms, documents, letters,
memoranda, notes, notebooks, reports, data, tables, calculations or copies
thereof in his possession or under his control which are the property of the
Corporation, and (b) all other property and Confidential Information of the
Corporation or Castelle in his possession or under his control, including all
documents which contain any Confidential Information of the Corporation or
Castelle.
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3.3 Notices. Any notice or other communication required or permitted to be
delivered to either party under this Agreement shall be in writing and shall be
deemed properly delivered, given and received when delivered (by hand, by
registered mail, by courier or express delivery service or by facsimile) to the
address or facsimile telephone number set forth beneath the name of such party
below (or to such other address or facsimile telephone number as such party
shall have specified in a written notice given to the other party hereto):
If to the Corporation: CASTELLE
0000-0 Xxxxx Xxxxxxxxx
Xxxxx Xxxxx, XX 00000
Attention: President
Xxxxxxxxx: (000) 000-0000
If to Employee:
3.4 Severability. In the event that any provision of this Agreement, or the
application of any such provision to any person, entity or set of circumstances,
shall be determined to be invalid, unlawful, void or unenforceable to any
extent, the remainder of this Agreement, and the application of such provision
to persons, entities or circumstances other than those as to which it is
determined to be invalid, unlawful, void or unenforceable, shall not be impaired
or otherwise affected and shall continue to be valid and enforceable to the
fullest extent permitted by law.
3.5 Governing Law. This Agreement shall be construed in accordance with,
and governed in all respects by, the laws of the State of California (without
giving effect to principles of conflicts of laws).
3.6 Waiver. No failure on the part of either party to exercise any power,
right, privilege or remedy under this Agreement, and no delay on the part of
either party in exercising any power, right, privilege or remedy under this
Agreement, shall operate as a waiver of such power, right, privilege or remedy;
and no single or partial exercise of any such power, right, privilege or remedy
shall preclude any other or further exercise thereof or of any other power,
right, privilege or remedy. Neither party shall be deemed to have waived any
claim arising out of this Agreement, or any power, right, privilege or remedy
under this Agreement, unless the waiver of such claim, power, right, privilege
or remedy is expressly set forth in a written instrument duly executed and
delivered on behalf of such party; and any such waiver shall not be applicable
or have any effect except in the specific instance in which it is given.
3.7 Captions. The captions contained in this Agreement are for convenience
of reference only, shall not be deemed to be a part of this Agreement and shall
not be referred to in connection with the construction or interpretation of this
Agreement.
100
3.8 Counterparts. This Agreement may be executed in several counterparts,
each of which shall constitute an original and all of which, when taken
together, shall constitute one agreement.
3.9 Further Assurances. Each party hereto shall execute and/or cause to be
delivered to the other party hereto such instruments and other documents and
shall take such other actions as such other party may reasonably request to
effectuate the intent and purposes of this Agreement.
3.10 Entire Agreement. This Agreement and the Other Agreements set forth
the entire understanding of the parties relating to the subject matter hereof
and thereof and supersede all prior agreements and understandings between the
parties relating to the subject matter hereof and thereof.
3.11 Amendments. This Agreement may not be amended, modified, altered or
supplemented other than by means of a written instrument duly executed and
delivered on behalf of the Corporation and Employee.
3.12 Assignment. This Agreement and all rights and obligations of Employee
hereunder are personal to Employee and may not be transferred or assigned by
Employee at any time. The Corporation may, with Employee's written consent
(which consent shall not be unreasonably withheld), assign its rights under this
Agreement to any entity that assumes the Corporation's obligations hereunder in
connection with any sale or transfer of all or a substantial portion of the
Corporation's assets to such entity.
3.13 Binding Nature. Subject to Section 3.12 above, this Agreement will be
binding upon and inure to the benefit of the Corporation and its successors and
assigns and Employee and his representatives, executors, administrators, estate,
heirs, successors and assigns.
3.14 Attorneys' Fees and Expenses. If any legal action or other legal
proceeding relating to the enforcement of any provision of this Agreement is
brought against either party hereto, the prevailing party shall be entitled to
recover reasonable attorneys' fees, costs and disbursements (in addition to any
other relief to which the prevailing party may be entitled).
101
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered as of the date first above written.
CASTELLE
By:
Its:
102
EXHIBIT H
FORM OF NONCOMPETITION AGREEMENT
NONCOMPETITION AGREEMENT
103
NONCOMPETITION AGREEMENT
THIS NONCOMPETITION AGREEMENT ("Agreement") is being executed and delivered
as of August __, 1996 (the "Closing Date"), by _____________ ("Shareholder") in
favor of and for the benefit of CASTELLE, a California corporation ("Company").
RECITALS
A. As an employee and major shareholder of Ibex Technologies, Inc., a
California corporation ("Ibex"), Shareholder has obtained extensive and valuable
knowledge and information concerning the business of Ibex (including
confidential information relating to Ibex and its operations, assets, contracts,
customers, personnel, plans and prospects).
B. Pursuant to an Agreement and Plan of Merger and Reorganization dated as
of August 22, 1996, by and among the Company, Ibex, Shareholder and certain
other shareholders of the Company (the "Reorganization Agreement"), Ibex is
merging into the Company on the Closing Date (the "Merger"). In connection with
the Merger, Shareholder and the Company's other shareholders are exchanging all
of their shares of stock of Ibex for shares of Common Stock of the Company.
C. Concurrently with this Agreement, Shareholder has entered into an
Employment Agreement with Company with a term of two years (the "Employment
Agreement").
D. In connection with the Merger (and as a condition to the consummation of
the Merger), and to more fully secure unto the Company the benefits of the
Merger, the Company has required that Shareholder enter into this Agreement and
Shareholder is entering into this Agreement in order to induce the Company to
consummate the Merger.
E. The Company has conducted and is conducting its business on a worldwide
basis.
AGREEMENT
In order to induce the Company to consummate the transactions contemplated
by the Reorganization Agreement, and in consideration of the issuance and
delivery to Shareholder of shares of Common Stock of the Company pursuant to the
Reorganization Agreement, Shareholder agrees as follows:
1. Acknowledgments by Shareholder. Shareholder acknowledges that the
promises and restrictive covenants he is providing in this Agreement are
reasonable and necessary for the Company's protection of its legitimate
interests in its acquisition of Ibex pursuant to the Reorganization Agreement,
including but not limited to Ibex's goodwill. Shareholder acknowledges that
Shareholder is exchanging all of Shareholder's shares of stock of Ibex for
shares of Common Stock of the Company in the Merger.
104
2. Noncompetition. During the period commencing on the Closing Date and
continuing until the date __________ (__) years after the termination of
Employee's employment with the Company (the "Noncompete Period"), Shareholder
shall not, directly or indirectly, provide any service (as an employee,
consultant or otherwise), support (including financial support), product or
technology to any person or entity, if such service, support, product or
technology involves or relates to, in any material respect, (A) the provision of
"information on demand" products, including but not limited to products
delivering information via facsimile, voice, video or any Internet mechanisms,
(B) "electronic commerce," (C) the use of the Internet for effecting economic
transactions, (D) the provision of information or products over the Internet,
(E) the design, development, coding or creation of software for use with or
otherwise involving the Internet including, but not limited to, the design,
development or coding of software for the purpose of gathering, collecting or
analyzing market data, customer data or web site visits (hits) over the
Internet, or (F) the design, development or coding of management software tools
utilized with "information on demand" products or to enhance the functionality
of network facsimile products (each, a "Restricted Business"); provided,
however, that nothing in this Section 2 shall prevent Shareholder from providing
services, support, products or technology to any person or entity while employed
by the Company, so long as Shareholder is providing such services, support,
products and technology solely in Shareholder's capacity as, and solely in the
course of discharging Shareholder's duties and responsibilities as, an employee
of the Company.
3. Nonsolicitation. Shareholder further agrees that during the Noncompete
Period, Shareholder will not:
(a) directly or indirectly, personally or through others, encourage,
induce, attempt to induce, solicit or attempt to solicit (on Shareholder's
own behalf or on behalf of any other person or entity) any employee of the
Company, or any of the Company's subsidiaries to leave his or her
employment with the Company, or any or of the Company's subsidiaries;
(b) employ, or permit any entity over which Shareholder exercises any
control, to employ such employee who has terminated his or her employment
with the Company or any of the Company's subsidiaries during the Noncompete
Period; or
(c) directly or indirectly, personally or through others, approach,
contact, solicit, advise or do (or attempt to do) business with, or
otherwise interfere with the relationship of the Company or any of the
Company's subsidiaries with, any person or entity who is, was or is
reasonably anticipated to become a customer or client of the Company or any
of the Company's subsidiaries with respect to any Restricted Business.
4. Consideration. As consideration for this Noncompetition Agreement, the
Company shall pay Shareholder $_______. Such payments shall be made to
105
Shareholder in three (3) $____ installments with the first installment due
on the date of this Agreement and the second and third installments due on
the first and second monthly anniversaries of the date of this Agreement.
5. Termination. Shareholder's obligations under Sections 2 and 3, and
Company's obligations under Section 4 shall terminate if Shareholder's
employment with Company pursuant to the Employment Agreement is terminated
without Cause (as such term is defined in the Employment Agreement).
6. Independence of Obligations. The covenants of Shareholder set forth in
this Agreement shall be construed as independent of any other agreement or
arrangement between Shareholder, on the one hand, and the Company on the
other. The existence of any claim or cause of action by Shareholder against
the Company shall not constitute a defense to the enforcement of such
covenants against Shareholder.
7. Specific Performance. Shareholder agrees that in the event of any breach
or threatened breach by Shareholder of any covenant, obligation or other
provision contained in this Agreement, the Company shall be entitled (in
addition to any other remedy that may be available to them) to (a) a decree
or order of specific performance or mandamus to enforce the observance and
performance of such covenant, obligation or other provision, and (b) an
injunction restraining such breach or threatened breach.
8. Non-Exclusivity. The rights and remedies of the Company hereunder are
not exclusive of or limited by any other rights or remedies which the
Company may have, whether at law, in equity, by contract or otherwise, all
of which shall be cumulative (and not alternative). Without limiting the
generality of the foregoing, the rights and remedies of the Company
hereunder, and the obligations and liabilities of Shareholder hereunder,
are in addition to their respective rights, remedies, obligations and
liabilities under the law of unfair competition, misappropriation of trade
secrets and the like. This Agreement does not limit, and is not limited by,
the terms of the Employment Agreement or the terms of any other agreement
between Shareholder and the Company or any affiliate of the Company.
9. Notices. Any notice or other communication required or permitted to be
delivered to Shareholder or the Company under this Agreement shall be in
writing and shall be deemed properly delivered, given and received when
delivered (by hand, by registered mail, by courier or express delivery
service or by facsimile) to the address or facsimile telephone number set
forth beneath the name of such party below (or to such other address or
facsimile telephone number as such party shall have specified in a written
notice given to the other party hereto):
If to the Company: CASTELLE
0000-0 Xxxxx Xxxxxxxxx
Xxxxx Xxxxx, XX 00000
Attention: President
Xxxxxxxxx: (000) 000-0000
106
If to Shareholder:
10. Severability. If any provision of this Agreement or any part of any
such provision is held under any circumstances to be invalid or unenforceable in
any jurisdiction, then (a) such provision or part thereof shall, with respect to
such circumstances and in such jurisdiction, be deemed amended to conform to
applicable laws so as to be valid and enforceable to the fullest possible
extent, (b) the invalidity or unenforceability of such provision or part thereof
under such circumstances and in such jurisdiction shall not affect the validity
or enforceability of such provision or part thereof under any other
circumstances or in any other jurisdiction, and (c) such invalidity of
enforceability of such provision or part thereof shall not affect the validity
or enforceability of the remainder of such provision or the validity or
enforceability of any other provision of this Agreement. Each provision of this
Agreement is separable from every other provision of this Agreement, and each
part of each provision of this Agreement is separable from every other part of
such provision.
11. Governing Law. This Agreement shall be construed in accordance with,
and governed in all respects by, the laws of the State of California (without
giving effect to principles of conflicts of laws).
12. Waiver. No failure on the part of the Company to exercise any power,
right, privilege or remedy under this Agreement, and no delay on the part of the
Company in exercising any power, right, privilege or remedy under this
Agreement, shall operate as a waiver of such power, right, privilege or remedy;
and no single or partial exercise of any such power, right, privilege or remedy
shall preclude any other or further exercise thereof or of any other power,
right, privilege or remedy. The Company shall not be deemed to have waived any
claim arising out of this Agreement, or any power, right, privilege or remedy
under this Agreement, unless the waiver of such claim, power, right, privilege
or remedy is expressly set forth in a written instrument duly executed and
delivered on behalf of such party; and any such waiver shall not be applicable
or have any effect except in the specific instance in which it is given.
13. Captions. The captions contained in this Agreement are for convenience
of reference only, shall not be deemed to be a part of this Agreement and shall
not be referred to in connection with the construction or interpretation of this
Agreement.
14. Further Assurances. Shareholder shall execute and/or cause to be
delivered to the Company such instruments and other documents and shall take
such other actions as Company may reasonably request to effectuate the intent
and purposes of this Agreement.
107
15. Entire Agreement. This Agreement and the Employment Agreement (and the
other agreements referred to in the Employment Agreement) set forth the entire
understanding of Shareholder and the Company relating to the subject matter
hereof and thereof and supersede all prior agreements and understandings between
any of such parties relating to the subject matter hereof and thereof.
16. Amendments. This Agreement may not be amended, modified, altered, or
supplemented other than by means of a written instrument duly executed and
delivered on behalf of the Company and Shareholder.
17. Assignment. This Agreement and all obligations hereunder are personal
to Shareholder and may not be transferred or assigned by Shareholder at any
time. The Company may, with Shareholder's written consent (which consent shall
not be unreasonably withheld), assign its rights under this Agreement to any
entity in connection with any sale or transfer of all or a substantial portion
of the Company's assets to such entity.
18. Binding Nature. Subject to Section 17, this Agreement will be binding
upon Shareholder and Shareholder's representatives, executors, administrators,
estate, heirs, successors and assigns, and will inure to the benefit of the
Company and its respective successors and assigns.
19. Attorneys' Fees and Expenses. If any legal action or other legal
proceeding relating to the enforcement of any provision of this Agreement is
brought against Shareholder, the prevailing party shall be entitled to recover
reasonable attorneys' fees, costs and disbursements (in addition to any other
relief to which the prevailing party may be entitled).
108
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the
date first above written.
109
EXHIBIT I
FORM OF LEGAL OPINION OF XXXXXX & XXXXX XXX
110
[XXXXXX & XXXXX LLP OPINION LETTER]
Castelle
0000-0 Xxxxx Xxxxxxxxx
Xxxxx Xxxxx, XX 00000
Ladies and Gentlemen:
We have acted as legal counsel for Ibex Technologies, Inc., a California
corporation (the "Company"), in connection with the merger of the Company with
and into Castelle, a California corporation ("Castelle") pursuant to an
Agreement and Plan of Reorganization dated as of August 22, 1996 (the
"Reorganization Agreement") by and among the Company, Castelle and the Signing
Shareholders listed on Exhibits A-1 and A-2 of the Agreement (the "Merger"). We
are rendering this opinion pursuant to Section 6.6(i) of the Agreement. Except
as otherwise defined herein, capitalized terms used but not defined herein have
the respective meanings given to them in the Agreement.
In rendering this opinions expressed below, we have examined originals,
certified copies or copies otherwise identified to us as being true copies of
the originals of the following documents:
(a) The Agreement.
(b) The Merger Agreement.
Items (a) and (b) are hereafter collectively referred to as the "Agreements".
We have also considered such questions of law and examined such other
instruments, records, certificates, opinions, memoranda and documents as we have
deemed necessary or advisable for the purpose of preparing this opinion letter.
As to questions of fact material to this opinion letter, we have relied upon the
certificates of officers of the Company. We have undertaken no further
investigation in connection with this opinion letter except for only such
factual inquiries as we deemed appropriate with respect to the facts underlying
such certificates and the Agreements.
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Castelle
______________, 1996
In rendering this opinion, we have assumed the following:
(i) The representations and warranties in the Agreements and any other
certificates, instruments or agreements executed in connection with the
Agreements or delivered to us are true, correct and not misleading;
(ii) The signatures on all original documents examined by us are genuine
and all copies of such documents submitted to us are genuine;
(iii) The due authorization, execution and delivery of all documents (other
than the Company where authorization, execution and delivery are a
prerequisite to the effectiveness thereof);
(iv) All individuals executing and delivering documents had the legal
capacity to so execute and deliver;
(v) Each party to the Agreements, other than the Company is duly organized,
validly existing and in good standing under its jurisdiction of
organization and is in good standing as a foreign corporation in each such
jurisdiction in which the conduct of its business or its ownership or
leasing of property currently requires that it qualify as a foreign
corporation, with the corporate or other organizational power to perform
its obligations under the Agreements to which it is a party, each such
party has complied with any applicable requirement to file tax returns and
pay taxes in each jurisdiction in which it is required to do so, each such
party has validly authorized, executed and delivered each of the Agreements
to which it is a party and the Agreements constitute the valid and binding
obligations of each such party, enforceable against each such party in
accordance with their terms;
(vi) The factual matters set forth in the Agreements are accurate and
complete in all material respects and all certificates and all other
written representations as to factual matters delivered or made to us by
officers of the Company or the Signing Shareholders are accurate and
complete in all material respects;
(vii) There are no agreements, written or oral, among any of the parties to
any of the Agreements that modify, waive, amend or affect the terms of any
of the Agreements;
(viii) Neither the execution of the Agreements nor the consummation of the
transactions provided for therein contravenes any applicable law of any
jurisdiction, other than California law or federal law.
112
Castelle
______________, 1996
The opinions hereinafter expressed are subject to the following additional
qualifications:
(a) The attorneys in our firm who have prepared this opinion are admitted
to practice law only in the States of California, and we express no opinion
herein concerning any law other than the law of the States of California
and the federal law of the United States.
(b) To the extent any opinion is rendered herein with respect to the
enforceability of any agreement: (1) we express no opinion as to the effect
on such enforceability of applicable federal or state bankruptcy,
insolvency, reorganization, moratorium or other similar laws generally
affecting relief of debtors or the enforcement of the rights of creditors;
(2) we express no opinion as to the effect on such enforceability of laws
governing specific performance, injunctive relief, fraudulent sales and/or
conveyances, preferences or other equitable remedies; (3) the
enforceability of obligations in the Agreements is subject to general
principles of equity regardless of whether such enforceability is
considered in a proceeding in equity or law, and a court applying such
principles may refuse to enforce, or may limit the application of, a
contract or any clause thereof; and (4) enforcement of indemnification
provisions contained in the Agreements may be limited by applicable law.
(c) We express no opinion herein as to compliance or non-compliance with
federal or state securities laws, including but not limited to, the
antifraud provisions of any state or federal securities law, rule or
regulation.
(d) We have acted as counsel to the Company and the Signing Shareholders
only with respect to certain corporate matters, the negotiation of the
Agreements and the rendering of these opinions. Accordingly, we may not
have knowledge of all matters of fact or law relating to the Company or the
Signing Shareholders that may be relevant in connection with the opinions
herein. Any alteration of those facts may adversely affect our opinions.
Whenever a statement herein is qualified by "known to us," "to our current
actual knowledge," or similar phrase, it is intended to indicate that
during the course of our representation of the Company, no information that
would give us current actual knowledge of the inaccuracy of such statement
has come to the attention of those attorneys in this firm who have rendered
legal services to the Company. However, except as otherwise expressly
indicated, we have not undertaken any independent investigation to
determine the accuracy of any such statement (including, without
limitation, any search of litigation filings in any court), and any limited
inquiry undertaken by us during the preparation of this letter should not
be regarded as such an investigation. No inference as to our current actual
knowledge of any matters bearing on the accuracy of any such statement
should be drawn from the fact of our representation of the Company.
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Castelle
______________, 1996
(e) With regard to our opinion in paragraph 4 below, we have examined and
relied upon a certificate executed by an officer of the Company, to the
effect that the consideration for all outstanding shares of capital stock
of the Company was received by the Company in accordance with the
provisions of the applicable Board of Directors resolutions and any plan or
agreement relating to the issuance of such shares, and we have undertaken
no independent verification with respect thereto.
(f) With regard to our opinion in paragraph 5 below with respect to
material defaults under any material agreement known to us, we have relied
solely upon (i) inquiries of officers of the Company, (ii) a list supplied
to us by the Company, a copy of which has been supplied to your counsel,
Xxxxxx Godward Xxxxxx Xxxxxxxxx & Xxxxx, of material agreements to which
the Company is a party, or by which it is bound, and (iii) an examination
of the items on the aforementioned list; we have made no further
investigation.
On the basis of the foregoing, in reliance thereon and with the foregoing
qualifications, we are of the opinion that:
1. The Company has been duly incorporated and is a validly existing
corporation in good standing under the laws of the State of California.
2. The Company has the requisite corporate power to own or lease its
property and assets and to conduct its business as it is currently being
conducted and, to the best of our knowledge, is qualified as a foreign
corporation to do business and is in good standing in each jurisdiction in
the United States in which the ownership of its property or the conduct of
its business requires such qualification and where any statutory fines or
penalties or any corporate disability imposed for the failure to qualify
would materially and adversely affect the Company, its assets, financial
condition or operations.
3. The Agreements have been duly and validly authorized, executed and
delivered by the Company and constitute valid and binding agreements of the
Company and the Signing Shareholders enforceable against the Company and
the respective Signing Shareholders in accordance with their terms.
4. The Company's authorized capital stock consists of (a) ten million
(10,000,000) shares of Common Stock, without par value, of which one
hundred forty-one thousand sixteen (141,016) shares are issued and
outstanding, and (b) five million (5,000,000) shares of Preferred Stock,
without par value, of which forty-eight thousand thirty-five (48,035)
shares have been designated Series A Preferred Stock, without par value, of
which all such shares are issued and outstanding. The outstanding shares of
Common Stock and of Preferred Stock have been authorized and validly issued
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Castelle
______________, 1996
and are fully paid and nonassessable. The rights, preferences and
privileges of the Series A Preferred Stock are as stated in the Certificate
of Determination of Preferences of Series A Preferred Stock. To the best of
our knowledge, there are no options, warrants, conversion privileges,
preemptive rights or other rights presently outstanding to purchase any of
the authorized but unissued capital stock of the Company, other than the
conversion privileges of the Series A Preferred Stock, rights created in
connection with the transactions contemplated by the Agreements and twenty
thousand (20,000) shares reserved for issuance under the Company's 1992
Stock Option Plan, of which fourteen thousand seven hundred thirty-one
(14,731) shares are subject to outstanding options.
5. The execution and delivery of the Agreements by the Company do not
violate any provision of the Company's Articles of Incorporation or Bylaws,
and do not constitute a material default under the provisions of any
material agreement known to us to which the Company is a party or by which
it is bound, and do not violate or contravene (a) any governmental statute,
rule or regulation applicable to the Company or (b) any order, writ,
judgment, injunction, decree, determination or award which has been entered
against the Company and of which we are aware, the violation or
contravention of which would materially and adversely affect the Company,
its assets, financial condition or operations.
6. To the best of our knowledge, there is no action, proceeding or
investigation pending or overtly threatened against the Company before any
court or administrative agency that questions the validity of the
Agreements or might result, either individually or in the aggregate, in any
material adverse change in the assets, financial condition, or operations
of the Company.
7. All consents, approvals, authorizations, or orders of, and filings,
registrations, and qualifications with any regulatory authority or
governmental body in the United States required for the consummation by the
Company and, to our knowledge, the Signing Shareholders, of the
transactions contemplated by the Agreements, have been made or obtained.
115
Castelle
______________, 1996
This opinion is intended solely for your use in connection with the transactions
contemplated by the Agreements and is not to be made available to or relied upon
by other persons or entities without our prior written consent. Our opinion is
expressly limited to the matters set forth above and we render no opinion,
whether by implication or otherwise, as to any other matters relating to the
Company or the Signing Shareholders. Our opinion is rendered as of the date
hereof, and we assume no obligation to advise you of facts, circumstances,
events or developments which hereafter may be brought to our attention and which
may alter, affect or modify the opinions expressed herein.
Very truly yours,
Xxxxxx & Xxxxx LLP
116
EXHIBIT J
FORM OF LEGAL OPINION OF
XXXXXX GODWARD XXXXXX XXXXXXXXX & XXXXX
117
[XXXXXX GODWARD OPINION LETTER]
____________, 1996
To the Ibex Shareholders
listed on Schedule A hereto
Dear Sir or Madam:
We have acted as counsel for Castelle, a California corporation (the "Company"),
in connection with the merger of Ibex Technologies, Inc. ("Ibex") with and into
the Company pursuant to an Agreement and Plan of Reorganization dated as of
August 22, 1996 (the "Reorganization Agreement") by and among the Company, Ibex
and the Signing Shareholders listed on Exhibit A-1 and A-2 of the Reorganization
Agreement (the "Merger) and the issuance and sale of [eight hundred fifty
thousand (850,000)] shares of Castelle Common Stock (the "Shares") in connection
with the Merger. We are rendering this opinion pursuant to Section 6.6(i) of the
Reorganization Agreement. Except as otherwise defined herein, capitalized terms
used but not defined herein have the respective meanings given to them in the
Reorganization Agreement.
In connection with this opinion, we have examined and relied upon the
representations and warranties as to factual matters contained in and made
pursuant to the Reorganization Agreement by the various parties and originals or
copies certified to our satisfaction, of such records, documents, certificates,
opinions, memoranda and other instruments as in our judgment are necessary or
appropriate to enable us to render the opinion expressed below. Where we render
an opinion "to the best of our knowledge" or concerning an item "known to us" or
our opinion otherwise refers to our knowledge, it is based solely upon (i) an
inquiry of attorneys within this firm who perform legal services for the
Company, (ii) receipt of a certificate executed by an officer of the Company
covering such matters, and (iii) such other investigation, if any, that we
specifically set forth herein.
In rendering this opinion, we have assumed: the genuineness and authenticity of
all signatures on original documents; the authenticity of all documents
submitted to us as originals; the conformity to originals of all documents
submitted to us as copies; the accuracy, completeness and authenticity of
certificates of public officials; and the due authorization, execution and
delivery of all documents (except the due authorization, execution and delivery
by the Company of the Reorganization Agreement and the exhibits thereto,
including the Merger Agreement and the Disclosure Schedule, (collectively the
"Agreements"), where authorization, execution and delivery are prerequisites to
the effectiveness of such documents. We have also assumed: that all individuals
executing and delivering documents had the legal capacity to so execute and
deliver; that you have received all documents you were to receive under the
Agreements; that the Agreements are obligations binding upon you; if you are a
corporation or other entity, that you have filed any required California
118
franchise or income tax returns and have paid any required California franchise
or income taxes; and that there are no extrinsic agreements or understandings
among the parties to the Agreements that would modify or interpret the terms of
the Agreements or the respective rights or obligations of the parties
thereunder.
Our opinion is expressed only with respect to the federal laws of the United
States of America and the laws of the State of California. We express no opinion
as to whether the laws of any particular jurisdiction apply, and no opinion to
the extent that the laws of any jurisdiction other than those identified above
are applicable to the subject matter hereof. We are not rendering any opinion as
to compliance with any antifraud law, rule or regulation.
With regard to our opinion in paragraph 4 below with respect to material
defaults under any material agreement known to us, we have relied solely upon
(i) inquiries of officers of the Company, (ii) a list supplied to us by the
Company, a copy of which has been supplied to your counsel, Xxxxxx & Xxxxx XXX,
of material agreements to which the Company is a party, or by which it is bound,
and (iii) an examination of the items on the aforementioned list; we have made
no further investigation.
On the basis of the foregoing, in reliance thereon and with the foregoing
qualifications, we are of the opinion that:
1. The Company has been duly incorporated and is a validly existing
corporation in good standing under the laws of the State of California.
2. The Agreements have been duly and validly authorized, executed and
delivered by the Company and constitute valid and binding agreements of the
Company enforceable against the Company in accordance with their terms, except
as rights to indemnity under section 9 of the Reorganization Agreement may be
limited by applicable laws and except as enforcement may be limited by
applicable bankruptcy, insolvency, reorganization, arrangement, moratorium or
other similar laws affecting creditors' rights, and subject to general equity
principles and to limitations on availability of equitable relief, including
specific performance.
3. The Shares, when issued in accordance with the terms of the
Reorganization Agreement, will be duly authorized, validly issued, fully paid
and non-assessable.
4. The execution and delivery of the Agreements by the Company pursuant
thereto do not violate any provision of the Company's Amended and Restated
Articles of Incorporation or Bylaws, and do not constitute a material default
under the provisions of any material agreement known to us to which the Company
is a party or by which it is bound, and do not violate or contravene (a) any
119
governmental statute, rule or regulation applicable to the Company or (b) any
order, writ, judgment, injunction, decree, determination or award which has been
entered against the Company and of which we are aware, the violation or
contravention of which would materially and adversely affect the Company, its
assets, financial condition or operations.
5. To the best of our knowledge, there is no action, proceeding or
investigation pending or overtly threatened against the Company before any court
or administrative agency that questions the validity of the Agreements or might
result, either individually or in the aggregate, in any material adverse change
in the assets, financial condition, or operations of the Company.
All consents, approvals, authorizations, or orders of, and filings,
registrations, and qualifications with any regulatory authority or governmental
body in the United States required for the consummation by the Company of the
transactions contemplated by the Agreements, have been made or obtained.
Registration #33-__________ (the "Registration Statement") filed pursuant
to the Securities Act of 1933, as amended (the "Securities Act"), has become
effective, and, to the best of our knowledge, no stop order suspending the
effectiveness of the Registration Statement or preventing the use of the
associated Prospectus/Proxy Statement has been issued and no proceedings for
that purpose have been instituted or are pending or threatened by the Securities
and Exchange Commission.
The Registration Statement and the Prospectus/Proxy Statement (except for
the financial statements and schedules, other financial information and
statistical data which are included therein and information concerning Ibex, as
to which we express no opinion) comply as to form in all material respects with
the requirements of the Securities Act and the rules and regulations thereunder.
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This opinion is intended solely for your benefit and is not to be made available
to or be relied upon by any other person, firm, or entity without our prior
written consent.
Very truly yours,
XXXXXX GODWARD XXXXXX
XXXXXXXXX & XXXXX
By:
Xxxxxx X. Xxxxxxxxx
121
Schedule A
Xxx Xxxxx and Xxxxx Xxxx-Xxxxx
Xxxxxx Xxxxxx
Xxxxxx Xxxxxx
Tucha Limited
Newark Holding S.A.
Xxxxxxx Xxxxx Xxxxxxx
122
EXHIBIT L
ESCROW AGREEMENT
123
ESCROW AGREEMENT
THIS ESCROW AGREEMENT is entered into as of August __, 1996 (the "Closing
Date"), by and among: CASTELLE, a California corporation ("Castelle"); IBEX
TECHNOLOGIES, INC., a California corporation ("Ibex"); the Shareholders of Ibex
who are listed on Attachment A (the "Shareholders"); XXX XXXXX as agent of the
Shareholders (the "Shareholders' Agent"); and ___________________ ("Escrow
Agent").
RECITALS
X. Xxxxxxxx, Ibex, and the Shareholders are entering into an Agreement and
Plan of Reorganization of even date herewith (the "Reorganization Agreement"),
pursuant to which Ibex shall be merged into Castelle and Ibex shareholders shall
exchange their stock in Ibex for shares of Castelle.
B. The Reorganization Agreement contemplates the establishment of an escrow
arrangement to secure the indemnification and other obligations of Ibex and the
Shareholders under the Reorganization Agreement and various related agreements.
X. Xxxxxxxx to Section 10.1 of the Reorganization Agreement, the Designated
Shareholders have appointed the Designated Shareholders' Agent as their
attorneys-in-fact for the purposes of this Agreement.
D. The Designated Shareholders have agreed to deposit ten percent (10%) of
the total number of shares of Common Stock of Castelle received pursuant to the
Reorganization Agreement (the "Shares") with Escrow Agent in connection with the
Designated Shareholders' performance of their obligations under the
Reorganization Agreement.
E. The Designated Shareholders' Agent and Castelle desire that Escrow Agent
hold the Shares pursuant to the terms hereof and to distribute such Shares in
accordance with the procedures specified herein.
AGREEMENT
The parties to this Escrow Agreement, intending to be legally bound, agree
as follows:
SECTION 1. DEFINED TERMS
Capitalized terms used and not otherwise defined in this Escrow Agreement
shall have the meanings assigned to them in the Reorganization Agreement.
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SECTION 2. ESCROW
2.1 Shares and Stock Powers to be Placed in Escrow. On the Closing Date,
(i) Castelle shall issue certificates for the Shares in the names of the
Designated Shareholders evidencing the shares of Castelle Stock to be held in
escrow in accordance with this Escrow Agreement, and (ii) the Designated
Shareholders shall deliver to Escrow Agent three stock powers each endorsed by
the Designated Shareholders in blank (the "Stock Powers"). Ibex and the
Designated Shareholders' Agent shall ensure that all signatures on the Stock
Powers delivered to Escrow Agent in accordance with the preceding sentence have
been guaranteed by a national bank or New York Stock Exchange member firm. The
shares and Stock Powers referred to in this Section 2.1 shall be held by Escrow
Agent in escrow (the "Escrow") in accordance with the provisions of this Escrow
Agreement.
2.2 Voting of Shares. The record owner of the Shares shall be entitled to
exercise all voting rights with respect to such Shares.
2.3 Dividends, Etc. Any cash, securities or other property distributable
(whether by way of dividend, stock split or otherwise) in respect of or in
exchange for any Shares shall not be distributed to the record owner of such
Shares, but rather shall be held by the Escrow Agent in the Escrow. At the time
any Shares are required to be released from the Escrow to any person pursuant to
this Escrow Agreement, any cash, securities or other property previously
distributed in respect of or in exchange for such shares shall be released from
the Escrow to such person.
2.4 Transferability. The interests of the Designated Shareholders' Agent
and the Shareholders in the Escrow and in the Shares held in the Escrow shall
not be assignable or transferable, other than by operation of law. No transfer
of any of such interests by operation of law shall be recognized or given effect
until Castelle shall have received written notice of such transfer.
2.5 Fractional Shares. No fractional shares of Castelle Stock shall be
retained in or released from the Escrow pursuant to this Escrow Agreement. In
connection with any release of shares from the Escrow, Castelle shall make a
cash payment to the owner of record for such fractional share which payment
shall be determined utilizing the Stipulated Value of such Share.
2.6 Receipt By Escrow Agent. Escrow Agent acknowledges receipt from
Castelle of a certificate representing the Shares and from the Designated
Shareholders' Agent of stock powers executed in blank by the Designated
Shareholders with respect to the Shares. Xxxxxx Agent accepts appointment
hereunder and agrees to hold and distribute the Shares in accordance herewith.
SECTION 3. CLAIM PROCEDURES
Claim Procedures shall be as set forth in Section 9 of the Reorganization
Agreement and this Section.
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3.1 Response Notice. Within twenty (20) business days after the delivery of
an Officer's Certificate to the Designated Shareholders' Agent (with a copy to
the Escrow Agent), the Designated Shareholders' Agent shall deliver to Escrow
Agent and Castelle a written notice (the "Response Notice") containing: (i)
instructions to the effect that Shares having a Stipulated Value (as defined in
Section 5 of this Escrow Agreement) equal to the entire Claim Amount set forth
in such Claim Notice are to be released from the Escrow to Castelle; or (ii)
instructions to the effect that Shares having a Stipulated Value equal to a
specified portion (but not the entire amount) of the Claim Amount set forth in
such Claim Notice are to be released from the Escrow to Castelle, together with
a statement that the remaining portion of such Claim Amount is being disputed;
or (iii) a statement that the entire Claim Amount set forth in such Claim Notice
is being disputed. If no Response Notice is received by Escrow Agent from the
Designated Shareholders' Agent within twenty (20) business days after the
delivery of an Officer's Certificate to the Designated Shareholders' Agent, then
the recipient of such Claim Notice shall be deemed to have given instructions
that Shares having a Stipulated Value equal to the entire Claim Amount set forth
in such Claim Notice are to be released to Castelle from the Escrow.
3.2 Release of Shares to Castelle.
(a) If the Designated Shareholders' Agent gives (or is deemed to have
given) instructions that shares of Castelle Stock having a Stipulated Value
equal to the entire Claim Amount set forth in an Officer's Certificate are
to be released from the Escrow to Castelle, then Escrow Agent shall be
authorized to use a Stock Power held in the Escrow to transfer to Castelle,
from the Escrow, Shares having a Stipulated Value equal to such Claim
Amount.
(b) If a Response Notice delivered by the Designated Shareholders' Agent in
response to an Officer's Certificate contains instructions to the effect
that Shares having a Stipulated Value equal to a specified portion (but not
the entire amount) of the Claim Amount set forth in such Officer's
Certificate are to be released from the Escrow to Castelle, then (i) Escrow
Agent shall be authorized to use a Stock Power held in the Escrow to
transfer to Castelle, from the Escrow, Shares having a Stipulated Value
equal to such specified portion of such Claim Amount, and (ii) the
procedures set forth in Section 3.2(c) of this Escrow Agreement shall be
followed with respect to the remaining portion of such Claim Amount.
(c) If a Response Notice delivered by the Designated Shareholders' Agent in
response to a Claim Notice contains a statement that all or a portion of
the Claim Amount set forth in such Claim Notice is being disputed (such
Claim Amount or the disputed portion thereof being referred to as the
"Disputed Amount"), then, notwithstanding anything contained in Section 4
of this Escrow Agreement, Escrow Agent shall continue to hold in the Escrow
(in addition to any other Shares permitted to be retained in the Escrow,
whether in connection with any other dispute, or otherwise) Shares having a
Stipulated Value equal to 125% of the Disputed Amount. Such Shares shall
continue to be held in the Escrow until such time as (i) Castelle and the
Designated Shareholders' Agent execute a settlement agreement containing
instructions regarding the release of such Shares, (ii) Escrow Agent
receives a written decision from the arbitrator assigned to the dispute and
an application to correct or vacate the arbitration award can no longer be
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filed pursuant to the terms of the Reorganization Agreement, or (iii)
Escrow Agent receives a copy of a court order containing instructions to
Escrow Agent regarding the release of such Shares. Escrow Agent shall
thereupon release such Shares from the Escrow in accordance with the
instructions set forth in such settlement agreement, arbitration decision
or court order. (The parties acknowledge that it is appropriate to retain
more than 100% of the Claim Amount in the Escrow in recognition of the fact
that Castelle may have underestimated the aggregate amount of the actual
and potential Damages arising from a particular breach.)
SECTION 4. RELEASE OF SHARES TO DESIGNATED SHAREHOLDERS' AGENT
4.1 Shares to be Released. On the date 365 days after the Closing Date,
Escrow Agent shall release to the Designated Shareholders' Agent from the Escrow
all Shares then held in the Escrow, except for any Shares subject to an
Officer's Certificate which has been delivered or that are to be retained in the
Escrow in accordance with Section 3.2(c) of this Escrow Agreement.
4.2 Procedures for Releasing Shares. Any release of shares to the
Designated Shareholders' Agent pursuant to Section 4.1 of this Escrow Agreement
may be effected by utilizing a nationally recognized overnight courier to
deliver a stock certificate to the Designated Shareholders' Agent.
SECTION 5. VALUATION OF SHARES HELD IN ESCROW
For purposes of this Escrow Agreement, the "Stipulated Value" of each of
the Shares held in the Escrow shall be deemed to be equal to $8.00 (adjusted as
appropriate to reflect any stock split, reverse stock split, stock dividend or
similar transaction effected by Castelle after the Closing Date).
SECTION 6. FEES AND EXPENSES
The Shareholders shall reimburse the Designated Shareholders' Agent for all
reasonable expenses (including attorneys' fees) incurred by the Designated
Shareholders' Agent in connection with the performance of his duties hereunder.
In addition, the Designated Shareholders' Agent shall be promptly reimbursed by
the Designated Shareholders, in proportion to the number of shares of Castelle
Common Stock received by each of them as a result of the Merger, for any
payments which the Designated Shareholders' Agent is obligated to make and which
are made to the Escrow Agent pursuant to the indemnification provisions of this
Escrow Agreement.
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SECTION 7. PAYMENT OF ESCROW AGENT'S FEES AND EXPENSES
All fees and expenses (including, without limitation, reasonable attorneys'
fees) charged by Escrow Agent for its activities pursuant to this Agreement
shall be paid by Castelle pursuant to the attached fee schedule.
SECTION 8. RIGHTS AND OBLIGATIONS OF ESCROW AGENT
8.1 Successor Escrow Agent. Escrow Agent may resign as Escrow Agent at any
time by notice to the Designated Shareholders' Agent and Xxxxxxxx (the
"Resignation Notice"). Upon receipt of the Resignation Notice, the Designated
Shareholders' Agent and Castelle shall appoint a successor Escrow Agent, which
shall be a banking corporation or trust company, organized under the laws of the
United States or of the State of California, with a place of business in San
Francisco. Upon receipt of notice of appointment from the Designated
Shareholders' Agent and Castelle, Escrow Agent shall promptly deliver the Shares
to such successor. In the event the Designated Shareholders' Agent and Xxxxxxxx
do not agree upon a successor and deliver written notice thereof to Escrow Agent
within 60 days following delivery of the Resignation Notice, the Presiding Judge
of the Superior Court of the State of California, in and for the City and County
of San Francisco, shall appoint a successor in accordance with the
above-mentioned guidelines, and Escrow Agent shall promptly deliver the Shares
to such successor.
8.2 Indemnification. The Designated Shareholders' Agent and Xxxxxxxx,
jointly and severally, hereby agree to indemnify and hold Escrow Agent harmless
from and against any and all losses, claims, damages, actions, suits or other
charges incurred by or assessed against Escrow Agent in the performance of its
duties hereunder, except to the extent resulting from its own negligence or
misconduct.
8.3 Limitation Of Liability. Escrow Agent shall not incur any liability to
anyone for damages, losses or expenses with respect to (a) any action taken or
omitted in good faith upon advice of Xxxxxx Agent's counsel given with respect
to any questions relating to Escrow Agent's duties and responsibilities
hereunder, or (b) any action taken or omitted in reliance upon any instrument
(including, without limitation, any Officer's Certificate or Response Notice
provided for herein) which Escrow Agent shall in good faith believe to be
genuine, to have been signed or presented by a proper person or persons and to
conform with the provisions hereof. Furthermore, in the event Escrow Agent shall
be uncertain as to its rights or obligations hereunder, or in the event Escrow
Agent shall receive any communication from the Designated Shareholders' Agent or
Castelle with respect to the Shares which, in the opinion of Escrow Agent, is in
conflict with any of the provisions of this Agreement, Escrow Agent shall be
entitled to refrain from taking any action until it shall be directed otherwise
in writing by the Designated Shareholders' Agent and Castelle or by order of a
court of competent jurisdiction.
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8.4 Controversies. If any controversy arises between the parties to this
Agreement, or with any other party, concerning the subject matter of this
Agreement, its terms or conditions, Escrow Agent will not be required to
determine the controversy or to take any action regarding it. Escrow Agent may
hold all documents and funds and may wait for settlement of any such controversy
pursuant to Section 9.11 of the Reorganization Agreement hereof or by final
appropriate legal proceedings or other means as, in Escrow Agent's discretion,
Escrow Agent may require, despite what may be set forth elsewhere in this
Agreement. In such event, Escrow Agent will not be liable for interest or
damage.
8.5 No Interest. Notwithstanding any provision to the contrary contained in
any other agreement between or among any of the parties hereto, Escrow Agent
shall have no interest in the Shares.
8.6 No Implied Obligations. This Agreement sets forth the exclusive
obligations of Escrow Agent with respect to any and all matters pertinent
hereto, and no implied duties or obligations of Escrow Agent shall be read into
this Agreement.
SECTION 9. GENERAL
9.1 Confirmation of Appointment. The Shareholders confirm the appointment
and authority of the Designated Shareholders' Agent as set forth in Section 10.1
of Reorganization Agreement with respect to all matters relating to this Escrow
Agreement. Any successor to the Designated Shareholders' Agent who is appointed
in accordance with the provisions of Section 10.1 of the Reorganization
Agreement shall be deemed to be the "Designated Shareholders' Agent" for
purposes of this Escrow Agreement. Any document executed or action taken by the
Shareholders' Agent shall be binding upon all of the Shareholders.
9.2 Other Agreements. Nothing in this Escrow Agreement is intended to limit
any of Castelle's rights, or any obligation of any Shareholder or Ibex, under
the Reorganization Agreement.
9.3 Notices. Any notice or other communication required or permitted to be
delivered to any party under this Escrow Agreement shall be in writing and shall
be deemed properly delivered, given and received when delivered (by hand, by
registered mail, by courier or express delivery service or by facsimile) to the
address or facsimile telephone number set forth beneath the name of such party
below (or to such other address or facsimile telephone number as such party
shall have specified in a written notice given to the other parties hereto):
129
if to the Designated Shareholders' Agent or any of the Shareholders:
XXX XXXXX
0000 Xxxxx Xxxxxxxxx
Xxxxxxx Xxxxx, XX 00000
Facsimile: (000) 000-0000
if to Castelle:
CASTELLE
0000-0 Xxxxx Xxxxxxxxx
Xxxxx Xxxxx, Xxxxxxxxxx 00000
Attn: President
Xxxxxxxxx: (000) 000-0000
if to Escrow Agent:
--------------------
--------------------
--------------------
9.4 Counterparts. This Escrow Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument.
9.5 Time of the Essence. Time is of the essence of this Escrow Agreement.
9.6 Headings. The underlined headings contained in this Escrow Agreement
are for convenience of reference only, shall not be deemed to be a part of this
Escrow Agreement and shall not be referred to in connection with the
construction or interpretation of this Escrow Agreement.
9.7 Governing Law; Venue.
(a) This Escrow Agreement shall be construed in accordance with, and
governed in all respects by, the internal laws of the State of California
(without giving effect to principles of conflicts of laws).
(b) Subject to the arbitration provisions of Section 9.11 of the
Reorganization Agreement, any legal action or other legal proceeding
relating to this Escrow Agreement or the enforcement of any provision of
this Escrow Agreement may be brought or otherwise commenced in any state or
federal court located in the State of California. Each party to this Escrow
Agreement:
130
(i) expressly and irrevocably consents and submits to the jurisdiction
of each state and federal court located in the State of California
(and each appellate court located in the State of California) in
connection with any such legal proceeding;
(ii) agrees that each state and federal court located in the State of
California shall be deemed to be a convenient forum; and
(iii) agrees not to assert (by way of motion, as a defense or
otherwise), in any such legal proceeding commenced in any state or
federal court located in the State of California, any claim that such
party is not subject personally to the jurisdiction of such court,
that such legal proceeding has been brought in an inconvenient forum,
that the venue of such proceeding is improper or that this Escrow
Agreement or the subject matter of this Escrow Agreement may not be
enforced in or by such court.
(c) Unless addressed in Section 9.7(b) of this Escrow Agreement, nothing
contained in this Escrow Agreement shall be deemed to limit or otherwise
affect the right of any party hereto to commence any legal proceeding or
otherwise proceed against any other party hereto in any other forum or
jurisdiction.
9.8 Successors and Assigns; Parties in Interest.
(a) Subject to Sections 2.4 and 9.8(b) of this Escrow Agreement, this
Escrow Agreement shall be binding upon: Ibex and its successors and assigns
(if any); the Designated Shareholders' Agent and the Shareholders and their
respective estates, successors and assigns (if any); and Xxxxxxxx and its
successors and assigns (if any). This Escrow Agreement shall inure to the
benefit of: Ibex; the Shareholders; Castelle; the other Indemnitees
(subject to Section 9.8 of the Reorganization Agreement); and the
respective successors (if any) of the foregoing.
(b) Castelle may freely assign any or all of its rights under this Escrow
Agreement, in whole or in part, to any other person without obtaining the
consent or approval of any other party hereto or of any other person.
Castelle may not delegate its obligations under this Escrow Agreement to
any other person without the prior consent of the Designated Shareholders'
Agent. None of the Shareholders, the Designated Shareholders' Agent or Ibex
shall be permitted to assign any of his, her or its rights or delegate any
of his, her or its obligations under this Escrow Agreement without
Castelle's prior reasonable written consent.
9.9 Waiver.
(a) No failure on the part of any person to exercise any power, right,
privilege or remedy under this Escrow Agreement, and no delay on the part
of any person in exercising any power, right, privilege or remedy under
this Escrow Agreement, shall operate as a waiver of such power, right,
privilege or remedy; and no single or partial exercise of any such power,
right, privilege or remedy shall preclude any other or further exercise
thereof or of any other power, right, privilege or remedy.
131
(b) No person shall be deemed to have waived any claim arising out of this
Escrow Agreement, or any power, right, privilege or remedy under this
Escrow Agreement, unless the waiver of such claim, power, right, privilege
or remedy is expressly set forth in a written instrument duly executed and
delivered on behalf of such person; and any such waiver shall not be
applicable or have any effect except in the specific instance in which it
is given.
9.10 Amendments. This Escrow Agreement may not be amended, modified,
altered or supplemented other than by means of a written instrument duly
executed and delivered on behalf of Castelle and the Designated Shareholders'
Agent.
9.11 Severability. In the event that any provision of this Escrow
Agreement, or the application of any such provision to any person or set of
circumstances, shall be determined to be invalid, unlawful, void or
unenforceable to any extent, the remainder of this Escrow Agreement, and the
application of such provision to persons or circumstances other than those as to
which it is determined to be invalid, unlawful, void or unenforceable, shall not
be impaired or otherwise affected and shall continue to be valid and enforceable
to the fullest extent permitted by law.
9.12 Entire Agreement. This Escrow Agreement, the Reorganization Agreement
and the Exhibits thereto set forth the entire understanding of the parties
relating to the subject matter hereof and thereof and supersede all prior
agreements and understandings among or between any of the parties relating to
the subject matter hereof and thereof.
9.13 Construction.
(a) For purposes of this Escrow Agreement, whenever the context requires:
the singular number shall include the plural, and vice versa; the masculine
gender shall include the feminine and neuter genders; the feminine gender
shall include the masculine and neuter genders; and the neuter gender shall
include the masculine and feminine genders.
(b) The parties hereto agree that any rule of construction to the effect
that ambiguities are to be resolved against the drafting party shall not be
applied in the construction or interpretation of this Escrow Agreement.
(c) As used in this Escrow Agreement, the words "include" and "including,"
and variations thereof, shall not be deemed to be terms of limitation, but
rather shall be deemed to be followed by the words "without limitation."
(d) Except as otherwise indicated, all references in this Escrow Agreement
to "Sections" are intended to refer to Sections of this Escrow Agreement.
132
IN WITNESS WHEREOF, the parties have executed this Escrow Agreement as of
the date first above written.
CASTELLE,
a California corporation
By:
IBEX TECHNOLOGIES, INC.,
a California corporation
By:
Xxx Xxxxx, President
Shareholders' Agent
ESCROW AGENT
133
ATTACHMENT A
SHAREHOLDERS
Xxx Xxxxx and Xxxxx Xxxx-Xxxxx
Xxxxxx Xxxxxx
Xxxxxx Xxxxxx
134
ATTACHMENT B
ESCROW AGENT FEE SCHEDULE
135
EXHIBIT M
FORM OF IRREVOCABLE PROXY
136
IRREVOCABLE PROXY
____________________ ("Shareholder"), a shareholder of Ibex Technologies,
Inc., a California corporation (the "Company"), hereby irrevocably appoints
Castelle, a California corporation, the attorney and proxy of the undersigned,
with full power of substitution and resubstitution, to vote the __________
shares of voting common stock of the Company owned of record by Shareholder (the
"Shares") with respect to the following matters (the "Identified Matters"):
(a) the Reorganization Agreement (as herein defined), the Merger (as herein
defined), and the other transactions contemplated by the Reorganization
Agreement;
(b) any proposal made in opposition to or in competition with the
consummation of the Merger;
(c) any proposal contemplating any transaction involving: (i) the sale,
license, disposition or acquisition of all or a material portion of the
Company's business or assets; or (ii) the issuance, disposition or
acquisition of (A) any capital stock or other equity security of the
Company, (B) any option, call, warrant or right (whether or not immediately
exercisable) to acquire, or otherwise relating to, any capital stock or
other equity security of the Company, or (C) any security, instrument or
obligation that is or may become convertible into or exchangeable for any
capital stock or other equity security of the Company; or
(d) any merger, consolidation, business combination, share exchange,
reorganization or similar transaction involving the Company; and
(e) any other action or agreement that could reasonably be expected to
result in (i) a breach of any representation, warranty covenant or
obligation of the Company or Shareholder under the Reorganization
Agreement, or under any other agreement executed on behalf of the Company
or Shareholder, or (ii) any of the conditions to the Company's or
Castelle's obligations under the Reorganization Agreement not being
satisfied.
This Proxy shall terminate at such time (if ever) as that certain Agreement
and Plan of Reorganization dated as of August __, 1996 (the "Reorganization
Agreement") among Castelle, the Company, Shareholder and certain other
shareholders of the Company, providing for the merger of the Company into
Castelle (the "Merger"), shall have been validly terminated or closed in
accordance with its terms. Upon the execution hereof, all prior proxies given by
Shareholder with respect to the Shares are hereby revoked, and no subsequent
proxies will be given. This Proxy is irrevocable, is coupled with an interest
and is granted in consideration of Castelle entering into the Reorganization
Agreement. The attorneys and proxies appointed pursuant to this Proxy will be
empowered (at all times prior to the termination of the Reorganization
Agreement) to exercise (in their discretion and in such manner as they may deem
appropriate) all voting and other rights of Shareholder with respect to the
Shares (including, without limitation, the power to execute and deliver written
137
consents with respect to the Shares), with respect to the Identified Matters, at
every meeting of the shareholders of the Company (and every adjournment or
postponement thereof) or by written consent in lieu of such a meeting, or
otherwise.
This Proxy shall be binding upon the Shareholder and his personal
representatives, executors, administrators, estates, heirs, successors and
assigns (if any). This Proxy shall inure to the benefit of Castelle and its
respective successors and assigns (if any).
Dated: ______________, 1996 _______________________________
Shareholder
138
