AMENDMENT TO AGREEMENT AND PLAN OF REORGANIZATION
THIS AMENDMENT TO AGREEMENT AND PLAN OF REORGANIZATION (this
"Amendment") is made as of November 12, 1998, by and among Avant! Corporation, a
Delaware corporation ("Acquiror"), Artemis Merger Corporation, a California
corporation ("Merger Sub") and interHDL, Inc., a California corporation
("Target").
RECITALS
A. Acquiror, Merger Sub and Target entered into that certain
Agreement and Plan of Reorganization, dated November 4, 1998 (the "Agreement and
Plan").
B. Acquiror, Merger Sub and Target desire to amend the Agreement and
Plan as provided below.
NOW, THEREFORE, in consideration of the covenants and representations
set forth herein, and for other good and valuable consideration, the parties
agree as follows:
1. Section 1.7(b) of the Agreement and Plan be, and it hereby is, amended
and restated to read in full as follows:
"(b) ACQUIROR TO PROVIDE COMMON STOCK AND CASH. Not later than five
(5) business days after the Effective Time, Acquiror shall make available
to the Exchange Agent for exchange in accordance with this Article I,
through such reasonable procedures as Acquiror may adopt, (i) the shares of
Acquiror Common Stock issuable pursuant to Section 1.6(a) in exchange for
shares of Target Capital Stock and Vested Options and (ii) cash in an
amount sufficient to permit payment of cash in lieu of fractional shares
pursuant to Section 1.6(i). In addition, within five (5) business days of
the Effective Time, Acquiror shall make available to Target's counsel for
exchange in accordance with this Article I, through such reasonable
procedures as Acquiror may adopt, cash to be paid pursuant to
Section 1.6(a) in exchange for shares of Target Capital Stock and Vested
Options less the amount of cash to be deposited into the escrow fund (the
"Escrow Fund"); PROVIDED, HOWEVER, that Acquiror shall make available only
those funds sufficient to pay Former Target Shareholders (as defined in
Section 8.1) who have delivered to Target or Target's representative (at
least one (1) day prior to Acquiror's making such funds available) stock
certificates representing all of the shares of Target Capital Stock owned
by them. In the event that a Former Target Shareholder has not delivered a
stock certificate to Target or Target's representative prior to the time
Acquiror makes such cash available to Target's counsel (a "Withholding
Shareholder") Acquiror shall make the cash payment to be paid to such
Withholding Shareholder pursuant to Section 1.6(a) (less the appropriate
amount of cash to be deposited in the Escrow Fund for such Withholding
Shareholder) in exchange for Target Capital Stock and Vested Options
directly to such Withholding Shareholder upon confirmation from the
Exchange Agent of receipt of the stock certificates."
2. MISCELLANEOUS.
2.1 NO OTHER MODIFICATION. Except as expressly provided herein, this
Agreement does not in any way change, modify or delete any of the provisions of
the Agreement and Plan, and all such provisions shall remain in full force and
effect.
2.2 GOVERNING LAW. This Amendment shall be governed by and construed
in accordance with the laws of the State of California without regard to
applicable principles of conflicts of law.
2.3 COUNTERPARTS. This Amendment may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
2
IN WITNESS WHEREOF, Target, Acquiror and Merger Sub have caused this
Agreement to be executed and delivered by their respective officers thereunto
duly authorized, all as of the date first written above.
INTERHDL, INC.
By: /s/ Xxxxx Xxxxxxxx
------------------------------------------
Xxxxx Xxxxxxxx,
President and Chief Executive Officer
AVANT! CORPORATION
By: /S/ Xxxxxx X Xxx
------------------------------------------
Xxxxxx X. Xxx,
President and Chief Executive Officer
ARTEMIS MERGER CORPORATION
By: /S/ Xxxxxx X Xxx
------------------------------------------
Xxxxxx X. Xxx,
President and Chief Executive Officer
SIGNATURE PAGE TO AMENDMENT TO AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
AVANT! CORPORATION,
ARTEMIS MERGER CORPORATION
AND
INTERHDL, INC.
November 4, 1998
TABLE OF CONTENTS
Page
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ARTICLE I THE MERGER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.1 The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2 Closing; Effective Time. . . . . . . . . . . . . . . . . . . . . . . 2
1.3 Effect of the Merger . . . . . . . . . . . . . . . . . . . . . . . . 2
1.4 Articles of Incorporation; Bylaws. . . . . . . . . . . . . . . . . . 2
1.5 Directors and Officers . . . . . . . . . . . . . . . . . . . . . . . 2
1.6 Maximum Aggregate Merger Consideration; Effect on Capital Stock. . . 3
1.7 Surrender of Certificates. . . . . . . . . . . . . . . . . . . . . . 6
1.8 No Further Ownership Rights in Target Capital Stock. . . . . . . . . 8
1.9 Lost, Stolen or Destroyed Certificates . . . . . . . . . . . . . . . 8
1.10 Tax Consequences. . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.11 Exemption from Registration . . . . . . . . . . . . . . . . . . . . 8
1.12 Taking of Necessary Action; Further Action. . . . . . . . . . . . . 8
ARTICLE II REPRESENTATIONS AND WARRANTIES OF TARGET . . . . . . . . . . . . . 9
2.1 Organization, Standing and Power . . . . . . . . . . . . . . . . . . 9
2.2 Capital Structure. . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.3 Authority. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
2.4 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . .11
2.5 Absence of Certain Changes . . . . . . . . . . . . . . . . . . . . .11
2.6 Absence of Undisclosed Liabilities . . . . . . . . . . . . . . . . .12
2.7 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
2.8 Restrictions on Business Activities. . . . . . . . . . . . . . . . .12
2.9 Governmental Authorization . . . . . . . . . . . . . . . . . . . . .12
2.10 Title to Property . . . . . . . . . . . . . . . . . . . . . . . . .13
2.11 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . .13
2.12 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . .14
2.13 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
2.14 Employee Benefit Plans. . . . . . . . . . . . . . . . . . . . . . .16
2.15 Employees and Consultants . . . . . . . . . . . . . . . . . . . . .18
2.16 Related-Party Transactions. . . . . . . . . . . . . . . . . . . . .19
2.17 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20
2.18 Compliance with Laws. . . . . . . . . . . . . . . . . . . . . . . .20
2.19 Brokers' and Finders' Fees. . . . . . . . . . . . . . . . . . . . .20
2.20 Vote Required . . . . . . . . . . . . . . . . . . . . . . . . . . .20
2.21 Customers and Suppliers . . . . . . . . . . . . . . . . . . . . . .20
2.22 Material Contracts. . . . . . . . . . . . . . . . . . . . . . . . .20
2.23 No Breach of Material Contracts . . . . . . . . . . . . . . . . . .22
2.24 Third-Party Consents. . . . . . . . . . . . . . . . . . . . . . . .22
2.25 Minute Books. . . . . . . . . . . . . . . . . . . . . . . . . . . .22
2.26 Complete Copies of Materials. . . . . . . . . . . . . . . . . . . .22
2.27 Representations Complete. . . . . . . . . . . . . . . . . . . . . .22
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2.28 Information Included in Registration Statement. . . . . . . . . . .23
ARTICLE III REPRESENTATIONS AND WARRANTIES OF ACQUIROR AND MERGER SUB . . . .23
3.1 Organization, Standing and Power . . . . . . . . . . . . . . . . . .23
3.2 Authority. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23
3.3 SEC Documents; Financial Statements. . . . . . . . . . . . . . . . .24
3.4 Absence of Certain Changes . . . . . . . . . . . . . . . . . . . . .25
3.5 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25
3.6 Information Included in Registration Statement . . . . . . . . . . .25
3.7 Representations Complete . . . . . . . . . . . . . . . . . . . . . .26
ARTICLE IV CONDUCT PRIOR TO THE EFFECTIVE TIME. . . . . . . . . . . . . . . .26
4.1 Conduct of Business of Target and Acquiror . . . . . . . . . . . . .26
4.2 Conduct of Business of Target. . . . . . . . . . . . . . . . . . . .27
ARTICLE V ADDITIONAL AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . .29
5.1 No Solicitation. . . . . . . . . . . . . . . . . . . . . . . . . . .29
5.2 Preparation of Information Statement . . . . . . . . . . . . . . . .29
5.3 Shareholders Meeting or Consent Solicitation . . . . . . . . . . . .30
5.4 Access to Information. . . . . . . . . . . . . . . . . . . . . . . .30
5.5 Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . . . .30
5.6 Public Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . .31
5.7 Consents; Cooperation. . . . . . . . . . . . . . . . . . . . . . . .31
5.8 Update Disclosure; Breaches. . . . . . . . . . . . . . . . . . . . .31
5.9 Legal Requirements . . . . . . . . . . . . . . . . . . . . . . . . .31
5.10 Tax-Free Reorganization . . . . . . . . . . . . . . . . . . . . . .31
5.11 Blue Sky Laws . . . . . . . . . . . . . . . . . . . . . . . . . . .31
5.12 Stock Options . . . . . . . . . . . . . . . . . . . . . . . . . . .32
5.13 Form S-3 Registration Statement . . . . . . . . . . . . . . . . . .33
5.14 Listing of Shares . . . . . . . . . . . . . . . . . . . . . . . . .33
5.15 Additional Agreements; Best Efforts . . . . . . . . . . . . . . . .33
5.16 Employee Benefits . . . . . . . . . . . . . . . . . . . . . . . . .33
5.17 Voting Agreement. . . . . . . . . . . . . . . . . . . . . . . . . .33
ARTICLE VI CONDITIONS TO THE MERGER . . . . . . . . . . . . . . . . . . . . .33
6.1 Conditions to Obligations of Each Party to Effect the Merger . . . .33
6.2 Additional Conditions to Obligations of Target . . . . . . . . . . .34
6.3 Additional Conditions to the Obligations of Acquiror . . . . . . . .35
ARTICLE VII TERMINATION, EXPENSES, AMENDMENT AND WAIVER . . . . . . . . . . .37
7.1 Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . .37
7.2 Effect of Termination. . . . . . . . . . . . . . . . . . . . . . . .38
7.3 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .38
7.4 Amendment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .38
7.5 Extension; Waiver. . . . . . . . . . . . . . . . . . . . . . . . . .38
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ARTICLE VIII ESCROW AND INDEMNIFICATION . . . . . . . . . . . . . . . . . . .39
8.1 Survival of Representations, Warranties and Covenants. . . . . . . .39
8.2 Indemnity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .39
8.3 Escrow Fund. . . . . . . . . . . . . . . . . . . . . . . . . . . . .39
ARTICLE IX GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . .40
9.1 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .40
9.2 Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . .41
9.3 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . .41
9.4 Entire Agreement; No Third Party Beneficiaries . . . . . . . . . . .42
9.5 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . .42
9.6 Remedies Cumulative. . . . . . . . . . . . . . . . . . . . . . . . .42
9.7 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . .42
8.8 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . .42
9.9 Rules of Construction. . . . . . . . . . . . . . . . . . . . . . . .42
SCHEDULES
Target Disclosure Schedule
Acquiror Disclosure Schedule
Option Schedule
EXHIBITS
Exhibit A -- Agreement of Merger
Exhibit B -- Registration Rights Agreement
Exhibit C -- Escrow Agreement
Exhibit D -- Legal Opinion of Counsel to Acquiror
Exhibit E -- Employment Agreements
Exhibit F -- Legal Opinion of Counsel to Target
Exhibit G -- FIRPTA Notice
Exhibit H -- Investment Representation Statement
Exhibit I -- Voting Agreement
iii
AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made
and entered into as of November 4, 1998, by and among Avant! Corporation, a
Delaware corporation ("Acquiror"), Artemis Merger Corporation, a California
corporation ("Merger Sub") and interHDL, Inc., a California corporation
("Target").
RECITALS
A. The Boards of Directors of Target, Acquiror and Merger Sub
believe it is in the best interests of their respective companies and the
stockholders of their respective companies that Target and Merger Sub combine
into a single company through the statutory merger of Target with and into
Merger Sub (the "Merger") and, in furtherance thereof, have approved the Merger.
B. Pursuant to the Merger, among other things, each outstanding
share of capital stock of Target, no par value ("Target Capital Stock"), shall
be converted into cash and shares of common stock of Acquiror, $0.0001 par value
("Acquiror Common Stock"), at the rates set forth herein.
C. Target, Acquiror and Merger Sub desire to make certain
representations and warranties and other agreements in connection with the
Merger.
D. The parties intend, by executing this Agreement, to adopt a plan
of reorganization within the meaning of Section 368 of the Internal Revenue Code
of 1986, as amended (the "Code"), and to cause the Merger to qualify as a
reorganization under the provisions of Sections 368(a)(2)(D) of the Code.
E. A portion of the cash consideration otherwise payable by Acquiror
in connection with the Merger shall be placed in escrow for the purposes of
satisfying damages, losses, expenses and other similar charges which result from
breaches of the representations, warranties or covenants contained in this
Agreement.
F. Concurrent with the execution of this Agreement and as an
inducement to Acquiror and Merger Sub to enter into this Agreement, Xxxxxx
XxXxxxx, Xxxxx Xxxxxxxx, Xxxxxx X. Xxxxxx, Xxxxxx Xxxxx, Xxxxxxx Xxxxxxxxx,
Xxxxx Xxxxxxx and Nippon Enterprise Development Company (the "Shareholders") who
are certain officers, directors and significant shareholders of Target, have on
the date hereof entered into the Voting Agreement attached hereto as EXHIBIT I
(the "Voting Agreement") to vote the shares of Target's capital owned by such
persons to approve the Merger.
NOW, THEREFORE, in consideration of the covenants and representations
set forth herein, and for other good and valuable consideration, the parties
agree as follows:
ARTICLE I
THE MERGER
1.1 THE MERGER. At the Effective Time (as defined in Section 1.2)
and subject to and upon the terms and conditions of this Agreement, the
Agreement of Merger attached hereto as EXHIBIT A (the "Agreement of Merger") and
the applicable provisions of the California Corporations Code ("California
Law"), Target shall be merged with and into Merger Sub, the separate corporate
existence of Target shall cease and Merger Sub shall continue as the surviving
corporation. Merger Sub as the surviving corporation after the Merger is
hereinafter sometimes referred to as the "Surviving Corporation."
1.2 CLOSING; EFFECTIVE TIME. The closing of the transactions
contemplated hereby (the "Closing") shall take place as soon as practicable
after the satisfaction or waiver of each of the conditions set forth in
Article VI hereof or at such other time as the parties hereto agree (the date on
which the Closing shall occur, the "Closing Date"). The Closing shall take
place at the offices of Xxxxxxxxx Xxxxxxx Xxxxxx Xxxxxxxxxx Xxxxxxxx &
Xxxxxxxxx, 000 Xxxxxxxxxxxx Xxxxx, Xxxxx Xxxx, Xxxxxxxxxx 00000, or at such
other location as the parties hereto agree. On the Closing Date, the parties
hereto shall cause the Merger to be consummated by filing the Agreement of
Merger with the Secretary of State of the State of California, in accordance
with the relevant provisions of California Law (the time and date of such filing
being the "Effective Time" and the "Effective Date," respectively).
1.3 EFFECT OF THE MERGER. At the Effective Time, the effect of the
Merger shall be as provided in this Agreement, the Agreement of Merger and the
applicable provisions of California Law. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time, all the property, rights,
privileges, powers and franchises of Target shall vest in the Surviving
Corporation, and all debts, liabilities and duties of Target shall become the
debts, liabilities and duties of the Surviving Corporation.
1.4 ARTICLES OF INCORPORATION; BYLAWS.
(a) At the Effective Time, the Articles of Incorporation of
Merger Sub, as in effect immediately prior to the Effective Time, shall be the
Articles of Incorporation of the Surviving Corporation until thereafter amended
as provided by California Law and such Articles of Incorporation; PROVIDED,
HOWEVER, that Article I of the Certificate of Incorporation shall be amended to
read as follows: "The name of the corporation is interHDL, Inc."
(b) The Bylaws of Merger Sub, as in effect immediately prior
to the Effective Time, shall be the Bylaws of the Surviving Corporation until
thereafter amended.
1.5 DIRECTORS AND OFFICERS. At the Effective Time, the directors
of Merger Sub immediately prior to the Effective Time shall be the directors of
the Surviving Corporation, to hold office until such time as such directors
resign, are removed or their respective successors are duly elected or appointed
and qualified. The officers of Merger Sub immediately prior to the Effective
Time shall be the officers of the Surviving Corporation, to hold office until
such time
2
as such officers resign, are removed or their respective successors are duly
elected or appointed and qualified.
1.6 MAXIMUM AGGREGATE MERGER CONSIDERATION; EFFECT ON CAPITAL
STOCK.
(a) MERGER CONSIDERATION. Subject to the remaining provisions of
this Section 1.6, the aggregate consideration to be paid by Acquiror in exchange
for the acquisition of all outstanding shares of Target Capital Stock that are
outstanding at the Effective Time and all options to purchase Target Common
Stock that are vested and outstanding immediately prior to the Effective Time
(the "Vested Options") shall be (i) a cash payment (the "Aggregate Cash
Consideration") equal to (x) forty-five percent (45%) of the Aggregate Purchase
Price less (y) the Excess Acquisition Expenses and (ii) a number of shares of
Acquiror Common Stock (the "Aggregate Stock Consideration") equal to the
quotient obtained by dividing fifty-five percent (55%) of the Aggregate Purchase
Price by fourteen dollars ($14.00) (such $14.00 per share price shall
hereinafter be referred to as, the "Closing Price"). Subject to the provisions
of this Section 1.6(a), each holder of one share of Target Capital Stock and
each holder of a Vested Option shall receive cash and/or Acquiror Common Stock
(the "Per Share Consideration") equal in value (with such stock valued for all
purposes of this Section 1.6 at the Closing Price) to (i) the Adjusted Aggregate
Purchase Price divided by (ii) the sum of the number of shares of Target Common
Stock Deemed Outstanding (as defined below) plus the number of shares of Target
Preferred Stock outstanding immediately prior to the Effective Time, which Per
Share Consideration shall be payable as follows:
(i) The holder of each share of Series A Preferred Stock
of Target, no par value or Series B Preferred Stock of Target, no par value
(collectively, the "Target Preferred Stock"), will, by virtue of the Merger and
at the Effective Time, and without further action on the part of such holder,
receive Per Share Consideration for each outstanding share of Target Preferred
Stock held by such shareholder immediately prior to the Effective Time
consisting of cash, subject to the deduction as set forth in Sections 1.6(e) and
8.3 below.
(ii) The holder of each share of Common Stock of Target,
no par value (the "Target Common Stock"), will, by virtue of the Merger and at
the Effective Time, and without further action on the part of such holder,
receive Per Share Consideration for each outstanding share of Target Common
Stock held by such shareholder immediately prior to the Effective Time
consisting of (i) the Common Stock Cash Payment and (ii) Acquiror Common Stock
(as calculated below), subject to the deduction as set forth in Sections 1.6(e)
and 8.3 below.
(iii) The holder of each Vested Option will, by virtue of
the Merger and at the Effective Time and without further action on the part of
such holder (collectively, the "Vested Optionees"), receive Per Share
Consideration for each outstanding share of Target Common Stock issuable upon
exercise of each such option held by such Vested Optionee immediately prior to
the Effective Time consisting of (i) the Common Stock Cash Payment and (ii)
Acquiror Common Stock (as calculated below), subject to the deduction as set
forth in Sections 1.6(e) and 8.3 below; PROVIDED, HOWEVER, that the exercise
price of such Vested Options shall be paid by the Vested Optionees immediately
prior to the Effective Time; and
3
PROVIDED, FURTHER, that applicable withholding and payroll taxes shall be
deducted from the Common Stock Cash Payment made to such Vested Optionee.
For purposes of this Section 1.6, the aggregate number of shares of Acquiror
Common Stock to be issued to holders of Target Common Stock and the Vested
Optionees in accordance with subsections 1.6(a)(ii) and (iii) above shall be
calculated by multiplying the number of shares of Target Common Stock held by
such holder or issuable upon exercise of a Vested Option held by such Vested
Optionee, as the case may be, times a fraction, the numerator of which is the
Aggregate Stock Consideration and the denominator of which is the Target Common
Stock Deemed Outstanding.
(b) DEFINITIONS.
(i) The "Adjusted Aggregate Purchase Price" shall
equal the Aggregate Purchase Price less all expenses incurred by Target in
excess of one hundred thousand dollars ($100,000) (such excess to be referred to
herein as the "Excess Acquisition Expenses") for fees and expenses of legal
counsel, accountants and financial advisors of Target incurred in connection
with the completion of the Merger.
(ii) The "Aggregate Purchase Price" shall equal
$30,500,000 (assuming a value of Acquiror Common Stock of $14.00 per share) plus
Target's aggregate balances for cash, cash equivalents and short term
investments on the Closing Date, minus (A) Target's aggregate balances for cash,
cash equivalents and short term investments on September 28, 1998 and (B) the
amount of any debt incurred (other than the Excess Acquisition Expenses) and/or
increases in accounts payable between September 28, 1998 and the Closing Date;
PROVIDED, HOWEVER, that in no event shall the Aggregate Purchase Price exceed
$32,000,000 (assuming a value of Acquiror Common Stock of $14.00 per share).
(iii) The "Common Stock Cash Payment" per share shall be
the amount equal to (a) the Aggregate Cash Consideration less the amount of cash
paid to holders of Target Preferred Stock pursuant to subsections 1.6(a)(i)
above, divided by (b) the Target Common Stock Deemed Outstanding.
(iv) The "Target Common Stock Deemed Outstanding" shall
equal the number of shares of Target Common Stock outstanding immediately prior
to the Effective Time plus the number of shares of Target Common Stock issuable
upon exercise of Vested Options.
(c) CONVERSION OF TARGET CAPITAL STOCK. At the Effective
Time, each share of Target Capital Stock (other than shares to be cancelled
pursuant to Section 1.6(d) and shares, if any, held by persons who have not
voted such shares for approval of the Merger and with respect to which such
persons shall become entitled to exercise dissenters' rights in accordance with
Chapter 13 of California Law ("Dissenting Shares")) shall be converted and
exchanged automatically into the right to receive, upon surrender of the
certificate representing such share of Target Capital Stock in the manner
provided in Section 1.7, shares of Acquiror Common Stock and cash upon the terms
and subject to the conditions set forth below and throughout this Agreement.
4
(d) CANCELLATION OF TARGET CAPITAL STOCK OWNED BY ACQUIROR
OR TARGET. At the Effective Time, each share of Target Capital Stock owned by
Acquiror or any direct or indirect wholly owned subsidiary of Acquiror or of
Target immediately prior to the Effective Time shall be canceled and
extinguished without any conversion thereof.
(e) ESCROW. An amount of the aggregate cash payment to be
made to the holders of Target Capital Stock and the Vested Optionees pursuant to
Section 1.6(a) equal to ten percent (10%) of the Aggregate Purchase Price paid
by Acquiror in the Merger (the "Escrow Proceeds") shall be held in escrow as
collateral for the indemnification obligations of the Former Target Shareholders
(as defined in Section 8.1) pursuant to Article VIII of this Agreement and the
provisions of the Escrow Agreement (as defined in Section 6.1(e)). The Escrow
Proceeds shall be withheld pro rata from cash proceeds to be received by the
Former Target Shareholders upon exchange of the shares of Target Capital Stock
and Vested Options with such amounts set forth on EXHIBIT B to the Escrow
Agreement.
(f) TARGET STOCK OPTION PLANS. At the Effective Time, the
Target 1993 Stock Option Plan, as amended and the Target 1996 Stock Plan, as
amended (collectively, the "Target Stock Option Plans") and all options to
purchase Target Common Stock (other than the Vested Options) that are then
unexercised and outstanding under the Target Stock Option Plans shall be assumed
by Acquiror in accordance with Section 5.12.
(g) CAPITAL STOCK OF MERGER SUB. At the Effective Time,
each share of Common Stock, no par value, of Merger Sub ("Merger Sub Common
Stock"), issued and outstanding immediately prior to the Effective Time shall
continue to evidence ownership of one share of capital stock of the Surviving
Corporation.
(h) ADJUSTMENTS TO PER SHARE CONSIDERATION. The per share
consideration received by the holders of Target Capital Stock and the Vested
Optionees shall be adjusted to reflect fully the effect of any stock split,
reverse split, stock dividend (including any dividend or distribution of
securities convertible into Acquiror Common Stock or Target Capital Stock),
reorganization, recapitalization or other like change with respect to Acquiror
Common Stock or Target Capital Stock occurring after the date hereof and prior
to the Effective Time.
(i) FRACTIONAL SHARES. No fraction of a share of Acquiror
Common Stock will be issued, but in lieu thereof each holder of Acquired Shares
who would otherwise be entitled to a fraction of a share of Acquiror Common
Stock (after aggregating all fractional shares of Acquiror Common Stock to be
received by such holder) shall receive from Acquiror an amount of cash (rounded
to the nearest whole cent) equal to the product of (i) such fraction, multiplied
by (ii) the Closing Price.
(j) DISSENTERS' RIGHTS. Any Dissenting Shares shall not be
converted into Acquiror Common Stock but shall instead be converted into the
right to receive such consideration as may be determined to be due with respect
to such Dissenting Shares pursuant to the Chapter 13 of California Law. Target
agrees that, except with the prior written consent of Acquiror, or as required
under California Law, it will not voluntarily make any payment with respect to,
or settle or offer to settle, any such purchase demand. Each holder of
Dissenting Shares ("Dissenting Shareholder") who, pursuant to the provisions of
California Law, becomes
5
entitled to payment of the fair value for shares of Target Capital Stock shall
receive payment therefor (but only after the value therefor shall have been
agreed upon or finally determined pursuant to such provisions). If, after the
Effective Time, any Dissenting Shares shall lose their status as Dissenting
Shares, Acquiror shall issue and deliver, upon surrender by such shareholder of
certificate or certificates representing shares of Target Capital Stock, the
number of shares of Acquiror Common Stock and/or cash to which such shareholder
would otherwise be entitled under this Section 1.6 and the Agreement of Merger
less the amount of cash allocable to such shareholder that has been or will be
deposited in the Escrow Fund (as defined below) in respect of cash pursuant to
Section 1.7(c) and Article VIII hereof.
1.7 SURRENDER OF CERTIFICATES.
(a) EXCHANGE AGENT. Xxxxxx Trust Company of California
shall act as exchange agent (the "Exchange Agent") in the Merger.
(b) ACQUIROR TO PROVIDE COMMON STOCK AND CASH. Not later
than five (5) business days after the Effective Time, Acquiror shall make
available to the Exchange Agent for exchange in accordance with this Article I,
through such reasonable procedures as Acquiror may adopt, (i) the shares of
Acquiror Common Stock issuable pursuant to Section 1.6(a) in exchange for shares
of Target Capital Stock and Vested Options, (ii) cash to be paid pursuant to
Section 1.6(a) in exchange for shares of Target Capital Stock and Vested Options
less the amount of cash to be deposited into the escrow fund (the "Escrow Fund")
and (iii) cash in an amount sufficient to permit payment of cash in lieu of
fractional shares pursuant to Section 1.6(i).
(c) EXCHANGE PROCEDURES. Promptly after the Effective Time,
Acquiror shall cause to be mailed to each holder of record of a certificate or
certificates (the "Certificates") which immediately prior to the Effective Time
represented outstanding shares of Target Capital Stock, whose shares were
converted into the right to receive shares of Acquiror Common Stock and/or the
required cash consideration (and cash in lieu of fractional shares) pursuant to
Section 1.6, (i) a letter of transmittal (which shall specify that delivery
shall be effected, and risk of loss and title to the Certificates shall pass,
only upon receipt of the Certificates by the Exchange Agent, and shall be in
such form and have such other provisions as Acquiror may reasonably specify) and
(ii) instructions for use in effecting the surrender of the Certificates in
exchange for certificates representing shares of Acquiror Common Stock and the
required cash consideration (and cash in lieu of fractional shares). Upon
surrender of a Certificate for cancellation to the Exchange Agent or to such
other agent or agents as may be appointed by Acquiror, together with such letter
of transmittal, duly completed and validly executed in accordance with the
instructions thereto, the holder of such Certificate shall be entitled to
receive in exchange therefor a certificate representing the number of whole
shares of Acquiror Common Stock and/or the required cash consideration less the
amount of cash to be deposited in the Escrow Fund on such holder's behalf
pursuant to Article VIII hereof and payment in lieu of fractional shares which
such holder has the right to receive pursuant to Section 1.6, and the
Certificate so surrendered shall forthwith be canceled; PROVIDED, HOWEVER, that
each Former Target Shareholder (as defined in Section 8.1) shall have entered
into a Investment Representation Statement in substantially the form attached
hereto as EXHIBIT H
6
before such Former Target Shareholder shall be entitled to receive shares of
Acquiror Common Stock and/or the required cash consideration pursuant to
Section 1.6.
(d) STATUS OF TARGET STOCK. Until so surrendered, each
outstanding Certificate that, prior to the Effective Time, represented shares of
Target Capital Stock will be deemed from and after the Effective Time, for all
corporate purposes, other than the payment of dividends, to evidence the
ownership of the number of full shares of Acquiror Common Stock into which such
shares of Target Capital Stock shall have been so converted and/or the right to
receive the required cash consideration and an amount in cash in lieu of the
issuance of any fractional shares in accordance with Section 1.6. Subject to
and in accordance with the provisions of Section 8.3 hereof, Acquiror shall
cause to be delivered to the Escrow Agent (as defined in Section 8.3 hereof) the
Escrow Proceeds. The Escrow Proceeds delivered to the Escrow Agent shall be
held in escrow and shall be available to compensate Acquiror for certain damages
as provided in Article VIII. To the extent not used for such purposes, such
cash shall be released, all as provided in Article VIII hereof and in the Escrow
Agreement.
(e) DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES. No
dividends or other distributions with respect to Acquiror Common Stock with a
record date after the Effective Time shall be paid to the holder of any
unsurrendered Certificate with respect to the shares of Acquiror Common Stock
represented thereby until the holder of record of such Certificate surrenders
such Certificate. Subject to applicable law, following surrender of any such
Certificate, there shall be paid to the record holder of the certificates
representing whole shares of Acquiror Common Stock issued in exchange therefor,
without interest, at the time of such surrender, the amount of any such
dividends or other distributions with a record date after the Effective Time
which would have been previously payable (but for the provisions of this
Section 1.7(d)) with respect to such shares of Acquiror Common Stock.
(f) TRANSFERS OF OWNERSHIP. If any certificate for shares
of Acquiror Common Stock is to be issued in a name other than that in which the
Certificate surrendered in exchange therefor is registered, it shall be a
condition of the issuance thereof that the Certificate so surrendered is
properly endorsed and otherwise in proper form for transfer and that the person
requesting such exchange will have paid to Acquiror or any agent designated by
it any transfer or other taxes required by reason of the issuance of a
certificate for shares of Acquiror Common Stock in any name other than that of
the registered holder of the Certificate surrendered, or established to the
satisfaction of Acquiror or any agent designated by it that such tax has been
paid or is not payable.
(g) NO LIABILITY. Notwithstanding anything to the contrary
in this Section 1.7, none of the Exchange Agent, the Surviving Corporation or
any party hereto shall be liable to any person for any amount properly paid to a
public official pursuant to any applicable abandoned property, escheat or
similar law.
(h) DISSENTING SHARES. The provisions of this Section 1.7
shall also apply to Dissenting Shares that lose their status as such, except
that the obligations of Acquiror under this Section 1.7 shall commence on the
date of loss of such status and the holder of such shares shall be entitled to
receive in exchange for such shares the number of shares of Acquiror
7
Common Stock and/or the cash consideration to which such holder is entitled
pursuant to Section 1.6 hereof.
1.8 NO FURTHER OWNERSHIP RIGHTS IN TARGET CAPITAL STOCK. The cash
consideration and/or all shares of Acquiror Common Stock delivered upon the
surrender for exchange of shares of Target Capital Stock in accordance with the
terms hereof (including any cash paid in lieu of fractional shares) shall be
deemed to have been delivered in full satisfaction of all rights pertaining to
such shares of Target Capital Stock, and there shall be no further registration
of transfers on the records of the Surviving Corporation of shares of Target
Capital Stock which were outstanding immediately prior to the Effective Time.
If, after the Effective Time, Certificates are presented to the Surviving
Corporation for any reason, they shall be canceled and exchanged as provided in
this Article I.
1.9 LOST, STOLEN OR DESTROYED CERTIFICATES. In the event any
Certificates shall have been lost, stolen or destroyed, the Exchange Agent shall
issue in exchange for such lost, stolen or destroyed Certificates, upon the
making of an affidavit of that fact by the holder thereof, the cash
consideration and such shares of Acquiror Common Stock (and cash in lieu of
fractional shares) as may be required pursuant to Section 1.6; PROVIDED,
HOWEVER, that Acquiror may, in its discretion and as a condition precedent to
the issuance thereof, require the owner of such lost, stolen or destroyed
Certificates to deliver a bond in such sum as it may reasonably direct as
indemnity against any claim that may be made against Acquiror, the Surviving
Corporation or the Exchange Agent with respect to the Certificates alleged to
have been lost, stolen or destroyed.
1.10 TAX CONSEQUENCES. It is intended by the parties hereto that
the Merger shall constitute a reorganization within the meaning of Section 368
of the Code. No party shall take any action which would, to such party's
knowledge, cause the Merger to fail to qualify as a reorganization within the
meaning of Section 368 of the Code.
1.11 EXEMPTION FROM REGISTRATION. The shares of Acquiror Common
Stock to be issued in connection with the Merger will be issued in a transaction
exempt from registration under the Securities Act of 1933, as amended (the
"Securities Act"), by reason of Regulation D thereof and the rules and
regulations promulgated thereunder and under Section 25100(o) of California Law.
The registration of the shares with the Securities and Exchange Commission (the
"SEC") and their resale shall be subject to the terms and conditions of a
registration rights agreement attached hereto as EXHIBIT B (the "Registration
Rights Agreement").
1.12 TAKING OF NECESSARY ACTION; FURTHER ACTION. If, at any time
after the Effective Time, any further action is necessary or desirable to carry
out the purposes of this Agreement and to vest the Surviving Corporation with
full right, title and possession to all assets, property, rights, privileges,
powers and franchises of Target, the officers and directors of Target and Merger
Sub are fully authorized in the name of their respective corporations or
otherwise to take, and shall take, all such lawful and necessary action, so long
as such action is not inconsistent with this Agreement.
8
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF TARGET
Target represents and warrants to Acquiror and Merger Sub that the
statements contained in this Article II are true and correct, except as set
forth in the disclosure schedule delivered by Target to Acquiror prior to the
execution and delivery of this Agreement (the "Target Disclosure Schedule"). As
used in this Agreement, "Business Condition" with respect to Target shall refer
to Target and all of its subsidiaries taken as a whole and shall mean the
financial condition, business (including products currently under development),
results of operations and assets of Target and all of its subsidiaries taken as
of whole. Any reference in this Article II to an agreement being "enforceable"
shall be deemed to be qualified to the extent such enforceability is subject to
(i) laws of general application relating to bankruptcy, insolvency, moratorium
and the relief of debtors, and (ii) the availability of specific performance,
injunctive relief and other equitable remedies. In the remainder of this
Article II, "Target" will be deemed to include (and each representation and
warranty will apply separately and collectively to) Target and Target's
subsidiary, unless the context otherwise requires.
2.1 ORGANIZATION, STANDING AND POWER. Target is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of organization. Target has the corporate power to own its
properties and to carry on its business as now being conducted and is duly
qualified to do business and is in good standing in each jurisdiction in which
the failure to be so qualified and in good standing would have a Material
Adverse Effect (as defined in Section 9.2) on Target. Target has delivered to
Acquiror a true and correct copy of the Articles of Incorporation and Bylaws or
other charter documents, as applicable, of Target, each as amended to date.
Target is not in violation of any of the provisions of its Articles of
Incorporation or Bylaws or equivalent organizational documents. Target is the
owner of all outstanding shares of capital stock of its subsidiary and all such
shares are duly authorized, validly issued, fully paid and nonassessable. All
of the outstanding shares of capital stock of such subsidiary are owned by
Target free and clear of any liens, charges, claims or encumbrances or rights of
others. There are no outstanding subscriptions, options, warrants, puts, calls,
rights, exchangeable or convertible securities or other commitments or
agreements of any character relating to the issued or unissued capital stock or
other securities of such subsidiary, or otherwise obligating Target or such
subsidiary to issue, transfer, sell, purchase, redeem or otherwise acquire any
such securities. Target does not directly or indirectly own any equity or
similar interest in, or any interest convertible or exchangeable or exercisable
for, any equity or similar interest in, any corporation, partnership, joint
venture or other business association or entity.
2.2 CAPITAL STRUCTURE. The authorized capital stock of Target
consists of ten million (10,000,000) shares of Common Stock and one million one
hundred eighty-one thousand forty-nine (1,181,049) shares of Preferred Stock, of
which there were issued and outstanding as of the date of this Agreement, four
million nine hundred sixty-seven thousand four hundred three (4,967,403) shares
of Common Stock, six hundred thirty-five thousand five hundred ninety-four
(635,594) shares of Series A Preferred Stock (the "Series A Preferred") and four
hundred fifty-four thousand five hundred forty-six (454,546) shares of Series B
Preferred Stock (the "Series B Preferred"). There are no other outstanding
shares of capital stock or voting securities and no
9
outstanding commitments to issue any shares of capital stock or voting
securities after the date of this Agreement other than pursuant to the exercise
of options outstanding as of the date of this Agreement under the Target Stock
Option Plans. All outstanding shares of Target Capital Stock are duly
authorized, validly issued, fully paid and non-assessable and are free of any
liens or encumbrances other than any liens or encumbrances created by or imposed
upon the holders thereof, and are not subject to preemptive rights, rights of
first refusal, rights of first offer or similar rights created by statute, the
Articles of Incorporation or Bylaws of Target or any agreement to which Target
is a party or by which it is bound. As of the date of this Agreement, Target
has reserved (i) one million one hundred eighty-one thousand forty-nine
(1,181,049) shares of Common Stock for issuance upon conversion of the Series A
Preferred and the Series B Preferred and (ii) four million three hundred
thousand (4,300,000) shares of Common Stock for issuance to employees, directors
and consultants pursuant to the Target Stock Option Plans, of which one million
three hundred twenty-six thousand six hundred fifty-five (1,326,655) shares have
been issued pursuant to option exercise, one million six hundred twelve thousand
six hundred one (1,612,601) are or will be outstanding and exercisable as of
October 30, 1998, and one million three hundred seven thousand one hundred
seventy-four (1,307,174) are or will be outstanding and unexercisable as of
October 30, 1998. Except for (i) the rights created pursuant to this Agreement
and (ii) Target's right to repurchase any unvested shares under the Target Stock
Option Plans, there are no other options, warrants, calls, rights, commitments
or agreements of any character to which Target is a party or, to Target's
knowledge, by which it is bound obligating Target to issue, deliver, sell,
repurchase or redeem, or cause to be issued, delivered, sold, repurchased or
redeemed, any shares of Target Capital Stock or obligating Target to grant,
extend, accelerate the vesting of, change the price of, or otherwise amend or
enter into any such option, warrant, call, right, commitment or agreement.
There are no contracts, commitments or agreements relating to the voting,
purchase or sale of Target Capital Stock (i) between or among Target and any of
its shareholders and (ii) to Target's knowledge, among any of Target's
shareholders or between any of Target's shareholders and any third party. The
terms of the Target Stock Option Plans permit the assumption of such Target
Stock Option Plans by Acquiror or the substitution of options to purchase
Acquiror Common Stock as provided in this Agreement, without the consent or
approval of the holders of the outstanding options, the Target shareholders, or
otherwise and without any acceleration of the exercise schedule or vesting
provisions in effect for such options. True and complete copies of all
agreements and instruments relating to or issued under the Target Stock Option
Plans have been made available to Acquiror, and such agreements and instruments
have not been amended, modified or supplemented, and there are no agreements to
amend, modify or supplement such agreements or instruments from the form made
available to Acquiror. All outstanding shares of Common Stock, Series A
Preferred and Series B Preferred were issued in compliance in all material
respects with all applicable federal and state securities laws.
2.3 AUTHORITY.
(a) Target has all requisite corporate power and authority
to enter into this Agreement and the Agreement of Merger, the Registration
Rights Agreement and the Escrow Agreement (collectively, the "Transaction
Documents") and to consummate the transactions contemplated hereby and thereby.
The execution and delivery this Agreement and the Transaction Documents and the
consummation of the transactions contemplated hereby and thereby have been duly
authorized by all necessary corporate action on the part of Target, subject
10
only to the approval of the Merger by Target's shareholders as contemplated by
Section 6.1(a). This Agreement and other Transaction Documents have been duly
executed and delivered by Target and constitute the valid and binding
obligations of Target enforceable against Target in accordance with their terms.
(b) The execution and delivery of this Agreement and the
Transaction Documents by Target do not, and the consummation of the transactions
contemplated hereby and thereby will not, conflict with, or result in any
violation of, or default under (with or without notice or lapse of time, or
both), or give rise to a right of termination, cancellation or acceleration of
any obligation or loss of any benefit under (i) any provision of the Articles of
Incorporation or Bylaws of Target, as amended, (ii) any Material Contract (as
defined in Section 2.22), (iii) any permit, concession, franchise or license
material to the conduct of Target's business, or (iv) any judgment, order,
decree, statute, law, ordinance, rule or regulation applicable to Target or any
of its properties or assets.
(c) No consent, approval, order or authorization of, or
registration, declaration or filing with, any court, administrative agency or
commission or other governmental authority or instrumentality ("Governmental
Entity") is required by or with respect to Target in connection with the
execution and delivery of this Agreement and the Transaction Documents or the
consummation of the transactions contemplated hereby or thereby, except for
(i) the filing of the Agreement of Merger, together with the required officers'
certificates, as provided in Section 1.1; (ii) such consents, approvals, orders,
authorizations, registrations, declarations and filings as may be required under
applicable state securities laws and the securities laws of any foreign country;
and (iii) such other consents, authorizations, filings, approvals and
registrations which, if not obtained or made, would not have a Material Adverse
Effect on Target and would not prevent, or materially alter or delay any of the
transactions contemplated by this Agreement.
2.4 FINANCIAL STATEMENTS. Target has delivered to Acquiror its
audited financial statements (balance sheet, statement of operations, statement
of shareholders' equity (deficit) and statement of cash flows) for the fiscal
years ended December 31, 1997, 1996 and 1995 and its unaudited financial
statements (balance sheet, statement of operations, statement of shareholders'
equity and statement of cash flows) on a consolidated basis as at, and for the
six-month period ended June 30, 1998 (collectively, the "Financial Statements").
The Financial Statements have been prepared in accordance with generally
accepted accounting principles ("GAAP") (except that the unaudited financial
statements do not have notes thereto) applied on a consistent basis throughout
the periods indicated and with each other. The Financial Statements fairly
present the financial condition and operating results of Target as of the dates,
and for the periods, indicated therein, subject, in the case of the unaudited
financing statements, to normal year-end audit adjustments which are, not
material in the aggregate. Target maintains a standard system of accounting
established and administered in accordance with generally accepted accounting
principles.
2.5 ABSENCE OF CERTAIN CHANGES. Since June 30, 1998 (the "Target
Balance Sheet Date") to the date of this Agreement, Target has conducted its
business in the ordinary course consistent with past practice and there has not
occurred: (i) any change, event or condition (whether or not covered by
insurance) that has resulted in, or might reasonably be expected to result in, a
Material Adverse Effect on Target; (ii) any acquisition, sale or transfer of
11
any material asset of Target; (iii) any change in accounting methods or
practices (including any change in depreciation or amortization policies or
rates) by Target or any revaluation by Target of any of its assets; (iv) any
declaration, setting aside, or payment of a dividend or other distribution with
respect to the shares of Target, or any direct or indirect redemption, purchase
or other acquisition by Target of any of its shares of capital stock (other than
the repurchase of shares of Target Common Stock from employees, officers,
directors, consultants or other persons performing services for Target or any
subsidiary of Target pursuant to agreements under which Target has the option to
repurchase such shares at cost upon the occurrence of certain events); (v) any
Material Contract (as defined in Section 2.22) entered into by Target or any
material amendment or termination of, or default under, any Material Contract
(as defined in Section 2.22) to which Target is a party or, to Target's
knowledge, by which it is bound; (vi) any amendment or change to the Articles of
Incorporation or Bylaws of Target; (vii) any increase in or modification of the
compensation or benefits payable or to become payable by Target to any of its
directors, employees or consultants; or (viii) any negotiation or agreement by
Target to do any of the things described in the preceding clauses (i) through
(vii) (other than negotiations with Acquiror and its representatives regarding
the transactions contemplated by this Agreement).
2.6 ABSENCE OF UNDISCLOSED LIABILITIES. Target has no material
obligations or liabilities of any nature (matured or unmatured, fixed or
contingent) required by GAAP to be disclosed on a balance sheet other than
(i) those set forth or adequately provided for in the Balance Sheet for the
period ended June 30, 1998 (the "Target Balance Sheet"), (ii) liabilities
incurred since June 30, 1998 in the ordinary course of business and (iii) those
incurred in connection with the transactions contemplated by this Agreement.
2.7 LITIGATION. There is no private or governmental action, suit,
proceeding, claim, arbitration or, to the knowledge of Target, investigation
pending before any agency, court or tribunal, foreign or domestic, or, to the
knowledge of Target, threatened (including allegations that could reasonably
form the basis for future action) against Target or any of its properties or
officers or directors (in their capacities as such). There is no judgment,
decree or order against Target, or, to the knowledge of Target, any of its
directors or officers (in their capacities as such), that could prevent, enjoin,
or materially alter or delay any of the transactions contemplated by this
Agreement, or that could reasonably be expected to have a Material Adverse
Effect on Target. All litigation to which Target is a party (or, to the
knowledge of Target, threatened to become a party) is disclosed in the Target
Disclosure Schedule. Target does not have any plans to initiate any litigation,
arbitration or other proceeding against any third party.
2.8 RESTRICTIONS ON BUSINESS ACTIVITIES. There is no material
agreement or any judgment, injunction, order or decree binding upon Target that
has or could reasonably be expected to have the effect of prohibiting or
materially impairing any current or future business practice of Target, any
acquisition of property by Target or the conduct of business by Target as
currently conducted or as proposed to be conducted by Target.
2.9 GOVERNMENTAL AUTHORIZATION. Target has obtained each federal,
state, county, local or foreign governmental consent, license, permit, grant, or
other authorization of a Governmental Entity (i) pursuant to which Target
currently operates or holds any interest in any of its properties or (ii) that
is required for the operation of Target's business or the holding of any such
interest ((i) and (ii) herein collectively called "Target Authorizations"), and
all of such
12
Target Authorizations are in full force and effect, except where the failure to
obtain or have any such Target Authorizations could not reasonably be expected
to have a Material Adverse Effect on Target.
2.10 TITLE TO PROPERTY. Target has good and marketable title to all
of its properties, interests in properties and assets, real and personal (other
than the Target Intellectual Property defined in Section 2.11 below), necessary
for the conduct of its business as presently conducted or which are reflected in
the Target Balance Sheet or acquired after the Target Balance Sheet Date (except
properties, interests in properties and assets sold or otherwise disposed of in
the ordinary course of business since the Target Balance Sheet Date), or with
respect to leased properties and assets, valid leasehold interests therein, in
each case free and clear of all mortgages, liens, pledges, charges or
encumbrances of any kind or character, except (i) the lien of current taxes not
yet due and payable, (ii) such imperfections of title, liens and easements as do
not and will not materially detract from or interfere with the use of the
properties subject thereto or affected thereby, or otherwise materially impair
business operations involving such properties and (iii) liens securing debt that
are reflected on the Target Balance Sheet. The plants, property and equipment
of Target that are used in the operations of its business are in good operating
condition and repair. All properties used in the operations of Target are
reflected in the Target Balance Sheet to the extent generally accepted
accounting principles require the same to be reflected.
2.11 INTELLECTUAL PROPERTY.
(a) Target is the sole and exclusive owner of or has an
exclusive license to all Target Intellectual Property (defined below) free of
all contingent and noncontingent liens, restrictions, interests, rights of
reversion or termination, and all other encumbrances of any nature, except for
liens and restrictions arising from licenses and other commercial contracts
entered into in the ordinary course of business by Target. To the knowledge of
Target, the conduct of Target's business as currently conducted or as proposed
to be conducted will not infringe, misappropriate or violate any Intellectual
Property (defined below) of others.
(b) All Target Intellectual Property that is the subject of
any application, registration or issuance with or from any governmental entity
is identified on the Target Disclosure Schedule; all such registered or issued
Intellectual Property is valid and subsisting and, to the knowledge of Target,
is free from any challenge (or threat thereof) and Target is not aware of any
specific basis therefor. All such applications, registrations and issuances
have been properly maintained. Target has adequately protected all other Target
Intellectual Property through the use of confidentiality agreements and
otherwise and Target is not aware of any use, exercise or exploitation of any
Target Intellectual Property, except as authorized by Target.
(c) Each current and former employee and contractor of
Target has executed and delivered (and to Target's knowledge, is in compliance
with) an agreement in substantially the form of Target's standard Proprietary
Information and Inventions Agreement (in the case of an employee) or Target's
standard Consulting Agreement (in the case of a contractor) (which agreement
provides valid written assignments of all title and rights to any
13
Target Intellectual Property conceived or developed thereunder or otherwise in
connection with his or her consulting or employment).
(d) "Intellectual Property" means patent rights; trade name,
trademark, service xxxx and similar rights ("Xxxx" rights); copyrights; mask
work rights; SUI GENERIS database rights; trade secret rights; moral rights; and
all other intellectual and industrial property rights of any sort throughout the
world, and all applications, registrations, issuances and the like with respect
thereto. "Target Intellectual Property" means all Intellectual Property that
has been, is, or is proposed to be owned by Target, or used, exercised, or
exploited, or otherwise necessary for, Target's business as currently conducted
or as proposed to be conducted.
2.12 ENVIRONMENTAL MATTERS. Target is and has at all times operated
its business in material compliance with all Environmental Laws and to the best
of Target's knowledge, no material expenditures are or will be required in order
to comply with such Environmental Laws. "Environmental Laws" means all
applicable statutes, rules, regulations, ordinances, orders, decrees, judgments,
permits, licenses, consents, approvals, authorizations, and governmental
requirements or directives or other obligations lawfully imposed by governmental
authority under federal, state or local law pertaining to the protection of the
environment, protection of public health, protection of worker health and
safety, the treatment, emission and/or discharge of gaseous, particulate and/or
effluent pollutants, and/or the handling of hazardous materials, including
without limitation, the Clean Air Act, 42 U.S.C. Section 7401, et seq., the
Comprehensive Environmental Response, Compensation and Liability Act of 1980
("CERCLA"), 42 U.S.C. Section 9601, et seq., the Federal Water Pollution
Control Act, 33 U.S.C. Section 1321, et seq., the Hazardous Materials
Transportation Act, 49 U.S.C. Section 1801, et seq., the Resource Conservation
and Recovery Act, 42 U.S.C. Section 6901, et seq. ("RCRA"), and the Toxic
Substances Control Act, 15 U.S.C. Section 2601, et seq.
2.13 TAXES.
(a) All Tax returns, statements, reports, declarations and
other forms and documents (including without limitation estimated Tax returns
and reports and material information statements, returns and reports) required
to be filed with any Tax authority with respect to any Taxable period ending on
or before the Effective Time, by or on behalf of Target (collectively, "Tax
Returns" and individually a "Tax Return"), have been or will be completed and
filed when due (including any extensions of such due date) and all amounts shown
due on such Tax Returns on or before the Effective Time have been or will be
paid on or before such date. The Target June 30, 1998 balance statement
included in the Financial Statements (the "Target Balance Sheet") (i) fully
accrue all actual and contingent liabilities for Taxes with respect to all
periods through June 30, 1998 and Target has not and will not incur any Tax
liability in excess of the amount reflected on such Target Balance Sheet with
respect to such periods, and (ii) properly accrues in accordance with GAAP all
material liabilities in all material respects for Taxes payable after
June 30,1998 with respect to all transactions and events occurring on or prior
to such date. All information set forth in the notes to the Target Financial
Statements relating to Tax matters is true, complete and accurate in all
material respects. No material Tax liability since June 30, 1998 has been or
will be incurred by Target other than in the ordinary course of business.
14
(b) Target has previously provided or made available to
Acquiror true and correct copies of all Tax Returns. Target has withheld and
paid to the applicable financial institution or Tax authority all amounts
required to be withheld. To the best knowledge of Target, no Tax Returns filed
with respect to Taxable years of Target through the Taxable year ended
December 31, 1997 in the case of the United States, have been examined and
closed. Target (or any member of any affiliated or combined group of which
Target has been a member) has not granted any extension or waiver of the
limitation period applicable to any Tax Returns that is still in effect. There
is no material claim, audit, action, suit, proceeding, or (to the knowledge of
Target) investigation now pending or (to the knowledge of Target) threatened
against or with respect to Target in respect of any Tax or assessment. No
notice of deficiency or similar document of any Tax authority has been received
by Target, and there are no liabilities for Taxes (including liabilities for
interest, additions to Tax and penalties thereon and related expenses) with
respect to the issues that have been raised (and are currently pending) by any
Tax authority that could, if determined adversely to Target, materially and
adversely affect the liability of Target for Taxes. There are no liens for
Taxes (other than for current Taxes not yet due and payable) upon the assets of
Target. Target has never been a member of an affiliated group of corporations,
within the meaning of Section 1504 of the Code. Target is in compliance in all
material respects with all the terms and conditions of any Tax exemptions or
other Tax-sharing agreement or order of a foreign government and the
consummation of the Merger will not have any adverse effect on the continued
validity and effectiveness of any such Tax exemption or other Tax-sharing
agreement or order. Neither Target nor any person on behalf of Target has
entered into or will enter into any agreement or consent pursuant to the
collapsible corporation provisions of Section 341(f) of the Code (or any
corresponding provision of state, local or foreign income tax law) or agreed to
have Section 341(f)(2) of the Code (or any corresponding provision of state,
local or foreign income tax law) apply to any disposition of any asset owned by
Target. None of the assets of Target is property that Target is required to
treat as being owned by any other person pursuant to the so-called "safe harbor
lease" provisions of former Section 168(f)(8) of the Code. None of the assets of
Target directly or indirectly secures any debt the interest on which is
tax-exempt under Section 103(a) of the Code. None of the assets of Target is
"tax-exempt use property" within the meaning of Section 168(h) of the Code.
Target has not made and will not make a deemed dividend election under Treas.
Reg. Section 1.1502-32(f)(2) or a consent dividend election under Section 565 of
the Code. Target has never been a party to any transaction intended to qualify
under Section 355 of the Code or any corresponding provision of state law.
Target has not participated in (and will not participate in) an international
boycott within the meaning of Section 999 of the Code. No Target shareholder is
other than a United States person within the meaning of the Code. Target does
not have and has not had a permanent establishment in any foreign country, as
defined in any applicable tax treaty or convention between the United States of
America and such foreign country and Target has not engaged in a trade or
business within any foreign country. Target has never elected to be treated as
an S-corporation under Section 1362 of the Code or any corresponding provision
of federal or state law. All material elections with respect to Target's Taxes
made during the fiscal years ending, December 31, 1995, 1996 and 1997 are
reflected on the Target Tax Returns for such periods, copies of which have been
provided or made available to Acquiror. After the date of this Agreement, no
material election with respect to Taxes will be made without the prior written
consent of Acquiror, which consent will not be unreasonably withheld or delayed.
Target is not party to any joint venture, partnership, or other arrangement or
contract which could be
15
treated as a partnership for federal income tax purposes. Target is not
currently and never has been subject to the reporting requirements of
Section 6038A of the Code. There is no agreement, contract or arrangement to
which Target is a party that could, individually or collectively, result in the
payment of any amount that would not be deductible by reason of Sections 280G
(as determined without regard to Section 280G(b)(4)), 162(a) (by reason of being
unreasonable in amount), 162(b) through (p) or 404 of the Code. Target is not a
party to or bound by any Tax indemnity, Tax sharing or Tax allocation agreement
(whether written or unwritten or arising under operation of federal law as a
result of being a member of a group filing consolidated Tax returns, under
operation of certain state laws as a result of being a member of a unitary
group, or under comparable laws of other states or foreign jurisdictions) which
includes a party other than Target nor does Target owe any amount under any such
Agreement. Target is not, and has not been, a United States real property
holding corporation (as defined in Section 897(c)(2) of the Code) during the
applicable period specified in Section 897(c)(1)(A)(ii) of the Code. Other than
by reason of the Merger, Target has not been and will not be required to include
any material 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, events or
accounting methods employed prior to the Merger.
(c) For purposes of this Agreement, the following terms have
the following meanings: "Tax" (and, with correlative meaning, "Taxes" and
"Taxable") means any and all taxes including, without limitation, (i) any net
income, alternative or add-on minimum tax, gross income, gross receipts, sales,
use, ad valorem, transfer, franchise, profits, value added, net worth, license,
withholding, payroll, employment, excise, severance, stamp, occupation, premium,
property, environmental or windfall profit tax, custom, duty or other tax
governmental fee or other like assessment or charge of any kind whatsoever,
together with any interest or any penalty, addition to tax or additional amount
imposed by any Governmental Entity (a "Tax authority") responsible for the
imposition of any such tax (domestic or foreign), (ii) any liability for the
payment of any amounts of the type described in (i) as a result of being a
member of an affiliated, consolidated, combined or unitary group for any Taxable
period or as the result of being a transferee or successor thereof and (iii) any
liability for the payment of any amounts of the type described in (i) or (ii) as
a result of any express or implied obligation to indemnify any other person. As
used in this Section 2.13, the term "Target" means Target and any entity
included in, or required under GAAP to be included in, any of the Target
Financial Statements.
2.14 EMPLOYEE BENEFIT PLANS.
(a) For all purposes under this Section 2.14 "ERISA
Affiliate" shall mean each person (as defined in Section 3(9) of ERISA) that,
together with Target, is treated as a single employer under Section 4001(b) of
ERISA or Section 414 of the Code. Except for the plans and agreements listed on
the Target Disclosure Schedule (collectively, the "Plans"), Target and its ERISA
Affiliates do not maintain, are not a party to, do not contribute to and are not
obligated to contribute to, and employees or former employees of Target and its
ERISA Affiliates and their dependents or survivors do not receive benefits
under, any of the following:
(i) Any employee benefit plan, as defined in
section 3(3) of ERISA;
16
(ii) Any bonus, deferred compensation, incentive,
restricted stock, stock purchase, stock option, stock appreciation right,
phantom stock, supplemental pension, executive compensation, cafeteria benefit,
dependent care, director or employee loan, fringe benefit, sabbatical,
severance, termination pay or similar plan, program, policy, agreement or
arrangement; or
(iii) Any plan, program, agreement, policy, commitment
or other arrangement relating to the provision of any benefit described in
section 3(1) of ERISA to former employees or directors or to their survivors,
other than procedures intended to comply with the Consolidated Omnibus Budget
Reconciliation Act of 1985 ("COBRA").
(b) Neither Target nor any ERISA Affiliate has, since
January 1, 1992, terminated, suspended, discontinued all contributions to or
withdrawn from any employee pension benefit plan, as defined in section 3(2) of
ERISA, including (without limitation) any multiemployer plan, as defined in
section 3(37) of ERISA.
(c) Target has provided to Acquiror complete, accurate and
current copies of each of the following:
(i) The text (including amendments) of each of the
Plans, to the extent reduced to writing;
(ii) With respect to each Plan that is an employee
benefit plan (as defined in section 3(3) of ERISA), the following:
(1) The most recent summary plan description, as
described in section 102 of ERISA;
(2) Any summary of material modifications that
has been distributed to participants but has not been incorporated in an updated
summary plan description furnished under Subparagraph (1) above; and
(3) The annual report, as described in section
103 of ERISA, and (where applicable) actuarial reports, for the three most
recent plan years for which an annual report or actuarial report has been
prepared; and
(iii) With respect to each Plan that is intended to
qualify under section 401(a) of the Code, the most recent determination,
opinion, notification or advisory letter concerning the plan's qualification
under section 401(a) of the Code, if any, as issued by the Internal Revenue
Service, and any subsequent application for such letter.
(d) With respect to each Plan that is an employee benefit
plan (as defined in section 3(3) of ERISA), the requirements of ERISA applicable
to such Plan have been satisfied, except to the extent that a failure to satisfy
any of such requirements would not have a Material Adverse Effect.
17
(e) With respect to each Plan that is subject to COBRA, the
requirements of COBRA applicable to such Plan have been satisfied, except to the
extent that a failure to satisfy any of such requirements would not have a
Material Adverse Effect.
(f) With respect to each Plan that is subject to the Family
Medical Leave Act of 1993, as amended, the requirements of such Act applicable
to such Plan have been satisfied, except to the extent that a failure to satisfy
any of such requirements would not have a Material Adverse Effect.
(g) Each Plan that is intended to qualify under section
401(a) of the Code meets the requirements for qualification under section 401(a)
of the Code and the regulations thereunder, except to the extent that such
requirements may be satisfied by adopting retroactive amendments under section
401(b) of the Code and the regulations thereunder. Each such Plan has been
administered in accordance with its terms (or, if applicable, such terms as will
be adopted pursuant to a retroactive amendment under section 401(b) of the Code)
and the applicable provisions of ERISA and the Code and the regulations
thereunder, except to the extent that a failure to be so administered would not
have a Material Adverse Effect.
(h) Neither Target nor any ERISA Affiliate has any
accumulated funding deficiency under section 412 of the Code or any termination
or withdrawal liability under Title IV of ERISA, except to the extent that any
such liability would not have a Material Adverse Effect.
(i) All contributions, premiums or other payments due from
the Target to (or under) any Plan have been fully paid or adequately provided
for on the books and financial statements of Target except as would not have a
Material Adverse Effect. All accruals (including, where appropriate,
proportional accruals for partial periods) have been made in accordance with
prior practices.
2.15 EMPLOYEES AND CONSULTANTS.
(a) Target has provided Acquiror with a true and complete
list of all individuals employed by the Company as of the date hereof and the
position and base compensation payable to each such individual. The Target
Disclosure Schedule contains a specific identification of any written or oral
employment agreements, offer letters, consulting agreements or termination or
severance agreements to which Target is a party.
(b) Target is not a party to or subject to a labor union or
a collective bargaining agreement or arrangement.
(c) The consummation of the transactions contemplated herein
will not result in (i) any material amount becoming payable to any employee,
director or independent contractor of Target that would not otherwise have been
payable to such person, (ii) the acceleration of payment or vesting of any
benefit, option or right to which any employee, director or independent
contractor of Target may be entitled, (iii) the forgiveness of any indebtedness
of any employee, director or independent contractor of Target or (iv) any
material cost becoming due or accruing to Target or the Acquiror with respect to
any employee, director or independent contractor of Target.
18
(d) Target is not obligated and upon consummation of the
Merger will not be obligated to make any payment or transfer any property that
would be considered a "parachute payment" under section 280G(b)(2)(A) of the
Code.
(e) To the knowledge of Target, no employee of Target has
been injured in the work place or in the course of his or her employment except
for injuries which are covered by insurance or for which a claim has been made
under workers' compensation or similar laws.
(f) Target has complied in all material respects with the
verification requirements and the record-keeping requirements of the Immigration
Reform and Control Act of 1986 ("IRCA"); to the knowledge of Target, the
information and documents on which Target relied to comply with IRCA are true
and correct; and there have not been any discrimination complaints filed against
Target pursuant to IRCA except such complaints as could not reasonably be
expected to have a Material Adverse Effect, and to the knowledge of Target,
there is no basis for the filing of such a complaint.
(g) Target has not received or been notified of any
complaint by any employee, applicant, union or other party of any discrimination
or other conduct forbidden by law or contract, nor to the knowledge of Target,
is there a basis for any complaint, except such complaints as could not
reasonably be expected to have a Material Adverse Effect.
(h) Target's action in complying with the terms of this
Agreement will not violate any agreements with any of Target's employees.
(i) Target has filed all required reports and information
with respect to its employees that are due prior to the Closing Date and
otherwise has complied in its hiring, employment, promotion, termination and
other labor practices with all applicable federal and state law and regulations,
including without limitation those within the jurisdiction of the United States
Equal Employment Opportunity Commission, United States Department of Labor and
state and local human rights or civil rights agencies, except to the extent that
any such failure to file or comply would not have a Material Adverse Effect on
the Company.
(j) Target is not aware that any of its employees or
contractors is obligated under any agreement, commitments, judgment, decree,
order or otherwise (an "Employee Obligation") that could reasonably be expected
to interfere with the use of his or her best efforts to promote the interests of
Target or that could reasonably be expected to conflict with any of Target's
business as conducted except as would not have a Material Adverse Effect.
Neither the execution nor delivery of this Agreement nor the conduct of Target's
business as conducted will, to Target's knowledge, conflict with or result in a
breach of the terms, conditions or provisions of, or constitute a default under,
any Employee Obligation.
2.16 RELATED-PARTY TRANSACTIONS. No employee, officer, or director
of Target or member of his or her immediate family is indebted to Target, nor is
Target indebted (or committed to make loans or extend or guarantee credit) to
any of them. To Target's knowledge, none of such persons has any direct or
indirect ownership interest in any firm or corporation with which Target is
affiliated or with which Target has a business relationship, or any firm or
19
corporation that competes with Target, except to the extent that employees,
officers, or directors of Target and members of their immediate families own
stock in publicly traded companies that may compete with the Company. No member
of the immediate family of any officer or director of Target is directly or
indirectly interested in any material contract with Target.
2.17 INSURANCE. Target has policies of insurance and bonds of the
type and in amounts customarily carried by persons conducting businesses or
owning assets similar to those of Target. There is no material claim pending
under any of such policies or bonds as to which coverage has been questioned,
denied or disputed by the underwriters of such policies or bonds. All premiums
due and payable under all such policies and bonds have been paid and Target is
otherwise in material compliance with the terms of such policies and bonds.
Target has no knowledge of any threatened termination of, or material premium
increase with respect to, any of such policies.
2.18 COMPLIANCE WITH LAWS. Target has complied with, is not in
violation of, and has not received any notices of violation with respect to, any
federal, state, local or foreign statute, law or regulation with respect to the
conduct of its business, or the ownership or operation of its business, except
for such violations or failures to comply as could not be reasonably expected to
have a Material Adverse Effect on Target.
2.19 BROKERS' AND FINDERS' FEES. Target has not incurred, nor will
it incur, directly or indirectly, any liability for brokerage or finders' fees
or agents' commissions or investment bankers' fees or any similar charges in
connection with this Agreement or any transaction contemplated hereby.
2.20 VOTE REQUIRED. The affirmative vote of the holders of a
majority of each class of the shares of Target Capital Stock outstanding on the
record date set for the Target shareholders meeting or Target shareholder
consent is the only vote of the holders of any of Target's Capital Stock
necessary to approve this Agreement and the transactions contemplated hereby.
2.21 CUSTOMERS AND SUPPLIERS. As of the date hereof, no customer
which individually accounted for more than five percent (5%) of Target's gross
revenues during the twelve (12) month period preceding the date hereof, and no
supplier of Target, has canceled or otherwise terminated, or made any threat to
Target to cancel or otherwise terminate its relationship with Target for any
reason including, without limitation the consummation of the transactions
contemplated hereby, or has at any time on or after June 30, 1998 decreased
materially its services or supplies to Target in the case of any such supplier,
or its usage of the services or products of Target in the case of such customer.
Target has not knowingly breached, so as to provide a benefit to Target that was
not intended by the parties, any agreement with, or engaged in any fraudulent
conduct with respect to, any customer or supplier of Target.
2.22 MATERIAL CONTRACTS. Except for the material contracts
described in the Target Disclosure Schedule (collectively, the "Material
Contracts"), Target is not a party to or bound by any material contract,
including without limitation:
20
(a) any distributor, sales, advertising, agency or
manufacturer's representative contract;
(b) any continuing contract for the purchase of materials,
supplies, equipment or services involving in the case of any such contact more
than $20,000 over the life of the contract;
(c) any contract that expires or may be renewed at the
option of any person other than the Target so as to expire more than one year
after the date of this Agreement;
(d) any trust indenture, mortgage, promissory note, loan
agreement or other contract for the borrowing of money, any currency exchange,
commodities or other hedging arrangement or any leasing transaction of the type
required to be capitalized in accordance with GAAP;
(e) any contract for capital expenditures in excess of
$20,000 in the aggregate;
(f) any contract limiting the freedom of the Target to
engage in any line of business or to compete with any other Person as that term
is defined in the Exchange Act, as defined herein, or any confidentiality,
secrecy or non-disclosure contract (other than confidentiality, secrecy or
non-disclosure agreements entered into with employees of Target);
(g) any contract pursuant to which Target leases any real
property;
(h) any contract pursuant to which the Target is a lessor of
any machinery, equipment, motor vehicles, office furniture, fixtures or other
personal property;
(i) any contract with any person with whom the Target does
not deal at arm's length within the meaning of the Code;
(j) any agreement of guarantee, support, indemnification,
assumption or endorsement of, or any similar commitment with respect to, the
obligations, liabilities (whether accrued, absolute, contingent or otherwise) or
indebtedness of any other Person;
(k) any material license, sublicense or other agreement to
which Target is a party (or by which it or any Target Intellectual Property is
bound or subject) and pursuant to which any person has been or may be assigned,
authorized to use, or given access to any Target Intellectual Property other
than (A) access to or use of standard object code product pursuant to Target's
standard non-exclusive end-user, object code, internal-use software license and
support/maintenance agreements entered into in the ordinary course of business
or (B) access provided in the ordinary course of business under Target's
standard nondisclosure/nonuse agreement;
(l) any material license, sublicense or other agreement
pursuant to which Target has been or may be assigned or authorized to Use, or
has or may have incurred any obligation in connection with, (A) any third party
Intellectual Property that is incorporated in or
21
form a part of any current or proposed product, service or Intellectual Property
offering of Target or (B) any Target Intellectual Property;
(m) any material agreement pursuant to which Target has
deposited or is required to deposit with an escrow holder or any other person or
entity, all or part of the source code (or any algorithm or documentation
contained in or relating to any source code) of any Target Intellectual Property
("Source Materials"); and
(n) any material agreement to indemnify, hold harmless or
defend any other person with respect to any assertion of Intellectual Property
infringement, misappropriation or violation or warranting the lack thereof,
other than indemnification provisions contained in Target's standard purchase
orders/purchase agreements/product licenses arising in the ordinary course of
business.
2.23 NO BREACH OF MATERIAL CONTRACTS. The Target has performed in
all material respects the obligations required to be performed by it and is
entitled in all material respects to the benefits under, and is not alleged to
be in default in respect of any Material Contract. Each of the Material
Contracts is in full force and effect, unamended, and there exists no default or
event of default or event, occurrence, condition or act, with respect to Target
or to Target's knowledge with respect to the other contracting party, or
otherwise that, with or without the giving of notice, the lapse of time or the
happening of any other event or conditions, could reasonably be expected to
(A) become a default or event of default under any Material Contract, which
default or event of default could reasonably be expected to have a Material
Adverse Effect on Target or (B) result in the loss or expiration of any material
right or option by Target (or the gain thereof by any third party) under any
Material Contract or (C) the release, disclosure or delivery to any third party
of any part of the Source Materials (as defined in Section 2.22(m)). True,
correct and complete copies of all Material Contracts have been delivered to the
Acquiror.
2.24 THIRD-PARTY CONSENTS. The Target Disclosure Schedule lists all
contracts that require a novation or consent to assignment, as the case may be,
so that Acquiror shall be made a party in place of Target or as assignee (the
"Contracts Requiring Novation or Consent to Assignment"). Such list is complete
and accurate.
2.25 MINUTE BOOKS. The minute books of Target made available to
Acquiror contain a complete and accurate summary of all meetings of directors
and shareholders or actions by written consent since the time of incorporation
of Target through the date of this Agreement, and reflect all transactions
referred to in such minutes accurately in all material respects.
2.26 COMPLETE COPIES OF MATERIALS. Target has delivered or made
available true and complete copies of each document which has been requested by
Acquiror or its counsel in connection with their legal and accounting review of
Target.
2.27 REPRESENTATIONS COMPLETE. None of the representations or
warranties made by Target herein or in any schedule hereto, including the Target
Disclosure Schedule, or certificate furnished by Target pursuant to this
Agreement, when all such documents are read together in their entirety, contains
or will contain at the Effective Time any untrue statement of a material fact,
or omits or will omit at the Effective Time to state any material fact necessary
in
22
order to make the statements contained herein or therein, in the light of the
circumstances under which made, not misleading.
2.28 INFORMATION INCLUDED IN REGISTRATION STATEMENT. The written
information supplied by Target expressly for the purpose of inclusion in the
Form S-3 registration statement (the "Registration Statement") shall not, at the
time the Registration Statement (including any amendments or supplements
thereto) is declared effective by the SEC, contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. Notwithstanding the foregoing, Target makes no representation,
warranty or covenant with respect to any information supplied by Acquiror or
Merger Sub which is contained in the Registration Statement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF ACQUIROR AND MERGER SUB
Acquiror and Merger Sub represent and warrant to Target that the
statements contained in this Article III are true and correct, except as set
forth in the disclosure schedule delivered by Acquiror to Target prior to the
execution and delivery of this Agreement (the "Acquiror Disclosure Schedule").
As used in this Agreement, "Business Condition" with respect to Acquiror shall
refer to Acquiror and all of its subsidiaries taken as a whole and shall mean
the financial condition, business (including products currently under
development), results of operations and assets of Acquiror and all of its
subsidiaries taken as a whole. Any reference in this Article III to an
agreement being "enforceable" shall be deemed to be qualified to the extent such
enforceability is subject to (i) laws of general application relating to
bankruptcy, insolvency, moratorium and the relief of debtors, and (ii) the
availability of specific performance, injunctive relief and other equitable
remedies.
3.1 ORGANIZATION, STANDING AND POWER. Each of Acquiror and Merger
Sub is a corporation duly organized, validly existing and in good standing under
the laws of its jurisdiction of organization. Each of Acquiror and Merger Sub
has the corporate power to own its properties and to carry on its business as
now being conducted and is duly qualified to do business and is in good standing
in each jurisdiction in which the failure to be so qualified and in good
standing would have a Material Adverse Effect on Acquiror's Business Condition.
3.2 AUTHORITY.
(a) Each of Acquiror and Merger Sub has all requisite
corporate power and authority to enter into this Agreement and the Transaction
Documents to which they are a party and to consummate the transactions
contemplated hereby and thereby. The execution and delivery of this Agreement
and the Transaction Documents and the consummation of the transactions
contemplated hereby and thereby have been duly authorized by all necessary
corporate action on the part of each of Acquiror and Merger Sub. Each of this
Agreement and the Transaction Documents has been duly executed and delivered by
each of Acquiror and Merger Sub and constitutes the valid and binding obligation
of each of Acquiror and Merger Sub enforceable against Acquiror and Merger Sub
in accordance with its terms.
23
(b) Subject to the satisfaction of the conditions set forth
in Article VI hereto, the execution and delivery of this Agreement and the
Transaction Documents do not, and the consummation of the transactions
contemplated hereby and thereby will not, conflict with, or result in any
violation of, or default under (with or without notice or lapse of time, or
both), or give rise to a right of termination, cancellation or acceleration of
any obligation or loss of a benefit under (i) any provision of the Certificate
of Incorporation or Bylaws of Acquiror, as amended, or the Articles of
Incorporation or Bylaws of Merger Sub, as amended, or (ii) any material
mortgage, indenture, lease, contract or other agreement or instrument, permit,
concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to Acquiror or Merger Sub or their
properties or assets.
(c) No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity, is required
by or with respect to Acquiror or Merger Sub in connection with the execution
and delivery of this Agreement or the Transaction Documents or the consummation
by Acquiror or Merger Sub of the transactions contemplated hereby or thereby,
except for (i) the filing of the Agreement of Merger, together with the required
officers' certificates, as provided in Section 1.1, (ii) the filing of a
registration statement on Form S-3 or other applicable form, (iii) the filing of
a Form 8-K with the SEC and National Association of Securities Dealers ("NASD")
within fifteen (15) days after the Closing Date, (iv) any filings as may be
required under applicable state securities laws and the securities laws of any
foreign country, (v) such filings as may be required under HSR, (vi) the filing
with the Nasdaq Stock Market of a Notification Form for Listing of Additional
Shares with respect to the shares of Acquiror Common Stock issuable upon
conversion of the Target Capital Stock in the Merger and upon exercise of the
options under the Target Stock Option Plan assumed by Acquiror, and (vii) such
other consents, authorizations, filings, approvals and registrations which, if
not obtained or made, would not have a Material Adverse Effect on Acquiror and
would not prevent, materially alter or delay any of the transactions
contemplated by this Agreement or the Transaction Documents.
3.3 SEC DOCUMENTS; FINANCIAL STATEMENTS. Acquiror has made
available to Target a true and complete copy of each statement, report,
registration statement (with the prospectus in the form filed pursuant to Rule
424(b) of the Securities Act), definitive proxy statement, and other filing
filed with the SEC by Acquiror since September 30, 1996, and, prior to the
Effective Time, Acquiror will have furnished Target with true and complete
copies of any additional documents filed with the SEC by Acquiror prior to the
Effective Time (collectively, the "Acquiror SEC Documents"). In addition,
Acquiror has made available to Target all exhibits to the Acquiror SEC Documents
filed prior to the date hereof, and will promptly make available to Target all
exhibits to any additional Acquiror SEC Documents filed prior to the Effective
Time. All documents required to be filed as exhibits to the Acquiror SEC
Documents have been so filed, and all material contracts so filed as exhibits
are in full force and effect, except those which have expired in accordance with
their terms, and neither Acquiror nor any of its subsidiaries is in default
thereunder. As of their respective filing dates, the Acquiror SEC Documents
complied in all material respects with the requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and the Securities Act,
and none of the Acquiror SEC Documents contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements made therein, in light of the circumstances
in which they were made, not misleading, except to the extent corrected by a
24
subsequently filed Acquiror SEC Document. The financial statements of Acquiror,
including the notes thereto, included in the Acquiror SEC Documents (the
"Acquiror Financial Statements") were complete and correct in all material
respects as of their respective dates, complied as to form in all material
respects with applicable accounting requirements and with the published rules
and regulations of the SEC with respect thereto as of their respective dates,
and have been prepared in accordance with generally accepted accounting
principles applied on a basis consistent throughout the periods indicated and
consistent with each other (except as may be indicated in the notes thereto or,
in the case of unaudited statements included in Quarterly Reports on Form 10-Qs,
as permitted by Form 10-Q of the SEC). The Acquiror Financial Statements fairly
present the consolidated financial condition and operating results of Acquiror
and its subsidiaries at the dates and during the periods indicated therein
(subject, in the case of unaudited statements, to normal, recurring year-end
adjustments).
3.4 ABSENCE OF CERTAIN CHANGES. Since June 30, 1998 (the "Acquiror
Balance Sheet Date"), Acquiror has conducted its business in the ordinary course
consistent with past practice and there has not occurred: (i) any change, event
or condition (whether or not covered by insurance) that has resulted in, or
might reasonably be expected to result in, a Material Adverse Effect on
Acquiror; (ii) any acquisition, sale or transfer of any material asset of
Acquiror; (iii) any change in accounting methods or practices (including any
change in depreciation or amortization policies or rates) by Acquiror or any
revaluation by Acquiror of any of its assets; (iv) any declaration, setting
aside, or payment of a dividend or other distribution with respect to the shares
of Acquiror, or any direct or indirect redemption, purchase or other acquisition
by Acquiror of any of such shares of capital stock; (v) any material contract
entered into by Acquiror, other than in the ordinary course of business and as
provided to Target, or any material amendment or termination of, or default
under, any material contract to which Acquiror is a party or by which it is
bound except in the ordinary course of business; (vi) any action or omission of
Acquiror which could prevent Acquiror from using a Form S-3 registration
statement, or to Acquiror's knowledge, which would delay effectiveness thereof;
or (vii) any negotiation or agreement by Acquiror to do any of the things
described in the preceding clauses (i) through (v) (other than negotiations with
Target and its representatives regarding the transactions contemplated by this
Agreement).
3.5 LITIGATION. Except as set forth in the Acquiror SEC Documents,
there is no private or governmental action, suit, proceeding, claim, arbitration
or investigation pending before any agency, court or tribunal, foreign or
domestic, or, to the knowledge of Acquiror or any of its subsidiaries,
threatened against Acquiror or any of its subsidiaries or any of their
respective properties or any of their respective officers or directors (in their
capacities as such) that, individually or in the aggregate, could reasonably be
expected to have a Material Adverse Effect on Acquiror. There is no judgment,
decree or order against Acquiror or any of its subsidiaries or, to the knowledge
of Acquiror or any of its subsidiaries, any of their respective directors or
officers (in their capacities as such) that could prevent, enjoin, or materially
alter or delay any of the transactions contemplated by this Agreement, or that
could reasonably be expected to have a Material Adverse Effect on Acquiror.
3.6 INFORMATION INCLUDED IN REGISTRATION STATEMENT. The written
information supplied by Acquiror and Merger Sub expressly for the purpose of
inclusion in the Registration Statement shall not, at the time the Registration
Statement (including any amendments or
25
supplements thereto) is declared effective by the SEC, contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. Notwithstanding the foregoing, Acquiror and
Merger Sub make no representation, warranty or covenant with respect to any
information supplied by Target which is contained in the Registration Statement.
3.7 REPRESENTATIONS COMPLETE. None of the representations,
warranties or statements made by Acquiror herein or in any Schedule hereto,
including the Acquiror Disclosure Schedule, or certificate furnished by Acquiror
pursuant to this Agreement, or the Acquiror SEC Documents, when all such
documents are read together in their entirety, contains or will contain at the
Effective Time any untrue statement of a material fact, or omits or will omit at
the Effective Time to state any material fact necessary in order to make the
statements contained herein or therein, in the light of the circumstances under
which made, not misleading.
ARTICLE IV
CONDUCT PRIOR TO THE EFFECTIVE TIME
4.1 CONDUCT OF BUSINESS OF TARGET AND ACQUIROR. During the period
from the date of this Agreement and continuing until the earlier of the
termination of this Agreement or the Effective Time, Target agrees (except to
the extent expressly contemplated by this Agreement or as consented to in
writing by the other), to carry on its and its subsidiaries' business in the
usual, regular and ordinary course in substantially the same manner as
heretofore conducted. Target further agrees to (i) pay and to cause its
subsidiaries to pay debts and Taxes when due subject to good faith disputes over
such debts or Taxes, (ii) subject to Acquiror's consent to the filing of
material Tax Returns if applicable, to pay or perform other obligations when
due, and (iii) to use all reasonable efforts consistent with past practice and
policies to preserve intact its and its subsidiaries' present business
organizations, keep available the services of its and its subsidiaries' present
officers and key employees and preserve its and its subsidiaries' relationships
with customers, suppliers, distributors, licensors, licensees, and others having
business dealings with it or its subsidiaries, to the end that its and its
subsidiaries' goodwill and ongoing businesses shall be unimpaired at the
Effective Time. Target agrees to promptly notify Acquiror of any event or
occurrence not in the ordinary course of its or its subsidiaries' business, and
of any event which could have a Material Adverse Effect on Target. Without
limiting the foregoing, except as expressly contemplated by this Agreement,
neither Target nor Acquiror shall do, cause or permit any of the following, or
allow, cause or permit any of its subsidiaries to do, cause or permit any of the
following, without the prior written consent of the other:
(a) CHARTER DOCUMENTS. Cause or permit any amendments to
its Certificate or Articles of Incorporation or Bylaws other than for purposes
of effecting the Merger;
(b) DIVIDENDS; CHANGES IN CAPITAL STOCK. Declare or pay any
dividends on or make any other distributions (whether in cash, stock or
property) in respect of any of its capital stock, or split, combine or
reclassify any of its capital stock or issue or authorize the issuance of any
other securities in respect of, in lieu of or in substitution for shares
26
of its capital stock, or repurchase or otherwise acquire, directly or
indirectly, any shares of its capital stock except from former employees,
directors and consultants in accordance with agreements providing for the
repurchase of shares in connection with any termination of service to it or its
subsidiaries; or
(c) OTHER. Take, or agree in writing or otherwise to take,
any of the actions described in Sections 4.1(a) and (b) above, or any action
which would make any of its representations or warranties contained in this
Agreement untrue or incorrect or prevent it from performing or cause it not to
perform its covenants hereunder.
4.2 CONDUCT OF BUSINESS OF TARGET During the period from the date
of this Agreement and continuing until the earlier of the termination of this
Agreement or the Effective Time, except as expressly contemplated by this
Agreement, Target shall not do, cause or permit any of the following, or allow,
cause or permit any of its subsidiaries to do, cause or permit any of the
following, without the prior written consent of Acquiror:
(a) MATERIAL CONTRACTS. Enter into any material contract,
agreement, license or commitment, or violate, amend or otherwise modify or waive
any of the terms of any of its material contracts, agreements or licenses other
than in the ordinary course of business consistent with past practice;
(b) STOCK OPTION PLANS, ETC. Accelerate, amend or change
the period of exercisability or vesting of options or other rights granted under
its stock plans or authorize cash payments in exchange for any options or other
rights granted under any of such plans; or
(c) ISSUANCE OF SECURITIES. Issue, deliver or sell or
authorize or propose the issuance, delivery or sale of, or purchase or propose
the purchase of, any shares of its capital stock or securities convertible into,
or subscriptions, rights, warrants or options to acquire, or other agreements or
commitments of any character obligating it to issue any such shares or other
convertible securities, other than the issuance of shares of its Common Stock
pursuant to the exercise of stock options or other rights therefor outstanding
as of the date of this Agreement or the conversion of Target Preferred Stock;
(d) INTELLECTUAL PROPERTY. Transfer to or license any
person or entity or otherwise extend, amend or modify any rights to its
Intellectual Property other than the grant of non-exclusive licenses in the
ordinary course of business consistent with past practice;
(e) EXCLUSIVE RIGHTS. Enter into or amend any agreements
pursuant to which any other party is granted exclusive marketing, manufacturing
or other exclusive rights of any type or scope with respect to any of its
products or technology;
(f) DISPOSITIONS. Sell, lease, license or otherwise dispose
of or encumber any of its properties or assets which are material, individually
or in the aggregate, to its and its subsidiaries' business, taken as a whole;
(g) INDEBTEDNESS. Incur or commit to incur any indebtedness
for borrowed money or guarantee any such indebtedness or issue or sell any debt
securities or guarantee any debt securities of others;
27
(h) LEASES. Enter into any operating lease requiring
payments in excess of $25,000;
(i) PAYMENT OF OBLIGATIONS. Pay, discharge or satisfy in an
amount in excess of $25,000 in any one case or $50,000 in the aggregate, any
claim, liability or obligation (absolute, accrued, asserted or unasserted,
contingent or otherwise) arising other than in the ordinary course of business,
other than the payment, discharge or satisfaction of liabilities reflected or
reserved against in the Target Financial Statements;
(j) CAPITAL EXPENDITURES. Incur or commit to incur any
capital expenditures in excess of $50,000 in the aggregate;
(k) INSURANCE. Materially reduce the amount of any material
insurance coverage provided by existing insurance policies;
(l) TERMINATION OR WAIVER. Terminate or waive any right of
substantial value, other than in the ordinary course of business;
(m) EMPLOYEE BENEFITS; SEVERANCE. Take any of the following
actions: (i) increase or agree to increase the compensation payable or to
become payable to its officers or employees, except for increases in salary or
wages of non-officer employees in the ordinary course of business and in
accordance with past practices, (ii) grant any additional severance or
termination pay to, or enter into any employment or severance agreements with,
any officer or employee, (iii) enter into any collective bargaining agreement,
or (iv) establish, adopt, enter into or amend in any material respect any bonus,
profit sharing, thrift, compensation, stock option, restricted stock, pension,
retirement, deferred compensation, employment, termination, severance or other
plan, trust, fund, policy or arrangement for the benefit of any directors,
officers or employees;
(n) LAWSUITS. Commence a lawsuit or arbitration proceeding
other than (i) for the routine collection of bills or (ii) for a breach of this
Agreement;
(o) ACQUISITIONS. Acquire or agree to acquire by merging or
consolidating with, or by purchasing a substantial portion of the assets of, or
by any other manner, any business or any corporation, partnership, association
or other business organization or division thereof, or otherwise acquire or
agree to acquire any assets which are material, individually or in the
aggregate, to its and its subsidiaries' business, taken as a whole;
(p) TAXES. Make any material Tax election other than in the
ordinary course of business and consistent with past practice, change any
material Tax election, adopt any Tax accounting method other than in the
ordinary course of business and consistent with past practice, change any Tax
accounting method, file any Tax return (other than any estimated tax returns,
immaterial information returns, payroll tax returns or sales tax returns) or any
amendment to a Tax return, enter into any closing agreement, settle any Tax
claim or assessment or consent to any Tax claim or assessment provided that
Acquiror shall not unreasonably withhold or delay approval of any of the
foregoing actions;
28
(q) REVALUATION. Revalue any of its assets, including
without limitation writing down the value of inventory or writing off notes or
accounts receivable other than in the ordinary course of business; or
(r) OTHER. Take or agree in writing or otherwise to take,
any of the actions described in Sections 4.2(a) through (q) above, or any action
which would make any of its representations or warranties contained in this
Agreement untrue or incorrect or prevent it from performing or cause it not to
perform its covenants hereunder.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 NO SOLICITATION.
(a) From and after the date of this Agreement until the
Effective Time or until termination of this Agreement in accordance with its
terms, Target shall not, directly or indirectly, through any officer, director,
employee, representative or agent, (i) solicit, initiate, or encourage any
inquiries or proposals that constitute, or could reasonably be expected to lead
to, a proposal or offer for a merger, consolidation, business combination, sale
of all or substantially all of the assets, sale of shares of capital stock
(including without limitation by way of a tender offer) or similar transactions
involving Target, other than the transactions contemplated by this Agreement
(any of the foregoing inquiries or proposals being referred to in this Agreement
as a "Takeover Proposal"), (ii) engage in negotiations or discussions
concerning, or provide any non-public information to any person or entity
relating to, any Takeover Proposal, or (iii) agree to approve or recommend any
Takeover Proposal.
(b) Target shall notify Acquiror immediately (and no later
than 24 hours) after receipt by Target (or its advisors or agents) of any
Takeover Proposal or any request for information in connection with a Takeover
Proposal or for access to the properties, books or records of Target by any
person or entity that informs Target that it is considering making, or has made,
a Takeover Proposal. Such notice shall be made orally and in writing and shall
indicate in reasonable detail the identity of the offeror and the terms and
conditions of such proposal, inquiry or contact.
5.2 PREPARATION OF INFORMATION STATEMENT. As soon as practicable
after the execution of this Agreement, Target shall prepare, with the
cooperation of Acquiror, an Information Statement for the shareholders of Target
to approve this Agreement, the Agreement of Merger and the transactions
contemplated hereby and thereby. The Information Statement shall constitute a
disclosure document for the offer and issuance of the shares of Acquiror Common
Stock to be received by the holders of Target Capital Stock in the Merger.
Acquiror and Target shall each use its best efforts to cause the Information
Statement to comply in all material respects with applicable federal and state
securities laws requirements. Each of Acquiror and Target agrees to provide
promptly to the other such information concerning its business and financial
statements and affairs as, in the reasonable judgment of the providing party or
its counsel, may be required or appropriate for inclusion in the Information
Statement, or in any amendments or supplements thereto, and to cause its counsel
and auditors to cooperate
29
with the other's counsel and auditors in the preparation of the Information
Statement. Target will promptly advise Acquiror, and Acquiror will promptly
advise Target, in writing if at any time prior to the Effective Time either
Target or Acquiror shall obtain knowledge of any facts that might make it
necessary or appropriate to amend or supplement the Information Statement in
order to make the statements contained or incorporated by reference therein not
misleading or to comply with applicable law. The Information Statement shall
contain the recommendation of the Board of Directors of Target that the Target
shareholders approve the Merger and this Agreement and the conclusion of the
Board of Directors that the terms and conditions of the Merger are fair and
reasonable to the shareholders of Target. Anything to the contrary contained
herein notwithstanding, Target shall not include in the Information Statement
any information with respect to Acquiror or its affiliates or associates, the
form and content of which information shall not have been approved by Acquiror
prior to such inclusion.
5.3 SHAREHOLDERS MEETING OR CONSENT SOLICITATION. Target shall
promptly after the date hereof take all actions necessary to either (i) call a
meeting of its shareholders to be held for the purpose of voting upon this
Agreement and the Merger or (ii) commence a consent solicitation to obtain such
approvals on or prior to November 15, 1998 or as soon thereafter as is
practicable.
5.4 ACCESS TO INFORMATION.
(a) Target shall afford Acquiror and its accountants,
counsel and other representatives, reasonable access during normal business
hours during the period prior to the Effective Time to (i) all of Target's and
its subsidiaries' properties, books, contracts, commitments and records, and
(ii) all other information concerning the business, properties and personnel of
Target and its subsidiaries as Acquiror may reasonably request. Target agrees
to provide to Acquiror and its accountants, counsel and other representatives
copies of internal financial statements promptly upon request.
(b) Acquiror shall afford Target reasonable access during
normal business hours during the period prior to the Effective Time to
Acquiror's management for due diligence purposes.
(c) Subject to compliance with applicable law, from the date
hereof until the Effective Time, each of Acquiror and Target shall confer on a
regular and frequent basis with one or more representatives of the other party
to report operational matters of materiality and the general status of ongoing
operations.
(d) No information or knowledge obtained in any
investigation pursuant to this Section 5.4 shall affect or be deemed to modify
any representation or warranty contained herein or the conditions to the
obligations of the parties to consummate the Merger.
5.5 CONFIDENTIALITY. The parties acknowledge that Acquiror and
Target have previously executed a non-disclosure agreement dated August 17, 1998
(the "Confidentiality Agreement"), which Confidentiality Agreement shall
continue in full force and effect in accordance with its terms.
30
5.6 PUBLIC DISCLOSURE. Unless otherwise permitted by this
Agreement, Acquiror and Target shall consult with each other before issuing any
press release or otherwise making any public statement or making any other
public (or non-confidential) disclosure (whether or not in response to an
inquiry) regarding the terms of this Agreement and the transactions contemplated
hereby, and neither shall issue any such press release or make any such
statement or disclosure without the prior approval of the other (which approval
shall not be unreasonably withheld), except as may be required by law and except
as may be required by Acquiror to comply with the rules and regulations of the
SEC or any obligations pursuant to any listing agreement with any national
securities exchange or with the NASD.
5.7 CONSENTS; COOPERATION. Each of Acquiror and Target shall
promptly apply for or otherwise seek, and use its best efforts to obtain, all
consents and approvals required to be obtained by it for the consummation of the
Merger and shall use its best efforts to obtain all necessary consents, waivers
and approvals under any of its material contracts in connection with the Merger
for the assignment thereof or otherwise.
5.8 UPDATE DISCLOSURE; BREACHES. From and after the date of this
Agreement until the Effective Time, each party hereto shall promptly notify the
other party, by written update to its Disclosure Schedule, of (i) the occurrence
or non-occurrence of any event which would be likely to cause any condition to
the obligations of any party to effect the Merger and the other transactions
contemplated by this Agreement not to be satisfied, or (ii) the failure of
Target or Acquiror, as the case may be, to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it pursuant to this
Agreement which would be likely to result in any condition to the obligations of
any party to effect the Merger and the other transactions contemplated by this
Agreement not to be satisfied. The delivery of any notice pursuant to this
Section 5.8 shall not cure any breach of any representation or warranty
requiring disclosure of such matter prior to the date of this Agreement or
otherwise limit or affect the remedies available hereunder to the party
receiving such notice.
5.9 LEGAL REQUIREMENTS. Each of Acquiror and Target will, and will
cause their respective subsidiaries to, take all reasonable actions necessary to
comply promptly with all legal requirements which may be imposed on them with
respect to the consummation of the transactions contemplated by this Agreement
and will promptly cooperate with and furnish information to any party hereto
necessary in connection with any such requirements imposed upon such other party
in connection with the consummation of the transactions contemplated by this
Agreement and will take all reasonable actions necessary to obtain (and will
cooperate with the other parties hereto in obtaining) any consent, approval,
order or authorization of, or any registration, declaration or filing with, any
Governmental Entity or other person, required to be obtained or made in
connection with the taking of any action contemplated by this Agreement.
5.10 TAX-FREE REORGANIZATION. Neither Target, Acquiror nor Merger
Sub will, either before or after consummation of the Merger, take any action
which, to the knowledge of such party, would cause the Merger to fail to
constitute a "reorganization" within the meaning of Code Section 368.
5.11 BLUE SKY LAWS. Acquiror shall take such steps as may be
necessary to comply with the securities and blue sky laws of all jurisdictions
which are applicable to the
31
issuance of the Acquiror Common Stock in connection with the Merger. Target
shall use its best efforts to assist Acquiror as may be necessary to comply with
the securities and blue sky laws of all jurisdictions which are applicable in
connection with the issuance of Acquiror Common Stock in connection with the
Merger.
5.12 STOCK OPTIONS.
(a) At the Effective Time, the Target Stock Option Plans and
each outstanding option (other than Vested Options) to purchase shares of Target
Common Stock under the Target Stock Option Plans that is unexercised as of the
Effective Time shall be assumed by Acquiror. Vested Options under the Target
Stock Option Plans shall be treated in accordance with Section 1.6 of this
Agreement. Target has delivered to Acquiror a schedule (the "Option Schedule")
which sets forth a true and complete list as of the date hereof of all holders
of outstanding options under the Target Stock Option Plans including the number
of shares of Target Capital Stock subject to each such option, the exercise or
vesting schedule, the exercise price per share and the term of each such option.
On the Closing Date, Target shall deliver to Acquiror an updated Option Schedule
current as of such date. Each such option so assumed by Acquiror under this
Agreement shall continue to have, and be subject to, the same terms and
conditions set forth in the applicable Target Stock Option Plan immediately
prior to the Effective Time, except that (i) such option shall be exercisable
for that number of whole shares of Acquiror Common Stock equal to the product of
the number of shares of Target Common Stock that were issuable upon exercise of
such option immediately prior to the Effective Time multiplied by a fraction,
the numerator of which is the Per Share Consideration and the denominator of
which is the Closing Price and rounded down to the nearest whole number of
shares of Acquiror Common Stock, and (ii) the per share exercise price for the
shares of Acquiror Common Stock issuable upon exercise of such assumed option
shall be equal to the quotient determined by dividing the exercise price per
share of Target Common Stock at which such option was exercisable immediately
prior to the Effective Time by a fraction, the numerator of which is the Per
Share Consideration and the denominator of which is the Closing Price, rounded
up to the nearest whole cent. It is the intention of the parties that the
options so assumed by Acquiror qualify following the Effective Time as incentive
stock options as defined in Section 422 of the Code to the extent such options
qualified as incentive stock options prior to the Effective Time. Within twenty
(20) business days after the Effective Time, Acquiror will issue to each person
who, immediately prior to the Effective Time was a holder of an outstanding
option under the Target Stock Option Plans a document in form and substance
satisfactory to Target evidencing the foregoing assumption of such option by
Acquiror.
(b) Acquiror shall comply with the terms of the Target Stock
Option Plans and ensure, to the extent required by, and subject to the
provisions of, such Target Stock Option Plans that Target Stock Options which
qualified as incentive stock options prior the Effective Time continue to
qualify as incentive stock options after the Effective Time.
(c) Acquiror shall take all corporate action necessary to
reserve and make available for issuance a sufficient number of shares of
Acquiror Common Stock for delivery under Target Stock Options assumed in
accordance with this Section 5.12. At or prior to the Effective Time, Acquiror
shall file a registration statement on Form S-8 (or any successor or other
appropriate forms) with respect to the shares of Acquiror Common Stock subject
to such
32
options and shall use its best efforts to maintain the effectiveness of such
registration statement or registration statements (and maintain the current
status of the prospectus or prospectuses contained therein) for so long as such
options remain outstanding.
5.13 FORM S-3 REGISTRATION STATEMENT. As soon as practicable but no
later than five (5) business days after the Effective Time, Acquiror shall file
with the SEC a registration statement on Form S-3 to register the Acquiror
Common Stock issued pursuant to the Merger for resale in Accordance with the
provisions of the Registration Rights Agreement.
5.14 LISTING OF SHARES. As soon as practicable but no later than
ten (10) days after the Effective Time, Acquiror will amend its listing
application with the Nasdaq Stock Market to include the Acquiror Common Stock
issued under this Agreement.
5.15 ADDITIONAL AGREEMENTS; BEST EFFORTS. Each of the parties
agrees to use their best efforts to take, or cause to be taken, all action and
to do, or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement, including cooperating fully with
the other party, including by provision of information. In case at any time
after the Effective Time any further action is necessary or desirable to carry
out the purposes of this Agreement or to vest the Surviving Corporation with
full title to all properties, assets, rights, approvals, immunities and
franchises of either of the constituent corporations, the proper officers and
directors of each party to this Agreement shall take all such necessary action.
5.16 EMPLOYEE BENEFITS. Acquiror shall take such reasonable
actions, to the extent permitted by Acquiror's benefits program, as are
necessary to allow eligible employees of Target to participate in the benefit
programs of Acquiror, or alternative benefits programs in the aggregate
substantially comparable to those applicable to employees of Acquiror on similar
terms, as soon as practicable after the Effective Time of the Merger. For
purposes of satisfying the terms and conditions of such programs, to the extent
permitted by Acquiror's benefit programs, Acquiror shall use reasonable efforts
to give full credit for eligibility, or vesting for each participant's period of
service with Target.
5.17 VOTING AGREEMENT. Target and the Shareholders shall enter into
the Voting Agreement concurrent with the execution of this Agreement.
ARTICLE VI
CONDITIONS TO THE MERGER
6.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY TO EFFECT THE MERGER.
The respective obligations of each party to this Agreement to consummate and
effect this Agreement and the transactions contemplated hereby shall be subject
to the satisfaction at or prior to the Effective Time of each of the following
conditions, any of which may be waived, in writing, by agreement of all the
parties hereto:
(a) SHAREHOLDER APPROVAL. This Agreement and the Merger
shall have been approved and adopted by the holders of a majority of the shares
of Target Common Stock
33
and the holders of a majority of the shares of Target Preferred Stock
outstanding as of the record date set for the Target shareholders meeting or
solicitation of shareholder consents, and any agreements or arrangements that
may result in the payment of any amount that would not be deductible by reason
of Section 280G of the Code shall have been approved by such number of
shareholders of Target as is required by the terms of Section 280G(b)(5)(B).
(b) NO INJUNCTIONS OR RESTRAINTS; ILLEGALITY. No temporary
restraining order, preliminary or permanent injunction or other order issued by
any court of competent jurisdiction or other legal or regulatory restraint or
prohibition preventing the consummation of the Merger shall be in effect, nor
shall any proceeding brought by an administrative agency or commission or other
governmental authority or instrumentality, domestic or foreign, seeking any of
the foregoing be pending; nor shall there be any action taken, or any statute,
rule, regulation or order enacted, entered, enforced or deemed applicable to the
Merger, which makes the consummation of the Merger illegal. In the event an
injunction or other order shall have been issued, each party agrees to use its
reasonable diligent efforts to have such injunction or other order lifted.
(c) GOVERNMENTAL APPROVAL. Acquiror and Target and their
respective subsidiaries shall have timely obtained from each Governmental Entity
all approvals, waivers and consents, if any, necessary for consummation of or in
connection with the Merger and the several transactions contemplated hereby,
including such approvals, waivers and consents as may be required under the
Securities Act and under state Blue Sky laws.
(d) TAX OPINION. Each of Target and Acquiror shall have
received a written opinion from their respective counsel to the effect that the
Merger will constitute a reorganization within the meaning of Section 368 of the
Code, which opinions shall be substantially identical in substance. The parties
to this Agreement agree to make such reasonable representations as requested by
such counsel for the purpose of rendering such opinions.
(e) ESCROW AGREEMENT. Acquiror, Target, Escrow Agent and
the Shareholders' Agent (as defined in the Escrow Agreement) shall have entered
into the Escrow Agreement contemplated by Article VIII of this Agreement in the
form attached hereto as EXHIBIT C (the "Escrow Agreement").
(f) REGISTRATION RIGHTS AGREEMENT. Acquiror and the holders
of a majority of the Target Capital Stock shall have entered into a Registration
Rights Agreement in the form attached hereto as EXHIBIT B.
6.2 ADDITIONAL CONDITIONS TO OBLIGATIONS OF TARGET. The
obligations of Target to consummate and effect this Agreement and the
transactions contemplated hereby shall be subject to the satisfaction at or
prior to the Effective Time of each of the following conditions, any of which
may be waived, in writing, by Target:
(a) REPRESENTATIONS, WARRANTIES AND COVENANTS. Except as
disclosed in the Acquiror Disclosure Schedule, (i) the representations and
warranties of Acquiror in this Agreement shall be true and correct in all
material respects (except for such representations and
34
warranties that are qualified by their terms by a reference to materiality which
representations and warranties as so qualified shall be true in all respects) on
and as of the Effective Time as though such representations and warranties were
made on and as of such time except, in all such cases, where such breaches of
such representations and warranties, individually or in the aggregate, have not
substantially impaired nor reasonably would be expected to substantially impair,
Acquiror's ability after the Closing to continue to develop, produce, sell and
distribute the products and services that are material to Acquiror's business in
a manner that has resulted in or would reasonably be expected to result in a
Material Adverse Effect on Acquiror, and (ii) Acquiror shall have performed and
complied in all material respects with all covenants, obligations and conditions
of this Agreement required to be performed and complied with by them as of the
Effective Time.
(b) CERTIFICATE OF ACQUIROR. Target shall have been
provided with a certificate, dated the Effective Date, executed on behalf of
Acquiror by its President and its Chief Financial Officer to the effect that, as
of the Effective Time, the conditions provided for in subsection (a) above has
been satisfied.
(c) LEGAL OPINION. Target shall have received a legal
opinion from Xxxxxxxxx Xxxxxxx Xxxxxx Xxxxxxxxxx Xxxxxxxx & Xxxxxxxxx, LLP,
Acquiror's legal counsel, substantially in the form attached as EXHIBIT D
hereto.
(d) EMPLOYMENT AGREEMENTS. Acquiror shall have entered into
Employment Agreements with Xxxxxxx Xxxxxx, Xxxxx Xxxxxxxx, Xxxxx Xxxxxxxx, Xxxx
Ramachandrun, Xxxxxxx Xxxxxxxxx and Xxxxxxx Xxxxxxxxxx, in the forms attached
hereto as EXHIBIT E.
6.3 ADDITIONAL CONDITIONS TO THE OBLIGATIONS OF ACQUIROR. The
obligations of Acquiror to consummate and effect this Agreement and the
transactions contemplated hereby shall be subject to the satisfaction at or
prior to the Effective Time of each of the following conditions, any of which
may be waived, in writing, by Acquiror:
(a) REPRESENTATIONS, WARRANTIES AND COVENANTS. Except as
disclosed in the Target Disclosure Schedule (i) the representations and
warranties of Target in this Agreement shall be true and correct in all material
respects (except for such representations and warranties that are qualified by
their terms by a reference to materiality which representations and warranties
as so qualified shall be true in all respects) on and as of the Effective Time
as though such representations and warranties were made on and as of such time
except, in all such cases, where such breaches of such representations and
warranties, individually or in the aggregate, have not substantially impaired
nor reasonably would be expected to substantially impair, Target's ability after
the Closing as an independent operating subsidiary to continue to develop,
produce, sell and distribute the products and services that are material to
Target's business in a manner that has resulted in or would reasonably be
expected to result in a Material Adverse Effect on Target, and (ii) Target shall
have performed and complied in all material respects with all covenants,
obligations and conditions of this Agreement required to be performed and
complied with by it as of the Effective Time.
35
(b) CERTIFICATE OF TARGET. Acquiror shall have been
provided with a certificate, dated the Effective Date, executed on behalf of
Target by its President and Chief Financial Officer to the effect that, as of
the Effective Time the condition provided for in subsection (a) above has been
satisfied.
(c) THIRD PARTY CONSENTS. Acquiror shall have been
furnished with evidence satisfactory to it of the consent or approval of those
persons whose consent or approval shall be required in connection with the
Merger under the contracts of Target set forth on the Target Disclosure
Schedule, if failure to obtain such consents or approvals would or would
reasonably be expected to have a Material Adverse Effect on Target.
(d) INJUNCTIONS OR RESTRAINTS ON MERGER AND CONDUCT OF
BUSINESS. No proceeding brought by any administrative agency or commission or
other governmental authority or instrumentality, domestic or foreign, seeking to
prevent the consummation of the Merger shall be pending. In addition, no
temporary restraining order, preliminary or permanent injunction or other order
issued by any court of competent jurisdiction or other legal or regulatory
restraint provision limiting or restricting Acquiror's conduct or operation of
the business of Target and its subsidiaries, following the Merger shall be in
effect, nor shall any proceeding brought by an administrative agency or
commission or other Governmental Entity, domestic or foreign, seeking the
foregoing be pending.
(e) LEGAL OPINION. Acquiror shall have received a legal
opinion from Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, P.C., Target's legal counsel, in
substantially the form attached hereto as EXHIBIT F.
(f) NO MATERIAL ADVERSE CHANGES. There shall not have
occurred any material adverse change in the condition (financial or otherwise),
properties, assets (including intangible assets), liabilities, business,
operations or results of operations of Target and its subsidiaries, taken as a
whole.
(g) FIRPTA CERTIFICATE. Target shall, prior to the Closing
Date, provide Acquiror with a properly executed FIRPTA Notification Letter,
substantially in the form of EXHIBIT G attached hereto, which states that shares
of capital stock of Target do not constitute "United States real property
interests" under Section 897(c) of the Code, for purposes of satisfying
Acquiror's obligations under Treasury Regulation Section 1.1445-2(c)(3). In
addition, simultaneously with delivery of such Notification Letter, Target shall
have provided to Acquiror, as agent for Target, a form of notice to the Internal
Revenue Service in accordance with the requirements of Treasury Regulation
Section 1.897-2(h)(2) and substantially in the form of EXHIBIT G attached hereto
along with written authorization for Acquiror to deliver such notice form to
the Internal Revenue Service on behalf of Target upon the Closing of the Merger.
(h) RESIGNATION OF OFFICERS AND DIRECTORS. The officers and
directors of Target in office immediately prior to the Effective Time shall have
resigned as officers and directors of Target effective as of the Effective Time.
(i) DISSENTING SHARES. Dissenting Shares shall consist of
no more than five percent (5%) of the then outstanding shares of Target Capital
Stock.
36
(j) AMENDED AND RESTATED ARTICLES OF INCORPORATION. Target
shall have adopted and filed with the Secretary of State of California its
Amended and Restated Articles of Incorporation in a form acceptable to Acquiror.
(k) TERMINATION OF TARGET 401(k) PLAN. Target shall have
terminated its 401(k) Plan.
ARTICLE VII
TERMINATION, EXPENSES, AMENDMENT AND WAIVER
7.1 TERMINATION. At any time prior to the Effective Time, whether
before or after approval of the matters presented in connection with the Merger
by the shareholders of Target, this Agreement may be terminated:
(a) by mutual consent duly authorized by the Board of
Directors of Acquiror and Target;
(b) by either Acquiror or Target, if, without fault of the
terminating party, the Closing shall not have occurred on or before November 30,
1998 (provided, a later date may be agreed upon in writing by the parties
hereto, and provided further that the right to terminate this Agreement under
this Section 7.1(b) shall not be available to any party whose action or failure
to act has been the cause or resulted in the failure of the Merger to occur on
or before such date and such action or failure to act constitutes a breach of
this Agreement);
(c) by Acquiror, if (i) Target shall breach any
representation, warranty, obligation or agreement hereunder and such breach
shall not have been cured within five (5) business days of receipt by Target of
written notice of such breach, provided that the right to terminate this
Agreement by Acquiror under this Section 7.1(c)(i) shall not be available to
Acquiror where Acquiror is at that time in willful breach of this Agreement,
(ii) the Board of Directors of Target shall have withdrawn or modified its
recommendation of this Agreement or the Merger in a manner adverse to Acquiror
or shall have resolved to do any of the foregoing, provided that the right to
terminate this Agreement by Acquiror under this Section 7.1(c)(ii) shall not be
available to Acquiror where Acquiror is at that time in willful breach of this
Agreement, or (iii) for any reason Target fails to call and hold the Target
Shareholders Meeting or commence solicitation of shareholder consents by
November 15, 1998, provided that the right to terminate this Agreement by
Acquiror under this Section 7.1(c)(iii) shall not be available to Acquiror where
Acquiror is at that time in material breach of this Agreement;
(d) by Target, if Acquiror shall breach any representation,
warranty, obligation or agreement hereunder and such breach shall not have been
cured within five (5) days following receipt by Acquiror of written notice of
such breach, provided that the right to terminate this Agreement by Target under
this Section 7.1(d) shall not be available to Target where Target is at that
time in material breach of this Agreement; or
(e) by Target or Acquiror if (i) any permanent injunction or
other order of a court or other competent authority preventing the consummation
of the Merger shall
37
have become final and nonappealable or (ii) if any required approval of the
shareholders of Target shall not have been obtained by reason of the failure to
obtain the required shareholder consents within thirty (30) days of the
commencement of a shareholder consent solicitation or vote upon a vote held at a
duly held meeting of shareholders or at any adjournment thereof.
7.2 EFFECT OF TERMINATION. In the event of termination of this
Agreement as provided in Section 7.1, this Agreement shall forthwith become void
and there shall be no liability or obligation on the part of Acquiror or Target
or their respective officers, directors, shareholders or affiliates, except to
the extent that such termination results from the willful breach by a party
hereto of any of its representations, warranties or covenants set forth in this
Agreement; provided that, the provisions of Section 5.5 (Confidentiality),
Section 7.3 (Expenses) and this Section 7.2 shall remain in full force and
effect and survive any termination of this Agreement.
7.3 EXPENSES.
(a) Whether or not the Merger is consummated, all costs and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby (including, without limitation, the fees and expenses of its
advisors, accountants and legal counsel) shall be paid by the party incurring
such expense; PROVIDED, HOWEVER, that if the Merger is consummated any
out-of-pocket expenses other than Excess Acquisition Expenses included in the
calculation of Adjusted Aggregate Purchase Price incurred by Target in
connection with the completion of the Merger, shall remain an obligation of
Target's shareholders. If Acquiror or Target receives any invoices for amounts
other than Excess Acquisition Expenses included in the calculation of Adjusted
Aggregate Purchase Price, it may, with Acquiror's written approval, pay such
fees; PROVIDED, HOWEVER, that such payment shall, if not promptly reimbursed by
the Target shareholders at Acquiror's request, constitute "Damages" recoverable
under the Escrow Agreement and such Damages shall not be subject to the Escrow
Basket (as such term is defined in Section 3.3(a) of the Escrow Agreement).
7.4 AMENDMENT. The boards of directors of the parties hereto may
cause this Agreement to be amended at any time by execution of an instrument in
writing signed on behalf of each of the parties hereto; provided, that an
amendment made subsequent to adoption of the Agreement by the shareholders of
Target shall not be made except as permitted by law.
7.5 EXTENSION; WAIVER. At any time prior to the Effective Time any
party hereto may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties made to such
party contained herein or in any document delivered pursuant hereto and
(iii) waive compliance with any of the agreements or conditions for the benefit
of such party contained herein. Any agreement on the part of a party hereto to
any such extension or waiver shall be valid only if set forth in an instrument
in writing signed on behalf of such party.
38
ARTICLE VIII
ESCROW AND INDEMNIFICATION
8.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS.
Notwithstanding any investigation conducted before or after the Closing Date,
and notwithstanding any actual or implied knowledge or notice of any facts or
circumstances which Acquiror or Target may have as a result of such
investigation or otherwise, Acquiror and Target will be entitled to rely upon
the other party's representations, warranties and covenants set forth in this
Agreement. The representations and warranties of Acquiror will terminate upon
the Closing. The obligations of Target with respect to its representations,
warranties, agreements and covenants will survive the Closing and continue in
full force and effect until the date twelve (12) months following the Closing
Date (the "Termination Date"), at which time, subject to the terms of this
Article VIII and the Escrow Agreement, the representations, warranties and
covenants of Target set forth in this Agreement and any liability of the holders
of Target Capital Stock and the Vested Optionees (collectively, the "Former
Target Shareholders") with respect to those representations, warranties and
covenants will terminate.
8.2 INDEMNITY. From and after the Effective Time of the Merger,
and subject to the provisions of Section 8.1, Acquiror and the Surviving
Corporation (on or after the Closing Date) shall be indemnified and held
harmless by the Former Target Shareholders against, and reimbursed for, any
actual liability, damage, loss, obligation, demand, judgment, fine, penalty,
cost or expense, other than any such damages resulting from injunctive relief
granted as to an intellectual property claim), but including reasonable
attorneys' fees and expenses, and the costs of investigation incurred in
defending against or settling such liability, damage, loss, cost or expense or
claim therefor and any amounts paid in settlement thereof) imposed on or
reasonably incurred by Acquiror or the Surviving Corporation as a result of any
breach of any representation, warranty, agreement or covenant on the part of
Target under this Agreement (collectively the "Damages"). "Damages" as used
herein shall be calculated after taking into account any net tax savings
attributable to such Damages and any net tax costs attributable to the receipt
of any payment hereunder and is not limited to matters asserted by third
parties, but includes Damages incurred or sustained by Acquiror in the absence
of claims by a third party.
8.3 ESCROW FUND. As exclusive security for the indemnity provided
for in Section 8.2 hereof, Escrow Proceeds shall be deposited by Acquiror in a
cash escrow account with Greater Bay Trust Company (or other institution
acceptable to Acquiror, Target and the Shareholders' Agent) as Escrow Agent (the
"Escrow Agent"), as of the Closing Date, such deposit to constitute an escrow
fund to be governed by the terms set forth in this Agreement and the provisions
of the Escrow Agreement to be executed and delivered pursuant to Section 6.1(e).
The Escrow Proceeds shall be withheld from the cash proceeds of the Per Share
Consideration to be received by the Former Target Shareholders on a pro-rata
basis in accordance with the number of shares of Target Capital Stock and Vested
Options held by the Former Target Shareholders at the Effective Time (excluding
for purposes of this calculation any Dissenting Shares). Upon compliance with
the terms hereof and subject to the provisions of this Article VIII and the
Escrow Agreement, Acquiror and the Surviving Corporation shall be entitled to
obtain indemnity from the Escrow Fund for Damages covered by the indemnity
provided for in Section 8.2 of this Agreement. The remedy provided in this
Section 8.3 is exclusive and shall
39
not be cumulative as to any other remedy at law or in equity; PROVIDED, HOWEVER,
that nothing in this Section 8.3 shall limit, in any manner, any remedy at law
or in equity to which Acquiror or the Surviving Corporation may be entitled from
any party to this Agreement or any person as a result of fraud. Nothing in this
Agreement shall limit the liability of Target for any breach of any
representation, warrant or covenant if the Merger does not close. Resort to the
Escrow Fund shall be the exclusive remedy of Acquiror for any such breaches and
misrepresentations following the Effective Time.
ARTICLE IX
GENERAL PROVISIONS
9.1 NOTICES. All notices and other communications hereunder shall
be in writing and shall be deemed given if delivered personally or by commercial
delivery service, or mailed by registered or certified mail (return receipt
requested) or sent via facsimile (with confirmation of receipt) to the parties
at the following address (or at such other address for a party as shall be
specified by like notice):
(a) if to Acquiror or Merger Sub, to:
Avant! Corporation
00000 Xxxxxxx Xxxxxxx
Xxxxxxx, Xxxxxxxxxx 00000
Attention: General Counsel
Facsimile No.: (000) 000-0000
Telephone No.: (000) 000-0000
with a copy to:
Xxxxxxxxx Xxxxxxx Xxxxxx Xxxxxxxxxx
Xxxxxxxx & Xxxxxxxxx, LLP
000 Xxxxxxxxxxxx Xxxxx
Xxxxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxxx, Esq.
Facsimile No.: (000) 000-0000
Telephone No.: (000) 000-0000
(b) if to Target, to:
interHDL, Inc.
0000 Xx Xxxxxx Xxxx
Xxx Xxxxx, Xxxxxxxxxx 00000
Attention: President
Facsimile No.: (000) 000-0000
Telephone No.: (000) 000-0000
40
with a copy to:
Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, P.C.
000 Xxxx Xxxx Xxxx
Xxxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxx, Esq.
Facsimile No.: (000) 000-0000
Telephone No.: (000) 000-0000
(c) if to Shareholders' Agent, to:
Xx. Xxxxx Xxxxxxxx
0000 Xxxxxxx Xxxxxx Xxxxx
Xxx Xxxx, Xxxxxxxxxx 00000
Telephone No.: (000) 000-0000
with a copy to:
Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, P.C.
000 Xxxx Xxxx Xxxx
Xxxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxx, Esq.
Facsimile No.: (000) 000-0000
Telephone No.: (000) 000-0000
9.2 INTERPRETATION. When a reference is made in this Agreement to
Exhibits, such reference shall be to an Exhibit to this Agreement unless
otherwise indicated. The words "include," "includes" and "including" when used
herein shall be deemed in each case to be followed by the words "without
limitation." In this Agreement, any reference to any event, change, condition
or effect being "material" with respect to any entity or group of entities means
any material event, change, condition or effect related to the condition
(financial or otherwise), properties, assets (including intangible assets),
liabilities, business, operations or results of operations of such entity or
group of entities. In this Agreement, any reference to a "Material Adverse
Effect" with respect to any entity or group of entities means any event, change
or effect that is materially adverse to the condition (financial or otherwise),
properties, assets (including intangible assets), liabilities, business,
operations or results of operations of such entity and its subsidiaries, taken
as a whole. The phrase "made available" in this Agreement shall mean that the
information referred to has been made available if requested by the party to
whom such information is to be made available. The phrases "the date of this
Agreement", "the date hereof", and terms of similar import, unless the context
otherwise requires, shall be deemed to refer to November 4, 1998. The table of
contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement.
9.3 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become
41
effective when one or more counterparts have been signed by each of the parties
and delivered to the other parties, it being understood that all parties need
not sign the same counterpart.
9.4 ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES. This
Agreement, the other Transaction Documents and the documents and instruments and
other agreements specifically referred to herein or delivered pursuant hereto,
including the Exhibits, the Schedules, including the Target Disclosure Schedule
and the Acquiror Disclosure Schedule (a) constitute the entire agreement among
the parties with respect to the subject matter hereof and supersede all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof, except for the Confidentiality Agreement,
which shall continue in full force and effect, and shall survive any termination
of this Agreement or the Closing, in accordance with its terms; (b) are not
intended to confer upon any other person any rights or remedies hereunder,
except for the rights of the Former Target Shareholders to receive the
consideration set forth in Article I of this Agreement.
9.5 SEVERABILITY. In the event that any provision of this
Agreement, or the application thereof, becomes or is declared by a court of
competent jurisdiction to be illegal, void or unenforceable, the remainder of
this Agreement will continue in full force and effect and the application of
such provision to other persons or circumstances will be interpreted so as
reasonably to effect the intent of the parties hereto. The parties further
agree to replace such void or unenforceable provision of this Agreement with a
valid and enforceable provision that will achieve, to the extent possible, the
economic, business and other purposes of such void or unenforceable provision.
9.6 REMEDIES CUMULATIVE. Except as otherwise provided herein, any
and all remedies herein expressly conferred upon a party will be deemed
cumulative with and not exclusive of any other remedy conferred hereby, or by
law or equity upon such party, and the exercise by a party of any one remedy
will not preclude the exercise of any other remedy.
9.7 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of California without regard
to applicable principles of conflicts of law. Each of the parties hereto
irrevocably consents to the exclusive jurisdiction of any court located within
the State of California, in connection with any matter based upon or arising out
of this Agreement or the matters contemplated herein, agrees that process may be
served upon them in any manner authorized by the laws of the State of California
for such persons and waives and covenants not to assert or plead any objection
which they might otherwise have to such jurisdiction and such process.
9.8 ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties. Subject to the preceding sentence, this Agreement
will be binding upon, inure to the benefit of and be enforceable by the parties
and their respective successors and permitted assigns.
9.9 RULES OF CONSTRUCTION. The parties hereto agree that they have
been represented by counsel during the negotiation, preparation and execution of
this Agreement and, therefore, waive the application of any law, regulation,
holding or rule of construction providing
42
that ambiguities in an agreement or other document will be construed against the
party drafting such agreement or document.
43
IN WITNESS WHEREOF, Target, Acquiror and Merger Sub have caused this
Agreement to be executed and delivered by their respective officers thereunto
duly authorized, all as of the date first written above.
INTERHDL, INC.
By: /s/ Xxxxx Xxxxxxxx
------------------------------------------
Xxxxx Xxxxxxxx,
President and Chief Executive Officer
AVANT! CORPORATION
By: /S/ Xxxxxx X Xxx
------------------------------------------
Xxxxxx X. Xxx,
President and Chief Executive Officer
ARTEMIS MERGER CORPORATION
By: /S/ Xxxxxx X Xxx
------------------------------------------
Xxxxxx X. Xxx,
President and Chief Executive Officer
SIGNATURE PAGE TO AGREEMENT AND PLAN OF REORGANIZATION
EXHIBIT A
AGREEMENT OF MERGER
E-1
EXHIBIT B
REGISTRATION RIGHTS AGREEMENT
E-2
EXHIBIT C
ESCROW AGREEMENT
E-3
EXHIBIT D
LEGAL OPINION OF COUNSEL TO ACQUIROR
E-4
EXHIBIT E
EMPLOYMENT AGREEMENTS
E-5
EXHIBIT F
LEGAL OPINION OF COUNSEL TO TARGET
E-6
EXHIBIT G
FIRPTA NOTICE
E-7
EXHIBIT H
INVESTMENT REPRESENTATION STATEMENT
E-8
EXHIBIT I
VOTING AGREEMENT
E-9
