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EXHIBIT 99.1
AGREEMENT AND PLAN OF REORGANIZATION
BY AND BETWEEN
CYPRESS SEMICONDUCTOR CORPORATION,
AND
ALATION SYSTEMS, INC.
DATED AS OF APRIL 25, 2000
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TABLE OF CONTENTS
PAGE
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ARTICLE I THE MERGER.....................................................................2
1.1 The Merger................................................................2
1.2 Effective Time............................................................2
1.3 Effect of the Merger......................................................2
1.4 Articles of Incorporation; Bylaws.........................................2
1.5 Directors and Officers....................................................3
1.6 Merger Consideration......................................................3
1.7 Dissenting Shares for Holders of Company Capital Stock....................9
1.8 Surrender of Certificates; Exchange Agent................................10
1.9 Capital Stock of Merger Sub..............................................12
1.10 Adjustments to Exchange Ratio............................................12
1.11 Tax Consequences.........................................................12
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY................................12
2.1 Organization of the Company..............................................13
2.2 Company Capital Structure................................................13
2.3 Subsidiaries.............................................................14
2.4 Authority................................................................14
2.5 Company Financial Statements.............................................15
2.6 No Undisclosed Liabilities...............................................15
2.7 No Changes...............................................................15
2.8 Tax and Other Returns and Reports........................................17
2.9 Restrictions on Business Activities......................................19
2.10 Title to Properties; Absence of Liens and Encumbrances...................19
2.11 Intellectual Property....................................................19
2.12 Agreements, Contracts and Commitments....................................24
2.13 Interested Party Transactions............................................26
2.14 Compliance with Laws.....................................................26
2.15 Litigation...............................................................26
2.16 Insurance................................................................26
2.17 Minute Books.............................................................27
2.18 Environmental Matters....................................................27
2.19 Brokers' and Finders' Fees; Third Party Expenses.........................28
2.20 Employee Matters and Benefit Plans.......................................28
2.21 Intentionally deleted....................................................32
2.22 No Material Adverse Change...............................................32
2.23 Intentionally Deleted....................................................32
2.24 Board Approval...........................................................32
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TABLE OF CONTENTS
(CONTINUED)
PAGE
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2.25 Representations Complete.................................................32
2.26 Solicitation of Stockholders.............................................33
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB.....................33
3.1 Organization, Standing and Power.........................................33
3.2 Authority................................................................33
3.3 Capital Structure........................................................34
3.4 SEC Documents; Parent Financial Statements...............................34
3.5 Litigation...............................................................35
3.6 Brokers' and Finders' Fees...............................................35
3.7 No Material Adverse Change...............................................35
3.8 Representations Complete.................................................35
3.9 Proxy and Information Statement..........................................35
ARTICLE IV CONDUCT PRIOR TO THE EFFECTIVE TIME..........................................36
4.1 Conduct of Business of the Company.......................................36
4.2 No Solicitation..........................................................38
ARTICLE V ADDITIONAL AGREEMENTS.........................................................39
5.1 Fairness Hearing; Stockholder Approval...................................39
5.2 Access to Information....................................................42
5.3 Confidentiality..........................................................42
5.4 Expenses.................................................................42
5.5 Public Disclosure........................................................43
5.6 Consents.................................................................43
5.7 FIRPTA Compliance........................................................43
5.8 Reasonable Efforts.......................................................43
5.9 Notification of Certain Matters..........................................44
5.10 Pooling Accounting.......................................................44
5.11 Company Affiliate Agreements.............................................44
5.12 New York Stock Exchange Listing..........................................44
5.13 S-8 Registration.........................................................44
5.14 401(k) Plan..............................................................45
5.15 Additional Documents and Further Assurances..............................45
5.16 Indemnification..........................................................45
5.17 Section 368 Election.....................................................45
5.18 Employee Compensation....................................................45
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TABLE OF CONTENTS
(CONTINUED)
ARTICLE VI CONDITIONS TO THE MERGER.....................................................46
6.1 Conditions to Obligations of Each Party to Effect the Merger.............46
6.2 Additional Conditions to Obligations of the Company......................46
6.3 Additional Conditions to the Obligations of Parent and Merger Sub........47
ARTICLE VII SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ESCROW..........................49
7.1 Survival of Representations and Warranties...............................49
7.2 Escrow Arrangements......................................................49
ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER..........................................56
8.1 Termination..............................................................56
8.2 Effect of Termination....................................................57
8.3 Amendment................................................................58
8.4 Extension; Waiver........................................................58
ARTICLE IX GENERAL PROVISIONS...........................................................58
9.1 Notices..................................................................58
9.2 Interpretation...........................................................59
9.3 Counterparts.............................................................60
9.4 Entire Agreement; Assignment.............................................60
9.5 Severability.............................................................60
9.6 Other Remedies...........................................................60
9.7 Governing Law............................................................60
9.8 Rules of Construction....................................................60
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AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is made and
entered into as of April 25, 2000 by and between Cypress Semiconductor
Corporation, a Delaware corporation ("Parent"), and Alation Systems, Inc., a
California corporation (the "Company"), and with respect to Article VII hereof
only, U.S. Bank Trust, N.A. (the "Escrow Agent") and Xxxxx Xxxxxxxx (the
"Securityholder Agent").
RECITALS
A. The Boards of Directors of each of the Company and Parent believe it
is in the best interests of each company and their respective stockholders that
Parent acquire the Company through the statutory merger of Alation Acquisition
Corp., a California corporation to be formed by Parent as a wholly-owned
subsidiary of Parent ("Merger Sub"), with and into the Company (the "Merger")
and, in furtherance thereof, have approved the Merger.
B. Pursuant to the Merger, among other things, and subject to the terms
and conditions of this Agreement, all of the issued and outstanding shares of
common, preferred and other capital stock of the Company ("Company Capital
Stock") and all outstanding options, warrants or other rights to acquire or
receive shares of Company Capital Stock shall be converted into options,
warrants or rights to acquire or receive shares of voting Common Stock of Parent
("Parent Common Stock").
C. A portion of the shares of Parent Common Stock otherwise issuable by
Parent in connection with the Merger shall be placed in escrow by Parent, the
release of which amount shall be contingent upon certain events and conditions,
all as set forth in Article VII hereof.
D. It is intended by the parties hereto that the Merger shall constitute
a reorganization within the meaning of Section 368 of the Internal Revenue Code
of 1986, as amended (the "Code").
E. It is further intended by the parties hereto that the Merger shall
qualify for accounting treatment as a pooling of interests.
F. Concurrently with the execution of this Agreement, as a condition and
inducement for Parent's willingness to enter into this Agreement, (i) certain
key employees of the Company will enter into non-competition and
non-solicitation agreements substantially in the form attached hereto as Exhibit
A (the "Non-Competition Agreement") with Parent, each of which shall become
effective as of the Effective Time (as defined herein), and (ii) certain
affiliates of the Company are entering into Voting Agreements in substantially
the form attached hereto as Exhibit B (the "Voting Agreements").
G. The Company and Parent desire to make certain representations and
warranties and other agreements in connection with the Merger.
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NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein, and for other good and valuable consideration,
intending to be legally bound hereby 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 and the
applicable provisions of the California Corporations Code ("California Law"),
Merger Sub shall be merged with and into the Company, the separate corporate
existence of Merger Sub shall cease and the Company shall continue as the
surviving corporation. The surviving corporation after the Merger is sometimes
referred to hereinafter as the "Surviving Corporation."
1.2 Effective Time. Unless this Agreement is earlier terminated pursuant
to Section 8.1, the closing of the Merger (the "Closing") will take place as
promptly as practicable, but no later than two (2) business days following
satisfaction or waiver of the conditions set forth in Article VI, at the offices
of Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, 000 Xxxx Xxxx Xxxx, Xxxx Xxxx, Xxxxxxxxxx,
unless another place or time is agreed to in writing by Parent and the Company.
The date upon which the Closing actually occurs is herein referred to as the
"Closing Date." On the Closing Date, the parties hereto shall cause the Merger
to be consummated by filing an Agreement of Merger in such form as shall be
agreed upon by Parent, Merger Sub and the Company (the "Agreement of Merger")
with the Secretary of State of the State of California in accordance with the
relevant provisions of applicable California Law (the effective time of the
Merger designated by the Secretary of State of California being referred to
herein as the "Effective Time").
1.3. Effect of the Merger. At the Effective Time, the effect of the
Merger shall be as provided in 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
the Company and Merger Sub shall vest in the Surviving Corporation, and all
debts, liabilities and duties of the Company and Merger Sub shall become the
debts, liabilities and duties of the Surviving Corporation.
1.4 Articles of Incorporation; Bylaws. Unless otherwise determined by
Parent prior to the Effective Time, 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 in accordance with California Law and as provided in such
Articles of Incorporation; provided, however, that at the Effective Time,
Article I of the Articles of Incorporation of the Surviving Corporation shall be
amended and restated in its entirety to read as follows: "The name of the
corporation is 'Alation Systems, Inc.'"
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(a) Unless otherwise determined by Parent prior to the Effective
Time, the Bylaws of Merger Sub as in effect immediately prior to the Effective
Time shall be the Bylaws of the Surviving Corporation at the Effective Time,
until thereafter amended in accordance with California Law and as provided in
the Articles of Incorporation of the Surviving Corporation and such Bylaws.
1.5 Directors and Officers. Unless otherwise determined by Parent prior
to the Effective Time, the directors of Merger Sub immediately prior to the
Effective Time shall be the directors of the Surviving Corporation, each to hold
the office of a director of the Surviving Corporation in accordance with the
provisions of California Law and the Articles of Incorporation and Bylaws of the
Surviving Corporation until their successors are duly elected and qualified. The
officers of Merger Sub immediately prior to the Effective Time shall be the
officers of the Surviving Corporation, each to hold office in accordance with
the provisions of the Bylaws of the Surviving Corporation.
1.6. Merger Consideration
(a) Certain Definitions. For purposes of this Agreement, the
following terms shall have the following meanings:
"Aggregate First Tier Series A Share Number" is defined in
Section 1.6(c)(1)(b).
"Aggregate First Tier Series B Share Number" is defined in
Section 1.6(c)(1)(a).
"Aggregate First Tier Share Number" is defined in Section
1.6(c)(1)(b).
"Aggregate Second Tier Share Number" is defined in Section
1.6(c)(2).
"Aggregate Third Tier Share Number" is defined in Section
1.6(c)(3).
"Aggregate Share Number" shall mean 690,808 shares of Parent
Common Stock.
"Company Common Stock" shall mean shares of common stock of the
Company, including those shares which would become issuable upon the exercise of
Company Options.
"Company Common Stock Exchange Ratio" shall equal the sum of the
Second Tier Preferential Consideration plus the Third Tier Preferential
Consideration plus the Remaining Share Consideration.
"Company Convertible Securities" shall mean the Company Options,
the Company Convertible Note, and any other rights (other than Company Preferred
Stock) to acquire or receive shares of Company Capital Stock.
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"Company Options" shall mean all issued and outstanding options
to purchase or otherwise acquire Company Capital Stock (whether or not vested)
held by employees or directors of or consultants to Company.
"Company Preferred Stock" shall mean shares of the Company's
Series A Preferred Stock and shares of the Company's Series B Preferred Stock.
"Company Stockholders" shall mean holders of any shares of
Company Capital Stock immediately prior to the Effective Time.
"Escrow Amount" shall mean that number of shares of Parent
Common Stock equal to ten percent (10%) of the Aggregate Share Number to be
distributed pursuant to the terms of this Section 1.6 to the holders of the
Company Common Stock, the Company Preferred Stock, and the Convertible Note. In
no event shall the Escrow Amount be less than ten percent (10%) of an amount
equal to (i) the Aggregate Share Number, minus (ii) the shares reserved for
issuance upon exercise of the Company Options assumed by Parent.
"First Tier Preferential Consideration" is the Series B First
Tier Preferential Consideration plus the Series A First Tier Preferential
Consideration.
"First Tier Series A Preferred Stock Value" is equal to $1.0697
plus the aggregate per share amount of all declared but unpaid dividends, if
any, with respect to such Company Series A Preferred Stock.
"First Tier Series B Preferred Stock Value" is equal to
$2.6084815 plus the aggregate per share amount of all declared but unpaid
dividends, if any, with respect to such Company Series B Preferred Stock.
"Outstanding Company Common Shares" shall mean the Total
Outstanding Shares amount less (i) the aggregate number of Shares of Company
Series A Preferred Stock issued and outstanding as of the Closing, or which are
issuable upon the exercise of any unexercised rights to convert Company
Convertible Securities into Series A Preferred Stock which are issued and
outstanding as of the Closing, and less (ii) the aggregate number of Shares of
Company Series B Preferred Stock issued and outstanding as of the Closing, or
which are issuable upon the exercise of any unexercised rights to convert
Company Convertible Securities (including the Convertible Note) into Series B
Preferred Stock which are issued and outstanding as of the Closing.
"Outstanding Series A Preferred Stock" is the total issued and
outstanding shares of the Company Series A Preferred Stock immediately prior to
the Effective Time.
"Outstanding Series B Preferred Stock" is the total issued and
outstanding shares of the Company Series B Preferred Stock immediately prior to
the Effective Time and in all events shall include that number of shares of the
Company Series B Preferred Stock that have been issued
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or would be issuable on exercise of the holder of the Convertible Note to
acquire Series B Preferred Stock as a consequence of the Merger (without regard
to whether such right has been exercised).
"Parent Common Stock Price" shall mean the closing price per
share of Parent Common Stock on the New York Stock Exchange on the trading day
immediately preceding the Closing Date.
"Remaining Share Consideration" is defined in Section 1.6(c)(4).
"Second Tier Preferential Consideration" is defined in Section
1.6(c)(2).
"Second Tier Stock Value" is equal to $2.1394 plus the aggregate
per share amount of all declared but unpaid dividends, if any, with respect to
the Total Outstanding Shares, other than those dividends included in the
determination of the Series A First Tier Preferred Stock Value or in the
determination of the Series B First Tier Preferred Stock Value.
"Series A First Tier Preferential Consideration" is defined in
Section 1.6(b)(1)(b) below.
"Series B First Tier Preferential Consideration" is defined in
Section 1.6(b)(1)(b) below.
"Series A Preferred Stock Exchange Ratio" shall be the sum of
the Series A First Tier Preferential Consideration plus the Second Tier
Preferential Consideration.
"Series B Preferred Stock Exchange Ratio" shall be the sum of
the Series B First Tier Preferential Consideration plus the Second Tier
Preferential Consideration plus the Third Tier Preferential Consideration.
"Third Tier Stock Value" is equal to (i) $5.216963 plus the
aggregate per share amount of all declared but unpaid dividends, if any, with
respect to the Total Outstanding Shares, other than those dividends included in
the determination of the Series A First Tier Preferred Stock Value and the
Series B First Tier Preferred Stock Value, minus (ii) the Second Tier Stock
Value.
"Total Outstanding Shares" means the aggregate number of shares
of Company Common Stock outstanding immediately prior to the Effective Time,
plus the aggregate number of shares of Company Preferred Stock outstanding
immediately prior to the Effective Time, and plus the aggregate number of shares
of the Company Common or Preferred Stock issuable, with or without the passage
of time or satisfaction of other conditions, upon exercise of the rights to
obtain such shares pursuant to the Convertible Note, the Company Options, or any
other Company Convertible Securities immediately prior to the Effective Time.
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(b) Shares to be Issued; Effect on Capital Stock. In connection
with the Merger, the maximum number of shares of Parent Common Stock to be
issued (including Parent Common Stock to be reserved for issuance upon exercise
of any of the Company's options to be assumed by Parent) in exchange for the
acquisition by Parent of the Total Outstanding Shares, including all unexpired
and unexercised options (vested and unvested), or other rights to acquire
Company Capital Stock shall be the Aggregate Share Number; provided that such
maximum number shall be adjusted to the extent required by Section 1.10 below
(herein the "Merger Consideration"). Subject to the terms and conditions of this
Agreement, as of the Effective Time, by virtue of the Merger and without any
action on the part of Merger Sub, the Company or the holder of any shares of the
Company Capital Stock, each share of the Company Capital Stock issued and
outstanding immediately prior to the Effective Time (other than any Dissenting
Shares, as defined in Section 1.7) will be canceled and extinguished and be
converted automatically into the right to receive, upon surrender of the Company
Certificate therefor, such number of shares of Parent Common Stock as is equal
to the Series A Preferred Stock Exchange Ratio, the Series B Preferred Stock
Exchange Ratio, or the Company Common Stock Exchange Ratio, as the case may be,
in the manner described in Section 1.8, below.
(c) Calculation of Exchange Ratio Components.
(1) First Tier Preferred Stock Preferential
Consideration. Prior and in preference to any distribution of the Remaining
Share Consideration to holders of Company Common Stock, the holders of Company
Series A Preferred Stock and Company Series B Preferred Stock shall be entitled
to receive the following:
a) First Tier Series B Preferential
Consideration. Prior and in preference to any distribution in respect of any
other shares of Company Capital Stock, as the "Series B First Tier Preferential
Consideration," each share of the Outstanding Series B Preferred Stock shall be
converted into the right to receive that number of shares of the Aggregate Share
Number equal to the lesser of (a) the quotient of (x) the First Tier Series B
Preferred Stock Value divided by (y) the Parent Common Stock Price, or (b) the
Aggregate Share Number divided by the Outstanding Series B Preferred Shares. The
total portion of the Aggregate Share Number to be issued in respect of the
Series B Preferred Stock pursuant to this subsection is the "Aggregate First
Tier Series B Share Number."
b) First Tier Series A Preferential
Consideration. If and only if the Aggregate Share Number exceeds the Aggregate
First Tier Series B Share Number, then prior to and in preference to any
distribution of such excess in respect of any other shares of Company Capital
Stock and as the "Series A First Tier Preferential Consideration," each share of
the Outstanding Series A Preferred Stock shall be converted into a right to
receive that number of shares of the Aggregate Share Number equal to the lesser
of (a) the quotient of (x) the First Tier Series A Preferred Stock Value divided
by (y) the Parent Common Stock Price, or (b) the quotient derived by dividing
(i) the positive difference between the Aggregate Share Number and the Aggregate
First
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Tier Series B Share Number, by (ii) the total number of shares of Outstanding
Series A Preferred Stock. The portion of the Aggregate Share Number to be issued
in respect of the Series A Preferred Stock pursuant to this subsection is the
"Aggregate First Tier Series A Share Number" and the "Aggregate First Tier Share
Number" is the sum of the Aggregate First Tier Series B Share Number and the
Aggregate First Tier Series A Share Number."
(2) Second Tier Preferential Consideration. If and only
if the Aggregate Share Number exceeds the Aggregate First Tier Share Number,
then prior to and in preference to any distribution of such excess in respect of
any other shares of the Company Capital Stock and as the "Second Tier
Preferential Consideration," each share of the Total Outstanding Shares shall be
converted into a right to receive that number of shares of the Aggregate Share
Number equal to the lesser of (a) the quotient of (x) the Second Tier Stock
Value divided by (y) the Parent Common Stock Price, or (b) the quotient derived
by dividing (i) an amount equal to the Aggregate Share Number less the Aggregate
First Tier Share Number, by (ii) the total number of shares of the Outstanding
Company Preferred Shares and the Outstanding Company Common Shares. The portion
of the Aggregate Share Number to be issued in respect of the Company Outstanding
Series B Preferred Stock, Outstanding Series A Preferred Stock, and the
Outstanding Company Common Stock pursuant to this subsection is the "Aggregate
Second Tier Share Number."
(3) Third Tier Preferential Consideration. If and only
if the Aggregate Share Number exceeds the total of the Aggregate First Tier
Share Number and the Aggregate Second Tier Share Number, then prior to and in
preference to any distribution of such excess in respect of any other shares of
the Company Capital Stock and as the "Third Tier Preferential Consideration,"
each share of the Outstanding Company Common Shares and each share of the
Outstanding Company Series B Preferred Stock shall be converted into the right
to receive that number of shares of the Aggregate Share Number equal to the
lesser of (a) the quotient of (x) the Third Tier Stock Value divided by (y) the
Parent Common Stock Price, or (b) the quotient derived by dividing (i) an amount
equal to the Aggregate Share Number less the Aggregate First Tier Share Number
less the Aggregate Second Tier Share Number, by (ii) an amount equal to the
Outstanding Company Common Shares and the Outstanding Company Series B Preferred
Shares. The portion of the Aggregate Share Number to be issued in respect of the
Company Outstanding Series B Preferred Shares and the Outstanding Company Common
Shares pursuant to this subsection is the "Aggregate Third Tier Share Number."
(4) Remaining Share. If and only if the Aggregate Share
Number exceeds the sum of the Aggregate First Tier Share Number, the Aggregate
Second Tier Share Number and the Aggregate Third Tier Share Number, then as the
"Remaining Share Consideration," each share of the Outstanding Company Common
Shares shall be converted into the right to receive that number of shares of the
Aggregate Share Number equal to the quotient derived by dividing (i) an amount
equal to the Aggregate Share Number, less the Aggregate First Tier Share Number,
less the Aggregate Second Tier Share Number, and less the Aggregate Third Tier
Share Number by (ii) the Outstanding Company Common Shares.
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Notwithstanding the foregoing provisions of this Section 1.6, in no
event shall the total number of shares received by the holder of the Outstanding
Company Common Shares and the Outstanding Company Preferred Shares exceed the
total Aggregate Share Number minus that portion of the Aggregate Share Number
that must be reserved for the issuance of the Parent Common Stock upon exercise
of the Options assumed by the Parent in accordance with Subpart (5), below and
in no event shall the total number of shares of the Parent Common Stock issued
or issuable in connection with the Merger exceed the Aggregate Share Number.
(5) Assumption of Company Options. At the Effective
Time, each outstanding Company Option issued pursuant to Company's 1998 Stock
Option Plan (the "Option Plan") or otherwise, whether vested or unvested, will
be assumed by Parent in connection with the Merger. Each Company Option so
assumed by Parent under this Agreement shall continue to have, and be subject
to, the same terms and conditions set forth in the Option Plan and/or as
provided in the respective option agreements applicable thereto immediately
prior to the Effective Time (including, without limitation, any vesting schedule
or repurchase rights), except that (i) each Company Option will be exercisable
for an amount of the Aggregate Share Number equal to the product of the number
of shares of Company Common Stock that were issuable if the Company Option been
exercised immediately prior to the Effective Time multiplied by the Company
Common Stock Exchange Ratio, rounded down to the nearest whole number of shares
of Parent Common Stock and (ii) the per share exercise price for such amount of
the Aggregate Share Number issuable upon exercise of said assumed Company Option
will be equal to the quotient determined by dividing the exercise price per
share of Company Capital Stock at which such Company Option was exercisable
immediately prior to the Effective Time by the Company Common Stock Exchange
Ratio, rounded up to the nearest whole cent. It is the intention of the parties
hereto that the Company Options assumed by Parent following the Closing pursuant
to this Section 1.6 will, to the extent permitted by applicable law, qualify as
incentive stock options as defined in Section 422 of the Code, to the extent any
such Company Options qualified as incentive stock options immediately prior to
the Effective Time.
(6) Withholding Taxes. Any shares of Parent Common Stock
issuable pursuant to Section 1.6(b) shall be subject to, and reduced by, the
amount of any state, federal and foreign withholding taxes incurred (and not
previously paid by or on behalf of Company) in connection with the acquisition
of capital stock upon the exercise of Company Options, the acceleration of
vesting of any Company Capital Stock or Company Options, or the payment of a
bonus, if any.
(7) Fractional Shares. No fractional share of Parent
Common Stock shall be issued in the Merger. In lieu thereof, each holder of
shares of Company Capital Stock who would otherwise be entitled to a fraction of
a share of Parent Common Stock (after aggregating all fractional shares of
Parent Common Stock to be received by such holder) shall be entitled to receive
from Parent an amount of cash (rounded to the nearest whole cent) equal to the
product of (i) such fraction, multiplied by (ii) $44.875.
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(8) Cancellation of Parent-Owned and Company-Owned
Stock. At the Effective Time, by virtue of the Merger and without any action on
the part of any of the parties hereto, each share of Company Capital Stock owned
by Parent, Merger Sub, Company or any direct or indirect wholly-owned subsidiary
thereof immediately prior to the Effective Time, shall be cancelled and
extinguished without any conversion thereof.
(9) Capital Stock of Merger Sub. At the Effective Time,
by virtue of the Merger and without any action on the part of any of the parties
hereto, each share of capital stock of Merger Sub issued and outstanding
immediately prior to the Effective Time shall be converted into and exchanged
for one validly issued, fully paid and nonassessable share of common stock of
the Surviving Corporation. Each stock certificate of Merger Sub evidencing
ownership of any such shares shall continue to evidence ownership of such shares
of capital stock of the Surviving Corporation.
1.7 Dissenting Shares for Holders of Company Capital Stock.
Notwithstanding any provision of this Agreement to the contrary, any shares of
Company Capital Stock held by a holder who has demanded and perfected appraisal
rights for such shares in accordance with California Law and who, as of the
Effective Time, has not effectively withdrawn or lost such appraisal rights
("Dissenting Shares"), shall not be converted into or represent a right to
receive Parent Common Stock pursuant to Section 1.6, but the holder thereof
shall only be entitled to such rights as are granted by California Law.
(a) Notwithstanding the provisions of subsection (a), if any
holder of shares of Company Capital Stock who demands appraisal of such shares
under California Law shall effectively withdraw or lose (through failure to
perfect or otherwise) the right to appraisal, then, as of the later of the
Effective Time and the occurrence of such event, such holder's shares shall
automatically be converted into and represent only the right to receive Parent
Common Stock as provided in Section 1.6 (and subject to the provisions of
Section 7.2 hereof), without interest thereon, upon surrender of the certificate
representing such shares of the Company capital stock (the "Company
Certificate").
(b) Company shall give Parent (i) prompt notice of any written
demands for appraisal of any shares of Company Capital Stock, withdrawals of
such demands, and any other instruments served pursuant to California Law and
received by Company and (ii) the opportunity to participate in all negotiations
and proceedings with respect to demands for appraisal under California Law.
Company shall not, except with the prior written consent of Parent, voluntarily
make any payment with respect to any demands for appraisal of Company Capital
Stock or offer to settle or settle any such demands. All Parent shares to be
issued to any Company Stockholders exercising appraisal rights (including the
escrowed shares) shall be sold and used for the payment of the amounts owing to
such Company Stockholders. In addition, Parent shall have full recourse to the
Escrow Fund (as defined in Section 7.2(a) for the amount, if any, paid by
Company or Parent in respect of Dissenting Shares. If any shares of Parent
Common Stock, constituting the Merger Consideration to be
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distributed to the holder of Dissenting Shares, are not sold to fund the cash
consideration to be paid to such dissenter, then said remaining shares shall be
delivered to the Securityholder Agent, added to the Escrow Fund, allocated
proportionately to the other Company Stockholders, and held and distributed from
the Escrow Fund in accordance with Section 1.6.
1.8 Surrender of Certificates; Exchange Agent. The transfer agent of
Parent (or another entity reasonably acceptable to Parent and the Company) shall
serve as exchange agent (the "Exchange Agent") in the Merger.
(a) Parent to Provide Parent Common Stock. Prior to the Closing,
Parent shall make available to the Exchange Agent for exchange in accordance
with this Article I the shares of Parent Common Stock issuable to Company
Stockholders pursuant to Section 1.6 in exchange for outstanding shares of
Company Capital Stock, less the Escrow Amount which Parent shall deposit into
the Escrow Fund (as defined in Section 7.2(a) hereof) on behalf of the Company
Stockholders. The portion of the Escrow Amount contributed on behalf of each
Company Stockholder shall be in proportion to the aggregate number of shares of
Parent Common Stock each such Company Stockholder would otherwise be entitled to
receive in the Merger (excluding any shares of Parent Common Stock issuable upon
exercise of any assumed Company Options) by virtue of ownership of outstanding
shares of Company Capital Stock immediately prior to the Effective Time.
(b) Exchange Procedures. As soon as practicable following the
Closing, Parent shall cause to be mailed to each Company Stockholder (i) a
letter of transmittal which shall specify that delivery shall be effected, and
risk of loss and title to the Company Certificates which immediately prior to
the Effective Time represent outstanding shares of Company Capital Stock whose
shares are converted into the right to receive such Company Stockholder's
portion of the consideration pursuant to Section 1.6, shall pass, only upon
delivery of the Company Certificates to the Exchange Agent at the Closing) and
(ii) instructions for use in effecting the surrender of the Company Certificates
in exchange for certificates representing such Company Stockholder's pro rata
portion of the consideration, and (iii) a Stockholder Certificate (a
"Stockholder Certificate") in form specified by Parent and approved prior to the
Closing by the Company, which approval shall not be unreasonably withheld, for
execution by the Company Stockholder. Upon surrender of a Company Certificate
for cancellation to the Exchange Agent or to such other agent or agents as may
be appointed by Parent, together with such letter of transmittal and Stockholder
Certificate, duly completed and validly executed in accordance with the
instructions thereto, the Company Stockholder shall be entitled to receive, and
the Exchange Agent shall promptly deliver in exchange therefor, a certificate
for the Parent Common Stock ("Parent Certificate") representing the number of
whole shares of Parent Common Stock (less the number of shares of Parent Common
Stock to be deposited in the Escrow Fund on such holder's behalf pursuant to
Section 1.8(b) and Article 7 hereof) to which such holder is entitled pursuant
to Section 1.6, and the Company Certificate so surrendered shall forthwith be
canceled. As soon as practicable after the Effective Time, and subject
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to and in accordance with the provisions of Article VII hereof, Parent shall
cause to be distributed to the Escrow Agent (as defined in Article VII) Parent
Certificate(s) representing that number of shares of Parent Common Stock equal
to the Escrow Amount which shall be registered in the name of the Escrow Agent.
Such shares shall be beneficially owned by the holders on whose behalf such
shares were deposited in the Escrow Fund and shall be available to compensate
Parent as provided in Article VII. Until so surrendered, each outstanding
Company Certificate that, prior to the Effective Time, represented shares of
Company 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 Parent Common Stock into which such
shares of Company Capital Stock shall have been so converted and the right to
receive any dividends or distributions payable pursuant to Section 1.8(d).
(c) Distributions With Respect to Unexchanged Shares. No
dividends or other distributions declared or made after the Effective Time with
respect to Parent Common Stock with a record date after the Effective Time will
be paid to the holder of any unsurrendered Company Certificate with respect to
the shares of Parent Common Stock represented thereby until the holder of record
of such Company Certificate shall surrender such Company Certificate. Subject to
applicable law, following surrender of any such Company Certificate, there shall
be paid to the record holder of the Parent Certificates representing whole
shares of Parent Common Stock issued in exchange therefor, plus the amount of
dividends or other distributions (without interest) with a record date after the
Effective Time theretofore paid with respect to such whole shares of Parent
Common Stock.
(d) Transfers of Ownership. If any Parent Certificate is to be
issued in a name other than that in which the Company Certificate surrendered in
exchange therefor is registered, it will be a condition of the issuance thereof
that the Company Certificate so surrendered will be properly endorsed and
otherwise in proper form for transfer and that the person requesting such
exchange will have paid to Parent or any agent designated by it any transfer or
other taxes required by reason of the issuance of a Parent Certificate for
shares of Parent Common Stock in any name other than that of the registered
holder of the Company Certificate surrendered.
(e) Lost, Stolen or Destroyed Company Certificates. In the event
any Company Certificate evidencing shares of Company Capital Stock shall have
been lost, stolen or destroyed, the Exchange Agent shall issue in exchange for
such lost, stolen or destroyed Company Certificates, upon the delivery by the
holder thereof of an affidavit of that fact by the holder thereof containing
customary indemnification provisions, Parent Certificates representing whole
shares of Parent Common Stock to be issued in exchange for such lost, stolen or
destroyed Company Certificates.
(f) No Liability. Notwithstanding anything to the contrary in
this Section 1.8, neither Parent nor any party hereto shall be liable to a
holder of shares of Parent Common Stock or Company Capital Stock for any amount
properly paid to a public official pursuant to any applicable abandoned
property, escheat or similar law.
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(g) No Further Ownership Rights in Company Capital Stock. The
shares of Parent Common Stock issued in accordance with the terms hereof shall
be deemed to be full satisfaction of all rights pertaining to shares of Company
Capital Stock outstanding prior to the Effective Time, and there shall be no
further registration of transfers on the records of Parent of shares of Company
Capital Stock that were outstanding prior to the Effective Time. If, after the
Effective Time, any Company Certificate is presented to Parent for any reason,
they shall be canceled and exchanged as provided in this Article I.
(h)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 the Company, Parent, Merger Sub, and the officers and
directors of the Company, Parent and Merger Sub are fully authorized in the name
of their respective corporations or otherwise to take, and will take, all such
lawful and necessary action.
1.9 Capital Stock of Merger Sub. Each share of Common Stock, $0.001 par
value per share, of Merger Sub (the "Merger Sub Common Stock") issued and
outstanding immediately prior to the Effective Time shall be converted
immediately upon the Merger into one validly issued, fully paid and
nonassessable share of Common Stock, $0.001 par value per share, of the
Surviving Corporation. Each certificate evidencing ownership of shares of Merger
Sub Common Stock shall evidence ownership of such shares of capital stock of the
Surviving Corporation.
1.10 Adjustments to Exchange Ratio. The exchange ratios determined above
shall be adjusted to reflect appropriately the effect of any stock split,
reverse stock split, stock dividend (including any dividend or distribution of
securities convertible into Parent Common Stock or Company Common Stock),
reorganization, recapitalization, reclassification, combination, exchange of
shares or other like change with respect to the Parent Common Stock.
1.11 Tax Consequences. It is intended by the parties hereto that the
Merger shall constitute a "plan of reorganization" within the meaning of Section
368 of the Code and Sections 1.368-2(g) and 1.368-3(a) of the United States
Income Tax Regulations. The parties shall not take a position on any tax return
inconsistent with this Section.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
As of the date hereof and as of the Closing Date, the Company represents
and warrants to Parent, subject to such exceptions as are clearly disclosed in
the Schedule of Exceptions (referencing the appropriate section number or as
otherwise may be obviously or clearly applicable by a reasonable person)
supplied by the Company to Parent (the "Company Schedules") and dated as of the
date hereof, as follows:
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2.1 Organization of the Company. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
California. The Company has the corporate power to own its properties and to
carry on its business as now being conducted. The Company is duly qualified to
do business and in good standing as a foreign corporation in each jurisdiction
in which the nature of its business requires it by law to be so qualified. The
Company has delivered a true and correct copy of its Articles of Incorporation
and Bylaws, each as amended to date, to Parent.
2.2 Company Capital Structure
(a) The authorized capital stock of the Company consists of
15,000,000 shares of authorized Common Stock, of which 4,495,000 shares are
issued and outstanding, and 3,012,631 shares of authorized Preferred Stock,
1,723,251 of which are designated Series A Preferred Stock, of which 1,723,251
shares are issued and outstanding, and 1,289,390 of which are designated Series
B Preferred Stock, of which 1,081,267 shares are issued and outstanding and that
certain Convertible Subordinated Promissory Note, dated as of June 23, 1999, in
the stated principle amount of $500,000, (the "Convertible Note"). The Company
Capital Stock is held of record by the persons, and in the amounts set forth on
Schedule 2.2(a). The Company has delivered to Parent the accurate address for
each such holder. All outstanding shares of Company Capital Stock are duly
authorized, validly issued, fully paid and non-assessable and not subject to
preemptive rights created by statute, the Articles of Incorporation or Bylaws of
the Company or any agreement to which the Company is a party or by which it is
bound. All preferential rights of the Company Preferred Stock in connection with
or arising from the Merger and the amount of common stock of the Company into
which such Company Preferred Stock or Notes convertible for each holder thereof
as accurately reflected in Schedule 2.2(a). Then, current, and complete copies
of each document authorizing, modifying, or affecting our Company Capital Stock
is contained in Schedule 2.2(a).
(b) The Company has reserved 4,000,000 shares of Common Stock
for issuance to employees and consultants pursuant to the Option Plan, of which
2,032,500 shares are subject to outstanding, unexercised options and the
remainder being available for future grant. The Company has not reserved any
other shares of Company Common Stock for issuance upon exercises of an option,
warrant, or convertible security or debt instrument, or otherwise. Schedule
2.2(b) sets forth for each outstanding Company Option, the number of shares of
Common Stock subject to such option, the exercise price of such option and the
vesting schedule for such option, including the extent vested to date and
whether the exercisability of such option will be accelerated and become
exercisable by reason of the transactions contemplated by this Agreement. The
Company has delivered to Parent a list setting forth the names and addresses of
the holders of each Outstanding Company Option. Except for the Company Options
described in Schedule 2.2(b), there are no options, warrants, calls, rights,
debt instruments, commitments or agreements of any character, written or oral,
to which the Company is a party or by which it is bound obligating the Company
to issue, deliver, sell, repurchase or redeem, or cause to be issued, delivered,
sold, repurchased or redeemed, any shares of the capital stock of the Company or
obligating the Company to grant,
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extend, accelerate the vesting of, change the price of, otherwise amend or enter
into any such option, warrant, call, right, debt instrument, commitment or
agreement. The holders of Company Options have been or will be given, or shall
have properly waived, any required notice prior to the Merger, and all such
rights will be terminated at or prior to the Effective Time. As a result of the
Merger, Parent will be the record and sole beneficial owner of all capital stock
of the Company and rights to acquire or receive such capital stock. Except as
contemplated by this Agreement or set forth in Schedule 2.2(b) there are no
registration rights agreements, no voting trust, proxy or other agreement or
understanding to which the Company is a party or by which it is bound with
respect to any equity security of any class of the Company.
2.3 Subsidiaries. The Company does not have and has never had any
subsidiaries or affiliated companies and does not otherwise own and has never
otherwise owned any shares of capital stock or any interest in, or control,
directly or indirectly, any other corporation, partnership, association, joint
venture or other business entity.
2.4 Authority. Subject only to the requisite approval of the Merger and
this Agreement by the Company's stockholders, the Company has all requisite
corporate power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The vote required of the Company's
Stockholders to duly approve the Merger and this Agreement is a majority of the
shares of Company Common Stock voting as a class and a majority of the shares of
the Company Preferred Stock voting as a class. The execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby have
been duly authorized by all necessary corporate action on the part of the
Company, subject only to the approval of the Merger by the Company's
stockholders. The Company's Board of Directors has approved the Merger and this
Agreement on April 19, 2000. This Agreement has been duly executed and delivered
by the Company and constitutes the valid and binding obligation of the Company,
enforceable in accordance with its terms, subject to the laws of general
application relating to bankruptcy, insolvency and relief of debtors and to
rules of law governing specific performance, injunctive relief and other
equitable remedies. Except as set forth on Schedule 2.4, subject only to the
approval of the Merger and this Agreement by the Company's stockholders, the
execution and delivery of this Agreement by the Company does not, and, as of the
Effective Time, the consummation of the transactions contemplated hereby 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 (any such event, a "Conflict") (i) any provision of the Articles
of Incorporation or Bylaws of the Company or (ii) any mortgage, indenture,
lease, contract or other agreement or instrument, permit, concession, franchise,
license, judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to the Company or its properties or assets. No consent, waiver,
approval, order or authorization of, or registration, declaration or filing
with, any court, administrative agency or commission or other federal, state,
county, local or foreign governmental authority, instrumentality, agency or
commission ("Governmental Entity") or any third party (so as not to trigger any
Conflict) is required by or with respect to the Company in connection with the
execution and delivery of this Agreement
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or the consummation of the transactions contemplated hereby, except for (i) the
filing of the Agreement of Merger with the California Secretary of State, (ii)
such consents, waivers, approvals, orders, authorizations, registrations,
declarations and filings as may be required under applicable federal and state
securities laws (iii) if applicable, the filing of such notices and the
expiration of such waiting periods as required by the Xxxx Xxxxx Xxxxxx
Antitrust Improvements Act of 1976, as amended (the "HSR Act") and (iv) such
other consents, waivers, authorizations, filings, approvals and registrations
which are set forth on Schedule 2.4.
2.5 Company Financial Statements. Schedule 2.5 sets forth the Company's
(i) audited balance sheet as of December 31, 1998, and the related audited
statements of income, cash flow and stockholders' equity for the one (1) year
period then ended (collectively, the "1998 Audited Year-End Financials") (ii)
balance sheet, as of June 30, 1999, and the related audited statements of
income, cash flow and stockholders' equity for the six month period then ended,
all reviewed by the Company's independent public accountant (collectively, the
"1999 Reviewed Financials"), (iii) unaudited balance sheet as of December 31,
1999, and the related unaudited statement of income for the twelve month period
then ended (collectively, the "1999 Unaudited Year-End Financials"), and, (iv)
unaudited balance sheet as of March 31, 2000, and the related unaudited
statement of income for the three month period then ended (collectively, the
"2000 Unaudited First Quarter Financials"). As used herein the 1998 audited
Year-end Financials, the 1999 Reviewed Financials, the 1999 Unaudited Year-End
Financials, and the 2000 Unaudited First Quarter Financials together are the
"Company Financial Statements"). The Company Financial Statements are complete
and correct and have been prepared in accordance with generally accepted
accounting principles ("GAAP") applied on a basis consistent throughout the
periods indicated and consistent with each other (except that the 2000 Unaudited
First Quarter Financials do not contain footnotes and other presentation items
that may be required by GAAP). The Company Financial Statements present fairly
the financial condition and operating results of the Company as of the dates and
during the periods indicated therein, subject in the case of the 2000 Unaudited
First Quarter Financials to normal year-end adjustments, which are not material
in amount or significance in any individual case or in the aggregate. The
balance sheet contained in its 2000 Unaudited First Quarter Financials is
referred to hereinafter as the "Balance Sheet."
2.6 No Undisclosed Liabilities. The Company has no liability,
indebtedness, obligation, expense, claim, deficiency, guaranty or endorsement of
any type, whether accrued, absolute, contingent, matured, unmatured or other
(whether or not required to be reflected in the Company Financial Statements in
accordance with GAAP), which individually or in the aggregate, (i) has not been
reflected in the Balance Sheet, or (ii) has not arisen in the ordinary course of
the Company's business since the date of the Balance Sheet, consistent with past
practices.
2.7 No Changes. Except as set forth in Schedule 2.7, since the date of
the Balance Sheet, there has not been, occurred or arisen any:
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(a) transaction by the Company except in the ordinary course of
business as conducted on the date of the Balance Sheet and consistent with past
practices;
(b) amendments or changes to the Articles of Incorporation or
Bylaws of the Company;
(c) capital expenditure or commitment by the Company exceeding
$20,000 individually or $50,000 in the aggregate;
(d) payment, discharge or satisfaction, in any amount in excess
of $5,000 in any one case, or $10,000 in the aggregate, of any claim, liability
or obligation (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than payment, discharge or satisfaction in the ordinary course
of business of liabilities reflected or reserved against in the Balance Sheet
(e) destruction of, damage to or loss of any assets, business or
customer of the Company (whether or not covered by insurance);
(f) labor trouble or claim of wrongful discharge or other
unlawful labor practice or action;
(g) event or condition that has or would be reasonably expected
to have a Material Adverse Effect on the Company;
(h) change in accounting methods or practices (including any
change in depreciation or amortization policies or rates) by the Company;
(i) revaluation by the Company of any of its assets;
(j) declaration, setting aside or payment of a dividend or other
distribution with respect to the capital stock of the Company, or any direct or
indirect redemption, purchase or other acquisition by the Company of any of its
capital stock;
(k) increase in the salary or other compensation payable or to
become payable to any of its officers or directors, or the declaration, payment
or commitment or obligation of any kind for the payment of a bonus or other
additional salary or compensation to any such person except as described in
Section 2.7(k) of the Company Schedule.
(l) sale, lease, license or other disposition of any of the
assets or properties of the Company, except for fair market value to the Company
in the ordinary course of business and consistent with past practices;
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(m) amendment or termination (other than pursuant to its terms)
of any contract described in Section 2.12(a) of the Company Schedule, material
contract, agreement or license to which the Company is a party or by which it is
bound,
(n) loan by the Company to any person or entity, incurring by
the Company of any indebtedness, guaranteeing by the Company of any
indebtedness, issuance or sale of any debt securities of the Company or
guaranteeing of any debt securities of others, except for advances to employees
for travel and business expenses in the ordinary course of business, consistent
with past practices;
(o) waiver or release of any right or claim of the Company,
including any write-off or other compromise of any account receivable of the
Company, other than in the ordinary course of business, consistent with past
practices;
(p) issuance or sale by the Company of any of its shares of
capital stock, or securities exchangeable, convertible or exercisable therefor,
or of any other of its securities, except for the issuance of Company Common
Stock upon the issuance of stock options;
(q) change in any material respect in pricing or royalties set
or charged by the Company to its customers or licensees or in pricing or
royalties set or charged by persons who have licensed Intellectual Property (as
defined in Section 2.11) to the Company; or
(r) negotiation or agreement by the Company or any officer or
employees thereof to do any of the things described in the preceding clauses (a)
through (q) (other than negotiations with Parent and its representatives
regarding the transactions contemplated by this Agreement).
2.8 Tax and Other Returns and Reports
(a) Definition of Taxes. For the purposes of this Agreement,
"Tax" or, collectively, "Taxes," means any and all federal, state, local and
foreign taxes, assessments and other governmental charges, duties, impositions
and liabilities, including taxes based upon or measured by gross receipts,
income, profits, sales, use and occupation, and value added, ad valorem,
transfer, franchise, withholding, payroll, recapture, employment, excise and
property taxes, together with all interest, penalties and additions imposed with
respect to such amounts and any obligations under any agreements or arrangements
with any other person with respect to such amounts and including any liability
for taxes of a predecessor entity.
(b) Tax Returns and Audits. Except as set forth in Schedule 2.8:
(i) The Company as of the Effective Time will have
prepared and filed all required federal, state, local and foreign returns,
estimates, information statements and reports ("Returns") relating to any and
all Taxes concerning or attributable to the Company or its operations and such
Returns are true and correct and have been completed in accordance with
applicable law.
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(ii) The Company as of the Effective Time: (A) will have
paid all Taxes it is required to pay and (B) will have withheld with respect to
its employees all federal and state income taxes, Federal Insurance Contribution
Act, Federal Unemployment Tax Act and other Taxes required to be withheld.
(iii) There is no Tax deficiency outstanding, proposed
or assessed against the Company, nor has the Company executed any waiver of any
statute of limitations on or extending the period for the assessment or
collection of any Tax.
(iv) No audit or other examination of any Return of the
Company is currently in progress, nor has the Company been notified of any
request for such an audit or other examination.
(v) The Company does not have any liabilities for unpaid
federal, state, local and foreign Taxes which have not been accrued or reserved
against in accordance with GAAP on the Balance Sheet, whether asserted or
unasserted, contingent or otherwise.
(vi) The Company has provided to Parent copies of all
federal and state income and all state sales and use Tax Returns for all periods
since the date of Company's incorporation.
(vii) There are (and as of immediately following the
Effective Date there will be) no liens, pledges, charges, claims, security
interests or other encumbrances of any sort ("Liens") on the assets of the
Company relating to or attributable to Taxes, other than Liens for Taxes not yet
due or payable, which, if required to be reflected, are reflected on the 2000
Unaudited First Quarter Financials.
(viii) As of the Effective Time, there will not be any
contract, agreement, plan or arrangement, including but not limited to the
provisions of this Agreement, covering any employee or former employee of the
Company that, individually or collectively, could give rise to the payment of
any amount that would not be deductible pursuant to Section 280G or 162 of the
Code.
(ix) The Company has not filed any consent agreement
under Section 341(f) of the Code or agreed to have Section 341(f)(2) of the Code
apply to any disposition of a subsection (f) asset (as defined in Section
341(f)(4) of the Code) owned by the Company.
(x) The Company is not a party to a tax sharing or
allocation agreement nor does the Company owe any amount under any such
agreement.
(xi) The Company is not, and has not been at any time, a
"United States real property holding corporation" within the meaning of Section
897(c)(2) of the Code.
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(xii) The Company's tax basis in its assets for purposes
of determining its future amortization, depreciation and other federal income
tax deductions is accurately reflected on the Company's tax books and records.
2.9 Restrictions on Business Activities. There is no agreement
(noncompete or otherwise), commitment, judgment, injunction, order or decree to
which the Company is a party or otherwise binding upon the Company which has or
reasonably would be expected to have the effect of prohibiting or impairing any
business practice of the Company, any acquisition of property (tangible or
intangible) by the Company or the conduct of business by the Company. Without
limiting the foregoing, the Company has not entered into any agreement under
which the Company is restricted from selling, licensing or otherwise
distributing any of its technology or products to or providing services to any
class of customers, in any geographic area, during any period of time or in any
segment of the market.
2.10 Title to Properties; Absence of Liens and Encumbrances.
(a) The Company owns no real property, nor has it ever owned any
real property. Schedule 2.10(a) sets forth a list of all real property currently
leased by the Company, the name of the lessor, the date of the lease and each
amendment thereto and the aggregate annual rental and/or other fees payable
under any such lease. All such current leases are in full force and effect, are
valid and effective in accordance with their respective terms, and there is not,
under any of such leases, any existing default or event of default (or event
which with notice or lapse of time, or both, would constitute a default by the
Company, or to the knowledge of the Company any other party to such leases).
(b) The Company has good and valid title to, or, in the case of
leased properties and assets, valid leasehold interests in, all of its tangible
properties and assets, real, personal and mixed, used or held for use in its
business, free and clear of any Liens (as defined in Section 2.8(b)(vii)),
except as reflected in the Company Financial Statements or in Schedule 2.10(b)
and except for Liens for Taxes not yet due and payable which, if required to be
reflected, are reflected in the 2000 Unaudited First Quarter Financials and such
non-monetary imperfections of title and encumbrances, if any, which are not
material in character, amount or extent, and which do not materially detract
from the value, or materially interfere with the present use, of the property
subject thereto or affected thereby.
2.11 Intellectual Property. For the purposes of this Agreement, the
following terms have the following definitions:
"Intellectual Property" shall mean any or all of the following
and all rights in, arising out of, or associated therewith: (i) all United
States and foreign patents and applications therefor and all reissues,
divisions, renewals, extensions, provisionals, continuations and
continuations-in-part thereof ("Patents"); (ii) all inventions (whether
patentable or not), invention disclosures, improvements, trade secrets,
proprietary information, know how, technology, technical data and
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customer lists, and all documentation relating to any of the foregoing; (iii)
all copyrights, copyright registrations and applications therefor and all other
rights corresponding thereto throughout the world; (iv) all semiconductor and
semiconductor circuit designs; (v) all rights to all mask works and reticles,
mask work registrations and applications therefor; (vi) all industrial designs
and any registrations and applications therefor throughout the world; (vii) all
trade names, logos, common law trademarks and service marks; trademark and
service xxxx registrations and applications therefor and all goodwill associated
therewith throughout the world; (viii) all databases and data collections and
all rights therein throughout the world; (ix) all computer software including
all source code, object code, firmware, development tools, files, records and
data, all media on which any of the foregoing is recorded, all Web addresses,
sites and domain names; (x) any similar, corresponding or equivalent rights to
any of the foregoing; and (xi) all documentation related to any of the foregoing
"Company Intellectual Property" shall mean any Intellectual
Property that is owned by or exclusively licensed to Company or any of its
subsidiaries.
"Registered Intellectual Property" shall mean all United States,
international and foreign: (i) patents, patent applications (including
provisional applications); (ii) registered trademarks, applications to register
trademarks, intent-to-use applications, or other registrations or applications
related to trademarks; (iii) registered copyrights and applications for
copyright registration; (iv) any mask work registrations and applications to
register mask works; and (v) any other Company Intellectual Property that is the
subject of an application, certificate, filing, registration or other document
issued by, filed with, or recorded by, any state, government or other public
legal authority.
"Company Registered Intellectual Property" means all of the
Registered Intellectual Property owned by, or filed in the name of, the Company
or any of its subsidiaries.
(a) Schedule 2.11(a) is a complete and accurate list of all
Company Registered Intellectual Property and specifies, where applicable, the
jurisdictions in which each such item of Company Registered Intellectual
Property has been issued or registered and lists any proceedings or actions
before any court, tribunal (including the United States Patent and Trademark
Office (the "PTO") or equivalent authority anywhere in the world) related to any
of the Company Registered Intellectual Property.
(b) Schedule 2.11(b) is a complete and accurate list (by name
and version number) of all products or service offerings (including related
software) of the Company or any of its subsidiaries ("Company Products") that
have been distributed or provided in the three (3)-year period preceding the
date hereof or which the Company or any of its subsidiaries intends to
distribute or provide in the future, including any products or service offerings
under development.
(c) The Company Intellectual Property is valid and enforceable.
Without limiting the foregoing, Company knows of no information, materials,
facts, or circumstances, including any
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information or fact that would constitute prior art, that would render any of
the Company Registered Intellectual Property invalid or unenforceable, or would
adversely effect any pending application for any Company Registered Intellectual
Property and the Company has not misrepresented, or failed to disclose, and has
no knowledge of any misrepresentation or failure by a third party to disclose,
any fact or circumstances in any application for any Company Registered
Intellectual Property that would constitute fraud or a misrepresentation with
respect to such application or that would otherwise affect the validity or
enforceability of any Company Registered Intellectual Property.
(d) No Company Intellectual Property or Company Product is
subject to any proceeding or outstanding decree, order, judgment, contract,
license, agreement, or stipulation restricting in any manner the use, transfer,
or licensing thereof by Company or any of its subsidiaries, or which may affect
the validity, use or enforceability of such Company Intellectual Property or
Company Product.
(e) Each material item of Company Registered Intellectual
Property is valid and subsisting, all necessary registration, maintenance and
renewal fees currently due in connection with such Company Registered
Intellectual Property have been made and all necessary documents, recordations
and certificates in connection with such Company Registered Intellectual
Property have been filed with the relevant patent, copyright, trademark or other
authorities in the United States or foreign jurisdictions, as the case may be,
for the purposes of perfecting and maintaining such Company Registered
Intellectual Property.
(f) Schedule 2.11(f) is a complete and accurate list of all
actions that are required to be taken by the Company within ninety (90) days of
the date hereof with respect to any of the foregoing Company Registered
Intellectual Property.
(g) Company owns and has good and exclusive title to each
material item of Company Intellectual Property, free and clear of any Lien
(excluding non-exclusive licenses and related restrictions granted in the
ordinary course). Without limiting the foregoing: (i) Company is the exclusive
owner of all trademarks and trade names (other than trademarks and trade names
licensed to the Company) used in connection with the operation or conduct of the
business of Company and its subsidiaries, including the sale, distribution or
provision of any Company Products by Company or its subsidiaries; and (ii)
Company owns exclusively, and has good title to, all copyrighted works that are
Company Products or which Company or any of its subsidiaries otherwise purports
to own; and (iii) the Company Products do not infringe upon any patent or
similar Intellectual Property held by any other person or entity.
(h) All Company Intellectual Property will be fully
transferable, alienable or licensable by Surviving Corporation and/or Parent
without restriction and without payment of any kind to any third party, other
than off the shelf commercial software.
(i) To the extent that any technology, software or material
Intellectual Property has been developed or created independently or jointly by
a third party for Company or any of its
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subsidiaries or is incorporated into any of the Company Products, Company has a
written agreement with such third party with respect thereto and Company thereby
either (i) has obtained ownership of, and is the exclusive owner of, or (ii) has
obtained a perpetual, non-terminable license (sufficient for the conduct of its
business as currently conducted) to all such third party's Intellectual Property
in such work, material or invention by operation of law or by valid assignment,
to the fullest extent it is legally possible to do so.
(j) Except as set forth on Schedule 2.11(j) and with exception
of "shrink-wrap" or similar widely-available commercial end-user licenses, all
Intellectual Property used in or necessary to the conduct of Company's business
as presently conducted or currently contemplated to be conducted by the Company
was written and created solely by either (i) employees of the Company acting
within the scope of their employment or (ii) by third parties who have validly
and irrevocably assigned all of their rights, including Intellectual Property
Rights therein, to the Company, and no third party owns or has any rights to any
of the Company Intellectual Property.
(k) All employees of the Company have entered into valid and
binding written agreements with the Company sufficient to vest title in the
Company of all Intellectual Property created by such employee in the scope of
his or her employment with the Company.
(l) Except as set forth on Schedule 2.11(l), no person who has
licensed any Intellectual Property to the Company has ownership rights or
license rights to improvements made by the Company in such Intellectual
Property.
(m) Neither Company nor any of its subsidiaries has transferred
ownership of, or granted any exclusive license with respect to, any Intellectual
Property that is or was material Company Intellectual Property, to any third
party, or permitted Company's rights in such material Company Intellectual
Property to lapse or enter the public domain.
(n) Schedule 2.11(n) lists all material contracts, licenses and
agreements to which Company or any of its subsidiaries is a party: (i) with
respect to Company Intellectual Property licensed or transferred to any third
party (other than end-user licenses in the ordinary course); or (ii) pursuant to
which a third party has licensed or transferred any material Intellectual
Property to Company.
(o) All contracts, licenses and agreements relating to either
(i) Company Intellectual Property or (ii) Intellectual Property of a third party
licensed to Company or any of its subsidiaries, are in full force and effect.
The consummation of the transactions contemplated by this Agreement will neither
violate nor result in the breach, modification, cancellation, termination or
suspension of such contracts, licenses and agreements. Each of Company and its
subsidiaries is in compliance with, and have not breached any term of any such
contracts, licenses and agreements and, to the Company's knowledge, all other
parties to such contracts, licenses and agreements are in compliance with, and
have not breached any term of, such contracts, licenses and agreements.
Following the Closing Date, the Surviving Corporation will be permitted to
exercise all of
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Company's rights under such contracts, licenses and agreements to the same
extent Company and its subsidiaries would have been able to had the transactions
contemplated by this Agreement not occurred and without the payment of any
additional amounts or consideration other than ongoing fees, royalties or
payments which Company would otherwise be required to pay.
(p) Neither this Agreement nor the transactions contemplated by
this Agreement, including the assignment to Parent or Merger Sub by operation of
law or otherwise of any contracts or agreements to which the Company is a party,
will result in: (i) either Parent's or the Merger Sub's granting to any third
party any right to or with respect to any material Intellectual Property right
owned by, or licensed to, either of them; (ii) either the Parent's or the Merger
Sub's being bound by, or subject to, any non-compete or other material
restriction on the operation or scope of their respective businesses; or (iii)
either the Parent's or the Merger Sub's being obligated to pay any royalties or
other amounts to any third party in excess of those payable by Parent or Merger
Sub, respectively, prior to the Closing.
(q) The operation of the business of the Company as it currently
is conducted or is contemplated by the Company to be conducted, including but
not limited to the design, development, use, import, branding, advertising,
promotion, marketing, manufacture and sale of the Company Products (including
products, technology or services currently under development) does not and will
not and will not when conducted by Parent and/or Surviving Corporation in
substantially the same manner following the Closing, infringe or misappropriate
any Intellectual Property right of any person, violate any right of any person
(including any right to privacy or publicity) or constitute unfair competition
or trade practices under the laws of any jurisdiction, and the Company has not
received notice from any person claiming that such operation or any act,
product, technology or service (including products, technology or services
currently under development) of the Company infringes or misappropriates any
Intellectual Property right of any person or constitutes unfair competition or
trade practices under the laws of any jurisdiction (nor is there any basis
therefor which is or should reasonably be within the knowledge of the Company).
(r) Except as set forth on Schedule 2.11(r), the Company
Intellectual Property constitutes all the Intellectual Property used in and/or
necessary to the conduct of the business of the Company as it currently is
conducted, and, to the Company's knowledge, as it is currently planned or
contemplated to be conducted by the Company, including, without limitation, the
design, development, manufacture, use, import and sale of products, technology
and performance of services (including products, technology or services
currently under development).
(s) Neither Company nor any of its subsidiaries has received
notice from any third party that the operation of the business of Company or any
of its subsidiaries or any act, product or service of Company or any of its
subsidiaries, infringes or misappropriates the Intellectual Property of any
third party or constitutes unfair competition or trade practices under the laws
of any jurisdiction.
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(t) To the Company's knowledge, no person has or is infringing
or misappropriating any Company Intellectual Property.
(u) Company and each of its subsidiaries has taken reasonable
steps for companies of a similar size in a similar business to protect Company's
and its subsidiaries' rights in Company's material confidential information and
trade secrets or any trade secrets or confidential information of third parties
provided to Company or any of its subsidiaries, and, without limiting the
foregoing, each of Company and its subsidiaries has and enforces a policy
requiring each employee and contractor to execute a proprietary
information/confidentiality agreement substantially in the form provided to
Parent and all current and former employees and contractors of Company and any
of its subsidiaries have executed such an agreement, except where the failure to
do so is not reasonably expected to be material to Company.
(v) No Company Product records, stores, processes, calculates or
presents calendar data in a manner which will cause records containing dates on
or after January 1, 2000 to loose functionality or to not be interoperable with
or to unable to receive records containing dates on or after January 1, 2000.
All of the Company's Information Technology (as defined below) is Year 2000
Compliant, and will not cause an interruption in the ongoing operations of the
Company's business on or after January 1, 2000. For purposes of the foregoing,
the term "Information Technology" shall mean and include all software, hardware,
firmware, telecommunications systems, network systems, embedded systems and
other systems, components and/or services (other than general utility services
including gas, electric, telephone and postal) that are integral to the
Company's Products or the conduct of its business.
12. Agreements, Contracts and Commitments.
(a) Except as set forth on Schedule 2.12(a), the Company does
not have, is not a party to nor is it bound by:
(i) any collective bargaining agreements,
(ii) any agreements or arrangements that contain any
severance pay or post-employment liabilities or obligations,
(iii) any bonus, deferred compensation, pension, profit
sharing or retirement plans, or any other employee benefit plans or
arrangements,
(iv) any employment or consulting agreement, contract or
commitment with an employee or individual consultant or salesperson or any
consulting or sales agreement, contract or commitment under which any firm or
other organization provides services to the Company,
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(v) any agreement or plan, including, without
limitation, any stock option plan, stock appreciation rights plan or stock
purchase plan, any of the benefits of which will be increased, or the vesting of
benefits of which will be accelerated, by the occurrence of any of the
transactions contemplated by this Agreement or the value of any of the benefits
of which will be calculated on the basis of any of the transactions contemplated
by this Agreement,
(vi) any fidelity or surety bond or completion bond,
(vii) any lease of personal property having a value in
excess of $5,000 individually or $10,000 in the aggregate,
(viii) any agreement of indemnification or guaranty,
(ix) any agreement, contract or commitment containing
any covenant limiting the freedom of the Company to engage in any line of
business or to compete with any person,
(x) any agreement, contract or commitment relating to
capital expenditures and involving future payments in excess of $20,000
individually or $50,000 in the aggregate,
(xi) any agreement, contract or commitment relating to
the disposition or acquisition of assets or any interest in any business
enterprise,
(xii) any mortgages, indentures, loans or credit
agreements, security agreements or other agreements or instruments relating to
the borrowing of money or extension of credit, including guaranties referred to
in clause (viii) hereof,
(xiii) any purchase order or contract for the purchase
of raw materials and/or supplies involving $20,000 or more,
(xiv) any construction contracts,
(xv) any dealer, distribution, joint marketing or
development agreement,
(xvi) any sales representative, original equipment
manufacturer, value added, remarketer, reseller or independent software vendor
or other agreement for use or distribution of the Company's products, technology
or services,
(xvii) any agreement pursuant to which the Company has
granted or may grant in the future, to any party, a source-code license or
option or other right to use or acquire source-code, or
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(xviii) any other agreement, contract or commitment that
involves $20,000 individually or $50,000 in the aggregate or more and is not
cancelable without penalty within thirty (30) days.
(b) Except for such alleged breaches, violations and defaults,
and events that would constitute a breach, violation or default with the lapse
of time, giving of notice, or both, as are all noted in Schedule 2.12(b), the
Company has not breached, violated or defaulted under, or received notice that
it has breached, violated or defaulted under, any of the terms or conditions of
any agreement, contract or commitment required to be set forth on Schedule
2.12(a) or Schedule 2.11(g) (any such agreement, contract or commitment, a
"Contract"). Each Contract is in full force and effect and, except as otherwise
disclosed in Schedule 2.12(b), is not subject to any default thereunder of which
the Company has knowledge by any party obligated to the Company pursuant
thereto.
2.13 Interested Party Transactions. No officer, director or stockholder
of the Company (nor any ancestor, sibling, descendant or spouse of any of such
persons, or any trust, partnership or corporation in which any of such persons
has or has had an interest), has or has had, directly or indirectly, (i) an
economic interest in any entity which furnished or sold, or furnishes or sells,
services or products that the Company furnishes or sells, or proposes to furnish
or sell, (ii) an economic interest in any entity that purchases from or sells or
furnishes to, the Company, any goods or services or (iii) a beneficial interest
in any contract or agreement set forth in Schedule 2.12(a) or Schedule 2.11(g);
provided, that ownership of no more than one percent (1%) of the outstanding
voting stock of a publicly traded corporation shall not be deemed an "economic
interest in any entity" for purposes of this Section 2.13.
2.14 Compliance with Laws. The Company has complied with, is not in
violation of, and has not received any notices of violation with respect to, any
foreign, federal, state or local statute, law or regulation.
2.15 Litigation. Except as set forth in Schedule 2.15, there is no
action, suit or proceeding of any nature pending or to the Company's knowledge
threatened against the Company, its properties or any of its officers or
directors, in their respective capacities as such. Except as set forth in
Schedule 2.15, there is no investigation pending or, to the Company's knowledge,
threatened against the Company, its properties or any of its officers or
directors in their respective capacities as such by or before any governmental
entity. Schedule 2.15 sets forth, with respect to any pending or, to the
knowledge of the Company, threatened action, suit, proceeding or investigation,
the forum, the parties thereto, the subject matter thereof and the amount of
damages claimed or other remedy requested. No governmental entity has at any
time challenged or questioned the legal right of the Company to manufacture,
offer or sell any of its products in the present manner or style thereof.
2.16 Insurance. With respect to the insurance policies and fidelity
bonds covering the assets, business, equipment, properties, operations,
employees, officers and directors of the Company, there is no claim by the
Company pending under any of such policies or bonds as to
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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 the Company is otherwise in compliance with the terms
of such policies and bonds (or other policies and bonds providing substantially
similar insurance coverage). The Company has no knowledge of any threatened
termination of, or premium increase with respect to, any of such policies.
2.17 Minute Books. The minute books of the Company made available to
counsel for Parent are the only minute books of the Company and contain
reasonably accurate summaries of all meetings of the Board of Directors (or
committees thereof) of the Company and its stockholders or actions by written
consent since the time of incorporation of the Company.
2.18 Environmental Matters.
(a) Hazardous Material. The Company has not operated any
underground storage tanks, and has no knowledge of the existence, of any
underground storage tank or related underground piping, at any property that the
Company has at any time owned, operated, occupied or leased. The Company has not
released any amount of any substance that has been designated by applicable
federal, state or local law to be radioactive, toxic, hazardous or otherwise a
danger to health or the environment, including, without limitation, PCBs,
asbestos, oil and petroleum products, urea formaldehyde and all substances
listed as a "hazardous substance," "hazardous waste," "hazardous material" or
"toxic substance" or words of similar import, under any law, including but not
limited to, the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended; the Resource Conservation and Recovery Act of
1976, as amended; the Federal Water Pollution Control Act, as amended; the Clean
Air Act, as amended, and the regulations promulgated pursuant to said laws (a
"Hazardous Material"). No Hazardous Materials are present as a result of the
actions or omissions of the Company, or any of its agents, employees or
contractors for which the Company is legally liable, or to the knowledge of the
Company any other third party as a result of any actions of any third party or
otherwise, in, on or under any property, including the land and the
improvements, ground water and surface water thereof, that the Company has at
any time owned, operated, occupied or leased.
(b) Hazardous Materials Activities. The Company has not
transported, stored, used, manufactured, disposed of, released or exposed its
employees or others to Hazardous Materials in violation of any law in effect on
or before the Effective Time, nor has the Company disposed of, transported,
sold, or manufactured any product containing a Hazardous Material (any or all of
the foregoing being collectively referred to as "Hazardous Materials
Activities") in violation of any rule, regulation, treaty or statute promulgated
by any Governmental Entity in effect prior to or as of the date hereof to
prohibit, regulate or control Hazardous Materials or any Hazardous Material
Activity.
(c) Permits. The Company currently holds all environmental
approvals, permits, licenses, clearances and consents (the "Environmental
Permits") necessary for the conduct of the Company's Hazardous Material
Activities and other businesses of the Company as such activities and businesses
are currently being conducted.
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(d) Environmental Liabilities. No action, proceeding, revocation
proceeding, amendment procedure, writ, injunction or claim is pending, or to the
Company's knowledge, threatened concerning any Environmental Permit, Hazardous
Material or any Hazardous Materials Activity of the Company. The Company is not
aware of any fact or circumstance which is reasonably likely to involve the
Company in any environmental litigation or impose upon the Company any
environmental liability.
2.19 Brokers' and Finders' Fees; Third Party Expenses. The Company has
not incurred, nor will it incur, directly or indirectly, any liability for
brokerage or finders' fees or agents' commissions or any similar charges in
connection with this Agreement or any transaction contemplated hereby. Schedule
2.19 sets forth the principal terms and conditions of any agreement, written or
oral, with respect to such fees. Schedule 2.19 also sets forth the Company's
current reasonable estimate of all Third Party Expenses (as defined in Section
5.4) expected to be incurred by the Company in connection with the negotiation
and effectuation of the terms and conditions of this Agreement and the
transactions contemplated hereby.
2.20 Employee Matters and Benefit Plans . Definitions. With the
exception of the definition of "Affiliate" set forth in Section 2.20(a)(i) below
(which definition shall apply only to this Section 2.20), for purposes of this
Agreement, the following terms shall have the meanings set forth below:
(i) "Affiliate" shall mean any other person or entity under
common control with the Company within the meaning of Section 414(b), (c), (m)
or (o) of the Code and the regulations issued thereunder;
(ii) "Company Employee Plan" shall mean any plan, program,
policy, practice, contract, agreement or other arrangement providing for
compensation, severance, termination pay, deferred compensation, performance
awards, stock or stock-related awards, fringe benefits or other employee
benefits or remuneration of any kind, whether written or unwritten or otherwise,
funded or unfunded, including without limitation, each "employee benefit plan,"
within the meaning of Section 3(3) of ERISA which is or has been maintained,
contributed to, or required to be contributed to, by the Company or any
Affiliate for the benefit of any Employee, or with respect to which the Company
or any Affiliate has or may have any liability or obligation;
(iii) "COBRA" shall mean the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended;
(iv) "DOL" shall mean the Department of Labor;
(v) "Employee" shall mean any current employee, consultant or
director of the Company or any Affiliate;
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(vi) "Employee Agreement" shall mean each management,
employment, severance, consulting, relocation, repatriation, expatriation,
visas, work permit or other agreement, contract or understanding between the
Company or any Affiliate and any Employee;
(vii) "ERISA" shall mean the Employee Retirement Income Security
Act of 1974, as amended;
(viii) "FMLA" shall mean the Family Medical Leave Act of 1993,
as amended;
(ix) "International Employee Plan" shall mean each Company
Employee Plan that has been adopted or maintained by the Company or any
Affiliate, whether informally or formally, or with respect to which the Company
or any Affiliate will or may have any liability, for the benefit of Employees
who perform services outside the United States;
(x) "IRS" shall mean the Internal Revenue Service;
(xi) "Multiemployer Plan" shall mean any "Pension Plan" (as
defined below) which is "multiemployer plan," as defined in Section 3(37) of
ERISA; and
(xii) "Pension Plan" shall mean each Company Employee Plan which
is an "employee pension benefit plan," within the meaning of Section 3(2) of
ERISA.
(b) Schedule. Schedule 2.20(b) contains an accurate and complete
list of each Company Employee Plan, International Employee Plan, and each
Employee Agreement. The Company does not have any plan or commitment to
establish any new Company Employee Plan, International Employee Plan, or
Employee Agreement, to modify any Company Employee Plan or Employee Agreement
(except to the extent required by law or to conform any such Company Employee
Plan or Employee Agreement to the requirements of any applicable law, in each
case as previously disclosed to Parent in writing, or as required by this
Agreement), or to adopt or enter into any Company Employee Plan, International
Employee Plan, or Employee Agreement.
(c) Documents. The Company has made available to Parent: (i)
correct and complete copies of all documents embodying each Company Employee
Plan, International Employee Plan, and each Employee Agreement including
(without limitation) all amendments thereto and all related trust documents;
(ii) the most recent annual actuarial valuations, if any, prepared for each
Company Employee Plan; (iii) the three (3) most recent annual reports (Form
Series 5500 and all schedules and financial statements attached thereto), if
any, required under ERISA or the Code in connection with each Company Employee
Plan; (iv) if the Company Employee Plan is funded, the most recent annual and
periodic accounting of Company Employee Plan assets; (v) the most recent summary
plan description together with the summary(ies) of material modifications
thereto, if any, required under ERISA with respect to each Company Employee
Plan; (vi) all IRS determination, opinion, notification and advisory letters,
and all applications and
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correspondence to or from the IRS or the DOL with respect to any such
application or letter; (vii) all material written agreements and contracts
relating to each Company Employee Plan, including, but not limited to,
administrative service agreements, group annuity contracts and group insurance
contracts; (viii) all communications material to any Employee or Employees
relating to any Company Employee Plan and any proposed Company Employee Plans,
in each case, relating to any amendments, terminations, establishments,
increases or decreases in benefits, acceleration of payments or vesting
schedules or other events which would result in any liability to the Company;
(ix) all correspondence to or from any governmental agency relating to any
Company Employee Plan; (x) samples of standard COBRA forms and related notices
(or such forms and notices as required under comparable law); (xi) all policies
pertaining to fiduciary liability insurance covering the fiduciaries for each
Company Employee Plan; (xii) the three (3) most recent plan years discrimination
tests for each Company Employee Plan; and (xiii) all registration statements,
annual reports (Form 11-K and all attachments thereto) and prospectuses prepared
in connection with each Company Employee Plan.
(d) Employee Plan Compliance. Except as set forth on Schedule
2.20(d), (i) the Company has performed in all material respects all obligations
required to be performed by it under, is not in default or violation of, and has
no knowledge of any default or violation by any other party to each Company
Employee Plan, and each Company Employee Plan has been established and
maintained in all material respects in accordance with its terms and in
compliance with all applicable laws, statutes, orders, rules and regulations,
including but not limited to ERISA or the Code; (ii) each Company Employee Plan
intended to qualify under Section 401(a) of the Code and each trust intended to
qualify under Section 501(a) of the Code has either received a favorable
determination, opinion, notification or advisory letter from the IRS with
respect to each such Company Employee Plan as to its qualified status under the
Code, including all amendments to the Code effected by the Tax Reform Act of
1986 and subsequent legislation, or has remaining a period of time under
applicable Treasury regulations or IRS pronouncements in which to apply for such
a letter and make any amendments necessary to obtain a favorable determination
as to the qualified status of each such Company Employee Plan; (iii) to the
knowledge of the Company, no "prohibited transaction," within the meaning of
Section 4975 of the Code or Sections 406 and 407 of ERISA, and not otherwise
exempt under Section 4975 of the Code or Section 408 of ERISA (or any
administrative class exemption issued thereunder), has occurred with respect to
any Company Employee Plan; (iv) there are no actions, suits or claims pending,
or, to the knowledge of the Company, threatened or reasonably anticipated (other
than routine claims for benefits) against any Company Employee Plan or against
the assets of any Company Employee Plan; (v) each Company Employee Plan (other
than any stock option plan) can be amended, terminated or otherwise discontinued
after the Effective Time, without liability to the Parent, Company or any of its
Affiliates (other than ordinary administration expenses); (vi) there are no
audits, inquiries or proceedings pending or, to the knowledge of the Company or
any Affiliates, threatened by the IRS or DOL with respect to any Company
Employee Plan; and (vii) neither the Company nor any Affiliate is subject to any
penalty or tax with respect to any Company Employee Plan under Section 502(i) of
ERISA or Sections 4975 through 4980 of the Code.
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(e) Pension Plan. Neither the Company nor any Affiliate has ever
maintained, established, sponsored, participated in, or contributed to, any
Pension Plan which is subject to Title IV of ERISA or Section 412 of the Code.
(f) Multiemployer and Multiple Employer Plans. At no time has
the Company or any Affiliate contributed to or been obligated to contribute to
any Multiemployer Plan. Neither the Company, nor any Affiliate has at any time
ever maintained, established, sponsored, participated in, or contributed to any
multiple employer plan, as described in Section 413(c) of the Code.
(g) No Post-Employment Obligations. Except as set forth in
Schedule 2.20(g), no Company Employee Plan provides, or reflects or represents
any liability to provide retiree health to any person for any reason, except as
may be required by COBRA or other applicable statute, and the Company has never
represented, promised or contracted (whether in oral or written form) to any
Employee (either individually or to Employees as a group) or any other person
that such Employee(s) or other person would be provided with retiree health,
except to the extent required by statute.
(h) Health Care Compliance. Neither the Company nor any
Affiliate has, prior to the Effective Time, violated any of the health care
continuation requirements of COBRA, the requirements of FMLA, the requirements
of the Health Insurance Portability and Accountability Act of 1996, the
requirements of the Women's Health and Cancer Rights Act, the requirements of
the Newborns' and Mothers' Health Protection Act of 1996, or any amendment to
each such Act, or any similar provisions of state law applicable to its
Employees.
(i) Effect of Transaction.
(i) Except as set forth on Schedule 2.20(i), the
execution of this Agreement and the consummation of the transactions
contemplated hereby will not (either alone or upon the occurrence of any
additional or subsequent events) constitute an event under any Company Employee
Plan, Employee Agreement, trust or loan that will or may result in any payment
(whether of severance pay or otherwise), acceleration, forgiveness of
indebtedness, vesting, distribution, increase in benefits or obligation to fund
benefits with respect to any Employee.
(ii) Except as set forth on Schedule 2.20(i), no payment
or benefit which will or may be made by the Company or its Affiliates with
respect to any Employee will be characterized as a "parachute payment," within
the meaning of Section 280G(b)(2) of the Code.
(j) Employment Matters. The Company: (i) is in compliance with
all applicable foreign, federal, state and local laws, rules and regulations
respecting employment, employment practices, terms and conditions of employment
and wages and hours, in each case, with respect to Employees; (ii) has withheld
and reported all amounts required by law or by agreement to be withheld and
reported with respect to wages, salaries and other payments to Employees; (iii)
is not liable for any arrears of wages or any taxes or any penalty for failure
to comply with any of the
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foregoing; and (iv) is not liable for any payment to any trust or other fund
governed by or maintained by or on behalf of any governmental authority, with
respect to unemployment compensation benefits, social security or other benefits
or obligations for Employees (other than routine payments to be made in the
normal course of business and consistent with past practice). There are no
pending, reasonably anticipated or, to the knowledge of the Company, threatened
claims or actions against the Company under any worker's compensation policy or
long-term disability policy.
(k) Labor. No work stoppage or labor strike against the Company
is pending, reasonably anticipated, or, to the knowledge of the Company,
threatened. The Company does not know of any activities or proceedings of any
labor union to organize any Employees. Except as set forth in Schedule 2.20(k),
there are no actions, suits, claims, labor disputes or grievances pending, or,
to the knowledge of the Company, threatened or reasonably anticipated relating
to any labor, safety or discrimination matters involving any Employee,
including, without limitation, charges of unfair labor practices or
discrimination complaints, which, if adversely determined, would, individually
or in the aggregate, result in any liability to the Company. Neither the Company
nor any of its subsidiaries has engaged in any unfair labor practices within the
meaning of the National Labor Relations Act. Except as set forth in Schedule
2.20(k), the Company is not presently, nor has it been in the past, a party to,
or bound by, any collective bargaining agreement or union contract with respect
to Employees and no collective bargaining agreement is being negotiated by the
Company.
(l) International Employee Plan. The Company does not now, nor
has it ever had the obligation to, maintain, establish, sponsor, participate in,
or contribute to any International Employee Plan.21. Intentionally deleted.
2.21 Intentionally Deleted.
2.22 No Material Adverse Change. Since the date of the Balance Sheet
there has not occurred, any Material Adverse Effect on the Company.
2.23 Intentionally Deleted.
2.24 Board Approval. The Board of Directors of the Company has, as of
the date of this Agreement (i) approved, subject to stockholder approval, this
Agreement and the transactions contemplated hereby, (ii) determined that the
Merger is in the best interests of the stockholders of the Company and is on
terms that are fair to such stockholders, and (iii) recommended that the Company
Stockholders approve this Agreement and the Merger.
2.25 Representations Complete. None of the representations or warranties
made by the Company (as modified by the Company Schedules), nor any statement
made in any schedule or certificate furnished by the Company pursuant to this
Agreement contains as of the date of this Agreement or will contain at the
Effective Time, any untrue statement of a material fact, or omits or
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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.
2.26 Solicitation of Stockholders. None of the information supplied, or
to be supplied by the Company for inclusion or incorporation (or furnished by
the Company for inclusion or incorporation) into any documents mailed or
delivered to the stockholders of the Company in connection with soliciting their
consent to this Agreement and the Merger, or into any document anticipated to be
filed with the Department of Corporations pursuant hereto, will at the time the
permit is obtained or at any relevant time thereafter contain any untrue
statement of a material fact, or omits or will omit to state any material fact
required to be stated therein or necessary in order to make statements therein,
in light of the circumstances under which made, not misleading. Notwithstanding
the foregoing, the Company makes no representation or warranty with respect to
any information, which is not supplied by the Company, which is contained in any
of the said documents.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
As of the date hereof and as of the Closing Date, Parent represents and
warrants to the Company as follows:
3.1 Organization, Standing and Power. Parent is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. Merger Sub will be a corporation duly organized, validly existing and
in good standing under the laws of the State of California. Parent 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 would be material to Parent
and Merger Sub as a whole. Merger Sub, when formed, will have the corporate
power to own its properties and to carry on its business as now being conducted
and will be duly qualified to do business and is in good standing in each
jurisdiction in which the failure to be so qualified would be material to Parent
and Merger Sub as a whole.
3.2 Authority. Parent has all requisite corporate power and authority to
enter into this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Parent. This Agreement has been duly executed
and delivered by Parent and constitutes the valid and binding obligations of
Parent, enforceable in accordance with its terms subject to the laws of general
application relating to bankruptcy, insolvency and relief of debtors and to
rules of law governing specific performance, injunctive relief and other
equitable remedies. Subject only to the approval of the Merger and this
Agreement by the Company's stockholders, the execution and delivery of this
Agreement by the Company does not, and, as of the Effective Time, the
consummation of the transactions
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contemplated hereby 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 conflict under (i) any provision of the Articles of Incorporation or Bylaws
of the Parent. No consent, waiver, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity or any third
party (so as not to trigger any Conflict) is required by or with respect to the
Parent in connection with the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby, except for (i) the filing
of the Agreement of Merger with the California Secretary of State, (ii) such
consents, waivers, approvals, orders, authorizations, registrations,
declarations and filings as may be required under applicable federal and state
securities laws, and (iii) if applicable, the filing of such notices and the
expiration of such waiting periods as required by the HSR Act.
3.3 Capital Structure.
(a) As of January 31, 2000, the authorized stock of Parent
consisted of 250,000,000 shares of Common Stock, of which 110,500,000 shares
were issued and outstanding as of January 22, 2000, and 5,000,000 shares of
Preferred Stock, none of which is issued or outstanding. The authorized capital
stock of Merger Sub will consist of 1,000 shares of Common Stock, 1,000 shares
of which, will be issued and outstanding and will be held by Parent. All such
shares will be duly authorized, and all such issued and outstanding shares will
be validly issued, are fully paid and nonassessable and are free of any liens or
encumbrances other than any liens or encumbrances created by or imposed upon the
holders thereof.
(b) The shares of Parent Common Stock to be issued pursuant to
the Merger, when issued, will be duly authorized, validly issued, fully paid,
non-assessable, free of any liens or encumbrances not, and are not subject to
any preemptive rights or rights of first refusal created by statute or the
Certificate of Incorporation or Bylaws of Parent or any agreement to which
Parent is a party or is bound. The shares of Parent Common Stock issued by
Parent in the Merger shall be issued in compliance with applicable federal and
state securities laws, be freely transferable by the Company Stockholders and
shall be legended only as required by applicable law or as contemplated by this
Agreement or the documents to entered into pursuant to this agreement.
3.4 SEC Documents; Parent Financial Statements. Parent has furnished or
made available to the Company true and complete copies of all reports or
registration statements filed by it with the Securities and Exchange Commission
(the "SEC") for the three (3) years prior to the date hereof, all in the form so
filed, including the exhibits thereto (all of the foregoing being collectively
referred to as the "SEC Documents"). As of their respective filing dates, the
SEC Documents complied in all material respects with the requirements of the
Securities Act of 1933 (the "Securities Act") or the Securities Exchange Act of
1934 (the "Exchange Act") as the case may be, and none of the 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
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document subsequently filed with the SEC. The financial statements of Parent,
including the notes thereto, included in the SEC Documents (the "Parent
Financial Statements") comply as to form in all material respects with
applicable accounting requirements and with the published rules and regulations
of the SEC with respect thereto, have been prepared in accordance with generally
accepted accounting principles consistently applied (except as may be indicated
in the notes thereto or, in the case of unaudited statements, as permitted by
Form 10-Q of the SEC) and present fairly the consolidated financial position of
Parent at the dates thereof and the consolidated results of its operations and
cash flows for the periods then ended (subject, in the case of unaudited
statements, to normal audit adjustments). There has been no change in Parent
accounting policies except as described in the notes to the Parent Financial
Statements; provided, however, the Parent may have restated or may restate one
or more of the Parent Financial Statements to reflect acquisitions entered into
subsequent to the respective dates thereof.
3.5 Litigation. There is no action, suit, proceeding, claim, arbitration
or investigation pending or to the knowledge of Parent, threatened against
Parent which in any manner challenges or seeks to prevent, enjoin, alter or
materially delay any of the transactions contemplated by this Agreement.
3.6 Brokers' and Finders' Fees. Parent has not incurred, nor will it
incur directly or indirectly, any liability for brokerage or finders' fees or
agents' commissions or any similar charges in connection with this Agreement or
any transaction contemplated hereby.
3.7 No Material Adverse Change. Since the date of the balance sheet
included in the Parent's report on Form 10-K filed March 9, 2000, there has not
occurred: (a) any Material Adverse Effect on Parent; or (b) any amendments or
changes in the Certificate of Incorporation or Bylaws of Parent.
3.8 Representations Complete. None of the representations or warranties
made by the Parent, nor any statement made in any schedule or certificate
furnished by the Parent pursuant to this Agreement, 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 light of the circumstances
under which made, not misleading.
3.9 Proxy and Information Statement. None of the information supplied,
or to be supplied, by Parent for inclusion or incorporation by reference (or
furnished by the Parent for inclusion or incorporation) into any documents
mailed or delivered to the stockholders of the Company in connection with
soliciting their consent to this Agreement or the Merger or into any document
anticipated to be filed with the California Department of Corporations pursuant
hereto, at the time the Permit is obtained or at any relevant time thereafter,
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 required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not materially
misleading.
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Notwithstanding the foregoing, Parent makes no representation or warranty with
respect to any information, which is not supplied by the Parent, which is
contained in any of the said documents.
ARTICLE IV
CONDUCT PRIOR TO THE EFFECTIVE TIME
4.1 Conduct of Business of the Company. During the period from the date
of this Agreement and continuing until the earlier of the termination of this
Agreement and the Effective Time, the Company agrees (except to the extent that
Parent shall otherwise consent in writing) to carry on its business in the
usual, regular and ordinary course in substantially the same manner as
heretofore conducted, to pay its debts and Taxes when due, to pay or perform
other obligations when due, and, to the extent consistent with such business, to
use all reasonable efforts consistent with past practice and policies to
preserve intact its present business organization, keep available the services
of its present officers and key employees and preserve the Company's
relationships with customers, suppliers, distributors, licensors, licensees, and
others having business dealings with it, all with the goal of preserving
unimpaired its goodwill and ongoing businesses at the Effective Time. The
Company shall promptly notify Parent of any event or occurrence or emergency not
in the ordinary course of business of the Company and any material event
involving the Company. Except as expressly contemplated by this Agreement, the
Company shall not, without the prior written consent of Parent:
(a) Enter into any commitment, activity or transaction not in
the ordinary course of business;
(b) Transfer to any person or entity any rights to any Company
Intellectual Property or enter into any agreement with respect to Company
Intellectual Property with any person or entity;
(c) Terminate any employees other than for cause or encourage
any employees to resign from the Company;
(d) Amend or otherwise modify (or agree to do so), or violate
the terms of, any of the agreements set forth or described in the Company
Schedules;
(e) Commence or settle any litigation;
(f) Declare, set aside 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 of capital stock of the Company, or repurchase,
redeem or otherwise acquire, directly or indirectly, any shares of its capital
stock (or options, warrants or other rights exercisable therefor) except for (i)
repurchases of Company Capital Stock upon the
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termination of service of any service providers of Company in accordance with
the standard terms set forth in the agreements governing such repurchases, all
of which agreements have been provided or made available to Parent, (ii)
conversion of Company Preferred Stock and (iii) exercises or conversion of
Company Convertible Securities;
(g) Except for the issuance of shares of Company Capital Stock
upon exercise or conversion of presently outstanding Company Options, Company
Preferred Stock or the Note, issue, sell, grant, contract to issue, grant or
sell, or authorize the issuance, delivery, sale or purchase of any shares of
Company Capital Stock or securities convertible into, or exercisable or
exchangeable for, shares of Company Capital Stock, or any securities, warrants,
options or rights to purchase any of the foregoing;
(h) Cause or permit any amendments to its Articles of
Incorporation or Bylaws;
(i) Acquire or agree to acquire by merging or consolidating
with, or by purchasing any assets or equity securities 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 the
business of the Company including any Company Intellectual Property;
(j) Sell, lease, license or otherwise dispose of any of the
assets or properties of Company which are not Company Intellectual Property or
create any security interest in such assets or properties;
(k) Grant any loan to any person or entity, incur any
indebtedness or guarantee any indebtedness, issue or sell any debt securities,
guarantee any debt securities of others, purchase any debt securities of others
or amend the terms of any outstanding agreements related to borrowed money,
except for advances to employees for travel and business expenses in the
ordinary course of business consistent with past practices;
(l) Grant any severance or termination pay (i) to any director
or officer or (ii) to any employee or consultant, or increase in the salary or
other compensation payable or to become payable by Company to any of its
officers, directors, employees or advisors other than salary increases in the
ordinary course of business consistent as to timing and amount with the prior
year's increases, or declare, pay or make any commitment or obligation of any
kind for the payment by Company of a bonus or other additional salary or
compensation to any such person, or adopt or amend any employee benefit plan or
enter into any employment contract;
(m) Revalue any of its assets, including without limitation
writing down the value of inventory or writing off notes or accounts receivable;
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(n) Take any action to accelerate the vesting schedule of any of
the outstanding Company Options or Company Capital Stock, other than as a
consequence of the effect of the transaction herein contemplated upon the Option
Plans in accordance with their terms.
(o) Pay, discharge or satisfy, in an amount in excess of $20,000
individually or $50,000 in the aggregate any claim, liability or obligation
(absolute, accrued, asserted or unasserted, contingent or otherwise), other than
the payment, discharge or satisfaction in the ordinary course of business of
liabilities reflected or reserved against in the 2000 Unaudited First Quarter
Financials;
(p) Make or change any election in respect of Taxes, adopt or
change any accounting method in respect of Taxes, enter into any closing
agreement, settle any claim or assessment in respect of Taxes, or consent to any
extension or waiver of the limitation period applicable to any claim or
assessment in respect of Taxes;
(q) Enter into any strategic alliance, joint development or
joint marketing arrangement or agreement;
(r) Fail to pay or otherwise satisfy its monetary obligations as
they become due, except such as are being contested in good faith;
(s) Waive or commit to waive any rights with a value in excess
of $20,000 individually or $50,000 in the aggregate;
(t) Cancel or renew any insurance policy other than in the
ordinary course of business; consistent with the prior policy.
(u) Alter, or enter into any commitment to alter, its interest
in any corporation, association, joint venture, partnership or business entity
in which the Company directly or indirectly holds any interest on the date
hereof; or
(v) Take, or agree in writing or otherwise to take, any of the
actions described in Sections 4.1(a) through (u) above, or any other action that
would prevent the Company from performing or cause the Company not to perform
its covenants hereunder.
4.2 No Solicitation. Until the earlier of the Effective Time and the
date of termination of this Agreement pursuant to the provisions of Section 8.1
hereof, the Company will not (nor will the Company permit any of the Company's
officers, directors, stockholders, agents, representatives or affiliates to)
directly or indirectly, take any of the following actions with any party other
than Parent and its designees: (a) solicit, initiate, entertain, or encourage
any proposals or offers from, or conduct discussions with or engage in
negotiations with, any person relating to any possible acquisition of the
Company or any of its subsidiaries (whether by way of merger, purchase of
capital stock, purchase of assets or otherwise), any portion of its capital
stock or assets or any equity interest in the Company or any of its
subsidiaries, (b) provide information with respect to it to any person,
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other than Parent, relating to, or otherwise cooperate with, facilitate or
encourage any effort or attempt by any such person with regard to, any possible
acquisition of the Company (whether by way of merger, purchase of capital stock,
purchase of assets or otherwise), any of its capital stock or assets or any
equity interest in the Company or any of its subsidiaries, (c) enter into an
agreement with any person, other than Parent, providing for the acquisition of
the Company (whether by way of merger, purchase of capital stock, purchase of
assets or otherwise), any of its capital stock or assets or any equity interest
in the Company or any of its subsidiaries, or (d) make or authorize any
statement, recommendation or solicitation in support of any possible acquisition
of the Company or any of its subsidiaries (whether by way of merger, purchase of
capital stock, purchase of assets or otherwise), any of its capital stock or
assets or any equity interest in the Company or any of its subsidiaries by any
person, other than by Parent. The Company shall immediately cease and cause to
be terminated any such contacts or negotiations with third parties relating to
any such transaction or proposed transaction. In addition to the foregoing, if
the Company receives prior to the Effective Time or the termination of this
Agreement any offer or proposal relating to any of the above, the Company shall
immediately notify Parent thereof, including information as to the identity of
the offeror or the party making any such offer or proposal and the specific
terms of such offer or proposal, as the case may be, and such other information
related thereto as Parent may reasonably request. Except as contemplated by this
Agreement, disclosure by the Company of the terms hereof (other than the
prohibition of this Section 4.2) shall be deemed to be a violation of this
Section 4.2.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Fairness Hearing; Stockholder Approval.
(a) As promptly as practicable after the execution of this
Agreement, the Company and Parent shall jointly prepare a notice of hearing
before the California Department of Corporation and shall take all other actions
requested to obtain a permit (a "Permit"), from the Commissioner of Corporations
of the State of California pursuant to Section 25121 of the California Corporate
Securities Law of 1968, so that the issuance of Parent Common Stock in the
Merger shall be exempt from registration under Section 3(a)(10) of the
Securities Act. Company and Parent will respond to any comments from the
California Department of Corporations and use their commercially reasonable
efforts to have the Permit granted as soon as practicable after such filing. As
promptly as practicable after receipt of a Permit, each party shall agree upon
an information statement and proxy for the Company Stockholders to approve this
Agreement, and the transactions contemplated hereby (the "Proxy and Information
Statement") and adoption by the Company Stockholders as provided by California
Law and its Articles of Incorporation and Bylaws. The Company shall use its best
efforts to solicit and obtain the consent of the Company Stockholders sufficient
to approve the Proxy and Information Statement. The Information Statement shall
include such disclosure materials as are necessary for the offer and issuance of
the shares of Parent Common Stock to be received by the holders of Company
Capital Stock in the Merger, and shall include
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without limitation information regarding the terms of the Merger and this
Agreement and the recommendation of the Board of Directors of the Company in
favor of the Merger and this Agreement. Each of Parent and the Company shall use
its reasonable efforts to cause the Information Statement to comply with
applicable federal and state securities laws. Each of Parent and the Company
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 with the other's counsel and
auditors in preparation of the Information Statement. The Company will promptly
advise Parent, and Parent will promptly advise the Company, in writing if at any
time prior to the Effective Time either Parent or the Company 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 Proxy and Information Statement will include the recommendation of the
Board of Directors of the Company in favor of adoption and approval of this
Agreement and approval of the Merger.
(b) Each of the Company and Parent will respond to any comments
of the California Department of Corporations, and will use its respective
commercially reasonable efforts to have the Permit as promptly as practicable
after such filing, and the Company will cause the Proxy and Information
Statement to be mailed to its stockholders at the earliest practicable time
after the Permit is issued by the California Department of Corporations. As
promptly as practicable after the date of this Agreement, each of the Company
and Parent will prepare and file any other filings required to be filed by it
under the Exchange Act, the Securities Act or any other Federal, foreign or Blue
Sky or related laws relating to the Merger and the transactions contemplated by
this Agreement (the "Other Filings"). Each of the Company and Parent will notify
the other promptly upon the receipt of any comments from the California
Department of Corporations or its staff or any other government officials and of
any request by the California Department of Corporations or its staff or any
other government officials for amendments or supplements to the Proxy and
Information Statement or any Other Filing or for additional information and will
supply the other with copies of all correspondence between such party or any of
its representatives, on the one hand, and the California Department of
Corporations or its staff or any other government officials, on the other hand,
with respect to the Proxy and Information Statement, the Merger or any Other
Filing. Each of the Company and Parent will cause all documents that it is
responsible for filing with the California Department of Corporations or other
regulatory authorities under this Section to comply in all material respects
with all applicable requirements of law and the rules and regulations
promulgated thereunder.
(c) Whenever any event occurs which is required to be set forth
in an amendment or supplement to the Proxy and Information Statement or any
Other Filing, the Company or Parent, as the case may be, will promptly inform
the other of such occurrence and cooperate in filing with the
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California Department of Corporations or its staff or any other government
officials, and/or mailing to Company Stockholders, such amendment or supplement.
(d) Upon receipt of the Permit, the Company shall, as promptly
as possible, but not later than 3 days of the effectiveness of the Permit submit
this Agreement and the transactions contemplated hereby to its stockholders for
approval and adoption as provided by California Law and its Articles of
Incorporation and Bylaws. The Company shall use its best efforts to solicit and
obtain the consent of the Company Stockholders sufficient to approve the Merger
and this Agreement and to enable the Closing to occur as promptly as practicable
and, in any event, on or before May 24, 2000. The materials submitted to the
Company Stockholders shall be subject to review and approval by Parent and
include information regarding the Company, the terms of the Merger and this
Agreement and the recommendation of the Board of Directors of the Company in
favor of the Merger and this Agreement, and the transactions contemplated
hereby. Notwithstanding anything to the contrary contained in this Agreement,
the Company shall adjourn or postpone the Company Stockholders' Meeting to the
extent necessary to ensure that any necessary supplement or amendment to the
Proxy and Information Statement is provided to the Company's Stockholders in
advance of a vote on the Merger and this Agreement or, if as of the time for
which the Company Stockholders' Meeting is originally scheduled (as set forth in
the Proxy and Information Statement) there are insufficient shares of Company
Common Stock represented (either in person or by proxy) to constitute a quorum
necessary to conduct the business of the Company Stockholders' Meeting. The
Company shall ensure that the Company Stockholders' Meeting is called, noticed,
convened, held and conducted, and that all proxies solicited by the Company in
connection with the Company Stockholders' Meeting are solicited, in compliance
with applicable law and the Company charter documents. The Company's obligation
to call, give notice of, convene and hold the Company Stockholders' Meeting in
accordance with this Section shall not be limited to or otherwise affected by
the commencement, disclosure, announcement or submission to the Company of any
Acquisition Proposal or by any withdrawal, amendment, or modification to the
recommendation of the Board of Directors of the Company with respect to the
Merger and/or this Agreement.
(e) All certificates representing Parent Common Stock
deliverable to any shareholder of the Company pursuant to this Agreement and in
connection with the Merger and any certificates subsequently issued with respect
thereto or in substitution therefor (including any shares issued or issuable in
respect of any such shares upon any stock split stock dividend,
recapitalization, or similar event) also shall bear any legend required by the
Commissioner of Corporations of the State of California or such as are required
pursuant to any federal, state, local or foreign law governing such securities;
provided that in the event that the Commissioner of Corporations of the State of
California shall require that any such certificate shall bear a legend which has
the effect of restricting transfer of such certificate (in any event, other than
a legend with respect to Rule 145 promulgated under the Securities Act ("Rule
145") or such legend as may be required pursuant to the Company Affiliate
Agreements or Section 5.12 hereof) Parent shall prepare and file with the
Securities and Exchange Commission and shall use its commercially reasonable
efforts to cause to become effective, at such time as the holders thereof would
otherwise be able to sell such securities
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in compliance with applicable provisions applicable to pooling of interests
treatment of the Merger, a Registration Statement on Form S-3 permitting the
sale by the Company Stockholders which acquire Parent Company Stock as a result
of the Merger, and to maintain the effectiveness of such registration until the
earlier of (a) a period of two years has elapsed or (b) such time as the holders
of such certificates can sell.
(f) The Board of Directors of the Company shall recommend that
the Company's stockholders vote in favor of and adopt and approve this Agreement
and the Merger at the Company Stockholders' Meeting. Neither the Board of
Directors of the Company nor any committee thereof shall withdraw, amend or
modify, or propose or resolve to withdraw, amend or modify in a manner adverse
to Parent, the recommendation of the Board of Directors of the Company that the
Company's stockholders vote in favor of and adopt and approve this Agreement and
the Merger.
5.2 Access to Information. The Company shall afford Parent and its
accountants, counsel and other representatives, reasonable access during normal
business hours during the period prior to the Effective Time to (a) all of the
Company's properties, books, contracts, commitments and records and (b) all
other information concerning the business, properties and personnel (subject to
restrictions imposed by applicable law) of the Company as Parent may reasonably
request, and (iii) for the sole purpose of obtaining information in connection
with the transactions contemplated by this Agreement, all employees of the
Company as identified by Parent. No information or knowledge obtained in any
investigation pursuant to this Section 5.2 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.
5.3 Confidentiality. Each of the parties hereto hereby agrees to keep
the terms of this Agreement (except to the extent contemplated hereby) and such
information or knowledge obtained in any investigation pursuant to Section 5.2,
or pursuant to the negotiation and execution of this Agreement or the
effectuation of the transactions contemplated hereby, confidential; provided,
however, that the foregoing shall not apply to information or knowledge which
(a) a party can demonstrate was already lawfully in its possession prior to the
disclosure thereof by the other party, (b) is generally known to the public and
did not become so known through any violation of law, (c) became known to the
public through no fault of such party, (d) is later lawfully acquired by such
party without confidentiality restrictions from other sources, (e) is required
to be disclosed by order of court or government agency with subpoena powers
(provided that such party shall have provided the other party with prior notice
of such order and an opportunity to object or take other available action) or
(f) which is disclosed in the course of any litigation between any of the
parties hereto.
5.4 Expenses. Whether or not the Merger is consummated, all fees and
expenses incurred in connection with the Merger including, without limitation,
all legal, accounting, financial advisory, consulting and all other fees and
expenses of third parties ("Third Party Expenses") incurred by a party in
connection with the negotiation and effectuation of the terms and conditions of
this
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Agreement and the transactions contemplated hereby, shall, (subject to Section
7.2(k)), be the obligation of the respective party incurring such fees and
expenses.
5.5 Public Disclosure. Unless otherwise required by law (including,
without limitation, federal and state securities laws) or, as to Parent, by the
rules and regulations of the New York Stock Exchange, prior to the Effective
Time, no disclosure (whether or not in response to an inquiry) of the subject
matter of this Agreement shall be made by any party hereto unless approved by
Parent and the Company prior to release, provided that such approval shall not
be unreasonably withheld.
5.6 Consents. The Company 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 including all consents,
waivers and approvals under any of the Contracts as may be required in
connection with the Merger (all of such consents, waivers and approvals are set
forth in the Company Schedules) so as to preserve all rights of and benefits to
the Company thereunder from and after the Effective Time.
5.7 FIRPTA Compliance. On or prior to the Closing Date, the Company
shall deliver to Parent a properly executed statement in a form reasonably
acceptable to Parent for purposes of satisfying Parent's obligations under
Treasury Regulation Section 1.1445-2(c)(3).
5.8 Reasonable Efforts. Subject to the terms and conditions provided in
this Agreement, each of the parties hereto shall use its reasonable efforts to
ensure that its representations and warranties remain true and correct in all
material respects, and to take promptly, or cause to be taken, all actions, and
to do promptly, or cause to be done, all things necessary, proper or advisable
under applicable laws and regulations to consummate and make effective the
transactions contemplated hereby, to obtain all necessary waivers, consents and
approvals, to effect all necessary registrations and filings, and to remove any
injunctions or other impediments or delays, legal or otherwise, in order to
consummate and make effective the transactions contemplated by this Agreement
for the purpose of securing to the parties hereto the benefits contemplated by
this Agreement; provided that Parent shall not be required to agree to any
divestiture by Parent or the Company or any of Parent's subsidiaries or
affiliates of shares of capital stock or of any business, assets or property of
Parent or its subsidiaries or affiliates or the Company or its affiliates, or
the imposition of any material limitation on the ability of any of them to
conduct their businesses or to own or exercise control of such assets,
properties and stock. To the extent required by law, as soon as may be
reasonably practicable, the Company and Parent each shall file with the United
States Federal Trade Commission (the "FTC") and the Antitrust Division of the
United States Department of Justice ("DOJ") Notification and Report forms
relating to the transactions contemplated herein as required by the HSR Act, as
well as comparable premerger notification forms required by the merger
notification or control laws and regulations of any applicable jurisdiction, as
agreed to by the parties. The Company and Parent each shall promptly (a) supply
the other with any information which may be required in order to effectuate such
filings and (b) supply any additional information which
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reasonably may be required by the FTC, the DOJ or the competition or merger
control authorities of any other jurisdiction and which the parties may
reasonably deem appropriate.
5.9 Notification of Certain Matters. The Company shall give prompt
notice to Parent, and Parent shall give prompt notice to the Company, of (i) the
occurrence or non-occurrence of any event, the occurrence or non-occurrence of
which is likely to cause any representation or warranty of the Company and
Parent, respectively, contained in this Agreement to be untrue or inaccurate at
or prior to the Effective Time and (ii) any failure of the Company or Parent, as
the case may be, to comply with or satisfy any covenant, condition or agreement
to be complied with or satisfied by it hereunder, such that the conditions set
forth in Section 6.2(a) or (b) or Section 6.3(a) or (b) would not be satisfied;
provided, however, that the delivery of any notice pursuant to this Section 5.9
shall not (a) limit or otherwise affect any remedies available to the party
receiving such notice or (b) limit or otherwise effect any remedies or defenses
available to the party giving such notice.
5.10 Pooling Accounting. Parent and the Company shall each use its
commercially reasonable efforts to cause the Merger to be accounted for as a
pooling of interests. Each of Parent and the Company shall use its commercially
reasonable efforts to cause the Company Affiliates (as defined in Section 5.11)
not to take any action that would adversely affect the ability of Parent to
account for the Merger as a pooling of interests.
5.11 Company Affiliate Agreements. Schedule 5.11 sets forth those
persons who, in the Company's reasonable judgment, are or may be "affiliates" of
the Company within the meaning of Rule 145 (each such person a "Company
Affiliate"). The Company shall provide Parent such information and documents as
Parent shall reasonably request for purposes of reviewing such list. The Company
shall deliver or cause to be delivered to Parent, concurrently with the
execution of this Agreement (and in any case prior to the Closing) from each of
the Company Affiliates, an executed Affiliate Agreement in the form attached
hereto as Exhibit C. Parent shall be entitled to place appropriate legends on
the Parent Certificates evidencing any Parent Common Stock to be received by
such Company Affiliates pursuant to the terms of this Agreement, and to issue
appropriate stop transfer instructions to the transfer agent for Parent Common
Stock, consistent with the terms of such Affiliate Agreements.
5.12 New York Stock Exchange Listing. Parent agrees to authorize for
listing on the New York Stock Exchange the shares of Parent Common Stock
issuable, and those required to be reserved for issuance, in connection with the
Merger, upon official notice of issuance.
5.13 S-8 Registration. Sixty (60) days after the Closing Date, Parent
agrees to file, if available for use by Parent, with the Securities and Exchange
Commission a registration statement on Form S-8 registering a number of shares
of Parent Common Stock equal to the number of shares of Parent Common Stock
issuable upon the exercise of all Company Options assumed by Parent pursuant to
Section 1.6 hereof as soon as reasonably possible after the Closing, but not
later than 60 days after the Closing.
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5.14 401(k) Plan. The Company agrees to terminate its 401(k) plan
immediately prior to Closing, unless Parent, in its sole and absolute discretion
agrees to sponsor and maintain such plan by providing the Company with notice of
such election at least ten (10) days prior to the Effective Time.
5.15 Additional Documents and Further Assurances. Each party hereto, at
the request of the other party hereto, shall execute and deliver such other
instruments and do and perform such other acts and things as may be necessary or
desirable for effecting completely the consummation of this Agreement and the
transactions contemplated hereby.
5.16 Indemnification. From and after the Effective Time, Parent shall
cause the Surviving Corporation to fulfill and honor in all respects the
obligations of the Company pursuant to indemnification agreements between the
Company and its directors and officers existing prior to the date hereof. The
Surviving Corporation shall (i) assume as of the Effective Time all obligations
of the Company pursuant to the Company's Articles of Incorporation, Bylaws and
indemnification agreements as they are in effect on the date hereof and (ii) pay
all amounts that become due and payable under such provisions. This Section
shall survive the consummation of the Merger, is intended to benefit the
Company, the Surviving Corporation and each indemnified party, shall be binding,
jointly and severally, on all successors and assigns of the Surviving
Corporation and Parent, and shall be enforceable by the indemnified parties.
Parent shall obtain a directors and officers insurance policy for a period of
three (3) years after the Closing insuring the directors and officers of the
Company from their errors and omissions prior to the Closing on such terms and
with such deductibles as the Parent shall approve. Except for the obtaining of
such policy, Parent shall have no liability for the acts, errors and omissions
of the officers and directors of the Company.
5.17 Section 368 Election. Parent, Merger Sub and the Company shall each
use its reasonable best efforts to cause the business combination to be effected
by the Merger to qualify as a "reorganization" within the meaning of Section 368
of the Code and to be accounted for as a pooling of interests.
5.18 Employee Compensation. Each person who was an employee of the
Company immediately prior to the Effective Time, shall be, at the Effective
Time, an at will employee of Parent or the Surviving Corporation, to the extent
permitted by applicable law; provided that each employee employed in the United
States shall provide proof of the right to work in the United States. Each
employee of the Company who remains an employee of Parent or the Surviving
Corporation after the Effective Time shall be eligible, upon completion of
Parent's standard employee background and reference check, to receive salary and
benefits (such as medical benefits, bonuses, 401(k) and stock options)
consistent with Parent's standard human resource policies.
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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 effect the Merger
shall be subject to the satisfaction at or prior to the Closing of the following
conditions:
(a) No Order. No Governmental Entity shall have enacted, issued,
promulgated, enforced or entered any statute, rule, regulation, executive order,
decree, injunction or other order (whether temporary, preliminary or permanent)
which is in effect and which has the effect of making the Merger illegal or
otherwise prohibiting consummation of the Merger.
(b) No Injunctions or Restraints; Illegality; HSR Act. 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.
(c) Tax Opinions. The Company and Parent shall each have
received written opinions from their respective counsel, Xxxx Xxxx Xxxx
Freidenrich LLP, and Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, Professional Corporation,
to the effect that the Merger will constitute a reorganization within the
meaning of Section 368(a) of the Code; provided, however, that if the counsel to
either the Company or Parent does not render such opinion, this condition shall
nonetheless be deemed to be satisfied with respect to such party, if counsel to
the other party renders such opinion to such party. The parties to this
Agreement agree to execute and deliver tax representation letters in a customary
form to such counsel for the purposes of rendering such opinions.
6.2 Additional Conditions to Obligations of the Company. The obligations
of the Company to consummate the Merger and the transactions contemplated by
this Agreement shall be subject to the satisfaction at or prior to the Closing
of each of the following conditions, any of which may be waived, in writing,
exclusively by the Company:
(a) Representations and Warranties. The representations and
warranties of Parent contained in this Agreement shall have been true and
correct in all material respects on the date hereof and shall be true and
correct in all material respects on and as of the Closing Date, except for those
representations and warranties which address matters only as of a particular
date (which shall remain true and correct in all material respects as of such
date), with the same force and effect as if made on and as of the Closing Date;
and the Company shall have received a certificate to such effect signed on
behalf of Parent by a duly authorized officer of Parent.
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(b) Agreements and Covenants. Parent and Merger Sub shall have
performed or complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by them on or prior
to the Effective Time, and the Company shall have received a certificate to such
effect signed by a duly authorized officer of Parent.
(c) Stockholder Approval. This Agreement and the Merger shall
have been approved and adopted by the stockholders of the Company by the
requisite vote under applicable law and the Company's Articles of Incorporation.
(d) Secretary's Certificate. Each of Parent and Merger Sub shall
have delivered to the Company a copy of (i) the text of the resolutions adopted
by its Board of Directors authorizing the execution, delivery and performance of
this Agreement and the consummation of all of the transactions contemplated by
this Agreement and (ii) its certificate of incorporation and bylaws, along with
a certificate executed on behalf of such entity by its corporate secretary
certifying to the Company that such copies are true, correct and complete copies
of such resolutions, certificate of incorporation and bylaws, respectively, and
that such resolutions, certificate of incorporation and bylaws were duly adopted
and have not been amended or rescinded.
(e) Legal Opinion. The Company shall have received a legal
opinion from counsel to Parent in substantially the form attached hereto as
Exhibit E.
6.3 Additional Conditions to the Obligations of Parent and Merger Sub.
The obligations of Parent and Merger Sub to consummate the Merger and the
transactions contemplated by this Agreement shall be subject to the satisfaction
at or prior to the Closing of each of the following conditions, any of which may
be waived, in writing, exclusively by Parent:
(a) Representations and Warranties. The representations and
warranties of the Company contained in this Agreement shall have been true and
correct in all material respects on the date hereof and shall be true and
correct in all material respects as of the Closing Date, except for those
representations and warranties which address matters only as of a particular
date (which shall remain true and correct in all material respects as of such
date), with the same force and effect as if made on and as of the Closing Date
and Parent shall have received a certificate to such effect signed on behalf of
the Company by the chief executive officer of the Company;
(b) Agreements and Covenants. The Company shall have performed
or complied in all material respects with all agreements and covenants required
by this Agreement to be performed or complied with by it on or prior to the
Effective Time, and Parent shall have received a certificate to such effect
signed by a duly authorized officer of the Company;
(c) Third Party Consents. Parent shall have been furnished with
evidence satisfactory to it that the Company has obtained the consents,
approvals and waivers set forth in Schedule 2.4.
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(d) Legal Opinion. Parent shall have received a legal opinion
from Xxxx Xxxx Xxxx & Freidenrich LLP, legal counsel to the Company, in
substantially the form attached hereto as Exhibit D.
(e) Affiliate Agreements. Each of the parties identified by the
Company as being a Company Affiliate shall have delivered to Parent an executed
Affiliate Agreement which shall be in full force and effect.
(f) Non-Competition Agreements. Each of the persons listed on
Schedule 6.3(f) shall have executed and delivered to Parent a Non-Competition
Agreement in substantially the form of Exhibit A, and all of the Non-Competition
Agreements shall be in full force and effect.
(g) New Employment Arrangements. Each of the employees listed on
Schedule 6.3(g) shall have entered into "at-will" employment arrangements with
Parent and/or the Surviving Corporation, shall have agreed to be employees of
Parent after the Closing, and shall be employees of the Company immediately
prior to the Effective Time.
(h) Letter from Independent Accountants. Parent shall have
received a letter from Pricewaterhouse Coopers LLP regarding such firm's
concurrence with Parent management's conclusions as to the appropriateness of
pooling of interests accounting for the Merger under Accounting Principles Board
Opinion No. 16 if closed and consummated in accordance with this Agreement. Such
letter shall be in form and substance satisfactory to Parent. In addition,
Deloitte & Touche, the Company's accountants, shall have provided a letter,
satisfactory in form and substance to Parent, regarding the appropriateness of
pooling of interests accounting for a transaction involving the Company (it
being understood that the Company shall use its reasonable best efforts to have
such letter provided).
(i) Securityholder Agent. There shall be a Securityholder Agent
appointed and acting for the Company Stockholders in accordance with Section
7.2(g).
(j) Securities Laws. Parent shall have received from the
California Department of Corporations a Permit for solicitation and issuance of
its Common Stock to the Company Stockholders in the Merger in accordance with
this Agreement. No other filing, approval, registrations, or qualifications are
required under applicable federal or state securities laws for the consummation
of the Merger in accordance with this Agreement.
(k) Stockholder Approval. The stockholders of the Company
holding (i) at least ninety-one percent (91%) of the Company Capital Stock, (ii)
a sufficient number of shares of Company Capital Stock as required under
applicable law and the Company's Articles of Incorporation, shall have approved
this Agreement, the Merger and the transactions contemplated hereby, and (iii)
the holders of more than 9% of the outstanding shares of the Company Capital
Stock shall not have exercised nor have any conditional right to exercise,
appraisal, dissenter's or similar rights under applicable law by virtue of the
Merger.
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(l) Resignation of Directors. Parent shall have received a
written resignation from each of the directors of the Company effective as of
the Effective Time.
(m) No Material Adverse Change. There shall not have occurred
any event or condition of any character that has had or is reasonably likely to
have a Material Adverse Effect on the Company.
(n) Secretary's Certificate. The Company shall have delivered to
Parent a copy of (i) the text of the resolutions adopted by the Board of
Directors of the Company authorizing the execution, delivery and performance of
this Agreement and the Agreement of Merger and the consummation of all of the
transactions contemplated by this Agreement and the Agreement of Merger, (ii)
the text of the resolutions adopted by the stockholders of the Company approving
and adopting this Agreement and the Merger and (iii) the articles of
incorporation and bylaws of the Company, along with a certificate executed on
behalf of the Company by its corporate secretary certifying to Parent that such
copies are true, correct and complete copies of such resolutions, articles of
incorporation and bylaws, respectively, and that such resolutions, articles of
incorporation and bylaws were duly adopted and have not been amended or
rescinded.
(o) Subordinated Convertible Note: Prior to the Merger, the
holder of the Convertible Note shall have elected to convert the Convertible
Note into Company Series B Preferred Stock and, as a consequence thereof, to
receive his proportionate share of the Parent's Common Stock comprising the
Aggregate Share Number in the Merger, such that the Convertible Note will be
extinguished prior to the Merger.
(p) Voting Agreements: On or before May 3, 2000, Parent shall
have received Voting Agreements substantially in the form of attached as Exhibit
B executed by National Semiconductor Corp. and S3 Incorporated (formerly known
as Diamond Multimedia Systems, Inc.) for the benefit of Parent.
ARTICLE VII
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ESCROW
7.1 Survival of Representations and Warranties. All of the Company's
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement (each as modified by the Company Schedules) shall
survive the Merger and continue until 5:00 p.m., California time, on the date
which is six months following the Closing Date (the "Expiration Date").
7.2 Escrow Arrangements.
(a) Escrow Fund. At the Effective Time, the Company Stockholders
will be deemed to have received and deposited with the Escrow Agent (as defined
below) the Escrow Amount (plus any additional shares as may be issued upon any
stock split, stock dividend or
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recapitalization effected by Parent after the Effective Time) without any act of
any Company Stockholder. As soon as practicable after the Effective Time, the
Escrow Amount, without any act of any Company Stockholder, will be deposited
with U.S. Bank Trust, N.A. (or other institution acceptable to Parent and the
Securityholder Agent (as defined in Section 7.2(g) below)), as Escrow Agent,
such deposit to constitute an escrow fund (the "Escrow Fund") to be governed by
the terms set forth herein and at Parent's cost and expense. The Escrow Fund
shall be available to compensate Parent and its affiliates for any claims,
losses, liabilities, damages, deficiencies, costs and expenses, including
reasonable attorneys' fees and expenses, and expenses of investigation and
defense (hereinafter individually a "Loss" and collectively "Losses") incurred
by Parent, its officers, directors, or affiliates (including the Surviving
Corporation) directly or indirectly as a result of any inaccuracy or breach of a
representation or warranty of the Company (as modified by the Company
Schedules), or any failure by the Company to perform or comply with any covenant
contained herein. Parent and the Company each acknowledge that such Losses, if
any, would relate to unresolved contingencies existing at the Effective Time,
which if resolved at the Effective Time would have led to a reduction in the
aggregate Merger Consideration. Nothing herein shall limit the liability of the
Company for any breach of any representation, warranty or covenant if the Merger
does not close. Other than as provided in Section 5.16, the Company stockholders
shall not have any right of contribution from the Company with respect to any
Loss claimed by Parent or its affiliates after the Effective Time. Parent may
not receive any shares from the Escrow Fund unless and until Escrow Claim
Certificate (as defined in paragraph (d) below) identifying Losses, the
aggregate amount of which exceed $100,000, have been delivered to the Escrow
Agent as provided in paragraph (e); provided, no claim for Losses with respect
to a single breach or failure to comply or perform in an amount less than
$15,000 shall be delivered by Parent to the Escrow Agent or otherwise claimed by
Parent. Once the aggregate amount of Losses claimed by Parent against the Escrow
as to which there are no unresolved objections under Section 7.2(e) exceeds
$100,000, Parent may recover from the Escrow Fund the total of such Losses.
(b) Escrow Period; Distribution upon Termination of Escrow
Periods. Subject to the following requirements, the Escrow Fund shall be in
existence immediately following the Effective Time and shall terminate at 5:00
p.m., California time, on the Expiration Date (the "Escrow Period"); provided
that the Escrow Period shall not terminate with respect to such amount (or some
portion thereof), that together with the aggregate amount remaining in the
Escrow Fund is necessary in the reasonable judgment of Parent, subject to the
objection of the Securityholder Agent and the subsequent arbitration of the
matter in the manner provided in Section 7.2(f) hereof, to satisfy any
unsatisfied claims concerning facts and circumstances existing prior to the
termination of such Escrow Period specified in any Escrow Claim Certificate
delivered to the Escrow Agent prior to termination of such Escrow Period. As
soon as all such claims have been resolved, the Escrow Agent shall deliver to
the Company Stockholders the remaining portion of the Escrow Fund and not
required to satisfy such claims. Deliveries of Escrow Amounts to the Company
Stockholders pursuant to this Section 7.2(b) shall be made in proportion to
their respective original contributions to the Escrow Fund as determined
pursuant to Section 1.8(b).
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(c) Protection of Escrow Fund.
(i) The Escrow Agent shall hold and safeguard the Escrow
Fund during the Escrow Period, shall treat such fund as a trust fund in
accordance with the terms of this Agreement and not as the property of Parent
and shall hold and dispose of the Escrow Fund only in accordance with the terms
hereof.
(ii) Any shares of Parent Common Stock or other equity
securities issued or distributed by Parent (including shares issued upon a stock
split) ("New Shares") in respect of Parent Common Stock in the Escrow Fund which
have not been released from the Escrow Fund shall be added to the Escrow Fund
and become a part thereof. New Shares issued in respect of shares of Parent
Common Stock which have been released from the Escrow Fund shall not be added to
the Escrow Fund but shall be distributed to the record holders thereof. Cash
dividends on Parent Common Stock shall not be added to the Escrow Fund but shall
be distributed to the record holders thereof.
(iii) Each Company Stockholder shall be shown as the
record owner on the Parent's books and records, and shall have voting rights
with respect to the shares of Parent Common Stock contributed to the Escrow Fund
by such Company Stockholder (and on any voting securities added to the Escrow
Fund in respect of such shares of Parent Common Stock).
(d) Claims Upon Escrow Fund.
(i) Upon receipt by the Escrow Agent at any time on or
before the last day of the Escrow Period of a certificate signed by any officer
of Parent (an "Escrow Claim Certificate"): (A) stating that Parent has paid,
sustained or properly accrued or reasonably anticipates that it will sustain or
have to pay or accrue Losses, and (B) specifying in reasonable detail the
individual items of Losses included in the amount so stated, the date each such
item was paid, sustained or properly accrued, or the basis for such anticipated
liability, and the nature of the misrepresentation, breach of warranty or
covenant to which such item is related, the Escrow Agent shall, subject to the
provisions of Section 7.2(e) hereof, deliver to Parent out of the Escrow Fund,
as promptly as practicable, shares of Parent Common Stock held in the Escrow
Fund in an amount equal to such Losses.
(ii) For the purposes of determining the number of
shares of Parent Common Stock to be delivered to Parent out of the Escrow Fund
pursuant to Section 7.2(d)(i) hereof, each share of Parent Common Stock shall be
deemed to have a value of $44.875.
(e) Objections to Claims. At the time of delivery of any Escrow
Claim Certificate to the Escrow Agent, a duplicate copy of such certificate
shall be delivered to the Securityholder Agent (as defined in Section 7.2(g))
and for a period of thirty (30) days after such delivery, the Escrow Agent shall
make no delivery to Parent of any Escrow Amounts pursuant to Section 7.2(d)
hereof unless the Escrow Agent shall have received written authorization from
the Securityholder
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Agent to make such delivery. After the expiration of such thirty (30)-day
period, the Escrow Agent shall make delivery of shares of Parent Common Stock
from the Escrow Fund in accordance with Section 7.2(d) hereof, provided that no
such payment or delivery may be made if the Securityholder Agent shall object in
a written statement to the claim made in the Escrow Claim Certificate, and such
statement shall have been delivered to the Escrow Agent prior to the expiration
of such thirty (30)-day period.
(f) Resolution of Conflicts; Arbitration.
(i) In case the Securityholder Agent shall so object in
writing to any claim or claims made in any Escrow Claim Certificate, the
Securityholder Agent and Parent shall attempt in good faith to agree upon the
rights of the respective parties with respect to each of such claims. If the
Securityholder Agent and Parent should so agree, a memorandum setting forth such
agreement shall be prepared and signed by both parties and shall be furnished to
the Escrow Agent. The Escrow Agent shall be entitled to rely on any such
memorandum and distribute shares of Parent Common Stock from the Escrow Fund in
accordance with the terms thereof.
(ii) If no such agreement can be reached after good
faith negotiation, either Parent or the Securityholder Agent may demand
arbitration of the matter unless the amount of the damage or loss is at issue in
pending litigation with a third party, in which event arbitration shall not be
commenced until such amount is ascertained or both parties agree to arbitration;
and in either such event the matter shall be settled by arbitration conducted by
three arbitrators. Parent and the Securityholder Agent shall each select one
arbitrator, and the two arbitrators so selected shall select a third arbitrator.
The arbitrators shall set a limited time period and establish procedures
designed to reduce the cost and time for discovery while allowing the parties an
opportunity, adequate in the sole judgment of the arbitrators, to discover
relevant information from the opposing parties about the subject matter of the
dispute. The arbitrators shall rule upon motions to compel or limit discovery
and shall have the authority to impose sanctions, including attorneys' fees and
costs, to the extent as a court of competent law or equity, should the
arbitrators determine that discovery was sought without substantial
justification or that discovery was refused or objected to without substantial
justification. The decision of a majority of the three arbitrators as to the
validity and amount of any claim in such Escrow Claim Certificate shall be
binding and conclusive upon the parties to this Agreement, and notwithstanding
anything in Section 7.2(e) hereof, the Escrow Agent shall be entitled to act in
accordance with such decision and make or withhold payments out of the Escrow
Fund in accordance therewith. Such decision shall be written and shall be
supported by written findings of fact and conclusions which shall set forth the
award, judgment, decree or order awarded by the arbitrators.
(iii) Judgment upon any award rendered by the
arbitrators may be entered in any court having jurisdiction. Any such
arbitration shall be held in Santa Xxxxx County, California under the rules then
in effect of the American Arbitration Association. For purposes of this Section
7.2(f), in any arbitration hereunder in which any claim or the amount thereof
stated in the
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Escrow Claim Certificate is at issue, Parent shall be deemed to be the
Non-Prevailing Party in the event that the arbitrators award Parent less than
the sum of one-half (1/2) of the disputed amount plus any amounts not in
dispute; otherwise, the stockholders of the Company as represented by the
Securityholder Agent shall be deemed to be the Non-Prevailing Party. The
Non-Prevailing Party to an arbitration shall pay its own expenses, the fees of
each arbitrator, the administrative costs of the arbitration and the expenses,
including without limitation, reasonable attorneys' fees and costs, incurred by
the other party to the arbitration.
(g) Securityholder Agent of the Stockholders; Power of Attorney.
(i) In the event that the Merger is approved, effective
upon such vote, and without further act of any Company Stockholder, Xxxxx
Xxxxxxxx or another person reasonable to the Parent and the Company, shall be
appointed as agent and attorney-in-fact (the "Securityholder Agent") for each
Company Stockholder (except such stockholders, if any, as shall have perfected
their appraisal or dissenters' rights under California Law or any other
applicable law), for and on behalf of the Company Stockholders, to give and
receive notices and communications, to authorize delivery to Parent of shares of
Parent Common Stock from the Escrow Fund in satisfaction of claims by Parent, to
object to such deliveries, to agree to, negotiate, enter into settlements and
compromises of, and demand arbitration and comply with orders of courts and
awards of arbitrators with respect to such claims, and to take all actions
necessary or appropriate in the judgment of Securityholder Agent for the
accomplishment of the foregoing. Such agency may be changed by the Company
Stockholders from time to time upon not less than thirty (30) days prior written
notice to Parent; provided that the Securityholder Agent may not be removed
unless holders of a majority interest of the Escrow Fund agree to such removal
and to the identity of the substituted agent. Any vacancy in the position of
Securityholder Agent may be filled by approval of the holders of a majority in
interest of the Escrow Fund. No bond shall be required of the Securityholder
Agent, and the Securityholder Agent shall not receive compensation for his or
her services. Notices or communications to or from the Securityholder Agent
shall constitute notice to or from each of the Company Stockholders.
(ii) The Securityholder Agent shall not be liable for
any act done or omitted hereunder as Securityholder Agent while acting in good
faith and in the exercise of reasonable judgment; and any act done or omitted
pursuant to the advice of counsel shall be conclusive evidence of such good
faith. The Company Stockholders on whose behalf the Escrow Amount was
contributed to the Escrow Fund shall severally indemnify the Securityholder
Agent and hold the Securityholder Agent harmless against any loss, liability or
expense incurred without negligence or bad faith on the part of the
Securityholder Agent and arising out of or in connection with the acceptance or
administration of the Securityholder Agent's duties hereunder, including the
reasonable fees and expenses of any legal counsel retained by the Securityholder
Agent.
(h) Actions of the Securityholder Agent. A decision, act,
consent or instruction of the Securityholder Agent shall constitute a decision
of all the stockholders for whom a portion of the
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Escrow Amount otherwise issuable to them are deposited in the Escrow Fund and
shall be final, binding and conclusive upon each of such Company Stockholder,
and the Escrow Agent and Parent may rely upon any such decision, act, consent or
instruction of the Securityholder Agent as being the decision, act, consent or
instruction of each every such Company Stockholder. The Escrow Agent and Parent
are hereby relieved from any liability to any person for any acts done by them
in accordance with such decision, act, consent or instruction of the
Securityholder Agent.
(i) Third-Party Claims. In the event Parent becomes aware of a
third-party claim which Parent believes may result in a demand against the
Escrow Fund, Parent shall notify the Securityholder Agent of such claim, and the
Securityholder Agent, as representative for the stockholders of the Company,
shall be entitled, at their expense, to participate in any defense of such
claim. Parent shall have the right in its sole discretion to settle any such
claim; provided, however, that except with the consent of the Securityholder
Agent, no settlement of any such claim with third-party claimants shall alone be
determinative of the amount of any claim against the Escrow Fund. In the event
that the Securityholder Agent has consented to any such settlement, the
Securityholder Agent shall have no power or authority to object under any
provision of this Article VII to the amount of any claim by Parent against the
Escrow Fund with respect to such settlement.
(j) Escrow Agent's Duties.
(i) The Escrow Agent shall be obligated only for the
performance of such duties as are specifically set forth herein, and as set
forth in any additional written escrow instructions which the Escrow Agent may
receive after the date of this Agreement which are signed by an officer of
Parent and the Securityholder Agent, and may rely and shall be protected in
relying or refraining from acting on any instrument reasonably believed to be
genuine and to have been signed or presented by the proper party or parties. The
Escrow Agent shall not be liable for any act done or omitted hereunder as Escrow
Agent while acting in good faith and in the exercise of reasonable judgment, and
any act done or omitted pursuant to the advice of counsel shall be conclusive
evidence of such good faith.
(ii) The Escrow Agent is hereby expressly authorized to
comply with and obey orders, judgments or decrees of any court of law,
notwithstanding any notices, warnings or other communications from any party or
any other person to the contrary. In case the Escrow Agent obeys or complies
with any such order, judgment or decree of any court, the Escrow Agent shall not
be liable to any of the parties hereto or to any other person by reason of such
compliance, notwithstanding any such order, judgment or decree being
subsequently reversed, modified, annulled, set aside, vacated or found to have
been entered without jurisdiction.
(iii) The Escrow Agent shall not be liable in any
respect on account of the identity, authority or rights of the parties executing
or delivering or purporting to execute or deliver this Agreement or any
documents or papers deposited or called for hereunder.
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(iv) The Escrow Agent shall not be liable for the
expiration of any rights under any statute of limitations with respect to this
Agreement or any documents deposited with the Escrow Agent.
(v) In performing any duties under the Agreement, the
Escrow Agent shall not be liable to any party for damages, losses, or expenses,
except for gross negligence or willful misconduct on the part of the Escrow
Agent. The Escrow Agent shall not incur any such liability for (A) any act or
failure to act made or omitted in good faith, or (B) any action taken or omitted
in reliance upon any instrument, including any written statement or affidavit
provided for in this Agreement that the Escrow Agent shall in good faith believe
to be genuine, nor will the Escrow Agent be liable or responsible for forgeries,
fraud, impersonations, or determining the scope of any representative authority.
In addition, the Escrow Agent may consult with the legal counsel in connection
with Escrow Agent's duties under this Agreement and shall be fully protected in
any act taken, suffered, or permitted by him/her in good faith in accordance
with the advice of counsel. The Escrow Agent is not responsible for determining
and verifying the authority of any person acting or purporting to act on behalf
of any party to this Agreement.
(vi) If any controversy arises between the parties to
this Agreement, or with any other party, concerning the subject matter of this
Agreement, its terms or conditions, the Escrow Agent will not be required to
determine the controversy or to take any action regarding it. The Escrow Agent
may hold all documents and shares of Parent Common Stock and may wait for
settlement of any such controversy by final appropriate legal proceedings or
other means as, in the Escrow Agent's discretion, the Escrow Agent may be
required, despite what may be set forth elsewhere in this Agreement. In such
event, the Escrow Agent will not be liable for damage. Furthermore, the Escrow
Agent may at its option, file an action of interpleader requiring the parties to
answer and litigate any claims and rights among themselves. The Escrow Agent is
authorized to deposit with the clerk of the court all documents and shares of
Parent Common Stock held in escrow, except all cost, expenses, charges and
reasonable attorney fees incurred by the Escrow Agent due to the interpleader
action and which the parties jointly and severally agree to pay. Upon initiating
such action, the Escrow Agent shall be fully released and discharged of and from
all obligations and liability imposed by the terms of this Agreement.
(vii) The parties and their respective successors and
assigns agree jointly and severally to indemnify and hold Escrow Agent harmless
against any and all losses, claims, damages, liabilities, and expenses,
including reasonable costs of investigation, counsel fees, and disbursements
that may be imposed on Escrow Agent or incurred by Escrow Agent in connection
with the performance of his/her duties under this Agreement, including but not
limited to any litigation arising from this Agreement or involving its subject
matter.
(viii) The Escrow Agent may resign at any time upon
giving at least thirty (30) days written notice to the parties; provided,
however, that no such resignation shall become effective until the appointment
of a successor escrow agent which shall be accomplished as
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follows: the parties shall use their best efforts to mutually agree on a
successor escrow agent within thirty (30) days after receiving such notice. If
the parties fail to agree upon a successor escrow agent within such time, the
Escrow Agent shall have the right to appoint a successor escrow agent authorized
to do business in the State of California. The successor escrow agent shall
execute and deliver an instrument accepting such appointment and it shall,
without further acts, be vested with all the estates, properties, rights,
powers, and duties of the predecessor escrow agent as if originally named as
escrow agent. The Escrow Agent shall be discharged from any further duties and
liability under this Agreement.
(k) Fees. All fees of the Escrow Agent for performance of its
duties hereunder shall be paid by Parent. It is understood that the fees and
usual charges agreed upon for services of the Escrow Agent shall be considered
compensation for ordinary services as contemplated by this Agreement. In the
event that the conditions of this Agreement are not promptly fulfilled, or if
the Escrow Agent renders any service not provided for in this Agreement, or if
the parties request a substantial modification of its terms, or if any
controversy arises, or if the Escrow Agent is made a party to, or intervenes in,
any litigation pertaining to this escrow or its subject matter, the Escrow Agent
shall be reasonably compensated for such extraordinary services and reimbursed
for all costs, attorney's fees, and expenses occasioned by such default, delay,
controversy or litigation. Parent promises to pay these sums upon demand.
(l) Exclusive Right to Indemnification. Except as provided for
in the following sentence, resort to the Escrow Fund shall be the exclusive
right and remedy of Parent for breaches of the representations, warranties,
covenants and agreements of the Company contained herein; provided, however,
that the foregoing limitation shall not apply to fraud or any intentional
breach. Notwithstanding the foregoing, the existence of this Article VII and the
rights and restrictions set forth herein do not limit any other potential
remedies of Parent with respect to any fraudulent breach by the Company or its
officers or directors of the representations, warranties, covenants or
agreements of the Company contained herein.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
8.1 Termination. Except as provided in Section 8.2 below, this Agreement
may be terminated and the Merger abandoned at any time prior to the Effective
Time:
(a) by mutual consent of the Company and Parent;
(b) by Parent or the Company if: (i) the Effective Time has not
occurred before 5:00 p.m. (Pacific time) on June 30, 2000 (the "End Date")
(provided that the right to terminate this Agreement under this Section
8.1(b)(i) shall not be available to any party whose failure to fulfill any
obligation hereunder has been the cause of, or resulted in, the failure of the
Effective Time to occur on or before such date); (ii) there shall be a final
nonappealable order of a federal or state court in
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effect preventing consummation of the Merger; or (iii) there shall be any
statute, rule, regulation or order enacted, promulgated or issued or deemed
applicable to the Merger by any governmental entity that would make consummation
of the Merger illegal;
(c) by Parent if there shall be any action taken, or any
statute, rule, regulation or order enacted, promulgated or issued or deemed
applicable to the Merger, by any Governmental Entity, which would: (i) prohibit
Parent's or the Company's ownership or operation of all or any portion of the
business of the Company or (ii) compel Parent or the Company to dispose of or
hold separate all or a portion of the business or assets of the Company or
Parent as a result of the Merger;
(d) by Parent, upon a breach of any representation, warranty,
covenant or agreement on the part of the Company set forth in this Agreement
which breach has a Material Adverse Effect on the Company, or if any
representation or warranty of the Company shall have become untrue, in either
case such that the conditions set forth in Section 6.3(a) or Section 6.3(b)
would not be satisfied as of the time of such breach or as of the time such
representation or warranty shall have become untrue, provided that if such
inaccuracy in the Company's representations and warranties or breach by the
Company is curable by the Company within 30 days through the exercise of its
reasonable best efforts, then for so long as the Company continues to exercise
such reasonable best efforts Parent may not terminate this Agreement under this
Section 8.1(d) unless such breach is not cured within 30 days (it being
understood that Parent may not terminate this Agreement pursuant to this Section
8.1(d) if it shall have materially breached this Agreement);
(e) by the Company, upon a breach of any representation,
warranty, covenant or agreement on the part of Parent set forth in this
Agreement which breach has a Material Adverse Effect on the Parent, or if any
representation or warranty of Parent shall have become untrue, in either case
such that the conditions set forth in Section 6.2(a) or Section 6.2(b) would not
be satisfied as of the time of such breach or as of the time such representation
or warranty shall have become untrue, provided, that if such inaccuracy in
Parent's representations and warranties or breach by Parent is curable by Parent
within 30 days through the exercise of its reasonable best efforts, then for so
long as Parent continues to exercise such reasonable best efforts the Company
may not terminate this agreement under this Section 8.1(e) unless such breach is
not cured within 30 days (it being understood that the Company may not terminate
this Agreement pursuant to this Section 8.1(e) if it shall have materially
breached this Agreement).
Where action is taken to terminate this Agreement pursuant to this
Section 8.1, it shall be sufficient for such action to be authorized by the
Board of Directors (as applicable) of the party taking such action.
8.2 Effect of Termination. In the event of termination of this Agreement
as provided in Section 8.1, this Agreement shall forthwith become void and there
shall be no liability or obligation on the part of Parent or the Company, or
their respective officers, directors or stockholders, provided that each party
shall remain liable for any breaches of this Agreement prior to its termination;
and
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provided further that, the provisions of Sections 5.3, 5.4 and 5.5 and Article
VIII of this Agreement shall remain in full force and effect and survive any
termination of this Agreement.
8.3 Amendment. Except as is otherwise required by applicable law after
the Company Stockholders approve this Agreement, this Agreement may be amended
by the parties hereto at any time by execution of an instrument in writing
signed on behalf of each of the parties hereto.
8.4 Extension; Waiver. At any time prior to the Effective Time, Parent,
on the one hand, and the Company, on the other, may, to the extent legally
allowed, (i) extend the time for the performance of any of the obligations of
the other party 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.
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 acknowledgment of complete transmission)
to the parties at the following addresses (or at such other address for a party
as shall be specified by like notice):
(a) if to Parent, to:
Cypress Semiconductor Corporation
0000 X. Xxxxx Xxxxxx
Xxx Xxxx, XX 00000-0000
Attention: J. Xxxxxx XxXxxxxx
Telephone No.: 000-000-0000
Facsimile No.: 000-000-0000
with a copy to:
Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, Professional Corporation
000 Xxxx Xxxx Xxxx
Xxxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxxxx Xxxxxxx
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
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(b) if to the Company, to:
Alation Systems, Inc.
000 Xxxx Xxxxxx
Xxxxxxxx Xxxx, XX 00000
Attention: Xxxxx Xxxxxxxx
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
with a copy to:
Xxxx Xxxx Xxxx & Freidenrich LLP
000 Xxxxxxxx Xxxxxx
Xxxx Xxxx, XX 00000
Attention: Xxxx Xxxxxxxxx
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
(c) if to the Securityholder Agent:
Xxxxx Xxxxxxxx
c/o Alation Systems, Inc.
000 Xxxx Xxxxxx
Xxxxxxxx Xxxx, XX 00000
(d) if to the Escrow Agent:
U.S. Bank Trust, National Association
Corporate Trust Services
Xxx Xxxxxxxxxx Xxxxxx
Xxx Xxxxxxxxx, XX 00000
Attention: Xxx Xxxxxx
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
9.2 Interpretation. The words "include," "includes" and "including" when
used herein shall be deemed in each case to be followed by the words "without
limitation." As used herein, the term "Material Adverse Effect" shall mean a
material adverse effect on the business, assets (including intangible assets),
financial condition, capitalization, and results of operations of the specified
entity, except for effects caused by conditions (i) of the U.S. economy in
general, (ii) of the industry of the specified entity, (iii) resulting from
announcement of the Merger or (iv) caused by actions of the Company taken with
the prior written consent of the Parent which would otherwise in compliance with
Section 4.1. In addition, as used herein, the term "knowledge" shall mean, with
respect to Company or Parent, what is within the actual knowledge of any of the
officers of
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Company or Parent, as the case may be. 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 effective when one or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.
9.4 Entire Agreement; Assignment. This Agreement, the Schedules and
Exhibits hereto, and the documents and instruments and other agreements among
the parties hereto referenced herein, together with the Mutual Confidentiality
Agreement dated February 29, 2000, between Parent and the Company: (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;
(b) are not intended to confer upon any other person any rights or remedies
hereunder; and (c) shall not be assigned by operation of law or otherwise except
as otherwise specifically provided, except that Parent may assign their
respective rights and delegate their respective obligations hereunder to their
respective affiliates.
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 Other Remedies. 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, regardless of the laws that
might otherwise govern under applicable principles of conflicts of laws thereof.
Each of the parties hereto 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 Rules of Construction. The parties hereto agree that they have been
represented by counsel during the negotiation and execution of this Agreement
and, therefore, waive the application
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of any law, regulation, holding or rule of construction providing that
ambiguities in an agreement or other document will be construed against the
party drafting such agreement or document.
[remainder of page intentionally left blank]
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IN WITNESS WHEREOF, Parent, the Company and, with respect to Article VII
only, the Escrow Agent and the Securityholder Agent, and have caused this
Agreement to be signed by their duly authorized respective officers, all as of
the date first written above.
CYPRESS SEMICONDUCTOR ALATION SYSTEMS, INC.
CORPORATION
By: /s/ Xxxxxxxx Xxxxxxxxx By: /s/ Xxxxx Xxxxxxxx
---------------------------------- ---------------------------------
Name: Xxxxxxxx Xxxxxxxxx Name: Xxxxx Xxxxxxxx
Title: CFO Title: President and CEO
SECURITYHOLDER AGENT:
/s/ Xxxxx Xxxxxxxx
-------------------------------------
Name: Xxxxx Xxxxxxxx
ESCROW AGENT:
/s/ Xxx Xxxxxx
------------------------------------
Name: Xxx Xxxxxx
U.S. Bank Trust National Association
67
INDEX OF EXHIBITS
EXHIBIT DESCRIPTION
------- -----------
Exhibit A Form of Non-Competition Agreement
Exhibit B Form of Voting Agreement
Exhibit C Form of Company Affiliate Agreement
Exhibit D Form of Legal Opinion of Counsel to the Company
Exhibit E Form of Legal Opinion of Counsel to Parent
Exhibit F Table of Definitions
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EXHIBIT A TO AGREEMENT AND PLAN OF REORGANIZATION
NON-COMPETITION AGREEMENT
THIS NON-COMPETITION AGREEMENT (the "Agreement") is made as of the
Effective Date (as defined below) by and among Cypress Semiconductor
Corporation, a Delaware corporation ("Parent"), and the undersigned stockholder
("Stockholder") of Alation Systems, Inc., a California corporation (the
"Company").
WHEREAS, concurrently with the execution of this Agreement, Parent, the
Company and certain other parties have entered into an Agreement and Plan of
Reorganization dated as of _______, 2000 (the "Merger Agreement") pursuant to
which a wholly own subsidiary to be formed by Parent ("Merger Sub") shall merge
(the "Merger") with and into the Company and Parent Common Stock will be
exchanged for all of the outstanding shares ("Shares") of the Company's capital
stock held by the stockholders of the Company, including Stockholder. The
Closing Date (as defined in the Merger Agreement) shall be the "Effective Date"
of this Agreement.
WHEREAS, as a result of the Merger, Stockholder shall receive from
Parent significant consideration in the form of Parent Common Stock in exchange
for all Shares held by Stockholder pursuant to the terms of the Merger
Agreement.
WHEREAS, as a condition to the Merger, and to preserve the value of the
business being acquired by Parent after the Merger, the Merger Agreement
contemplates, among other things, that Stockholder shall enter into this
Agreement and that this Agreement shall become effective on the Effective Date.
WHEREAS, Stockholder's primary place of employment with the Company is
in California.
NOW, THEREFORE, in consideration of the mutual promises made herein,
Parent and the Stockholder hereby agree as follows:
1. Covenant Not to Compete or Solicit.
(a) Beginning on the Effective Date and ending on the earlier
of: (i) the date which is two (2) years after the date of Stockholder's
voluntary termination of Stockholder's employment with Parent or the Company or
the termination of Stockholder's employment by Parent or the Company with Cause
(as defined below); (ii) the date of termination of Stockholder's employment
with Parent or the Company by Parent without Cause; and (iii) the date of
Stockholder's voluntary termination of employment with Parent or the Company for
Good Reason (the "Non-Competition Period"), Stockholder shall not directly or
indirectly (other than on behalf of Parent or the Company), without the prior
written consent of Parent, engage in a Competitive Business Activity (as defined
below) anywhere in the Restricted Territory (as defined below).
69
For all purposes hereof, the term "Cause" shall mean: (i) Stockholder's
continued failure to perform his or her duties and responsibilities in good
faith and to the best of his or her ability in all material respects; (ii)
Stockholder personally engaging in fraud, (iii) Stockholder being convicted of a
felony; (iv) Stockholder materially breaching any term of this Agreement or any
other agreement (including any non-competition agreement) with Parent or any
subsidiary in which Parent has a majority ownership interest; (v) Stockholder's
commencement of employment or a consulting arrangement with another employer
while he or she is an employee of Parent or any subsidiary in which Parent has a
majority ownership interest, without Parent's prior written consent, excluding
any service by Stockholder as an outside member of a board of directors of a
company not engaged in a Competitive Business Activity; (vi) material
noncompliance by Stockholder with the human resources policies of Parent
delivered or made available to Stockholder, provided Stockholder has been
provided notice of such noncompliance; (vii) material nonconformance with
Parent's standard business practices and policies generally known by the
Company's employees, made known or made available to Stockholder or delivered in
writing to Stockholder, provided Stockholder has been provided notice of such
nonconformance; or (viii) termination or loss, through no fault or derogation of
duty on the part of the Company, of Stockholder's employment authorization from
the U.S. Immigration and Naturalization Service or the U.S. Department of State
reflecting a right to work in the United States. With respect to subparts (i),
(vi), warnings and (vii) above, the Parent or Company who is the employer shall
provide the Stockholder with such advice, recommendations, notice and
opportunity to cure the existence (or potential existence) of any Cause (as
defined above for termination of Stockholder's employment) which is required by
applicable employment laws or is otherwise consistent with the Parent's
employment policies as applied to its other employees generally.
For all purposes hereof, the term "Good Reason" shall mean only
any of the following conditions, which condition(s) remain(s) in effect 30 days
after written notice to the Board from Stockholder of such condition(s):
(1) a substantial decrease in Stockholder's base salary
and employee benefits, taken as a whole when compared to the base salary and
benefits that are payable at the Closing to the Stockholder under his/her
employment agreement with the Parent or the Company, without the Stockholder's
consent, or
(2) a material reduction in Stockholder's authority,
responsibilities and duties taken as a whole, as measured against Stockholder's
authority, responsibilities and duties immediately prior to such change, without
the Stockholder's consent, or
(3) the relocation of Stockholder's work place to a
location which is both greater than fifty (50) miles from the city limits of
Mountain View, California and fifty (50) miles from the location of
Stockholder's residence at the time of the relocation.
For all purposes hereof, the term "Competitive Business Activity" shall
mean: (i) engaging in, or managing or directing persons engaged in any business
related to (1) the design, development, manufacture, marketing and/or sales of
any radio transmitter, receiver, [baseboard] control circuit, or other product
or device that employs, or has any component that employs, any "Bluetooth
Protocol" (as defined below) (the "Company's Field"); or (ii) acquiring or
having an
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ownership interest in any entity which derives revenues from any business
engaged in the Company's Field (except for ownership of one percent (1%) or less
of any entity whose securities have been registered under the Securities Act of
1933, as amended, or Section 12 of the Securities Exchange Act of 1934, as
amended); or (iii) participating in financing of more than 1% of the equity or
working capital of any entity which derives revenues from any business engaged
in the Company's Field; or (iv) any operation, management or control of, any
entity which derives revenues from any business engaged in the Company's Field.
"Bluetooth Protocol" means any past, current or future version
of the profile, core, and other protocols and specifications now or hereafter
promulgated by Telefonaktiebolaget LM Ericsson, International Business Machines
Corporation, Intel Corporation, Nokia Corporation, and/or Toshiba Corporation,
or any of their successor(s) and/or assign(s) for the bluetooth wireless
transmitter/receiver architecture, including without limitation that certain
Specification of the Bluetooth System, Volume 1 Core and Volume 2 Profiles,
v1.0B, promulgated as of December 1, 1999 by the above parties, and any
enhancements, modifications, or other versions thereof.
For all purposes hereof, the term "Restricted Territory" shall
mean each and every country, province, state, city or other political
subdivision of North America, Asia and Europe in which Parent or the Company is
currently engaged in business or otherwise distributes, licenses or sells its
products.
(b) During the Non-Competition Period, Stockholder shall not
directly or indirectly solicit, encourage or take any other action which is
intended to induce or encourage, or has the effect of inducing of encouraging,
any employee of the Parent or the Company to terminate his or her employment
with the Parent or the Company.
(c) The covenants contained in Section 1(a) hereof shall be
construed as a series of separate covenants, one for each country, province,
state, city or other political subdivision of the Restricted Territory. Except
for geographic coverage, each such separate covenant shall be deemed identical
in terms to the covenant contained in Section 1(a) hereof. If, in any judicial
proceeding, a court refuses to enforce any of such separate covenants (or any
part thereof), then such unenforceable covenant (or such part) shall be
eliminated from this Agreement to the extent necessary to permit the remaining
separate covenants (or portions thereof) to be enforced. In the event that the
provisions of this Section 1 are deemed to exceed the time, geographic or scope
limitations permitted by applicable law, then such provisions shall be reformed
to the maximum time, geographic or scope limitations, as the case may be,
permitted by applicable laws.
(d) Stockholder acknowledges that (i) the goodwill associated
with the existing business, customers and assets of the Company prior to the
Merger are an integral component of the value of the Company to Parent and is
reflected in the portion of the consideration payable to Stockholder pursuant to
Section 1.6 of the Merger Agreement, and (ii) Stockholder's agreement as set
forth herein is necessary to preserve the value of the Company for Parent
following the Merger. Stockholder also acknowledges that the limitations of
time, geography and scope of activity agreed to in this Agreement are reasonable
because, among other things, (A) the Company and Parent are engaged in a highly
competitive industry, (B) Stockholder has unique access to, and will continue to
have access to, the trade secrets and know-how of the Company and Parent,
including, without
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limitation, the plans and strategy (and, in particular, the competitive
strategy) of the Company, (C) Stockholder is receiving significant consideration
in connection with the Merger, and (D) in the event Stockholder's employment
with Parent or the Company ended, Stockholder would be able to obtain suitable
and satisfactory employment without violation of this Agreement.
(e) Stockholder's obligations under this Agreement shall remain
in effect if Stockholder's employment with Parent or the Company is terminated
for any reason, subject to the provisions of Section 1(a) above.
(f) Nothing in this Section 1 shall be deemed or construed to
alter any employment relationship between Parent or the Company and Stockholder
under any employment agreement between Parent, the Company and/or the
Stockholder.
2. Miscellaneous.
(a) Governing Law; Consent to Personal Jurisdiction. This
Agreement shall be governed by the laws of the State of California without
reference to rules of conflicts of law. Stockholder hereby consents to the
personal jurisdiction of the state and federal courts located in California for
any action or proceeding arising from or relating to this Agreement or relating
to any arbitration in which the parties are participants.
(b) Specific Performance. Stockholder agrees that in the event
of any breach by Stockholder of any covenant, obligation or other provision
contained in this Agreement, Parent shall be entitled (in addition to any other
remedy that may be available to it) to the extent permitted by applicable law to
(a) a decree or order of specific performance to enforce the observance and
performance of such covenant, obligation or other provision and (b) an
injunction restraining such breach or threatened breach.
(c) Severability. If any portion of this Agreement is held by an
arbitrator or a court of competent jurisdiction to conflict with any federal,
state or local law, or to be otherwise invalid or unenforceable, such portion of
this Agreement shall be of no force or effect and this Agreement shall otherwise
remain in full force and effect and be construed as if such portion had not been
included in this Agreement.
(d) No Assignment. Because the nature of the Agreement is
specific to the actions of Stockholder, Stockholder may not assign this
Agreement. This Agreement shall inure to the benefit of Parent and its
successors and assigns.
(e) Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered personally or by
commercial messenger or courier service, or mailed by registered or certified
mail (return receipt requested) or sent via facsimile (with acknowledgment of
complete transmission) to the parties at the following addresses (or at such
other address for a party as shall be specified by like notice); provided,
however, that notices sent by mail will not be deemed given until received:
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(i) if to Parent or the Company, to:
Cypress Semiconductor Corporation
0000 Xxxxx Xxxxx Xxxxxx
Xxx Xxxx, Xxxxxxxxxx 00000
Attn: President
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
with a copy to:
Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx
Professional Corporation
000 Xxxx Xxxx Xxxx
Xxxx Xxxx, Xxxxxxxxxx 00000
Attn: Xxxxx X. Xxxxxxx, Esq.
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
(ii) if to Stockholder, at the address set forth on the
signature page hereto.
(f) Entire Agreement. This Agreement contains the entire
agreement and understanding of the parties and supersedes all prior discussions,
agreements and understandings relating to the subject matter hereof. This
Agreement may not be changed or modified, except by an agreement in writing
executed by Parent and Stockholder.
(g) Waiver of Breach. The waiver of a breach of any term or
provision of this Agreement, which must be in writing, shall not operate as or
be construed to be a waiver of any other previous or subsequent breach of this
Agreement.
(h) Headings. All captions and section headings used in this
Agreement are for convenience only and do not form a part of this Agreement.
(i) Counterparts. This Agreement may be executed in
counterparts, and each counterpart shall have the same force and effect as an
original and shall constitute an effective, binding agreement on the part of
each of the undersigned.
[Remainder of Page Intentionally Left Blank]
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
Effective Date.
CYPRESS SEMICONDUCTOR CORPORATION
By:
---------------------------------
Name:
Title:
STOCKHOLDER
Name:
Address:
----------------------------
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[SIGNATURE PAGE TO NON-COMPETITION AGREEMENT]
74
EXHIBIT B TO AGREEMENT AND PLAN OF REORGANIZATION
VOTING AGREEMENT
This Voting Agreement ("AGREEMENT") is made and entered into as of April
20, 2000, between Cypress Semiconductor Corporation, a Delaware corporation
("PARENT"), and the undersigned stockholder ("STOCKHOLDER") of Alation Systems,
Inc., a California corporation (the "COMPANY").
RECITALS
A. Concurrently with the execution of this Agreement, Parent, the
Company and Alation Acquisition Corporation, a Delaware corporation and a
wholly-owned subsidiary of Parent ("MERGER SUB"), are entering into an Agreement
and Plan of Reorganization (the "MERGER AGREEMENT") which provides for the
merger (the "MERGER") of Merger Sub and the Company. Pursuant to the Merger,
shares of capital stock of the Company will be converted into Common Stock of
Parent on the basis described in the Merger Agreement.
B. Stockholder is the beneficial owner (as defined in Rule 13d-3 under
the Securities Exchange Act of 1934, as amended) of the number of outstanding
shares of capital stock of the Company indicated on Annex I to this Agreement.
C. As a material inducement to enter into the Merger Agreement, Parent
desires the Stockholder to agree, and in consideration of good and valuable
consideration the receipt and sufficiency of which is hereby acknowledged, the
Stockholder is willing to agree, to vote the Shares and New Shares (as defined
below) so as to facilitate consummation of the Merger.
NOW, THEREFORE, intending to be legally bound, the parties agree as
follows:
1. Agreement to Vote Shares; Additional Purchases; Transfers and
Encumbrance.
(a) Agreement to Vote Shares. At every meeting of the
stockholders of the Company called with respect to any of the following, and at
every adjournment thereof, and on every action or approval by written consent of
the stockholders of the Company with respect to any of the following,
Stockholder shall cause the Shares and any New Shares (as defined below) to be
voted and shall otherwise consent to:
(i) in favor of approval of the Merger and the adoption
and approval of the Merger Agreement including all further instruments,
agreements, and actions contemplated thereby;
(ii) contingent upon the Closing of the Merger, in favor
of the termination of any stockholders agreements to which the Stockholder is a
party including, without limitation, the Amended and Restated Investor Rights
Agreement and Amended and Restated Right of First Refusal and Co-Sale Agreement
between Company and Affiliate dated August 23, 1999;
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(iii) in favor of waiving any notice that may have been
or may be required relating to any reorganization of the Company, any
reclassification or recapitalization of the capital stock of the Company or any
sale of assets, change of control, or acquisition of the Company by any other
person, or any consolidation or merger of the Company with or into any other
person; and
(iv) against the following actions (other than those
actions that relate to the Merger and the transactions contemplated by the
Merger Agreement): (A) any merger, consolidation or other business combination
involving Company or any subsidiary of Company with any party other than Parent,
Merger Sub or any of their respective affiliates; (B) any sale, lease or
transfer of more than any significant part of the assets of Company or any
subsidiary of Company to any party other than Parent, Merger Sub or any of their
respective affiliates; (D) any change in a majority of the board of directors of
Company; (E) any material change in the capitalization of Company or Company's
corporate structure, other than as contemplated by the Merger Agreement; or (F)
any other action which is intended, or could reasonably be expected to, impede,
interfere with, delay, postpone, discourage or adversely affect the Merger or
any of the other transactions contemplated by the Merger Agreement or this
Agreement.
(b) No Agreements. Prior to the Expiration Date, Stockholder
shall not enter into any agreement or understanding with any person to vote or
give instructions in any manner inconsistent with this Agreement.
(c) Definition. For purposes of this Agreement, "SHARES" shall
mean all issued and outstanding shares of capital stock, or debt instruments
convertible into capital stock, of the Company for which Stockholder is the
beneficial owner or over which Stockholder has voting control, including any
securities convertible into, or exercisable or exchangeable for shares of the
Company's capital stock, all as set forth on Exhibit B attached hereto.
(d) Additional Purchases. Stockholder agrees that any shares of
capital stock of the Company that Stockholder purchases or with respect to which
Stockholder otherwise acquires beneficial ownership or voting control after the
execution of this Agreement and prior to the date of termination of this
Agreement ("NEW SHARES") shall be subject to the terms and conditions of this
Agreement to the same extent as if they constituted Shares.
(e) Transfer of Shares.
(i) Stockholder agrees that, during the period from the
date of this Agreement through the termination of this Agreement pursuant to
Section 9 below, Stockholder shall not cause or permit any transfer, sale,
exchange, pledge, gift, or other disposition or encumbrance (a "TRANSFER") of
any of the Shares and any New Shares to be effected unless such Transfer is in
accordance with any Affiliate Agreement between Stockholder and Parent
contemplated by the Merger Agreement and each person to which any of such Shares
and any New Shares, or any interest in any of such Shares and any New Shares, is
or may be Transferred shall have: (a) executed a counterpart of this Agreement
and a proxy in the form attached hereto as Exhibit A (with such modifications as
Parent may reasonably request); and (b) agreed in writing to hold such Shares
and any New Shares (or interest in such Shares and any New Shares) subject to
all of the terms and provisions of this Agreement.
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(ii) Stockholder agrees that, during the period from the
date of this Agreement through the termination of this Agreement pursuant to
Section 9 below, Stockholder shall not deposit (or permit the deposit of) any
Shares and any New Shares in a voting trust or grant any proxy or enter into any
voting agreement or similar agreement in contravention of the obligations of
Stockholder under this Agreement with respect to any of the Shares and any New
Shares.
2. Irrevocable Proxy. Concurrently with the execution of this Agreement,
Stockholder agrees to deliver to Parent a proxy in the form attached hereto as
Exhibit A (the "PROXY") with respect to the Shares and New Shares, which,
subject to Section 9 hereof, shall be irrevocable to the fullest extent
permitted by applicable law.
3. Appointment of Securityholder Agent. Stockholder agrees to appoint
the Securityholder Agent (as defined in the Merger Agreement) as agent and
attorney-in-fact for and on behalf for purposes of Section 7.2 of the Merger
Agreement. Stockholder further agrees that any decision, act, consent or
instruction of the Securityholder Agent (as defined in the Merger Agreement),
including, without limitation, any agreement by the Securityholder Agent for and
on behalf of the Stockholders (as defined in the Merger Agreement) to any
amendments, modifications and waivers of any term, condition or other agreement
set forth in the Merger Agreement, shall constitute a decision of Stockholder
for all purposes of and under the Merger Agreement, and that such decision, act,
consent or instruction shall be final, binding and conclusive upon Stockholder
as if made by the Stockholder.
4. Non-Solicitation. Stockholder covenants and agrees with Parent,
Merger Sub and Company that, during the period commencing on the date of this
Agreement and ending on June 30, 2000, Stockholder shall not, directly or
indirectly, (i) solicit or initiate discussions or engage in negotiations with
any person, or take any action intended, designed or reasonably likely to
facilitate the efforts of any person relating to the possible acquisition of
Company (whether by way of merger, purchase of its capital stock, purchase of
assets or otherwise) or any material portion of its capital stock or assets
("ACQUISITION PROPOSAL"), (ii) furnish any nonpublic information regarding
Company to any person in connection with or in response to an Acquisition
Proposal or potential Acquisition Proposal; (iii) engage in discussions with any
person with respect to any Acquisition Proposal; (iv) approve, endorse or
recommend any Acquisition Proposal in Stockholder's capacity as a Stockholder;
or (v) enter into any letter of intent or other similar document or any contract
contemplating or otherwise relating to any Acquisition Proposal. Stockholder
shall immediately cease any existing discussions or other communications with
any persons other than Parent or Merger Sub that relate to any Acquisition
Proposal.
5. Representations and Warranties of the Stockholder.
(i)Stockholder is the beneficial owner of the Shares free and
clear of any liens, claims, options, charges or other encumbrances.
(ii) Stockholder does not beneficially own any securities of the
Company other than the shares of Common Stock and Preferred Stock of the Company
and options to purchase shares of Common Stock of the Company indicated on
Exhibit B to this Agreement.
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(iii) Stockholder: (A) has full authority to vote and direct the
voting of the Shares; (B) does not beneficially own any securities of the
Company other than the Shares indicated on the final page of this Agreement; and
(C) has full power and authority to make, enter into and carry out the terms of
this Agreement and the Proxy.
6. Additional Documents; Stockholder Agreement. Stockholder hereby
covenants and agrees to execute and deliver any additional documents necessary
or desirable, in the reasonable opinion of Parent and the Company, to carry out
the intent of this Agreement.
7. Consent and/or Waiver. Stockholder hereby gives any consents or
waivers that are reasonably required for the consummation of the Merger under
the terms of any agreements to which Stockholder is a party or pursuant to any
rights Stockholder may have.
8. Termination. This Agreement and the Proxy shall terminate and shall
have no further force or effect as of the earlier to occur of (i) such date and
time as the Merger shall become effective in accordance with the terms and
provisions of the Merger Agreement or (ii) such date and time as the Merger
Agreement shall have been terminated in accordance with its terms.
9. Miscellaneous.
(a) Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, void or unenforceable, then the remainder of the terms, provisions,
covenants and restrictions of this Agreement shall remain in full force and
effect and shall in no way be affected, impaired or invalidated.
(b) Binding Effect and Assignment. This Agreement and all of the
provisions hereof shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns and any person or
entity to which legal or beneficial ownership of such Shares or New Shares shall
pass whether by operation of law or otherwise, but, except as otherwise
specifically provided herein, neither this Agreement nor any of the rights,
interests or obligations of the parties hereto may be assigned by either of the
parties without prior written consent of the other.
(c) Amendments and Modification. This Agreement may not be
modified, amended, altered or supplemented except upon the execution and
delivery of a written agreement executed by the parties hereto.
(d) Specific Performance; Injunctive Relief. The parties hereto
acknowledge that Parent will be irreparably harmed and that there will be no
adequate remedy at law for a violation of any of the covenants or agreements of
Stockholder set forth herein. Therefore, it is agreed that, in addition to any
other remedies that may be available to Parent upon any such violation, Parent
shall have the right to enforce such covenants and agreements by specific
performance, injunctive relief or by any other means available to Parent at law
or in equity.
(e) Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and sufficient if delivered in
person or sent by overnight courier by a reputable carrier (prepaid) to the
respective parties as follows:
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If to Parent: Cypress Semiconductor Corporation
0000 Xxxxx Xxxxx Xxxxxx
Xxx Xxxx, Xxxxxxxxxx 00000
Attn:
---------------------------------------
With a copy to: Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, P.C.
000 Xxxx Xxxx Xxxx
Xxxx Xxxx, Xxxxxxxxxx 00000-0000
Attention: Xxxxx X. Xxxxxxx, Esq.
If to the Stockholder: To the address for notice set forth on the
signature page hereof.
With a copy to: Xxxx Xxxx Xxxx & Freidenrich LLP
000 Xxxxxxxx Xxxxxx
Xxxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxxx Xxxxxxxxx, Esq.
or to such other address as any party may have furnished to the other in writing
in accordance herewith, except that notices of change of address shall only be
effective upon receipt.
(f) Governing Law. This Agreement shall be governed by, and
construed and enforced in accordance with, the internal laws of the State of
California (without regard to the principles of conflict of laws thereof).
(g) Entire Agreement. This Agreement contains the entire
understanding of the parties in respect of the subject matter hereof, and
supersedes all prior negotiations and understandings between the parties with
respect to such subject matter.
(h) Counterparts. This Agreement may be executed in several
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same agreement.
(i) Effect of Headings. The section headings herein are for
convenience only and shall not affect the construction or interpretation of this
Agreement
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IN WITNESS WHEREOF, the parties have caused this Voting Agreement to be
duly executed on the date and year first above written.
PARENT
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
[SIGNATURE PAGE TO VOTING AGREEMENT]
80
STOCKHOLDER:
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
Stockholder's Address for Notice:
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[SIGNATURE PAGE TO VOTING AGREEMENT]
81
STOCKHOLDER:
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
Stockholder's Address for Notice:
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[SIGNATURE PAGE TO VOTING AGREEMENT]
82
ANNEX I
Stockholder beneficially owns and has voting control over the following
capital stock of the Company:
Common Stock
1. _____________ shares of Common Stock of the Company.
Preferred Stock
2. _____________ shares of Series A Preferred Stock of the Company.
3. _____________ shares of Series B Preferred Stock of the Company.
Options, Warrants and Other Convertible Securities
4. _____________ shares of __________ Stock issuable upon exercise of
Stock Options.
5. _____________ shares of __________ Stock issuable upon exercise of
the conversion rights in a Note.
6. _____________ shares of __________ Stock issuable upon exercise or
conversion of other outstanding securities of the Company.
83
EXHIBIT A
IRREVOCABLE PROXY
The undersigned Stockholder of Alation Systems, Inc., a California
corporation (the "COMPANY"), hereby irrevocably appoints the directors on the
Board of Directors of Cypress Semiconductor Corporation, a Delaware corporation
("PARENT"), and each of them, as the sole and exclusive attorneys and proxies of
the undersigned, with full power of substitution and resubstitution, to the full
extent of the undersigned's rights with respect to the voting of the Shares and
New Shares (as each such term is defined in the Voting Agreement of even date
between Parent and the Stockholder (the "VOTING AGREEMENT")) on the matters
described below (and on no other matter), until such time as that certain
Agreement and Plan of Reorganization dated as of April 20, 2000 (the "MERGER
AGREEMENT"), among Parent, Alation Acquisition Corp., a Delaware corporation and
a wholly-owned subsidiary of Parent ("MERGER SUB"), and the Company, shall be
terminated in accordance with its terms or the Merger (as defined in the Merger
Agreement) becomes effective. Upon the execution hereof, all prior proxies given
by the undersigned with respect to the Shares and any and all other shares or
securities issued or issuable in respect thereof on or after the date hereof are
hereby revoked and no subsequent proxies will be given.
This proxy is irrevocable (to the fullest extent permitted by law and
subject to the termination of the Proxy as set forth in Section 9 of the Voting
Agreement), is granted pursuant to the Voting Agreement, is granted in
consideration of Parent entering into the Merger Agreement and is coupled with
an interest. The attorneys and proxies named above will be empowered at any time
prior to the earlier of termination of the Merger Agreement and the date on
which the Merger becomes effective to exercise all voting rights (including,
without limitation, the power to execute and deliver written consents with
respect to the Shares and the New Shares) of the undersigned at every annual,
special or adjourned meeting of the Company's stockholders, and in every written
consent in lieu of such a meeting, or otherwise, to vote the Shares and the New
Shares:
(i) in favor of approval of the Merger and the adoption and
approval of the Merger Agreement including all further instruments, agreements,
and actions contemplated thereby;
(ii) contingent upon the Closing of the Merger, in favor of the
termination of any stockholders agreements to which the Stockholder is a party
including, without limitation, the Amended and Restated Investor Rights
Agreement and Amended and Restated Right of First Refusal and Co-Sale Agreement
between Company and Affiliate dated August 23, 1999; and
(iii) in favor of waiving any notice that may have been or may
be required relating to any reorganization of the Company, any reclassification
or recapitalization of the capital stock of the Company or any sale of assets,
change of control, or acquisition of the Company by any other person, or any
consolidation or merger of the Company with or into any other person; and
84
(iv) against the following actions (other than those actions
that relate to the Merger and the transactions contemplated by the Merger
Agreement): (A) any merger, consolidation or other business combination
involving Company or any subsidiary of Company with any party other than Parent,
Merger Sub or any of their respective affiliates; (B) any sale, lease or
transfer of more than any significant part of the assets of Company or any
subsidiary of Company to any party other than Parent, Merger Sub or any of their
respective affiliates; (D) any change in a majority of the board of directors of
Company; (E) any material change in the capitalization of Company or Company's
corporate structure, other than as contemplated by the Merger Agreement; or (F)
any other action which is intended, or could reasonably be expected to, impede,
interfere with, delay, postpone, discourage or adversely affect the Merger or
any of the other transactions contemplated by the Merger Agreement or this
Agreement.
The attorneys and proxies named above may only exercise this proxy to
vote the Shares and any New Shares subject hereto at any time prior to the
earlier of termination of the Merger Agreement and the date on which the Merger
becomes effective, at every annual, special or adjourned meeting of the
stockholders of the Company and in every written consent in lieu of such
meeting. The undersigned Stockholder may vote the Shares and New Shares on all
other matters.
Any obligation of the undersigned hereunder shall be binding upon the
successors and assigns of the undersigned.
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This proxy is irrevocable and coupled with an interest.
Dated: __________, 2000
Signature of Stockholder:
Print Name of Stockholder:
***PROXY***
86
EXHIBIT C TO AGREEMENT AND PLAN OF REORGANIZATION
COMPANY AFFILIATE AGREEMENT
THIS COMPANY AFFILIATE AGREEMENT (this "Agreement") is made and entered
into as of April 20, 2000, among Cypress Semiconductor Corporation, a Delaware
corporation ("Parent"), and the undersigned stockholder who may be deemed an
affiliate ("Affiliate") of Alation Systems, Inc., a California corporation
("Company"). Capitalized terms used but not otherwise defined herein shall have
the meanings ascribed to them in the Reorganization Agreement (as defined
below).
RECITALS
A. The Company, Merger Sub (as defined below) and Parent have entered
into an Agreement and Plan of Reorganization (the "Reorganization Agreement")
which provides for the merger (the "Merger") of a wholly-owned subsidiary of
Parent ("Merger Sub") with and into the Company. Pursuant to the Merger, all
outstanding shares of capital stock of the Company (the "Company Capital Stock")
shall be converted into the right to receive Common Stock of Parent;
B. Affiliate has been advised that Affiliate may be deemed to be an
"affiliate" of the Company, as the term "affiliate" is used for purposes of Rule
144 of the Rules and Regulations (the "Rules and Regulations") of the Securities
and Exchange Commission (the "Commission"); and
C. The execution and delivery of this Agreement by Affiliate is a
material inducement to Parent to enter into the Reorganization Agreement.
NOW, THEREFORE, intending to be legally bound, the parties hereto agree
as follows:
1. Acknowledgments by Affiliate. Affiliate acknowledges and understands
that the representations, warranties and covenants by Affiliate set forth herein
shall be relied upon by Parent, the Company and their respective affiliates,
counsel and accounting firms, and that substantial losses and damages may be
incurred by these persons if Affiliate's representations, warranties or
covenants are breached. Affiliate has carefully read this Agreement and the
Reorganization Agreement and has discussed the requirements of this Agreement
with Affiliate's professional advisors, who are qualified to advise Affiliate
with regard to such matters.
2. Beneficial Ownership of Company Capital Stock. The Affiliate is the
beneficial owner of shares of Company Capital Stock (the "Shares"). The Shares
are not subject to any claim, lien, pledge, charge, security interest or other
encumbrance or to any rights of first refusal of any kind except for the Amended
and Restated Investor Rights Agreement and Amended and Restated Right of First
Refusal and Co-Sale Agreement between Company and Affiliate dated August 23,
1999. There are no options, warrants, calls, rights, commitments or agreements
of any character, written or oral, to which the Affiliate is a party or by which
it is bound obligating the Affiliate to issue, deliver, sell, repurchase or
redeem, or cause to be issued, delivered, sold, repurchased or redeemed, any
87
Shares or obligating the Affiliate to grant or enter into any such option,
warrant, call, right, commitment or agreement. The Affiliate has the sole right
to transfer such Shares. The Shares are not subject to preemptive rights created
by any agreement to which the Affiliate is party except for the Amended and
Restated Investor Rights Agreement and Amended and Restated Right of First
Refusal and Co-Sale Agreement between Company and Affiliate dated August 23,
1999. All shares of Company Capital Stock and common stock of Parent ("Parent
Common Stock") acquired by Affiliate in the Merger shall be subject to the
provisions of this Agreement as if held by Affiliate as of the date hereof
(excluding Parent Common Stock acquired in the open market).
3. Covenants Related to Pooling of Interests. During the period
beginning 35 days preceding the Effective Time of the Merger and ending two
trading days after Parent publicly announces financial results covering at least
30 days of combined operations of Parent and the Company, Affiliate shall not
sell, exchange, transfer, pledge, distribute, make any gift or otherwise dispose
of or grant any option, establish any "short" or put-equivalent position with
respect to or enter into any similar transaction (through derivatives or
otherwise) intended or having the effect, directly or indirectly, to reduce
Affiliate's risk relative to any shares of Parent Common Stock or any of the
Shares. Parent may, at its discretion, place a stock transfer notice consistent
with the foregoing, with respect to Affiliate's shares.
4. Compliance with Rule 145 and the Securities Act.
(a) Affiliate has been advised that (i) the issuance of shares
of Parent Common Stock in connection with the Merger is expected to be effected
pursuant to a fairness hearing under California law, and the resale of such
shares shall be subject to restrictions set forth in Rule 145 promulgated under
the Securities Act of 1933, as amended (the "Securities Act"), and (ii)
Affiliate may be deemed to be an affiliate of the Company. Affiliate accordingly
agrees not to sell, transfer or otherwise dispose of any Parent Common Stock
issued to Affiliate in the Merger unless (i) such sale, transfer or other
disposition is made in conformity with the requirements of Rule 145(d)
promulgated under the Securities Act, (ii) such sale, transfer or other
disposition is made pursuant to an effective registration statement under the
Securities Act or an appropriate exemption from registration, (iii) Affiliate
delivers to Parent a written opinion of counsel, reasonably acceptable to Parent
in form and substance, that such sale, transfer or other disposition is
otherwise exempt from registration under the Securities Act or (iv) an
authorized representative of the Commission shall have rendered written advice
to Affiliate to the effect that the Commission would take no action, or that the
staff of the Commission would not recommend that the Commission take any action,
with respect to the proposed disposition if consummated.
(b) Parent shall give stop transfer instructions to its transfer
agent with respect to any Parent Common Stock received by Affiliate pursuant to
the Merger and there shall be placed on the certificates representing such
Common Stock, or any substitutions therefor, a legend stating in substance:
"THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A TRANSACTION
TO WHICH RULE 145 APPLIES AND MAY ONLY BE TRANSFERRED IN
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CONFORMITY WITH RULE 145(d) OR PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR IN ACCORDANCE WITH A WRITTEN
OPINION OF COUNSEL, REASONABLY ACCEPTABLE TO THE ISSUER IN FORM AND SUBSTANCE,
THAT SUCH TRANSFER IS EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933,
AS AMENDED."
The legend set forth above shall be removed (by delivery of a substitute
certificate without such legend) and Parent shall so instruct its transfer
agent, if Affiliate delivers to Parent (i) satisfactory written evidence that
the shares have been sold in compliance with Rule 145 (in which case, the
substitute certificate shall be issued in the name of the transferee), or (ii)
an opinion of counsel, in form and substance reasonably satisfactory to Parent,
to the effect that public sale of the shares by the holder thereof is no longer
subject to Rule 145.
5. Rule 144/145 Reporting. Parent shall, for a period of two (2) years
from the date hereof, use commercially reasonable efforts to: (a) make and keep
public information available (as such terms are understood and defined in Rule
144 under the Securities Act), (b) file with the Commission in a timely manner
all reports and other documents required of Parent under the Securities Act and
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and (c)
furnish to Affiliate promptly upon request a written statement as to its
compliance with reporting requirements of Rule 144.
6. Termination. This Agreement shall be terminated and shall be of no
further force and effect in the event of the termination of the Reorganization
Agreement pursuant to Article VIII of the Reorganization Agreement.
7. Miscellaneous.
(a) Waiver; Severability. No waiver by any party hereto of any
condition or of any breach of any provision of this Agreement shall be effective
unless in writing and signed by each party hereto. In the event that any
provision of this Agreement, or the application of any such provision to any
person, entity or set of circumstances, shall be determined to be invalid,
unlawful, void or unenforceable to any extent, the remainder of this Agreement,
and the application of such provision to persons, entities or circumstances
other than those as to which it is determined to be invalid, unlawful, void or
unenforceable, shall not be impaired or otherwise affected and shall continue to
be valid and enforceable to the fullest extent permitted by law.
(b) Binding Effect and Assignment. This Agreement and all of the
provisions hereof shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns, but, except as
otherwise specifically provided herein, neither this Agreement nor any of the
rights, interests or obligations of the parties hereto may be assigned by either
of the parties without prior written consent of the other party hereto.
(c) Amendments and Modification. This Agreement may not be
modified, amended, altered or supplemented except upon the execution and
delivery of a written agreement executed by the parties hereto.
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(d) Injunctive Relief. Each of the parties acknowledge that: (i)
the covenants and the restrictions contained in this Agreement are necessary,
fundamental, and required for the protection of Parent and the Company and to
preserve for Parent the benefits of the Merger; (ii) such covenants relate to
matters which are of a special, unique, and extraordinary character that gives
each of such covenants a special, unique, and extraordinary value; and (iii) a
breach of any such covenants or any other provision of this Agreement shall
result in irreparable harm and damages to Parent and the Company which cannot be
adequately compensated by a monetary award. Accordingly, it is expressly agreed
that in addition to all other remedies available at law or in equity, Parent and
the Company shall be entitled to the immediate remedy of a temporary restraining
order, preliminary injunction, or such other form of injunctive or equitable
relief as may be used by any court of competent jurisdiction to restrain or
enjoin any of the parties hereto from breaching any such covenant or provision
or to specifically enforce the provisions hereof.
(e) Governing Law. This Agreement shall be governed by and
construed, interpreted and enforced in accordance with the internal laws of the
State of California without giving effect to any choice or conflict of laws
provision or rule (whether of the State of California or any other jurisdiction)
that would cause the application of the laws of any jurisdiction other than the
State of California.
(f) Entire Agreement. This Agreement, the Reorganization
Agreement and the other agreements referred to in the Reorganization Agreement
set forth the entire understanding of Affiliate and Parent relating to the
subject matter hereof and thereof and supersede all prior agreements and
understandings between Affiliate and Parent relating to the subject matter
hereof and thereof.
(g) Attorneys' Fees. In the event of any legal actions or
proceeding to enforce or interpret the provisions hereof, the prevailing party
shall be entitled to reasonable attorneys' fees, whether or not the proceeding
results in a final judgment.
(h) Further Assurances. Affiliate shall execute and/or cause to
be delivered to Parent such instruments and other documents and shall take such
other actions as Parent may reasonably request to effectuate the intent and
purposes of this Agreement.
(i) Third Party Reliance. Counsel to and independent auditors
for Parent and the Company shall be entitled to rely upon this Affiliate
Agreement.
(j) Survival. The representations, warranties, covenants and
other provisions contained in this Agreement shall survive the Merger.
(k) Counterparts. This Agreement shall be executed in one or
more counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties have caused this Affiliate Agreement to
be duly executed on the day and year first above written.
CYPRESS SEMICONDUCTOR AFFILIATE
CORPORATION
By: By:
-------------------------------- ---------------------------------
Name:
------------------------------ ---------------------------------
Title:
----------------------------- Affiliate's Address for Notice:
------------------------------------
------------------------------------
------------------------------------
Shares beneficially owned:
______ shares of Company Common Stock
______ shares of Company Common Stock
issuable upon conversion of Company
Preferred Stock
______ shares of Company Common Stock
issuable upon exercise of outstanding
options and warrants
______ shares of Parent Common Stock
[SIGNATURE PAGE TO AFFILIATE AGREEMENT]
91
EXHIBIT D TO AGREEMENT AND PLAN OF REORGANIZATION
[Letterhead of GCWF]
__________, 2000
Cypress Semiconductor Corporation
0000 Xxxxx Xxxxx Xxxxxx
Xxx Xxxx, Xxxxxxxxxx 00000-0000
Ladies and Gentlemen:
We have acted as counsel to Alation Systems, Inc., a California
corporation (the "Company"), in connection with the merger (the "Merger") of
Alation Acquisition Corp., a California corporation (the "Sub") and a
wholly-owned subsidiary of Cypress Semiconductor Corporation (the "Parent"),
with and into the Company, pursuant to an Agreement and Plan of Merger and
Reorganization by and among the Parent, the Sub and the Company dated as of
April 20, 2000 (the "Reorganization Agreement"). This opinion is furnished to
you pursuant to Section 6.3(d) of the Reorganization Agreement. Unless otherwise
specified herein, the capitalized terms used in this opinion have the meaning
given to them in the Reorganization Agreement.
As counsel to the Company, we have made such legal and factual
examinations and inquiries as we have deemed advisable or necessary for the
purposes of rendering this opinion. We have examined originals or copies of the
following documents: (a) the Articles of Incorporation of the Company in the
form certified as of a recent date by the Secretary of State of the State of
California, and the Certificate of Correction related thereto; (b) the Bylaws of
the Company in the form certified as of the date hereof by an officer of the
Company; (c) resolutions of the Board of Directors of the Company in the form
certified as of the date hereof by an officer of the Company; (d) a Certificate
of Status from the Secretary of State of the State of California with respect to
the Company; (e) the Reorganization Agreement and the Agreement of Merger
contemplated thereby (together the "Merger Agreements"); (f) the Company
Schedules; (g) the agreements set forth in Section 2.12(a) of the Company
Schedules (each a "Material Company Contract"); and (h) such other documents,
records, certificates and other factual information otherwise supplied to us, as
in our judgment are necessary or appropriate to render the opinions expressed
below. In such examination, we have assumed the genuineness of all signatures on
original documents, the conformity to original documents of all copies submitted
to us and the due authorization, execution and delivery of all documents by any
party other than the Company where due authorization, execution and delivery are
a prerequisite to the effectiveness thereof, that you have received all of the
documents that you are
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required to receive under the Reorganization Agreement and that the Merger
Agreements are the binding obligation of the Parent and the Sub.
Subject to the further limitations on the scope of our inquiry set forth
herein, we have relied solely upon certificates of public officials (as to which
we have assumed the accuracy, completeness and genuineness), certificates of
officers of the Company (each, an "Officer's Certificate") and oral and written
representations made to us by officers of the Company. We have made no
independent investigation of any of the facts stated in the Officer's
Certificates or any representations made by officers of the Company.
For purposes of this opinion, we are assuming that the Parent, the Sub
and the Escrow Agent have all requisite power and authority and have taken any
and all necessary corporate action to execute and deliver such of the
Reorganization Agreement, the Merger Agreement and related documents to which
they are a party. In addition, we have assumed that the representations and
warranties made by the Parent and the Sub in Article III of the Reorganization
Agreement are true and correct. We have not acted as counsel to any of the
shareholders of the Company.
As used in this opinion, the expression "to our knowledge" or "known to
us" with reference to matters of fact means that, during the course of our
representation and after an examination of the documents referenced in the above
paragraph, and after inquiries of officers of the Company, but without any
further independent factual investigation, we find no reason to believe that the
opinions expressed herein are factually incorrect. Further, the expression "to
our knowledge" with reference to matters of fact refers to the current actual
knowledge of the attorneys of this firm who have worked on matters for the
Company solely in connection with the Merger Agreements and the transactions
contemplated thereby. Except to the extent expressly set forth herein, we have
not undertaken any independent investigation to determine the existence or
absence of any fact, and no inference as to our knowledge of the existence or
absence of any fact should be drawn from our representation of the Company or
the rendering of the opinion set forth below.
With respect to our opinion in paragraph 1 that the Company is in good
standing under the laws of the State of California, we have relied solely upon a
certificate of status issued by the Secretary of State of California.
With respect to our opinion in Paragraph 4(iv), we have relied solely
upon the representations of officers of the Company regarding the existence of
facts that may result in a violation or default and our review of the documents
referred to in the second paragraph of this opinion.
With respect to our opinions in Paragraph 7 regarding the outstanding
capital stock of the Company, we have based our opinion solely upon our review
of the Articles of Incorporation of the Company, the Bylaws of the Company, the
stock ledgers and minutes of the meetings of the board of directors of the
Company provided to us by the Company. In addition, with respect to our opinion
in Paragraph 7 hereof that all issued and outstanding shares of the Company are
fully paid, we have
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relied exclusively upon representations concerning receipt by the Company of the
proper consideration for such shares made to us by the officers of the Company.
The opinions hereinafter expressed are subject to the following
qualifications:
A. We express no opinion as to the effect of general principles of
equity, including, but not limited to, concepts of materiality, reasonableness,
good faith and fair dealing, and the possible unavailability of specific
performance or injunctive relief (regardless of whether such remedy is
considered in a proceeding in equity or at law).
B. We express no opinion as to the effect of applicable bankruptcy,
insolvency, reorganization, moratorium and other similar federal and state laws
affecting the rights of creditors generally.
C. We express no opinion as to compliance with the anti-fraud provisions
of state and federal laws, rules and regulations concerning the issuance of
securities.
D. We are not expressing any opinion relating to any jurisdiction other
than the laws of the United States of America and the laws of the State of
California. In rendering our opinions in Paragraphs 4 and 5 below, to the extent
that such opinion relates to judgments, orders, decrees, or authorizations,
approvals or consents of, or registrations, declarations or filings with, any
governmental authority or agency applicable to the Company, it is understood
that we have not conducted any special investigation of statutes, laws,
ordinances, rules or regulations, and our opinion with respect thereto is
limited to such United States and California statutes, laws, ordinances, rules,
regulations, approvals and filings as in our experience are normally applicable
to a transaction of the type contemplated by the Reorganization Agreement.
E. In rendering our opinion in Paragraph 4 below to the extent that such
opinion relates to a violation of a Material Company Contract, to the extent any
of such Material Company Contracts are governed by the laws of any jurisdiction
other than the United States of America and the State of California, we express
no opinion relating to such other laws, and our opinion is based upon the plain
meaning of the provisions of such contracts and assumes that the governing law
is substantially identical to the laws of the United States of America and the
State of California.
Based upon and subject to the foregoing we are of the opinion that:
1. The Company is a corporation duly incorporated, validly existing and
in good standing under the laws of the State of California. The Company has all
requisite corporate power to own and operate its properties and assets, and to
carry on its business as presently conducted.
2. The Company has all requisite corporate power and authority to enter
into the Merger Agreements, to perform its obligations thereunder and to
consummate the transactions contemplated thereby.
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3. The execution and delivery of the Merger Agreements and the
performance of the obligations of the Company thereunder have been duly and
validly authorized by all necessary corporate action and have been approved by
the Board of Directors and shareholders of record of the Company. The Merger
Agreements have been duly executed and delivered by the Company and constitutes
the valid and binding obligation of the Company, enforceable in accordance with
their terms.
4. Except as expressly set forth in the Reorganization Agreement or on
the Company Schedules, the execution and delivery of the Merger Agreements by
the Company and the consummation of the transactions contemplated thereby does
not and will not violate or result in a violation of: (i) the Company's Articles
of Incorporation or Bylaws; (ii) any provision of any federal law or law of the
State of California applicable to the Company; (iii) to our knowledge, any
judgment, order or decree of any court or arbiter to which the Company is a
party; or (iv) any Material Company Contract.
5. Except as expressly set forth in the Reorganization Agreement or on
the Company Schedules, no authorizations, approvals or consents of or notice to,
or registrations, declarations or filings with, any court or governmental
authority or agency are required in connection with the execution and delivery
of the Merger Agreements by the Company, and the performance of the transactions
contemplated therein.
6. To our knowledge, there is no action, proceeding or investigation
pending or threatened against the Company.
7. The authorized capital stock of the Company as of immediately prior
to the Closing consists of (a) 15,000,000 shares of Common Stock and (b)
3,012,641 shares of Company Preferred Stock, of which 1,723,251 have been
designated as Series A Preferred Stock and 1,289,390 have been designated as
Series B Preferred Stock. To our knowledge, immediately prior to the Closing,
there are: (i) 4,495,000 shares of Company Common Stock issued and outstanding;
(ii) 2,032,500 shares of Company Common Stock issuable upon exercise of
outstanding Company Options; (iii) 371,250 shares of Company Common Stock
reserved for issuance upon conversion of outstanding promissory notes; and (iv)
2,804,518 shares of Company Preferred Stock issued and outstanding, consisting
of 1,723,251 shares of Series A Preferred Stock issued and outstanding and
1,081,267 shares of Series B Preferred Stock issued and outstanding. All
outstanding shares of the Company's capital stock have been duly authorized and
validly issued and, to our knowledge, are fully paid and nonassessable.
8. To our knowledge, except as set forth in the Reorganization Agreement
or on the Company Schedules, there are no options, warrants, conversion
privileges, preemptive rights or other rights (or agreements for any such
rights) currently outstanding to purchase or otherwise obtain any authorized but
unissued shares of capital stock or other securities of the Company, or any
obligation of the Company to purchase, redeem or otherwise acquire any of its
securities.
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This opinion is solely for your benefit and is not to be made available
to or relied upon by any other party without our express prior written consent.
Very truly yours,
XXXX XXXX XXXX & FREIDENRICH LLP
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96
EXHIBIT E TO AGREEMENT AND PLAN OF REORGANIZATION
WSGR LETTERHEAD
May _______, 2000
Alation Systems, Inc.
000 Xxxx Xxxxxx
Xxxxxxxx Xxxx, XX 00000
Ladies and Gentlemen:
We have acted as counsel to Cypress Semiconductor Corporation, a
Delaware corporation ("Parent"), in connection with the merger (the "Merger") of
Alation Acquisition Corporation, a California corporation ("Merger Sub") and a
wholly owned subsidiary of Parent, with and into Alation Systems, Inc., a
California corporation (the "Company" or "Alation"), pursuant to the Agreement
and Plan of Reorganization among Parent, Merger Sub, and the Company, dated as
of April 25, 2000 (the "Reorganization Agreement"). This opinion is furnished to
you pursuant to Section 6.2(f) of the Reorganization Agreement. Unless otherwise
defined herein, the capitalized terms used in this opinion have the meaning
given to them in the Reorganization Agreement.
We have acted as counsel for Parent and Merger Sub in connection with
the negotiation of the Reorganization Agreement and the effectuation of the
Merger. As such counsel, we have made such legal and factual examinations and
inquiries as we have deemed advisable or necessary for the purposes of rendering
this opinion. In addition, we have examined originals or copies of documents,
corporate records and other writings which we consider relevant for the purposes
of this opinion. In such examination, we have assumed the genuineness of all
signatures on original documents, the conformity to original documents of all
copies submitted to us and the due execution and delivery of all documents by
any party other than Parent where due execution and delivery are a prerequisite
to the effectiveness thereof.
As used in this opinion, the expression "to our knowledge" or "known to
us" with reference to matters of fact means that, after an examination of
documents made available to us by Parent and after inquiries of officers of
Parent but without any further independent factual investigation, we find no
reason to believe that the opinions expressed herein are factually incorrect.
Further, the expression "to our knowledge" with reference to matters of fact
refers to the current actual knowledge of the attorneys of this firm who have
worked on matters for Parent solely in connection with the Reorganization
Agreement and the transactions contemplated thereby. Except to the extent
expressly set forth herein or as we otherwise believe to be necessary to our
opinion, we have not undertaken any independent investigation to determine the
existence or absence of any fact, and no
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inference as to our knowledge of the existence or absence of any fact should be
drawn from our representation of Parent or the rendering of the opinion set
forth below.
Based upon our inquiries and examinations, and subject to the
qualifications, exceptions, assumptions and limitations herein contained, and
except as set forth in the Reorganization Agreement, we are of the opinion that:
1. Parent is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and is duly qualified to do
business and is in good standing in each state listed on a schedule attached to
the opinion. Parent has all the requisite corporate power and authority to own
or lease its properties and assets and to conduct its business as is currently
conducted.
2. Merger Sub is a corporation duly organized, validly existing and in
good standing under the laws of the State of California. Merger Sub has all
requisite corporate power and authority to own or lease its properties and
assets and to conduct its business as is currently conducted.
3. The shares of Parent Common Stock to be issued pursuant to the Merger
have been duly authorized by all necessary corporate proceedings on the part of
Parent and, when issued in accordance with the terms of the Reorganization
Agreement, will be validly issued, fully paid and nonassessable and free of
liens, encumbrances or preemptive or similar rights (other than those liens,
encumbrances and preemptive or similar rights imposed as a result of actions of
the Alation shareholders); provided, however, that such shares may be subject to
restriction on transfer under state and/or federal securities laws.
4. Parent has all requisite corporate power and authority to execute and
deliver the Reorganization Agreement and Agreement of Merger and to otherwise
carry out and perform its obligations under the terms of such agreements. The
Reorganization Agreement and Agreement of Merger have been duly and validly
authorized, executed and delivered by Parent and each constitutes a valid,
binding and enforceable agreement of Parent.
5. Merger Sub has all requisite corporate power and authority to execute
and deliver the Reorganization Agreement and Agreement of Merger and to
otherwise carry out and perform its obligations under the terms of such
agreements. The Reorganization Agreement and Agreement of Merger have been duly
and validly authorized, executed and delivered by Parent and each constitutes a
valid, binding and enforceable agreement of Merger Sub.
6. The execution and delivery of each of the Reorganization Agreement
and the Agreement of Merger and the performance by Parent and Merger Sub of the
covenants set forth in such agreements (i) do not conflict with any provision of
the Certificate of Incorporation and Bylaws of Parent or the Articles of
Incorporation and Bylaws of Merger Sub, or (ii) to our knowledge, violate or
contravene any order, writ, judgment, decree, determination or award of any
United States federal or any state governmental authority applicable to Parent
or Merger Sub.
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7. Other than those as have been obtained by the Company and Parent, no
consent, waiver, approval, order or authorization of, or registration,
declaration or filing with any Governmental Entity (so as not to trigger any
Conflict (as defined in the Reorganization Agreement)) is required by or with
respect to Parent in connection with the execution and delivery of the
Reorganization Agreement and the Agreement of Merger.
The foregoing opinions are subject to the following additional
qualifications, exceptions, assumptions and limitations:
A. We are members of the Bar of the State of California and we are not
expressing any opinion as to any matter relating to laws of any jurisdiction
other than the federal laws of the United States of America (excluding the
federal securities laws as to which we are not expressing any opinion), the laws
of the State of California and the general corporate laws of the State of
Delaware. As you are aware, we are not licensed to practice law in the State of
Delaware, and our opinions as to the general corporate laws of the State of
Delaware are based solely upon review of standard compilations of the Delaware
General Corporation Law and without reference to its conflicts of law rules. In
addition, we render no opinion with respect to the compliance or non-compliance
with applicable federal, state or foreign securities laws, rules and
regulations.
B. In rendering the opinions set forth in paragraphs 1 and 2 below as to
the qualification and good standing of Parent in Delaware, and Merger Sub in
California, respectively we have relied exclusively on certificates of the
Delaware Secretary of State and California Secretary of State, respectively.
C. We express no opinion as to the effect of applicable bankruptcy,
insolvency, reorganization, moratorium and other similar laws relating to or
affecting the rights of creditors generally including, but not limited to, the
effects of statutory and other laws regarding fraudulent conveyances,
preferential transfers, and limitations on dividends and redemptions.
D. We express no opinion as to the effect or availability of rules of
law governing specific performance, injunctive relief, fraudulent conveyance or
transfer, or other equitable remedies (regardless of whether any such remedy is
considered in a proceeding at law or in equity).
E. We express no opinion as to compliance or noncompliance with
applicable antifraud provisions of federal or state securities statutes, laws,
rules and regulations.
F. We express no opinion as to the validity or enforceability of the
indemnification or contribution provisions set forth in the Reorganization
Agreement or elsewhere.
G. We express no opinion as to the validity or enforceability of any
agreement governed by the laws of any state other than California to the extent
the provisions of the laws of any state differ from the laws of the State of
California.
H. We express no opinion concerning the past, present or future fair
market value of any securities.
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I. Our opinions are subject to the effect of judicial decisions which
may permit the introduction of extrinsic evidence to interpret the terms of
written contracts.
J. Our opinion is in all respects subject to the effect of general
principles of equity (regardless of whether enforcement is considered in
proceedings at law or in equity) upon the enforceability of any of the remedies,
covenants or other provisions of the Reorganization, or upon the availability of
injunctive relief or other equitable remedies.
K. In rendering this opinion, with your permission, we have assumed
that, Alation is duly organized, validly existing and in good standing under
applicable law and has full power, authority and legal right to execute and
deliver, and to perform its obligations under such agreements. With your
permission, we have further assumed that, Alation has been duly authorized the
execution, performance and delivery of each such agreement and has duly executed
and delivered each such agreement, and that each such agreement constitutes the
legal, valid and binding obligation of Alation. With your permission, we have
further assumed the genuineness of all signatures, other than those of the
Parent and Merger Sub, the authenticity of all documents submitted to us as
originals and the conformity to the originals of all documents submitted to us
either as photostatic copies or as conformed copies and the authenticity of the
originals of all such documents. With your permission, we have further assumed
that Alation holds the requisite title and rights to any property involved in
the transactions which the Transaction Documents contemplate. We have further
assumed that there has not been any mutual mistake of fact or misunderstanding,
fraud, duress or undue influence.
This opinion is rendered to you pursuant to Section 6.2(f) of the
Reorganization Agreement and may not be relied upon by any other person in any
context or by you in any other context. This opinion may not be quoted or copies
hereof furnished to any other person without the prior written consent of this
firm, except that you may furnish a copy hereof (i) to your independent auditors
and attorneys, (ii) to any foreign, state or federal authority having regulatory
jurisdiction over you, (iii) pursuant to order or legal process of any court or
other governmental authority and (iv) in connection with any legal action to
which you are a party arising out of the above-described transaction.
We assume no obligation to revise or supplement this opinion should the
present laws of such jurisdictions be changed by legislative action, judicial
decision or otherwise. This opinion is rendered as of the date hereof, and we
express no opinion as to, and disclaim any undertaking or obligation to update
this opinion in respect of, changes of circumstances or events that occur
subsequent to this date.
Very truly yours,
XXXXXX XXXXXXX XXXXXXXX & XXXXXX
Professional Corporation
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EXHIBIT F TO AGREEMENT AND PLAN OF REORGANIZATION
TABLE OF DEFINITIONS
The following definitions used in this Agreement are defined in the
Sections specified below.
DEFINITIONS SECTION
----------- -------
1998 Audited Year End Financials 2.5
1999 Reviewed Financials 2.5
1999 Unaudited Year End Financials 2.5
2000 Unaudited First Quarter Financials 2.5
Affiliate 2.20(a)(i)
Aggregate First Tier Series A Share Number 1.6(a)
Aggregate First Tier Series B Share Number 1.6(a)
Aggregate First Tier Share Number 1.6(a)
Aggregate Second Tier Share Number 1.6(a)
Aggregate Third Tier Share Number 1.6(a)
Aggregate Share Number 16.(a)
Agreement Preamble
Agreement of Merger 1.2
Balance Sheet 2.5
California Law 1.1
Closing 1.2
Closing Date 1.2
COBRA 2.20(a)(iii)
Code Recital D
Company Preamble
Company Affiliates 5.11
Company Capital Stock Recital B
Company Certificate 1.6(b)(i)
Company Common Stock 1.6(a)
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Company Common Stock Exchange Ratio 1.6(a)
Company Convertible Securities 1.6(a)
Company Employee Plan 2.20(a)(ii)
Company Financial Statements 2.5
Company Intellectual Property 2.11
Company Options 1.6(a)
Company Preferred Stock 1.6(a)
Company Products 2.11(b)
Company Registered Intellectual Property 2.11
Company Schedules Preamble
Article II
Company Stockholders 1.6(a)
Conflict 2.5
Contract 2.12(b)
Convertible Note 2.2(a)
Dissenting Shares 1.7(a)
DOJ 5.8
DOL 2.20(a)(iv)
Effective Time 1,2
Employee 2.20(a)(v)
Employee Agreement 2.20(a)(vi)
End Date 8.1(b)
Environmental Permit 2.11(c)
ERISA 2.20(a)(vii)
Escrow Agent Preamble
Escrow Amount 1.6(a)
Escrow Claim Certificate 7.2(c)(i)
Escrow Fund 7.2(a)
Escrow Period 7.2(a)
Exchange Ratio 1.6(a)
Exchange Act 3.4
Exchange Agent 1.8(a)
Expiration Date 7.1
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First Tier Preferential Consideration 1.6(a)
First Tier Series A Preferred Stock Value 1.6(a)
First Tier Series B Preferred Stock Value 1.6(a)
FMLA 2.20(a)(viii)
FTC 5.8
GAAP 2.5
Governmental Entity 2.4
Hazardous Material 2.18(a)
Hazardous Material Activity 2.18(b)
HSR Act 2.4
Information Technology 2.11(v)
Intellectual Property 2.11
International Employee Plan 2.20(a)(ix)
IRS 2.20(a)(x)
knowledge 9.2
Liens 2.8(b)(vii)
Loss (and Losses) 7.2(a)
Material Adverse Effect 9.2
Merger Recital A
Merger Consideration 1.6(b)(1)
Merger Sub Recital A
Merger Sub Common Stock 1.9
Multi-Employee Plan 2.20(a)(xi)
New Shares 7.2(c)
Non-Competition Agreement Recital F
Option Plan 1.6(c)(5)
Other Filings 5.1(b)
Outstanding Company Common Shares 1.6(a)
Outstanding Series A Preferred Stock 1.6(a)
Outstanding Series B Preferred Stock 1.6(a)
Parent Preamble
Parent Certificate 1.8(c)
Parent Common Stock Recital B
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Parent Common Stock Price 1.6(a)
Parent Financial Statements 3.4
Patents 2.11
Pension Plan 2.20(a)(xii)
Permit 5.1(a)
Proxy and Information Statement 5.1(a)
PTO 2.11(a)
Registered Intellectual Property 2.11
Remaining Share Consideration 1.6(a)
Remaining Share Number 1.6(a)
Returns 2.8(b)(1)
Rule 145 5.1(e) and 5.11
SEC 3.4
SEC Documents 3.4
Second Tier Preferential Consideration 1.6(a)
Second Tier Stock Value 1.6(a)
Securities Act 3.4
Securityholder Agent Preamble and 7.2(g)
Series A First Tier Preferential Consideration 1.6(a)
Series B First Tier Preferential Consideration 1.6(a)
Series A Preferred Stock Exchange Ratio 1.6(a)
Series B Preferred Stock Exchange Ratio 1.6(a)
Stockholder's Certificate 1.8(c)
Surviving Corporation 1.1
Tax (or Taxes) 2.8(a)
Third Party Expenses 5.4
Third Tier Stock Value 1.6(a)
Total Outstanding Shares 1.6(a)
Voting Agreement(s) Recital F
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