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EXHIBIT 10.31
AFFILIATE AGREEMENT
This AFFILIATE AGREEMENT (this "AGREEMENT") dated as of January 22,
1999, by and among Genesis Microchip Incorporated, a Nova Scotia corporation
("PARENT"), Paradise Electronics, Inc., a Delaware corporation ("COMPANY"), and
the undersigned affiliate ("AFFILIATE") of 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. Parent and Company propose to enter into an Agreement and Plan
of Reorganization ("REORGANIZATION AGREEMENT") pursuant to which a subsidiary of
Parent will merge with and into Company (the "MERGER"), and Company will become
a subsidiary of Parent;
B. Pursuant to the Merger, at the Effective Time outstanding shares
of Company Capital Stock, including the Shares owned by Affiliate, will be
converted into the right to receive shares of Parent Common Stock;
C. It will be a condition to effectiveness of the Merger that the
independent accounting firms that audit the annual financial statements of
Company and Parent will have delivered their written concurrences to the effect
that the Merger will be accounted for as a pooling of interests;
D. Affiliate may be deemed to be an "affiliate" of Company, as the
term "affiliate" is used (i) for purposes of paragraphs (c) and (d) of Rule 145
of the Rules and Regulations of the Securities and Exchange Commission (the
"SEC") and (ii) in the SEC's Accounting Series Releases 130 and 135, as amended,
although nothing contained herein shall be construed as an admission by
Affiliate that Affiliate is in fact an affiliate of Company.
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 will be relied upon by Parent, 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 his professional advisors, who are qualified to advise him
with regard to such matters.
2. Compliance with Rule 145 and the Act. Affiliate will not sell,
transfer, exchange, pledge or otherwise dispose of, or make any offer or
agreement relating to any of the foregoing with respect to, any shares of Parent
Common Stock that Affiliate may acquire in connection with the Merger, or any
securities that may be paid as a dividend or otherwise distributed thereon or
with respect thereto or issued or delivered in exchange or substitution therefor
(all such shares and other securities of Parent are sometimes collectively
referred to as "RESTRICTED SECURITIES"), or any option, right or other interest
with respect to any Restricted Securities, unless: (i) such transaction is
permitted pursuant to Rule 145(d) under the Securities Act; (ii) counsel
representing Affiliate, which counsel is reasonably satisfactory to
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Parent, shall have advised Parent in a written opinion letter reasonably
satisfactory to Parent and Parent's legal counsel, and upon which Parent and its
legal counsel may rely, that no registration under the Securities Act would be
required in connection with the proposed sale, transfer or other disposition;
(iii) a registration statement under the Securities Act covering the Parent
Common Stock proposed to be sold, transferred or otherwise disposed of,
describing the manner and terms of the proposed sale, transfer or other
dispositions, and containing a current prospectus, shall have been filed with
the SEC and made effective under the Securities Act; or (iv) an authorized
representative of the SEC shall have rendered written advice to Affiliate
(sought by Affiliate or counsel to Affiliate, with a copy thereof and all other
related communications delivered to Parent) to the effect that the SEC would
take no action, or that the staff of the SEC would not recommend that the SEC
take any action, with respect to the proposed disposition if consummated.
Notwithstanding anything herein to the contrary, no registration statement or
opinion of counsel shall be necessary for a transfer by a holder of securities
which is a partnership to its partners or former partners in accordance with
partnership interests; provided, however, that such transferees shall remain
subject to the transfer restrictions herein.
3. Covenants Related to Pooling of Interests. During the period
beginning 30 days prior to the Closing Date and ending on the second day after
the day that Parent publicly announces financial results covering at least 30
days of combined operations of Parent and Company, Affiliate will not sell,
exchange, transfer, pledge, distribute, 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
to have or having the effect, directly or indirectly, of reducing its risk
relative to any securities or shares of Parent Common Stock received by
Affiliate in connection with the Merger. Parent may, at its discretion, cause a
restrictive legend to the foregoing effect to be placed on Parent Common Stock
certificates issued to Affiliate in the Merger and place a stock transfer notice
consistent with the foregoing with its transfer agent with respect to the
certificates. Notwithstanding the foregoing, Affiliate will not be prohibited by
the foregoing from selling or disposing of shares so long as such sale or
disposition is in accordance with the "de minimis" test set forth in SEC Staff
Accounting Bulletin No. 76 and so long as Affiliate has obtained Parent's prior
written approval of such sale or disposition which shall not be unreasonably
withheld. Affiliate may also make charitable gifts, so long as (i) the charity
agrees to be bound by this Section 3, and (ii) Parent reasonably determines that
the gift would not result in the Merger being accounted for as other than a
pooling of interests.
4. Beneficial Ownership of Stock. Affiliate is the beneficial owner
(as defined in Rule 13d-3 under the Securities Exchange Act of 1934, as
amended), of such number of shares of the Company Capital Stock (including
shares issuable upon exercise of options and warrants) as is indicated on the
final page of this Agreement.
5. Legends. Affiliate understands and agrees that stop transfer
instructions will be given to Parent's transfer agent with respect to
certificates evidencing the Restricted Securities and that there will be placed
on the certificates evidencing the Restricted Securities legends stating in
substance:
"THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE OFFERED,
SOLD, PLEDGED, EXCHANGED, TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT IN
ACCORDANCE WITH THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED."
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Parent agrees to remove promptly such stop transfer instructions and legend upon
full compliance with this Agreement by the undersigned, including, without
limitation, a sale or transfer or Parent Common Stock permitted under Section 2
above.
6. Termination. This Agreement shall be terminated and shall be of
no further force and effect upon the termination of the Reorganization Agreement
pursuant to the provisions contained in Article VIII of the Reorganization
Agreement.
7. Miscellaneous.
a. 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.
b. Binding Agreement. This Agreement will inure to the
benefit of and be binding upon and enforceable against the parties and their
successors and assigns, including administrators, executors, representatives,
heirs, and devisees of Affiliate and pledgees holding Restricted Securities as
collateral.
c. Waiver. 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.
d. Governing Law. This Agreement shall be governed by and
construed, interpreted and enforced in accordance with the laws of the State of
California, without giving effect to any choice or conflict of law 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.
e. 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.
f. Effect of Headings. The Section headings herein are for
convenience only and shall not affect the construction or interpretation of this
Agreement.
g. Third Party Reliance. Counsel to and independent
auditors for the parties shall be entitled to rely upon this Agreement.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed on the day and year first above written.
GENESIS MICROCHIP INCORPORATED AFFILIATE
By: By:
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Name: Name:
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Title: Title:
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Affiliate's Address for Notice:
PARADISE ELECTRONICS, INC.
By: ----------------------------------------
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Name: ----------------------------------------
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Title: ----------------------------------------
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Shares beneficially owned by Affiliate:
________ shares of Company Common Stock
________ shares of Company Series A
Preferred Stock
________ shares of Company Series B
Preferred Stock
________ shares of Company Series C
Preferred Stock
________ shares of Company Common Stock
issuable upon exercise of
outstanding options and
warrants
________ shares of Company Series A
Preferred Stock issuable upon
exercise of outstanding options
and warrants
________ shares of Company Series B
Preferred Stock issuable upon
exercise of outstanding options
and warrants
________ shares of Company Series C
Preferred Stock issuable upon
exercise of outstanding options
and warrants
[Signature Page to Company Affiliate Agreement]
