Exhibit 2.1
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
SIRENZA MICRODEVICES, INC.
XAVIER MERGER SUB, INC.
AND
XEMOD INCORPORATED
Dated as of August 15, 2002
TABLE OF CONTENTS
Page
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ARTICLE I THE MERGER ................................................................. 1
1.1 The Merger ................................................................ 1
1.2 Effective Time ............................................................ 2
1.3 Effect of the Merger ...................................................... 2
1.4 Articles of Incorporation; Bylaws ......................................... 2
1.5 Directors and Officers .................................................... 2
1.6 Certain Definitions ....................................................... 2
1.7 Merger Consideration; Effect on Capital Stock ............................. 6
1.8 Additional Consideration .................................................. 8
1.9 Dissenting Shares ......................................................... 10
1.10 Surrender of Certificates ................................................. 10
1.11 No Further Ownership Rights in Company Capital Stock ...................... 12
1.12 Lost, Stolen or Destroyed Certificates .................................... 12
1.13 Required Withholding ...................................................... 12
1.14 Tax and Accounting Consequences ........................................... 12
1.15 Unclaimed Merger Consideration ............................................ 12
1.16 Taking of Necessary Action; Further Action ................................ 12
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY ............................. 13
2.1 Organization of the Company ............................................... 13
2.2 Company Capital Structure ................................................. 13
2.3 Subsidiaries .............................................................. 14
2.4 Authority ................................................................. 15
2.5 No Conflict ............................................................... 15
2.6 Consents .................................................................. 16
2.7 Financial Statements ...................................................... 16
2.8 No Undisclosed Liabilities ................................................ 17
2.9 No Changes ................................................................ 17
2.10 Tax and Other Returns and Reports ......................................... 19
2.11 Restrictions on Business Activities ....................................... 21
2.12 Title to Properties; Absence of Liens and Encumbrances; Condition of
Equipment ................................................................. 22
2.13 Intellectual Property ..................................................... 22
2.14 Agreements, Contracts and Commitments ..................................... 26
2.15 Interested Party Transactions ............................................. 28
2.16 Compliance with Laws ...................................................... 29
2.17 Litigation; Proceedings ................................................... 29
2.18 Insurance ................................................................. 29
2.19 Minute Books .............................................................. 29
2.20 Environmental Matters ..................................................... 30
2.21 Brokers' and Finders' Fees ................................................ 30
2.22 Employee Matters and Benefit Plans ........................................ 31
2.23 Representations Complete .................................................. 35
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB .................. 35
3.1 Organization of Parent and Merger Sub ..................................... 35
3.2 Authority ................................................................. 36
3.3 Litigation ................................................................ 36
3.4 No Conflict; Consents ..................................................... 36
3.5 Financing ................................................................. 36
ARTICLE IV CONDUCT PRIOR TO THE EFFECTIVE TIME ....................................... 37
4.1 Conduct of Business of the Company ........................................ 37
4.2 No Solicitation ........................................................... 39
ARTICLE V ADDITIONAL AGREEMENTS ...................................................... 40
5.1 Shareholder Meeting ....................................................... 40
5.2 Access to Information ..................................................... 41
5.3 Confidentiality ........................................................... 41
5.4 Expenses .................................................................. 41
5.5 Public Disclosure ......................................................... 42
5.6 Consents .................................................................. 42
5.7 FIRPTA Compliance ......................................................... 42
5.8 Reasonable Efforts ........................................................ 42
5.9 Notification of Certain Matters ........................................... 42
5.10 Additional Documents and Further Assurances ............................... 43
5.11 Financial Statements ...................................................... 43
5.12 Company Employee Plan Terminations ........................................ 43
5.13 Termination of Microsemi Agreement ........................................ 43
5.14 Termination of Assumed Warrants ........................................... 43
5.15 Company Option Exercises .................................................. 43
5.16 Termination of Amsterdam Engagement Letter ................................ 44
ARTICLE VI CONDITIONS TO THE MERGER .................................................. 44
6.1 Conditions to Obligations of Each Party to Effect the Merger .............. 44
6.2 Additional Conditions to Obligations of the Company ....................... 44
6.3 Additional Conditions to the Obligations of Parent and Merger Sub ......... 45
ARTICLE VII SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ESCROW; INDEMNITY ............ 47
7.1 Survival of Representations and Warranties ................................ 47
7.2 Escrow Arrangements ....................................................... 47
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ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER ....................................... 54
8.1 Termination ............................................................... 54
8.2 Effect of Termination ..................................................... 55
8.3 Amendment ................................................................. 55
8.4 Extension; Waiver ......................................................... 55
ARTICLE IX GENERAL PROVISIONS ........................................................ 56
9.1 Notices ................................................................... 56
9.2 Interpretation ............................................................ 57
9.3 Counterparts .............................................................. 57
9.4 Entire Agreement; Assignment .............................................. 57
9.5 Severability .............................................................. 58
9.6 Other Remedies ............................................................ 58
9.7 Governing Law ............................................................. 58
9.8 Rules of Construction ..................................................... 58
9.9 Specific Performance ...................................................... 58
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AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is made and
entered into as of August 15, 2002 among Sirenza Microdevices, Inc., a Delaware
corporation ("Parent"), Xavier Merger Sub, Inc., a California corporation and a
wholly-owned subsidiary of Parent ("Merger Sub"), and Xemod Incorporated, a
California corporation (the "Company").
RECITALS
A. The Boards of Directors of each of the Company, Parent and Merger Sub
believe it is in the best interests of each company and their respective
shareholders that Parent acquire the Company through the statutory merger of
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
capital stock of the Company and all outstanding options, warrants and other
rights to acquire or receive shares of capital stock of the Company, shall be
converted into the right to receive cash or cancelled as provided in Sections
1.7 and 1.8 hereof.
C. A portion of the cash otherwise payable 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. The Company, Parent and Merger Sub desire to make certain
representations and warranties and other agreements in connection with the
Merger.
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 Corporations Code of the State of California (the
"California Code"), 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 and as a wholly-owned subsidiary of
Parent. The Company as the surviving corporation after the Merger is hereinafter
sometimes referred to 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 five (5) business days, following
satisfaction or waiver of the conditions set forth in Article VI, at the offices
of Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, P.C., 000 Xxxx Xxxx Xxxx, Xxxx Xxxx,
Xxxxxxxxxx, unless another place or time is agreed to 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 (or like instrument) with the
Secretary of State of the State of California (the "Agreement of Merger"), in
accordance with the relevant provisions of applicable law. The date and time the
Merger becomes effective in accordance with the provisions of the California
Code is 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 the California Code.
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.
(a) Unless otherwise determined by Parent prior to the Effective Time,
at the Effective Time, the Articles of Incorporation of Merger Sub shall be the
Articles of Incorporation of the Surviving Corporation until thereafter amended
as provided by law and such Articles of Incorporation; provided, however, that
Article I of the Articles of Incorporation of the Surviving Corporation shall be
amended to read as follows: "The name of the corporation is Xemod Incorporated".
(b) The Bylaws of Merger Sub, as in effect immediately prior to the
Effective Time, shall be the Bylaws of the Surviving Corporation until
thereafter amended.
1.5 Directors and Officers. The director(s) of Merger Sub immediately prior
to the Effective Time shall be the initial director(s) of the Surviving
Corporation, each to hold office in accordance with the Articles of
Incorporation and Bylaws of the Surviving Corporation. The officers of Merger
Sub immediately prior to the Effective Time shall be the initial officers of the
Surviving Corporation, each to hold office in accordance with the Bylaws of the
Surviving Corporation.
1.6 Certain Definitions. For purposes of this Agreement, the following
terms shall have the following meanings:
(a) "Bridge Debt" shall mean any outstanding loan made to the Company
by any shareholder of the Company or by Parent.
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(b) "Closing Bridge Debt Amount" shall mean the aggregate principal
amount and any accrued but unpaid interest, fees and penalties associated with
the Bridge Debt, measured as of the Closing Date.
(c) "Common Per Share Amount" shall mean an amount of cash equal to (A)
the Merger Consideration, multiplied by (B) 0.15, divided by (C) the Outstanding
Common Amount.
(d) "Common Per Share Escrow Amount" shall mean an amount of cash equal
to (A) the Escrow Amount, multiplied by (B) 0.15, divided by (C) the Outstanding
Common Amount.
(e) "Company Capital Stock" shall mean Company Common Stock and Company
Preferred Stock.
(f) "Company Common Stock" shall mean shares of Common Stock, no par
value, of the Company.
(g) "Company Options" shall mean any and all options to purchase or
otherwise acquire Company Capital Stock, whether or not vested, and whether
issued under the Option Plan or otherwise, but shall not include Company
Preferred Stock or Company Warrants.
(h) "Company Preferred Stock" shall mean shares of Series A Preferred,
Series B Preferred, Series C Preferred, Series D Preferred, and Series E
Preferred.
(i) "Company Warrants" shall mean any and all warrants to purchase or
otherwise acquire Company Capital Stock.
(j) "Escrow Amount" shall mean $450,000 in cash.
(k) "Excess Bridge Debt Amount" shall mean any principal, interest, fee
or penalty amount represented by the Bridge Debt and not reflected on the
Statement of Closing Bridge Debt Amount.
(l) "Excess Expense Amount" shall mean the amount by which the
aggregate fees and expenses (including Third Party Expenses, as defined in
Section 5.4 hereof) incurred by the Company in connection with the Merger exceed
$100,000.
(m) "Excess Optionee Note Amount" shall mean the amount, if any, by
which (x) the aggregate principal and accrued interest amount (measured as of
the Effective Time) of any and all promissory notes delivered to the Company by
holders of Company Options in payment of the exercise price of such Company
Options, exceeds (y) the total amount of cash otherwise payable by Parent at the
Closing to such holders in respect of such holders' shares of Company Capital
Stock issued upon exercise of such Company Options which Parent is permitted to
withhold under the right of setoff set forth in Section 1.7(a) hereof and
required to be incorporated in such notes by Section 5.15 hereof.
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(n) "Merger Consideration" shall mean (A) $4,500,000, minus (B) the
Escrow Amount, minus (C) the Closing Bridge Debt Amount, minus (D) the Excess
Expense Amount, minus (E) the Excess Optionee Note Amount, plus (F) only to the
extent such amount does not exceed the Closing Bridge Debt Amount, the aggregate
amount of any cash proceeds (net of any required tax withholding amount)
received by the Company between the date hereof and the Closing Date pursuant to
the exercise of Company Options or Company Warrants.
(o) "Option Plan" shall mean the Company's 1997 Stock Option Plan.
(p) "Outstanding Common Amount" shall mean the aggregate number of
shares of Company Common Stock outstanding immediately prior to the Effective
Time, including, without limitation, any shares of Company Common Stock issued
pursuant to the exercise of Company Options, Company Warrants or other rights,
or the conversion of Company Preferred Stock.
(q) "Outstanding Series A Preferred Amount" shall mean the aggregate
number of shares of Series A Preferred outstanding immediately prior to the
Effective Time, together with all shares of Series A Preferred issuable upon
exercise of any Company Warrants or other rights to acquire shares of Series A
Preferred outstanding at the Effective Time.
(r) "Outstanding Series B Preferred Amount" shall mean the aggregate
number of shares of Series B Preferred outstanding immediately prior to the
Effective Time, together with all shares of Series B Preferred issuable upon
exercise of any Company Warrants or other rights to acquire shares of Series B
Preferred outstanding at the Effective Time.
(s) "Outstanding Series C Preferred Amount" shall mean the aggregate
number of shares of Series C Preferred outstanding immediately prior to the
Effective Time, together with all shares of Series C Preferred issuable upon
exercise of any Company Warrants or other rights to acquire shares of Series C
Preferred outstanding at the Effective Time.
(t) "Outstanding Series D Preferred Amount" shall mean the aggregate
number of shares of Series D Preferred outstanding immediately prior to the
Effective Time, together with all shares of Series D Preferred issuable upon
exercise of any Company Warrants or other rights to acquire shares of Series D
Preferred outstanding at the Effective Time.
(u) "Outstanding Series E Preferred Amount" shall mean the aggregate
number of shares of Series E Preferred outstanding immediately prior to the
Effective Time, together with all shares of Series E Preferred issuable upon
exercise of any Company Warrants or other rights to acquire shares of Series E
Preferred outstanding at the Effective Time.
(v) "Series A Per Share Amount" shall mean an amount of cash equal to
(A) the Merger Consideration, multiplied by (B) 0.1411, divided by (C) the
Outstanding Series A Preferred Amount.
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(w) "Series A Per Share Escrow Amount" shall mean an amount of cash
equal to (A) the Escrow Amount, multiplied by (B) 0.1411, divided by (C) the
Outstanding Series A Preferred Amount.
(x) "Series A Preferred" shall mean shares of Series A Preferred Stock,
no par value, of the Company.
(y) "Series B Per Share Amount" shall mean an amount of cash equal to
(A) the Merger Consideration, multiplied by (B) 0.1601, divided by (C) the
Outstanding Series B Preferred Amount.
(z) "Series B Per Share Escrow Amount" shall mean an amount of cash
equal to (A) the Escrow Amount, multiplied by (B) 0.1601, divided by (C) the
Outstanding Series B Preferred Amount.
(aa) "Series B Preferred" shall mean shares of Series B Preferred
Stock, no par value, of the Company.
(bb) "Series C Per Share Amount" shall mean an amount of cash equal to
(A) the Merger Consideration, multiplied by (B) 0.1077, divided by (C) the
Outstanding Series C Preferred Amount.
(cc) "Series C Per Share Escrow Amount" shall mean an amount of cash
equal to (A) the Escrow Amount, multiplied by (B) 0.1077, divided by (C) the
Outstanding Series C Preferred Amount.
(dd) "Series C Preferred" shall mean shares of Series C Preferred
Stock, no par value, of the Company.
(ee) "Series D Per Share Amount" shall mean an amount of cash equal to
(A) the Merger Consideration, multiplied by (B) 0.1909, divided by (C) the
Outstanding Series D Preferred Amount.
(ff) "Series D Per Share Escrow Amount" shall mean an amount of cash
equal to (A) the Escrow Amount, multiplied by (B) 0.1909, divided by (C) the
Outstanding Series D Preferred Amount.
(gg) "Series D Preferred" shall mean shares of Series D Preferred
Stock, no par value, of the Company.
(hh) "Series E Per Share Amount" shall mean an amount of cash equal to
(A) the Merger Consideration, multiplied by (B) 0.2502, divided by (C) the
Outstanding Series E Preferred Amount.
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(ii) "Series E Per Share Escrow Amount" shall mean an amount of cash
equal to (A) the Escrow Amount, multiplied by (B) 0.2502, divided by (C) the
Outstanding Series E Preferred Amount.
(jj) "Series E Preferred" shall mean shares of Series E Preferred
Stock, no par value, of the Company.
(kk) "Statement of Closing Bridge Debt Amount" shall mean a written
statement of the Closing Bridge Debt Amount and the calculation thereof, in form
reasonably satisfactory to Parent and accompanied by a certificate signed by the
Chief Financial Officer of the Company stating that the calculation of the
Closing Bridge Debt Amount contained therein is true and correct as of the
Effective Time, which shall be delivered to Parent's Chief Financial Officer at
the Closing (and a draft of which shall be delivered to Parent's Chief Financial
Officer three (3) business days prior to the Closing Date).
1.7 Merger Consideration; Effect on Capital Stock. 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 Parent, Merger Sub, the Company or the
holder of any shares of the Company Capital Stock, Company Options or Company
Warrants, the following shall occur:
(a) Conversion of Company Common Stock. Each share of Company Common
Stock issued and outstanding immediately prior to the Effective Time (other than
any shares of Company Common Stock to be canceled pursuant to Section 1.7(c) and
any Dissenting Shares (as defined and to the extent provided in Section 1.9(a))
will be canceled and extinguished and be converted automatically into the right
to receive, upon surrender of the certificate representing such share of Company
Common Stock in the manner provided in Section 1.10, (A) an amount of cash equal
to the Common Per Share Amount, plus (B) an amount of cash equal to the Common
Per Share Escrow Amount (which amount shall be initially deposited with the
Escrow Agent in accordance with, and subject to, the obligations set forth in
Article VII hereof). Notwithstanding any provision of this Agreement to the
contrary, Parent shall have the right to setoff and reduce any payment of Merger
Consideration, Escrow Fund proceeds or Additional Consideration otherwise due
hereunder to a holder of Company Common Stock to the extent of any outstanding
principal and interest amount owed to the Company by such holder pursuant to a
promissory note delivered by such holder in payment of the exercise price of a
Company Option.
(b) Conversion of Company Preferred Stock.
(i) Series A Preferred Stock. Each share of Series A Preferred
issued and outstanding immediately prior to the Effective Time (other than any
shares of Series A Preferred that are converted into shares of Company Common
Stock immediately prior to the Effective Time, any shares of Series A Preferred
to be canceled pursuant to Section 1.7(c) and any Dissenting Shares (as defined
and to the extent provided in Section 1.9(a)) will be canceled and extinguished
and be converted automatically into the right to receive, upon surrender of the
certificate representing such share of Series A Preferred in the manner provided
in Section 1.10, (A) an amount of cash equal to the Series A Per Share Amount,
plus (B) an amount of cash equal to the Series A Per Share Escrow
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Amount (which amount shall be initially deposited with the Escrow Agent in
accordance with, and subject to, the obligations set forth in Article VII
hereof).
(ii) Series B Preferred Stock. Each share of Series B Preferred
issued and outstanding immediately prior to the Effective Time (other than any
shares of Series B Preferred that are converted into shares of Company Common
Stock immediately prior to the Effective Time, any shares of Series B Preferred
to be canceled pursuant to Section 1.7(c) and any Dissenting Shares (as defined
and to the extent provided in Section 1.9(a)) will be canceled and extinguished
and be converted automatically into the right to receive, upon surrender of the
certificate representing such share of Series B Preferred in the manner provided
in Section 1.10, (A) an amount of cash equal to the Series B Per Share Amount,
plus (B) an amount of cash equal to the Series B Per Share Escrow Amount (which
amount shall be initially deposited with the Escrow Agent in accordance with,
and subject to, the obligations set forth in Article VII hereof).
(iii) Series C Preferred Stock. Each share of Series C Preferred
issued and outstanding immediately prior to the Effective Time (other than any
shares of Series C Preferred that are converted into shares of Company Common
Stock immediately prior to the Effective Time, any shares of Series C Preferred
to be canceled pursuant to Section 1.7(c) and any Dissenting Shares (as defined
and to the extent provided in Section 1.9(a)) will be canceled and extinguished
and be converted automatically into the right to receive, upon surrender of the
certificate representing such share of Series C Preferred in the manner provided
in Section 1.10, (A) an amount of cash equal to the Series C Per Share Amount,
plus (B) an amount of cash equal to the Series C Per Share Escrow Amount (which
amount shall be initially deposited with the Escrow Agent in accordance with,
and subject to, the obligations set forth in Article VII hereof).
(iv) Series D Preferred Stock. Each share of Series D Preferred
issued and outstanding immediately prior to the Effective Time (other than any
shares of Series D Preferred that are converted into shares of Company Common
Stock immediately prior to the Effective Time, any shares of Series D Preferred
to be canceled pursuant to Section 1.7(c) and any Dissenting Shares (as defined
and to the extent provided in Section 1.9(a)) will be canceled and extinguished
and be converted automatically into the right to receive, upon surrender of the
certificate representing such share of Series D Preferred in the manner provided
in Section 1.10, (A) an amount of cash equal to the Series D Per Share Amount,
plus (B) an amount of cash equal to the Series D Per Share Escrow Amount (which
amount shall be initially deposited with the Escrow Agent in accordance with,
and subject to, the obligations set forth in Article VII hereof).
(v) Series E Preferred Stock. Each share of Series E Preferred
issued and outstanding immediately prior to the Effective Time (other than any
shares of Series E Preferred that are converted into shares of Company Common
Stock immediately prior to the Effective Time, any shares of Series E Preferred
to be canceled pursuant to Section 1.7(c) and any Dissenting Shares (as defined
and to the extent provided in Section 1.9(a)) will be canceled and extinguished
and be converted automatically into the right to receive, upon surrender of the
certificate representing such share of Series E Preferred in the manner provided
in Section 1.10, (A) an amount of cash equal to the Series E Per Share Amount,
plus (B) an amount of cash equal to the Series E Per Share Escrow
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Amount (which amount shall be initially deposited with the Escrow Agent in
accordance with, and subject to, the obligations set forth in Article VII
hereof).
(c) Cancellation of Parent-Owned and Company-Owned Stock. Each share
of Company Capital Stock owned by Merger Sub, Parent, the Company or any direct
or indirect wholly-owned subsidiary of Parent or of the Company immediately
prior to the Effective Time shall be canceled and extinguished without any
conversion thereof.
(d) Termination of Company Options. Each issued and outstanding
Company Option shall be terminated and cancelled and shall not be assumed by
Parent. Prior to the Effective Time, the Company shall take all necessary action
(including providing all required notices) to arrange for each Company Option to
be terminated and cancelled at or prior to the Effective Time.
(e) Termination of Company Warrants. Each issued and outstanding
Company Warrant shall be terminated and cancelled and shall not be assumed by
Parent. Prior to the Effective Time, the Company shall take all necessary action
(including providing all required notices) to arrange for each Company Warrant
to be terminated and cancelled at or prior to the Effective Time.
Notwithstanding anything contained in the provisions of this section to the
contrary, and only to the extent such Company Warrants are neither exercised nor
terminated prior to the Effective Time, (i) the Company Warrant held by Silicon
Valley Bank and dated as of October 30, 2000, which is currently exercisable for
Series C Preferred at an exercise price of $1.15 per share, and (ii) the Company
Warrant held by Silicon Valley Bank and dated as of October 30, 2000, which is
currently exercisable for Series E Preferred at an exercise price of $4.0642 per
share (collectively, the "Assumed Warrants") shall not be terminated and
cancelled at the Effective Time, and shall instead be assumed by Parent in
accordance with their respective terms. Notwithstanding anything contained in
this Agreement to the contrary, no amount of cash shall be payable to any holder
of an Assumed Warrant in respect of such Assumed Warrant pursuant to this
Agreement until such time as the Assumed Warrant has been exercised.
(f) Capital Stock of Merger Sub. Each share of Common 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.
1.8 Additional Consideration.
(a) When Payable. In the event that at any time within two hundred ten
(210) calendar days following the Closing Date, a Qualifying Agreement (as
defined below) is executed by each of (i) a Qualified Third Party (as defined
below), and (ii) either Parent or the Surviving Corporation, then within fifteen
(15) days following the date upon which such Qualifying Agreement is executed
and delivered as provided above, Parent will deliver the Additional
Consideration (as defined below) to the Exchange Agent as additional
consideration to the holders of Company Capital Stock and Assumed Warrants. No
portion of the Additional Consideration shall
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be deposited in the Escrow Fund. In no case shall the Additional Consideration
become due and payable before the Closing Date, if at all. The Additional
Consideration may be earned and paid hereunder only once. In the event that
Parent or the Surviving Corporation executes Qualifying Agreements with more
than one Qualified Third Party within the period specified above, only the first
such Qualifying Agreement shall be considered in determining the amount of
Additional Consideration to be paid hereunder, if any.
(b) Distribution. Subject to the terms and conditions of Section 1.10
hereof, the Exchange Agent shall then distribute promptly to each former holder
of Company Capital Stock and holder of an exercised Assumed Warrant an amount of
the aggregate Additional Consideration proportional to the amount of the Merger
Consideration that such Person became entitled to receive at the Closing
pursuant to Section 1.7 hereof. The Exchange Agent shall concurrently deliver to
Parent any amount of the Additional Consideration that would otherwise be
allocated to the holder of any unexercised Assumed Warrant in respect of such
Assumed Warrant, and Parent thereafter shall act as exchange agent with respect
to the rights of holders of unexercised Assumed Warrants to receive Additional
Consideration under this Section 1.8.
(c) Definitions. As used in this Section 1.8, the following terms
shall have the following meanings:
(i) "Additional Consideration" shall mean (A) ninety-seven
percent (97%) of [***], if the NPV of the Qualifying Agreement to Parent or
Surviving Corporation is not less than [***], (B) ninety-seven percent (97%) of
the product of the Consideration Formula (defined below) as applied to such
Qualifying Agreement, if the NPV of the Qualifying Agreement to Parent or
Surviving Corporation is less than [***], but greater than [***], or (C) [***],
in any other case.
(ii) "Consideration Formula" shall mean the following formula:
1.75 1.75
Additional Consideration = (NPV x ----) - [***] (----) + [***]
1.5 1.5
(iii) "NPV" shall mean the net present value, calculated using a
discount rate of four percent (4.0%), of all cash inflows to Parent or the
Surviving Corporation contractually required by the proposed agreement being
evaluated for purposes of this Section 1.8, net of all cash outflows from Parent
or the Surviving Corporation contractually required by the proposed agreement
(it being understood that the application to a Qualifying Agreement in the
ordinary course of business of any equipment currently owned by the Company or
any personnel currently employed by the Company shall not be considered a "cash
outflow" hereunder).
(iv) "Qualified Third Party" shall mean any of the following: (A)
[***], (B) any corporation mutually agreed upon by Parent and the Company in
writing, or (C) any corporation with either (x) not less than $200,000,000 in
revenues during its last
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*** Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
fiscal year, as measured on its last annual income statement, which shall have
been audited by an accounting firm of national stature, or (y) a public float of
not less than $1,000,000,000, as reported on a national securities exchange or
an equivalent electronic stock quotation system on the execution date of the
agreement with such corporation.
(v) "Qualifying Agreement" shall mean a supply, development or
licensing agreement whereby Parent or the Surviving Corporation will provide
products based on Company Intellectual Property Rights (as defined in Section
2.13) or grant a license to Company Intellectual Property on a non-exclusive
basis to a third party, which agreement (A) has an NPV to Parent or the
Surviving Corporation in excess of $3,500,000, (B) contractually requires the
third party to pay not less than $2,500,000 to Parent or the Surviving
Corporation at the execution date of such agreement, and (C) is otherwise
reasonably acceptable to Parent and is approved by the Board of Directors of
Parent.
1.9 Dissenting Shares.
(a) Notwithstanding any provision of this Agreement to the contrary,
any shares of Company Capital Stock held by a holder who has demanded and
perfected dissenters' rights for such shares in accordance with the California
Code and who, as of the Effective Time, has not effectively withdrawn or lost
such dissenters' rights ("Dissenting Shares"), shall not be converted into or
represent a right to receive cash pursuant to Sections 1.7 and 1.8, but the
holder thereof shall only be entitled to such rights as are granted by the
California Code.
(b) Notwithstanding the provisions of subsection (a), if any holder of
shares of Company Capital Stock who demands dissenter's rights with respect to
such shares under the California Code shall effectively withdraw or lose
(through failure to perfect or otherwise) such dissenter's rights, 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 cash as pursuant to Sections 1.7 and 1.8, without interest thereon, upon
surrender of the certificate representing such shares.
(c) The Company shall give Parent (i) prompt notice of any written
demands of dissenter's rights with regard to any shares of Company Capital
Stock, withdrawals of such demands, and any other instruments served pursuant to
the California Code and received by the Company and (ii) the opportunity to
participate in all negotiations and proceedings with respect to demands for
dissenter's rights under the California Code. The Company shall not, except with
the prior written consent of Parent, voluntarily make any payment with respect
to any demands for dissenter's rights with regard to Company Capital Stock or
offer to settle or settle any such demands. Notwithstanding the foregoing, to
the extent that Parent or the Company is required by California Law to make any
payment in respect of the Dissenting Shares or incurs any other reasonable
out-of-pocket costs or expenses (including, without limitation, legal expenses)
in respect of the Dissenting Shares (collectively, the "Dissenting Share
Costs"), Parent shall be entitled to recover from the Escrow Fund under the
terms of Article VII the amount of the Dissenting Share Costs.
1.10 Surrender of Certificates.
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(a) Exchange Agent. Prior to the Effective Time, Parent shall
designate Mellon Investor Services, LLC or a bank or trust company reasonably
acceptable to Parent and the Company to act as exchange agent (the "Exchange
Agent") in the Merger.
(b) Parent to Provide Cash. Promptly after the Effective Time, but
not more than three (3) business days thereafter, (i) Parent shall make
available to the Exchange Agent for exchange in accordance with this Article I
an aggregate amount of cash equal to the Merger Consideration, and (ii) Parent
shall make available to the Escrow Agent (as defined in Section 7.2(a)), on
behalf of the holders of Company Capital Stock and Assumed Warrants, an
aggregate zamount of cash equal to the Escrow Amount in accordance with, and
subject to, the obligations set forth in Article VII. The portion of the Escrow
Amount contributed on behalf of each holder of Company Capital Stock shall be
equal to the Aggregate Per Shareholder Escrow Amount (as defined in Section
7.2(a) hereof) for such holder. The portion of the Escrow Amount contributed on
behalf of each holder of an Assumed Warrant shall be equal to the Aggregate Per
Warrantholder Escrow Amount (as defined in Section 7.2(a) hereof) for such
holder.
(c) Exchange Procedures. Promptly after the Effective Time, the
Surviving Corporation shall cause to be mailed to each holder of record of a
certificate or certificates (the "Certificates") which immediately prior to the
Effective Time represented outstanding shares of Company Capital Stock whose
shares were converted into the right to receive cash pursuant to Sections 1.7
and 1.8, (i) a letter of transmittal (which shall specify that delivery shall be
effected, and risk of loss and title to the Certificates shall pass, only upon
delivery of the Certificates to the Exchange Agent and shall be in such form and
have such other provisions as Parent may reasonably specify) and (ii)
instructions for use in effecting the surrender of the Certificates in exchange
for cash. Upon surrender of a 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, duly completed and validly executed in accordance
with the instructions thereto, the holder of such Certificate shall be entitled
to receive promptly thereafter in exchange therefor: (x) the amount of cash to
which such holder is entitled under Section 1.7 in respect of the shares of
Company Capital Stock represented by such Certificate, less the amount of cash
to be deposited in the Escrow Fund on such holder's behalf pursuant to Article
VII hereof in respect of the shares of Company Capital Stock represented by such
Certificate, plus (z) the amount of cash, if any, to which such holder shall
become entitled prior to the date of such surrender under Section 1.8 in respect
of the shares of Company Capital Stock represented by such Certificate, and the
Certificate so surrendered shall forthwith be canceled. Until so surrendered,
each outstanding 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, to evidence only the right to receive the
applicable cash amount specified above, without interest.
(d) No Liability. Notwithstanding anything to the contrary in this
Section 1.10, none of the Exchange Agent, the Surviving Corporation or 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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1.11 No Further Ownership Rights in Company Capital Stock. All cash paid
upon the surrender for exchange of shares of Company Capital Stock in accordance
with the terms hereof shall be deemed to have been issued in full satisfaction
of all rights pertaining to such shares of Company Capital Stock, and there
shall be no further registration of transfers on the records of the Surviving
Corporation of shares of Company Capital Stock which were outstanding
immediately prior to the Effective Time. If, after the Effective Time,
Certificates are presented to the Surviving Corporation for any reason, they
shall be canceled and exchanged as provided in this Article I.
1.12 Lost, Stolen or Destroyed Certificates. In the event any certificates
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 certificates, upon the making of an affidavit of that fact by the
holder thereof, such cash, if any, as may be required pursuant to Section 1.7
and 1.8; provided, however, that Parent may, in its discretion and as a
condition precedent to the issuance thereof, require the owner of such lost,
stolen or destroyed certificates to deliver a bond in such sum as it may
reasonably direct as indemnity against any claim that may be made against Parent
or the Exchange Agent with respect to the certificates alleged to have been
lost, stolen or destroyed.
1.13 Required Withholding. Each of the Parent and the Surviving Corporation
shall be entitled to deduct and withhold from any consideration payable or
otherwise deliverable pursuant to this Agreement to any holder or former holder
of Company Capital Stock such amounts as may be required to be deducted or
withheld therefrom under the Code (as defined in Section 2.10 below) or under
any provision of state, local or foreign tax law or under any other applicable
legal requirement. To the extent such amounts so deducted or withheld are paid
to the appropriate Governmental Entity, such amounts shall be treated for all
purposes under this Agreement as having been paid to the Person to whom such
amounts would otherwise have been paid.
1.14 Tax and Accounting Consequences. Each party has consulted with its own
tax advisors and accountants with respect to the tax and accounting
consequences, respectively, of the Merger.
1.15 Unclaimed Merger Consideration. Any portion of the Merger
Consideration delivered and made available to the Exchange Agent pursuant to
this Article I and not exchanged for Company Capital Stock within six (6) months
after the Effective Time pursuant to Section 1.10 above shall be returned by the
Exchange Agent to Parent, which thereafter shall act as Exchange Agent subject
to the rights of holders of unsurrendered Certificates under this Article I.
Thereafter such holders shall be entitled to look to Parent and the Surviving
Corporation (subject to abandoned property, escheat and other similar laws) only
as general creditors thereof with respect to any Merger Consideration that may
be payable upon due surrender of the Certificates held by them
1.16 Taking of Necessary Action; Further Action. If, at any time after the
Effective Time, any such 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 and Merger Sub, the officers and directors of the
Company 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.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Merger Sub, subject to
such exceptions as are specifically disclosed in the disclosure schedule
(referencing the appropriate section and paragraph numbers) supplied by the
Company to Parent (the "Disclosure Schedule") and dated as of the date hereof,
that on the date hereof and as of the Effective Time, as though made at the
Effective Time:
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 is duly qualified to do business and in good standing as
a foreign corporation in each jurisdiction in which such qualification is
required, except for such failures to be so duly qualified or licensed or in
good standing that would not reasonably be expected to have a Material Adverse
Effect on the Company. As used in this Agreement, "Material Adverse Effect on
the Company" shall mean any change, effect or circumstance of or relating to the
Company that (i) is reasonably likely to be materially adverse to the business,
assets (including intangible assets), liabilities, condition (financial or
other) or results of operations of the Company taken as a whole, (ii) would
reasonably be expected to materially delay or prevent the consummation of the
transactions contemplated hereby, or (iii) would reasonably be expected to
materially impair the ability of Parent to operate the business of the Company
immediately after the Closing. Schedule 2.1 sets forth each jurisdiction where
the Company is so qualified, licensed or admitted to do business and separately
lists each other jurisdiction in which the Company owns, uses, licenses or
leases its assets and properties, or conducts business or has employees or
engages independent contractors. The Company has full corporate power and
authority to carry on its business as now being conducted and as currently
proposed to be conducted, and to own and use the properties owned and used by
it. Schedule 2.1 lists the directors and officers of the Company as of the date
of this Agreement. The Company has delivered to Parent a true and correct copy
of its Articles of Incorporation and Bylaws, each as amended through the date
hereof and as are in full force and effect as of the date hereof.
2.2 Company Capital Structure.
(a) The authorized capital stock of the Company consists of 30,000,000
shares of Company Common Stock, 3,108,256 shares of which are issued and
outstanding, and 22,842,473 shares of Company Preferred Stock, (i) 6,045,981
shares of which are designated Series A Preferred, of which 6,045,981 shares are
issued and outstanding, (ii) 4,135,251 shares of which are designated Series B
Preferred, of which 4,135,251 shares are issued and outstanding, (iii) 3,778,744
shares of which are designated Series C Preferred, of which 2,699,070 shares are
issued and outstanding, (iv) 5,232,497 shares of which are designated Series D
Preferred, of which 4,350,000 shares are issued and outstanding and (v)
3,650,000 shares of which are designated Series E Preferred, of which 2,780,405
shares are issued and outstanding. Each share of Company Preferred Stock is
convertible by its terms into one share of Company Common Stock. The Company
Capital Stock is
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held of record as of the date of this Agreement by the persons, with the
addresses of record and in the amounts set forth on Schedule 2.2(a)(i). All
outstanding shares of Company Capital Stock have been duly authorized, are
validly issued, fully paid and non-assessable and were not issued in violation
of, and are not subject to nor issued in violation of any preemptive rights
created by, statute, the Articles of Incorporation or Bylaws of the Company or,
except as set forth on Schedule 2.2(a)(ii), any agreement to which the Company
is a party or by which it is bound. All of the outstanding shares of Company
Capital Stock (including options and other rights to acquire shares of Company
Capital Stock) have been offered, issued and sold by the Company in compliance
with applicable federal and state securities laws. There are no undeclared or
accrued but unpaid dividends with respect to any shares of Company Capital
Stock.
(b) The Company has reserved 3,311,525 shares of Company Common Stock
for issuance to employees and consultants pursuant to the Option Plan, of which,
as of the date of this Agreement, 3,190,800 shares are subject to outstanding,
unexercised Company Options and 94 shares remain available for future grant. The
Company has reserved no shares of Common Stock for issuance upon exercise of
outstanding Company Options granted outside the Option Plan. Schedule 2.2(b)
sets forth for each outstanding Company Option the name of the holder of such
option, the domicile address of such holder, the number of shares of Company
Common Stock subject to such option, the exercise price of such option and the
vesting schedule for such option, including the extent to which such option is
vested to date. The Company has reserved an aggregate of 1,004,674 shares of
Series C Preferred Stock, 652,497 shares of Series D Preferred Stock, and
318,223 shares of Series E Preferred Stock for issuance pursuant to the Company
Warrants, all of which are listed on Schedule 2.2(b). Except for the Company
Options and Company Warrants described in Schedule 2.2(b), there are no options,
warrants, calls, rights, 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. There are no outstanding or authorized stock appreciation, phantom
stock, profit participation or other similar rights with respect to the Company.
Except as set forth on Schedule 2.2(b) and as contemplated hereby, there are no
voting trusts, proxies, or other understandings with respect to the voting stock
of the Company. Except for the Company Options and Company Warrants described in
Schedule 2.2(b), there are no options, warrants, calls, rights, 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 grant, extend, accelerate the
vesting of, change the price of, otherwise amend or enter into any such option,
warrant, call, right, commitment or agreement. The holders of Company Options
and Company Warrants 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
sole record and beneficial owner of all Company Capital Stock and all rights to
acquire or receive Company Capital Stock, whether or not such shares of Company
Capital Stock are outstanding.
2.3 Subsidiaries. The Company does not have any Subsidiaries or affiliated
companies and does not otherwise own 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. As
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used in this Agreement, "Subsidiary" means any Person or Persons (as defined in
Section 2.9 hereof) in which the Company or Parent, as the context requires,
directly or indirectly through Subsidiaries or otherwise, beneficially own at
least fifty percent (50%) of either the equity interest in, or the voting
control of, such Person.
2.4 Authority. Subject only to the requisite approval of the Merger and
this Agreement by the shareholders of the Company, the Company has all requisite
corporate power and authority to enter into this Agreement, and to consummate
the Merger and the other transactions contemplated hereby and thereby. The
execution and delivery of this Agreement, and the consummation of the Merger and
the other transactions contemplated hereby, have been duly authorized by all
necessary corporate action on the part of the Company, and no further action is
required on the part of the Company to authorize the Agreement and the Merger
and the other transactions contemplated hereby, subject only to the adoption of
this Agreement and the approval of the Merger by the shareholders of the
Company. This Agreement and the Merger have been unanimously approved by the
Board of Directors of the Company. This Agreement has been duly executed and
delivered by the Company, and assuming the due authorization, execution and
delivery by the other parties hereto, constitutes the valid and binding
obligation of the Company, enforceable against it in accordance with its terms,
except as such enforceability may be subject to the laws of general application
relating to bankruptcy, insolvency, and the relief of debtors and rules of law
governing specific performance, injunctive relief, or other equitable remedies.
2.5 No Conflict. Subject only to the requisite approval of the Merger and
this Agreement by the shareholders of the Company, the execution and delivery by
the Company of this Agreement, the performance by the Company of its obligations
under this Agreement and the consummation of the transactions contemplated
hereby, will not materially conflict with or result in any material violation of
or default under (with or without notice or lapse of time, or both) or give rise
to a right of termination, cancellation, modification or acceleration of any
obligation or loss of any benefit under (any such event, a "Conflict") (i) any
provision of the Articles of Incorporation, Bylaws or charter documents of the
Company, (ii) any mortgage, indenture, lease, contract, covenant or other
agreement, instrument or commitment, permit, concession, franchise or license
(each a "Contract" and, collectively, the "Contracts") to which the Company or
any of its properties or assets (whether tangible or intangible) is subject, or
(iii) any judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to the Company or any of its properties (whether tangible or
intangible) or assets. The Company is in compliance with, and has not materially
breached, violated or defaulted under, or received notice that it has breached,
violated or defaulted under, any of the terms or conditions of any Contract, and
the Company is not aware of any event that would constitute such a material
breach, violation or default with the lapse of time, giving of notice or both.
The Company has obtained, or will obtain prior to the Effective Time, all
necessary consents, waivers and approvals of parties to any Contract as are
required thereunder in connection with the Merger, or for any such Contract to
remain in full force and effect without limitation, modification or alteration
after the Effective Time. Following the Effective Time, the Surviving
Corporation will be permitted to exercise all of its rights under the Contracts
without the payment of any additional amounts or consideration other than
ongoing fees, royalties or payments which the Company would otherwise
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required to pay pursuant to the terms of such Contracts had the transactions
contemplated by this Agreement not occurred.
2.6 Consents. No consent, notice, waiver, approval, order or
authorization of, or registration, declaration or filing with any Governmental
Entity or any third party, including a party to any agreement with the Company
(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 or the
consummation of the transactions contemplated hereby, except for (i) the filing
of the Agreement of Merger and related officer's certificates with the Secretary
of State of the State of California, and (ii) such other consents, waivers,
authorizations, filings, approvals and registrations which are set forth on
Schedule 2.6. As used in this Agreement, "Governmental Entity" shall mean any
court, administrative agency or commission or other federal, state, county,
local or other foreign governmental authority, instrumentality, agency or
commission. The vote required of the shareholders of the Company to duly adopt
this Agreement and duly approve the Merger is (i) a majority of the outstanding
shares of Company Common Stock, voting separately as a class, (ii) a majority of
the outstanding shares of Company Preferred Stock, voting separately as a class,
and (iii) a majority of the outstanding shares of Company Common Stock and
Company Preferred Stock, voting together as a class. The vote required of the
shareholders of the Company to duly approve and adopt the Articles Amendment (as
defined in Section 5.1 hereof) is (i) a majority of the outstanding shares of
Company Common Stock, voting separately as a class, (ii) a majority of the
outstanding shares of Company Preferred Stock, voting separately as a class,
(iii) a majority of the outstanding shares of each of the Series A, B, C, D and
E Preferred, voting as separate classes, and (iv) a majority of the outstanding
shares of Company Common Stock and Company Preferred Stock, voting together as a
class. The Fourth Amended and Restated Voting Agreement dated as of September
19, 2000 by and among the Company and certain of its shareholders ("Prior Voting
Agreement") has been validly amended by written consent of the Company and the
holders of (A) a majority of the outstanding shares of Company Capital Stock
held by the Common Holders (as defined therein) and (B) a majority of the
outstanding Company Preferred Stock, such that it shall not apply to the Merger
and shall terminate in all respects upon the Closing. The Fourth Amended and
Restated Investors' Rights Agreement dated as of September 19, 2000 by and among
the Company and certain of its shareholders ("Prior Rights Agreement") has been
validly amended by written consent of the Company and the holders of a majority
of the outstanding shares of Company Capital Stock held by all parties to the
Prior Rights Agreement other than the Founders' Stock (as defined therein), such
that it shall not apply to the Merger and shall terminate in all respects upon
the Closing. The holders of Company Capital Stock executing voting agreements in
the form attached as Exhibit A hereto ("Voting Agreements") concurrently with
the execution hereof are the record holders of shares of Company Capital Stock
sufficient to (A) duly adopt this Agreement and duly approve the Merger, (B)
duly approve and adopt the Articles Amendment, and (C) duly and validly amend
the Prior Voting Agreement and the Prior Rights Agreement such that each such
agreement shall not apply to the Merger and shall terminate in all respects upon
the Closing.
2.7 Financial Statements. Schedule 2.7 sets forth the following financial
statements (collectively the "Company Financials"): (i) the audited consolidated
balance sheet and related consolidated statements of income and cash flows as of
and for the fiscal years ended December 31,
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1999, December 31, 2000 and December 31, 2001 for the Company; and (ii) an
unaudited consolidated balance sheet as at June 30, 2002 and related statements
of income and cash flows as of and for the six (6) months then ended for the
Company (collectively the "Most Recent Financial Statements"). The unaudited
consolidated balance sheet of the Company as of June 30, 2002 is hereinafter
referred to as the "Current Balance Sheet". The Company Financials (including
the notes thereto) have been prepared in accordance with GAAP applied on a
consistent basis throughout the periods covered thereby and present fairly the
financial condition of the Company as of such dates and the results of
operations of the Company for such periods, except that the Most Recent
Financial Statements do not contain footnotes and are subject to normal year end
adjustments which will not be material, in amount or significance, individually
or in the aggregate. As used in this Agreement, "GAAP" shall mean United States
generally accepted accounting principles consistently applied.
2.8 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,
other than those that, (a) have been reflected in the Current Balance Sheet, or
(b) have arisen in the ordinary course of business consistent with past
practices since the date of the Current Balance Sheet and that are not,
individually or in the aggregate, material to the Company.
2.9 No Changes. Except as set forth in Schedule 2.9, since December 31,
2001, there has not been, occurred or arisen any:
(a) commitment or transaction by the Company except in the ordinary
course of business as conducted on that date and consistent with past practices;
(b) amendments or changes to the Articles of Incorporation, Bylaws
or other organizational documents, as the case may be, of the Company;
(c) changes in the Company's authorized capital structure;
(d) capital expenditures or capital commitments by the Company,
either individually exceeding $15,000 or in the aggregate exceeding $50,000;
(e) payment, discharge or satisfaction by the Company, in any
amount in excess of $15,000 in any one case or $50,000 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
Current Balance Sheet;
(f) destruction of, damage to or loss of any material assets
(whether tangible or intangible) (whether or not covered by insurance), any
business or any customer of the Company in excess of $25,000 in the aggregate;
(g) claim of wrongful discharge or other unlawful labor practice or
action asserted against the Company;
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(h) revaluation by the Company of any of their respective assets
(whether tangible or intangible);
(i) event or condition that has had or could be reasonably expected
to have a Material Adverse Effect on the Company;
(j) change in accounting methods or practices (including any change
in depreciation or amortization policies or rates) by the Company, except in
accordance with GAAP;
(k) change in any material election with respect to Taxes (as
defined in Section 2.10 below), adoption or change in any accounting method in
respect of Taxes, agreement or settlement of any claim or assessment in respect
of Taxes, or extension or waiver of the limitation period applicable to any
claim or assessment in respect of Taxes;
(l) declaration, setting aside or payment of a dividend or other
distribution with respect to the Company Capital Stock, or any split,
combination or reclassification in respect of any Company Capital Stock, or any
issuance or authorization of any issuance of any other securities in respect of,
in lieu of or in substitution for Company Capital Stock, or any direct or
indirect redemption, repurchase or other acquisition by the Company of any of
Company Capital Stock (or options, warrants or other rights convertible into,
exercisable or exchangeable therefor), except in accordance with the Option
Plan;
(m) increase in the salary or other compensation payable or to
become payable by the Company to any of its officers, directors, employees or
advisors or the declaration, payment or commitment or obligation of any kind for
the payment, by the Company, of a severance payment, termination payment, bonus
or other additional salary or compensation to any such Person (as defined below)
except as otherwise contemplated by this Agreement;
(n) termination, extension, amendment or modification of the terms
of any material agreement, contract, covenant, instrument, lease, license or
commitment to which the Company is a party or by which it or any of its assets
is bound other than in the ordinary course of business consistent with past
practices;
(o) sale, lease, license or other disposition of any of the
material assets (tangible or intangible) or material properties of the Company;
(p) loan by the Company to or capital investment in any individual,
corporation (including any non-profit corporation), general or limited
partnership, limited liability company, joint venture, estate, trust,
association, organization, labor union, or other entity or Governmental Entity
(each a "Person"), incurring by the Company of any indebtedness for borrowed
money, guaranteeing by the Company of any indebtedness for borrowed money,
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;
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(q) 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;
(r) commencement or settlement of any lawsuit by the Company, or
commencement, settlement, notice or, to the Knowledge of the Company, threat of
any lawsuit or proceeding or other investigation against the Company or its
affairs, or any reasonable basis for any of the foregoing (as used in this
Agreement, "Knowledge" shall mean, with respect to the Company, the actual
knowledge of the Company's officers and directors after careful consideration of
the matters set forth in the representation that is so qualified and a
reasonably diligent review of all files, documents, agreements and other
materials in such person's possession or subject to his or her control);
(s) notice of any claim or potential claim of ownership by a third
party of the Company Intellectual Property (as defined in Section 2.13 below) or
of infringement by the Company of any third party's Intellectual Property Rights
or Technology (each as defined in Section 2.13 below);
(t) issuance or sale, or contract or agreement to issue or sell, by
the Company of any of shares of Company Capital Stock or securities
exchangeable, convertible or exercisable therefor, or of any other of its
securities, except for, in the case of the Company, issuances of Company Capital
Stock upon the exercise thereof and option grants under the Option Plan;
(u) (i) transfer or license to or from any Person any Technology or
Intellectual Property Rights (including any Company Intellectual Property) or
entry into or amendment of any agreement with any Person regarding any
Technology or Intellectual Property Rights (including any Company Intellectual
Property), (ii) agreement with respect to the development of any Technology with
a third party or amendment of any such agreement, or (iii) change 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 Technology or
Intellectual Property Rights to the Company;
(v) agreement or modification to any agreement pursuant to which
any other party was granted marketing, distribution, development or similar
rights of any type or scope with respect to any products or services of the
Company or Company Intellectual Property;
(w) failure to pay or otherwise satisfy its material monetary
obligations as they become due, except such as are being contested in good
faith; or
(x) agreement by the Company or any officer or employee on behalf
of the Company to do any of the things described in the preceding clauses (a)
through (w).
2.10 Tax and Other Returns and Reports.
(a) Definition of Taxes. For the purposes of this Agreement, the
term "Tax" or, collectively, "Taxes" shall mean (i) any and all federal, state,
local and foreign taxes, assessments and other governmental charges, duties,
impositions and liabilities, including taxes based upon or
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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 as well as public imposts, fees and social
security charges (including but not limited to health, unemployment and pension
insurance), together with all interest, penalties and additions imposed with
respect to such amounts, (ii) any liability for the payment of any amounts of
the type described in clause (i) of this Section 2.10 as a result of being a
member of an affiliated, consolidated, combined or unitary group for any period,
and (iii) any liability for the payment of any amounts of the type described in
clauses (i) or (ii) of this Section 2.10 as a result of any express or implied
obligation to indemnify any other person or as a result of any obligation under
any agreement or arrangement with any other person with respect to such amounts
and including any liability for taxes of a predecessor entity.
(b) Tax Returns and Audits.
(i) The Company has prepared and timely filed or caused to be
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 or will be true and correct in all material respects and have been
or will be completed in accordance with applicable law.
(ii) The Company: (A) has paid all Taxes it is required to pay and
(B) has withheld with respect to its employees (and timely paid over to the
appropriate Taxing authority) all other Taxes required to be withheld.
(iii) (A) The Company has not been delinquent in the payment of any
Tax, (B) nor is there any Tax deficiency outstanding, assessed or proposed in
writing against the Company, and (C) 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 that remains in effect.
(iv) No audit or other examination of any Return of the Company is
presently in progress, nor has the Company been notified in writing of any
request for such an audit or other examination.
(v) As of the date of the Current Balance Sheet, the Company had no
liabilities for unpaid federal, state, local or foreign Taxes which have not
been accrued or reserved against on the Current Balance Sheet (other than with
respect to deferred Taxes), whether asserted or unasserted, contingent or
otherwise, and has not incurred any liability for Taxes since the date of the
Current Balance Sheet other than in the ordinary course of business.
(vi) The Company has provided Parent or its legal counsel copies of
all foreign, federal, state and local income and all state and local sales and
use Returns for the Company filed for all periods within and including the three
(3) year period preceding the date of this Agreement.
(vii) There are no liens, pledges, charges, claims, restrictions on
transfer, mortgages, security interests or other encumbrances of any sort
(collectively, "Liens") on the assets
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of the Company relating to or attributable to Taxes other than Liens for Taxes
not yet due and payable.
(viii) None of the Company's assets is treated as "tax-exempt use
property," within he meaning of Section 168(h) of the Internal Revenue Code of
1986, as amended (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)(4) 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 has not (a) ever been a member of an
affiliated group (within the meaning of Code ss.1504(a)) filing a consolidated
federal income Tax Return (other than a group the common parent of which was the
Company), (b) ever been a party to any Tax sharing, indemnification or
allocation agreement, (c) incurred any liability for the Taxes of any person
(other than Company) under Treasury Regulation ss.1.1502-6 (or any similar
provision of state, local or foreign law), as a transferee or successor, by
contract or agreement, or otherwise and (d) ever been a party to any joint
venture, partnership or other arrangement that could be treated as a partnership
for Tax purposes.
(xi) The Company has not been, at any time, a "United States
Real Property Holding Corporation" within the meaning of Section 897(c)(2) of
the Code.
(xii) The Company has not constituted either a "distributing
corporation" or a "controlled corporation" in a distribution of stock intended
to qualify for tax-free treatment under Section 355 of the Code (x) in the two
(2) years prior to the date of this Agreement or (y) in a distribution which
could otherwise constitute part of a "plan" or "series of related transactions"
(within the meaning of Section 355(e) of the Code) in conjunction with the
Merger.
(c) Executive Compensation Tax. There is no contract, agreement, plan
or arrangement to which the Company is a party, including the provisions of this
Agreement, covering any employee or former employee of the Company, which,
individually or collectively, could give rise to the payment of any amount that
would not be deductible pursuant to Sections 280G, or 404 of the Code.
2.11 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
could 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, the conduct of business by the Company or otherwise limiting the
freedom of the Company to engage in any line of business or to compete with any
Person. 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 (including any Company Intellectual
Property) or products, or from providing services
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to, customers or potential customers, or any class of customers, in any
geographic area, during any period of time or in any segment of the market.
2.12 Title to Properties; Absence of Liens and Encumbrances; Condition of
Equipment.
(a) The Company does not own any real property, nor has the Company
ever owned any real property. Schedule 2.12 sets forth a list of all real
property currently leased by the Company or otherwise used or occupied by the
Company for the operation of the Company's business (the "Leased Real
Property"), the name of the lessor, the date of the lease and each amendment
thereto and, with respect to any current lease, the aggregate annual rental
payable under any such lease.
(b) The Company has provided Parent true, correct and complete copies
of all leases, lease guaranties, subleases, agreements for the leasing, use or
occupancy of, or otherwise granting a right in or relating to the Leased Real
Property, including all amendments, terminations and modifications thereof
("Lease Agreements"); and there are no other Lease Agreements for real property
affecting the real property or to which the Company is bound other than those
identified in Schedule 2.12. All Lease Agreements are in full force and effect,
are valid and enforceable in accordance with their respective terms and there is
not any material existing default or event of default by the Company, no rentals
are past due, and no circumstance exists, which, with notice, the passage of
time, or both, could constitute a default by the Company under any such Lease
Agreement. The Company has not received any notice of a default, alleged failure
to perform, or any offset or counterclaim with respect to any such Lease
Agreement, which has not been fully remedied and withdrawn. The Closing will not
affect the enforceability against any person of any such Lease Agreement or the
rights of the Company or the Surviving Corporation to the continued use and
possession of the real property for the conduct of business as presently
conducted.
(c) 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, except (i) as reflected in the Current
Balance Sheet, (ii) Liens for Taxes not yet due and payable, and (iii) such
imperfections of title and encumbrances, if any, which do not materially detract
from the value or interfere with the present use of the property subject thereto
or affected thereby.
(d) Schedule 2.12(d) lists all material items of equipment (the
"Equipment") owned or leased by the Company, and such Equipment taken as a whole
is (i) adequate for the conduct of the business of the Company as currently
conducted and as currently contemplated to be conducted, and (ii) in good
operating condition, regularly and properly maintained, subject to normal wear
and tear.
2.13 Intellectual Property.
(a) Definitions. For all purposes of this Agreement, the following
terms shall have the following respective meanings:
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"Technology" shall mean any or all of the following: (i) works of
authorship, including computer programs, source code, and executable code,
whether embodied in software, firmware or otherwise, documentation, designs,
files, records, data and mask works, (ii) inventions (whether or not
patentable), discoveries, improvements, and technology, (iii) proprietary and
confidential information, trade secrets and know how, (iv) databases, data
compilations and collections and technical data, (v) domain names, web addresses
and sites, and (vi) tools, methods and processes.
"Intellectual Property Rights" shall mean worldwide common law and
statutory rights arising from or associated with (i) patents and patent
applications, and divisions, continuations, continuations-in-part, renewals,
reissuances and extensions of the foregoing, (ii) copyrights, copyright
registrations and copyright applications, "moral" rights and mask work rights,
(iii) rights in trade and industrial secrets and confidential information, (iv)
trademark, trade name and service xxxx rights, and (v) analogous rights to those
set forth above.
"Company Intellectual Property" shall mean any Technology and Intellectual
Property Rights that are owned by or exclusively licensed to the Company,
including all Company Registered Intellectual Property.
"Registered Intellectual Property" shall mean any Technology and
Intellectual Property Rights that have been registered, filed, certified or
otherwise perfected or recorded with any state, government or other public legal
authority.
(b) Disclosure of Registered Intellectual Property. Schedule 2.13(b):
(i) lists all Registered Intellectual Property owned by, or filed in the name
of, the Company (the "Company Registered Intellectual Property"), and (ii) 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.
(c) No Liens. Each item of Company Intellectual Property is free and
clear of any Liens or other encumbrances.
(d) Third Party Technology. Schedule 2.13(d) sets forth all
Intellectual Property Rights of a third party (other than end-user software
obtained by payment of license and/or maintenance fees of less than $1,000 in
the aggregate), or any modification or derivative thereof, including any version
of any software licensed pursuant to any GNU general public license or limited
general public license, that was used in, incorporated into, integrated or
bundled with any Technology that is, or was, used by the Company in its
business, or incorporated in or used in the development or manufacture of any
products of the Company.
(e) Acquired Technology. To the extent that any Technology that has
been developed or created independently or jointly by any person other than the
Company for which the Company has paid (the "Acquired Technology"): (i) the
Company has a written agreement with such third party or parties with respect
thereto, pursuant to which the Company has obtained complete, unencumbered,
unrestricted and exclusive ownership of all such Acquired Technology and
associated Intellectual Property Rights or has otherwise acquired the same by
operation of law,
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valid assignment or otherwise; (ii) such third parties have not retained and do
not have any rights with respect to any such Acquired Technology or associated
Intellectual Property Rights; and (iii) no basis exists for any such third party
to challenge or object to this Agreement. Schedule 2.13(e) sets forth all
agreements with respect to Acquired Technology.
(f) Exclusive Ownership. The Company has not granted any exclusive
license of or exclusive right to use, or transferred any joint ownership in, or
authorized the retention of any exclusive rights to use or joint ownership of,
any Company Intellectual Property, to any other person.
(g) Sufficiency. Other than licenses listed on Schedule 2.13(d), but
not including public or open-source technology, the Company Intellectual
Property constitutes all of the Intellectual Property Rights used in and/or
necessary to the conduct of the business of the Company as it currently is
conducted or proposed to be conducted, including, without limitation, the
design, development, manufacture, use, import and sale of the Company's products
and provision of services (including products or services currently under
development).
(h) Disclosure of Intellectual Property Agreements. Schedule 2.13(h)
lists all contracts, licenses and agreements to which the Company is a party
with respect to any Technology or Intellectual Property Rights. No third party
who has licensed Technology to the Company has ownership rights or license
rights to improvements made by the Company in such Technology.
(i) Disclosure of Indemnity Obligations. Schedule 2.13(i) lists all
contracts, licenses and agreements between the Company and any other person
wherein or whereby the Company has agreed to, or assumed, any obligation or duty
to warrant, indemnify, reimburse, hold harmless, guaranty or otherwise assume or
incur any obligation or liability or provide a right of rescission with respect
to the infringement or misappropriation by the Company or such other person of
the Intellectual Property Rights of any person other than the Company.
(j) Non-Infringement. The operation of the business of the Company as
it has been conducted, currently is conducted or is currently proposed to be
conducted, including but not limited to the design, development, use, import,
manufacture and sale of the Company's products or services (including the
Company's products or services currently under development or currently proposed
to be developed) of the Company, does not and will not infringe or
misappropriate the Intellectual Property Rights of any person, violate the
rights of any person (including rights to privacy or publicity), or constitute
unfair competition or trade practices under the laws of any jurisdiction;
provided, however, that solely with respect to end-user software licensed by the
Company from third parties and listed on Schedule 2.13(d), the Company makes the
representations and warranties contained in this sentence only to its Knowledge.
The Company has not received any notice or communication from any person
claiming that such operation or any act, product or service (including products
or services currently under development or currently proposed to be developed)
of the Company infringes or misappropriates the Intellectual Property Rights of
any person or constitutes unfair competition or trade practices under the laws
of any jurisdiction (nor does Company have Knowledge of any basis therefor).
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(k) Validity. Each item of Company Registered Intellectual Property is
valid and subsisting and all necessary registration, maintenance and renewal
fees in connection with such Company Registered Intellectual Property have been
paid and all necessary documents 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 maintaining such
Registered Intellectual Property. There are no actions that must be taken by the
Company prior to sixty (60) days after the Closing Date, including the payment
of any registration, maintenance or renewal fees or the filing of any documents,
applications or certificates for the purposes of maintaining, perfecting or
preserving or renewing any Company Registered Intellectual Property. In each
case in which the Company has acquired any Intellectual Property Rights from any
person, the Company has obtained a valid and enforceable assignment sufficient
to irrevocably transfer all rights in such Intellectual Property Rights
(including the right to seek past and future damages with respect thereto) to
the Company and, to the maximum extent provided for by, and in accordance with,
applicable laws and regulations, the Company has recorded each such assignment
with the relevant governmental authorities, including the PTO, the U.S.
Copyright Office, or their respective equivalents in any relevant foreign
jurisdiction, as the case may be.
(l) Disputes. There are no contracts, licenses or agreements between
the Company and any other person with respect to Company Intellectual Property
under which there is any dispute to the Knowledge of the Company regarding the
scope of such agreement or performance under such agreement, including with
respect to any payments to be made or received by the Company thereunder.
(m) No Springing Rights or Obligations. Neither this Agreement nor the
transactions contemplated by this Agreement, including the assignment to Parent
or the Surviving Corporation by operation of law or otherwise of any contracts
or agreements to which the Company is a party, will result in: (i) Parent, the
Surviving Corporation, Merger Sub, or the Company granting to any third-party
any right to or with respect to any Intellectual Property Rights owned by, or
licensed to, any of them, (ii) Parent, the Surviving Corporation, Merger Sub, or
the Company being bound by, or subject to, any non-compete or other material
restriction on the operation or scope of their respective businesses, or (iii)
Parent, the Surviving Corporation, Merger Sub, or the Company being obligated to
pay any royalties or other material amounts to any third party in excess of
those payable by any of them, respectively, in the absence of this Agreement or
the transactions contemplated hereby.
(n) Third Party Infringement. To the Knowledge of the Company, no
person is infringing or misappropriating any Company Intellectual Property.
(o) Effort to Protect Rights. The Company has taken reasonable steps
that are required to protect its rights in confidential information and to
protect the trade secrets of the Company provided by any other person to the
Company. Without limiting the foregoing, the Company has, and enforces, a policy
requiring each employee, consultant, and contractor to execute proprietary
information, confidentiality and assignment agreements substantially in the
Company's
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standard forms, and all current and former employees, consultants and
contractors of the Company have executed such an agreement in substantially the
Company's standard form.
(p) No Orders or Decrees. No Company Intellectual Property is
subject to any proceeding or outstanding decree, order, judgment or settlement
agreement or stipulation that restricts in any manner the use, transfer or
licensing thereof by the Company or may affect the validity, use or
enforceability of such Company Intellectual Property; provided, however, that
solely with respect to end-user software licensed by the Company from third
parties and listed on Schedule 2.13(d), the Company makes the representations
and warranties contained in this sentence only to its Knowledge.
(q) Privacy and Publicity Rights. To the Knowledge of the Company,
no (i) product, technology, service or publication of the Company, (ii) material
published or distributed by the Company, or (iii) conduct or statement of
Company constitutes obscene material, an invasion of privacy, a defamatory
statement or material, false advertising or otherwise violates any law or
regulation.
(r) Government and University Rights. No government funding,
facilities of a university, college, other educational institution or research
center or funding from third parties was used in the development of any Company
Technology. Notwithstanding any disclosure set forth in the Disclosure Schedule,
no Governmental Entity, university, college, other educational institution or
research center has any claim or right in or to the Company Technology. No
current or former employee, consultant or independent contractor of the Company
who was involved in, or who contributed to, the creation or development of any
Company Technology, has performed services for the government, a university,
college, or other educational institution, or a research center, during a period
of time during which such employee, consultant or independent contractor was
also performing services for the Company. Notwithstanding the remainder of this
Section 2.13(r), solely with respect to end-user software licensed by the
Company from third parties and listed on Schedule 2.13(d), the Company makes the
representations and warranties contained in this Section 2.13(r) only to its
Knowledge.
(s) Customer Information. The Company has sole and exclusive
ownership, free and clear of any Liens, of all customer lists, customer contact
information, customer correspondence and customer licensing and purchasing
histories relating to its current and former customers (the "Customer
Information"). No Person other than the Company possesses any claims or rights
with respect to use of the Customer Information except to the extent the same is
in the public domain.
(t) Maintenance and Support Obligations. The Company is not a party
to, or bound by, any agreement, contract, commitment or obligation to provide
support with respect to any Company Intellectual Property or product or service
that is not terminable by the Company upon one year's notice.
2.14 Agreements, Contracts and Commitments.
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(a) Except as set forth on Schedule 2.14(a), the Company is not a
party to, nor is it bound by:
(i) any agreement under which the consequences of a default
or termination would reasonably be expected to have a Material Adverse Effect on
the Company;
(ii) any agreement between the Company and any shareholder of
the Company (other than in their capacity as such);
(iii) any agreement containing a "most favored nation" pricing
clause granted by the Company;
(iv) any agreement granting an exclusive license to any
Company Technology or creating exclusive distribution rights;
(v) any agreement of indemnification or guaranty other than
agreements entered into in the ordinary course of business in connection with
the sale of goods or services;
(vi) any employment, consulting or sales agreement, contract
or commitment with an individual employee, consultant or salesperson, or with a
firm or other organization;
(vii) 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;
(viii) any fidelity or surety bond or completion bond;
(ix) any lease of personal property having a value in excess
of $10,000 individually or $25,000 in the aggregate;
(x) any agreement, contract or commitment relating to capital
expenditures and involving future payments in excess of $10,000 individually or
$25,000 in the aggregate;
(xi) any agreement, contract or commitment relating to the
disposition or acquisition of assets or any interest in any business enterprise
outside the ordinary course of the Company's business consistent with past
practices;
(xii) any mortgages, indentures, guarantees, loans or credit
agreements, security agreements or other agreements or instruments relating to
the borrowing of money or extension of credit;
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(xiii) any purchase order or contract for the purchase of
materials involving in excess of $10,000 individually or $25,000 in the
aggregate;
(xiv) any dealer, distribution, joint marketing, joint venture
or development agreement, strategic alliance, or any other agreement (noncompete
or otherwise) that reasonably could be expected to have the effect of
prohibiting or impairing any business practice of the Company, any acquisition
of property by the Company, the conduct of business by the Company, or the
manufacture, sale, licensing or distribution by the Company of any product,
service, Technology or Intellectual Property Right in any manner, or otherwise
limiting the freedom of the Company to engage in any line of business or compete
with any Person;
(xv) any sales representative, original equipment
manufacturer, value added, remarketer, reseller, or independent software vendor
agreement, or other agreement for use or distribution of the Company's products,
technology or services; or
(xvi) any other agreement, contract or commitment that involves
$10,000 individually or $25,000 in the aggregate or more and is not cancelable
by the Company without penalty within thirty (30) days.
(b) The Company has delivered to Parent a correct and complete copy
of each written agreement (as amended through the date of this Agreement) listed
in Schedule 2.14(a). The Company has not breached, violated or defaulted under,
nor received notice that it has breached, violated or defaulted under, nor to
the Knowledge of the Company has any event occurred that would constitute a
breach, violation or default with the lapse of time, the giving of notice, or
both, under any of the terms or conditions of any agreement, contract or
commitment required to be set forth in Schedule 2.14(a) or Schedule 2.13 (any
such agreement, contract or commitment, a "Listed Contract"). Each Listed
Contract is in full force and effect and is not subject to any default
thereunder of which the Company has Knowledge by any party obligated to the
Company pursuant thereto.
2.15 Interested Party Transactions. To the Company's Knowledge, no officer,
director of the Company, or to the Company's Knowledge no shareholder of the
Company (nor any affiliate of any of the foregoing), has, directly or
indirectly, (i) an economic interest in any entity which furnished or sold or
furnishes or sells, services, products or technology 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 set forth in Schedule
2.14(a); provided, however, that in the case of a publicly traded corporation,
ownership of no more than one percent (1%) of the outstanding voting stock of
such corporation, or, in the case of an entity which is not a publicly traded
corporation, ownership of no more than ten percent (10%) of the outstanding
voting stock of such other entity shall not be deemed an "economic interest in
any entity" for purposes of this Section 2.15. Except as set forth on Schedule
2.15, there are no agreements, contracts, or commitments with regard to
contribution or indemnification between the Company and any shareholder of the
Company or, to the Knowledge of the Company, among any of the shareholders of
the Company.
-28-
2.16 Compliance with Laws. The Company is in compliance in all material
respects with, and has not received any notices of violation with respect to,
any Legal Requirement which is operative as of the date of this Agreement, and
to the Company's Knowledge, no action, suit, proceeding, hearing, investigation,
charge, complaint, claim, demand, notice or inquiry has been filed or commenced
against the Company by any Governmental Entity alleging any failure to so
comply. As used in this Agreement, "Legal Requirement" shall mean any
requirement, prohibition or obligation under any judgment, order, decree,
statute, law, ordinance, rule or regulation enacted by a Governmental Entity and
applicable to the Company or its properties or assets. The Company has all
licenses, permits, approvals, registrations, qualifications, certificates and
other governmental authorizations that are necessary or appropriate for the
operations of the Company as they are currently conducted and currently proposed
to be conducted.
2.17 Litigation; Proceedings. There is no action, suit, claim or proceeding
of any nature pending or to the Company's Knowledge threatened against the
Company, any of its assets or properties (tangible or intangible) or any of its
officers or directors, in their respective capacities as such, nor to the
Knowledge of the Company is there any reasonable basis therefor. There is no
investigation or other proceeding pending or, to the Knowledge of the Company,
threatened against the Company or any of its assets or properties (tangible or
intangible) or against any of its officers or directors by or before any
Governmental Entity, nor to the Knowledge of the Company is there any reasonable
basis therefor. Schedule 2.17 sets forth, with respect to any pending or
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 challenged or questioned in a
writing delivered to the Company or otherwise brought to the attention of the
Company the legal right of the Company to conduct its operations as presently
conducted or as presently contemplated to be conducted.
2.18 Insurance. The Company has delivered or made available to Parent
copies of each insurance policy (including policies providing property,
casualty, liability, and workers' compensation coverage and bond and surety
arrangements) with respect to which the Company or any of its affiliates is a
party, a named insured, or otherwise the beneficiary of coverage. With respect
to the insurance policies and fidelity bonds covering the assets, business,
equipment, properties, operations, employees, officers and directors of the
Company or any of its affiliates, there is no claim by the Company or any of its
affiliates pending under any of such policies or bonds as to which coverage has
been questioned, denied or disputed by the underwriters of such policies or
bonds. All premiums due and payable under all such policies and bonds have been
paid and the Company and its affiliates are otherwise in material 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 material premium increase with respect to, any of
such policies.
2.19 Minute Books. The minute books of the Company made available to
counsel for Parent contain a reasonably accurate summary of each meeting of
directors (or committees thereof) or stockholders of the Company and actions by
written consent of the directors or stockholders of the Company between the time
of incorporation of the Company and the date hereof.
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2.20 Environmental Matters.
(a) Hazardous Material. The Company has not: (i) operated any
underground storage tanks at any property that the Company has at any time
owned, operated, occupied or leased, or (ii) released any amount of any
substance that has been designated by any Governmental Entity or 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, petroleum, and urea-formaldehyde and all substances listed as
hazardous substances pursuant to the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended, or defined as a hazardous
waste pursuant to the United States Resource Conservation and Recovery Act of
1976, as amended, and the regulations promulgated pursuant to said laws (a
"Hazardous Material"), but excluding office and janitorial supplies properly and
safely maintained. Except in compliance with Environmental Laws and in a manner
that could not reasonably be expected to result in liability to the Company, no
Hazardous Materials are present 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. "Environmental Laws" means
any applicable federal, state, local or foreign law (including common law),
statute, code, ordinance, rule, regulation or other requirement relating to the
environment, natural resources or employee health and safety, in each case as
amended to date.
(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, 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
herein as "Hazardous Materials Activities") in violation of any rule,
regulation, treaty or statute promulgated by any Governmental Entity 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 as such activities are currently being conducted and as currently
contemplated to be conducted.
(d) Environmental Liabilities. No action, proceeding, revocation
proceeding, amendment procedure, writ, injunction or claim is pending, or to the
Knowledge of the Company threatened, concerning any Environmental Permit,
Hazardous Material or any Hazardous Materials Activity of the Company. The
Company has no Knowledge of any fact or circumstance which could involve the
Company in any environmental litigation or impose upon the Company any
environmental liability.
2.21 Brokers' and Finders' Fees. Except as set forth on Schedule 2.21, 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. The Company has provided to Parent a copy of all agreements set forth on
Schedule 2.21.
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2.22 Employee Matters and Benefit Plans.
(a) Definitions. For purposes of this Agreement, the following terms
shall have the meanings set forth below:
(i) "ERISA Affiliate" shall mean any Person under common
control with the Company within the meaning of Section 414(b), (c), (m) or (o)
of the Code and the regulations thereunder;
(ii) "COBRA" shall mean the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended;
(iii) "Company Employee Plan" shall refer to any plan, program,
policy, practice, contract, agreement or other arrangement providing for
compensation, severance, termination pay, performance awards, stock or
stock-related awards, fringe benefits or other employee benefits or remuneration
of any kind, whether formal or informal, funded or unfunded, including, 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 ERISA Affiliate for the benefit of any "Employee" or with respect
to which the Company or any ERISA Affiliate has or may have any liability or
obligation;
(iv) "DOL" shall meant the Department of Labor;
(v) "Employee" shall mean any current, former, or retired
employee, consultant, or director of the Company or any ERISA Affiliate;
(vi) "Employee Agreement" shall mean each management,
employment, severance, consulting, relocation, repatriation, expatriation,
visas, work permit or other agreement, or contract or understanding between the
Company any ERISA 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 ERISA
Affiliate, whether informally or formally, or with respect to which the Company
or any ERISA 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 a "multiemployer plan", as defined in Section 3(37) of
ERISA; and
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(xii) "Pension Plan" shall refer to each Company Employee Plan
which is an "employee pension benefit plan", within the meaning of Section 3(2)
of ERISA.
(b) Schedule 2.22(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 provided or made available to Parent
correct and complete copies of: (i) all documents embodying or relating to each
Company Employee Plan, International Employee Plan, and each Employee Agreement
including all amendments thereto and all related trust documents, administrative
service agreements, group annuity contracts, group insurance contracts, and
policies pertaining to fiduciary liability insurance covering the fiduciaries
for each Plan; (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),
if any, required under ERISA or the Code in connection with each Company
Employee Plan or related trust; (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 summaries 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, all applications and correspondence to or from the IRS or the DOL with
respect to any such application or letter; (vii) 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 material liability
to the Company; (viii) all correspondence to or from any governmental agency
relating to any Company Employee Plan; (ix) all COBRA forms and related notices
(or such forms and notices as required under comparable law); (x) the three (3)
most recent plan years discrimination tests for each Company Employee Plan; and
(xi) 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
2.22(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,
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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) no "prohibited transaction,"
within the meaning of Section 4975 of the Code or Sections 406 and 407 of ERISA,
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 anticipated (other than routine claims for benefits) against any
Company Employee Plan or against the assets of any Company Employee Plan; and
(v) each Company Employee Plan can be amended, terminated or otherwise
discontinued after the Effective Time in accordance with its terms, without
liability to Parent, the Company, or any ERISA Affiliate (other than ordinary
administration expenses typically incurred in a termination event); (vi) there
are no audits, inquiries or proceedings pending or, to the Knowledge of the
Company, or any ERISA Affiliates, threatened by the IRS or DOL with respect to
any Company Employee Plan; and (vii) neither the Company nor any ERISA 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.
(e) Pension Plans. Neither the Company nor any ERISA Affiliate does
not now, nor has it ever, maintained, established, sponsored, participated in,
or contributed to, any Pension Plan which is subject to Part 3 of Subtitle B of
Title I of ERISA, Title IV of ERISA or Section 412 of the Code.
(f) Multiemployer and Multiple Employer Plans. At no time has either
the Company or any ERISA Affiliate contributed to or been obligated to
contribute to any Multiemployer Plan. Neither the Company nor any ERISA
Affiliate has at any time ever maintained, established, sponsored, participated
in, or contributed to any multiple employer plan, or to any plan described in
Section 413 of the Code.
(g) No Post-Employment Obligations. Except as set forth in Schedule
2.22(g), no Company Employee Plan provides, or reflects or represents any
liability to provide, life insurance, medical or other employee benefits to any
Employee upon his or her retirement or termination of employment for any reason,
except as may be required by 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 life insurance, medical or
other employee welfare benefits upon their retirement or termination of
employment, except to the extent required by statute.
(h) Health Care Compliance. Neither the Company nor any ERISA
Affiliate has, prior to the Effective Time and in any material respect, 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 of
1998, the requirements of the Newborns' and Mothers' Health Protection Act of
1996,
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or any amendment to each such act, or any similar provisions of state law
applicable to its Employees.
(i) Effect of Transaction.
(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) No payment or benefit which will or may be made by the
Company or its ERISA Affiliates with respect to any Employee or any
"disqualified individual" (as defined in Code Section 280G and the regulations
thereunder) 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 in all
material respects 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 material 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 foregoing; and (iv)
is not liable for any payment to any trust or other fund or to any governmental
or administrative 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, threatened or reasonably anticipated
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, threatened or reasonably anticipated. The Company does not know of any
activities or proceedings of any labor union to organize any Employees. 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 liability to the Company. The Company has never engaged in
any unfair labor practices within the meaning of the National Labor Relations
Act. 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. Each International Employee Plan has
been established, maintained and administered in all material respects in
compliance with its terms and conditions and with the requirements prescribed by
any and all statutory or regulatory laws that are
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applicable to such International Employee Plan. Furthermore, no International
Employee Plan has unfunded liabilities, that as of the Effective Time, will not
be offset by insurance or fully accrued. Except as required by law, no condition
exists that would prevent the Company or Parent from terminating or amending any
International Employee Plan at any time for any reason without liability to the
Company or its ERISA Affiliates (other than ordinary administration expenses or
routine claims for benefits).
2.23 Representations Complete. To the Knowledge of the Company, none of the
representations or warranties made by the Company (as modified by the Disclosure
Schedule) in this Agreement, and none of the statements made in any exhibit,
schedule or certificate furnished by the Company 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
the light of the circumstances under which made, not misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub represent and warrant to the Company on the date
hereof and as of the Effective Time:
3.1 Organization of Parent and Merger Sub. Parent is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, and Merger Sub is a corporation duly organized, validly existing and
in good standing under the laws of the State of California. Parent is duly
qualified to do business and in good standing as a foreign corporation in each
jurisdiction in which such qualification is required, except for such failures
to be so duly qualified or licensed or in good standing that would not
reasonably be expected to have a Material Adverse Effect on Parent. As used in
this Agreement, "Material Adverse Effect on Parent" shall mean any change,
effect or circumstance of or relating to Parent that (i) is reasonably likely to
be materially adverse to the business, assets (including intangible assets),
liabilities, condition (financial or other) or results of operations of the
Parent and its Subsidiaries taken as a whole or (ii) would reasonably be
expected to materially delay or prevent the consummation of the transactions
contemplated hereby, provided, however, that a reduction in the trading price or
volume of Parent's Common Stock, occurring at any time or from time to time,
shall not constitute, or be taken into account in determining whether there has
been or would be, a Material Adverse Effect on Parent. Parent has full corporate
power and authority to carry on its business as now being conducted and as
currently proposed to be conducted, and to own and use the properties owned and
used by it. Since the date of its incorporation, Merger Sub has not conducted
any business except as otherwise contemplated by this Agreement.
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3.2 Authority. Each of Parent and Merger Sub has all requisite corporate
power and authority to enter into this Agreement, and to consummate the Merger
and the other transactions contemplated hereby. The execution and delivery of
this Agreement, and the consummation of the Merger and the other transactions
contemplated hereby, have been duly authorized by all necessary corporate action
on the part of Parent and Merger Sub, and no further action is required on the
part of Parent or Merger Sub to authorize the Agreement and the Merger and the
other transactions contemplated hereby. This Agreement and the Merger have been
approved by the Board of Directors of each of Parent and Merger Sub. This
Agreement has been duly executed and delivered by Parent or Merger Sub, as
applicable, and assuming the due authorization, execution and delivery by the
other parties hereto, constitutes the valid and binding obligation of Parent or
Merger Sub, as applicable, enforceable against each of them in accordance with
its terms, except as such enforceability may be subject to the laws of general
application relating to bankruptcy, insolvency, and the relief of debtors and
rules of law governing specific performance, injunctive relief, or other
equitable remedies.
3.3 Litigation. There is no action, suit, proceeding, claim, arbitration or
investigation pending, or as to which Parent has received any notice of
assertion against Parent, which in any manner challenges or seeks to prevent,
enjoin, alter or materially delay any of the transactions contemplated by this
Agreement.
3.4 No Conflict; Consents. The execution and delivery by Parent and Merger
Sub of this Agreement, the performance by Parent and Merger Sub of their
respective obligations under this Agreement and the consummation of the
transactions contemplated hereby, will not result in a Conflict with (i) any
provision of the certificate of incorporation or bylaws of Parent or Merger Sub,
(ii) any Contract to which either Parent or Merger Sub or any of its properties
or assets (whether tangible or intangible) is subject, or (iii) any judgment,
order, decree, statute, law, ordinance, rule or regulation applicable to either
Parent or Merger Sub or any of its properties (whether tangible or intangible)
or assets, in each case except where the Conflict would not materially and
adversely affect the ability of Parent to consummate the Merger. No consent,
notice, waiver, approval, order or authorization of, or registration,
declaration or filing with any Governmental Entity or any third party, including
a party to any Contract with Parent or Merger Sub (so as not to trigger any
Conflict), is required by, or with respect to, Parent or Merger Sub 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 and related officer's certificates with the Secretary of
State of the State of California, (ii) such other consents, waivers,
authorizations, filings, approvals and registrations as have already been
obtained, and (iii) any of the above-listed items which if not performed or
obtained would not materially and adversely affect the ability of Parent to
consummate the Merger.
3.5 Financing. Parent has available cash resources and financing in an
amount sufficient to consummate the transactions contemplated hereby.
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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 (i) the termination of this
Agreement and (ii) the Effective Time, the Company agrees (except to the extent
that Parent shall otherwise consent in writing) to carry on its business in the
ordinary course and in accordance with past practices, 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 commercially 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 their 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 its business, and any
material event involving the Company or its business. Except as set forth in
Schedule 4.1, the Company shall not, without the prior written consent of
Parent:
(a) enter into any commitment or transaction not in the ordinary course
of business as conducted on that date and consistent with past practices.
(b) transfer or license to or from any Person any Technology or
Intellectual Property Rights (including any Company Intellectual Property) or
enter into or amend any agreement with any Person regarding any Technology or
Intellectual Property Rights (including any Company Intellectual Property);
(c) enter into or amend any agreement pursuant to which any other party
is granted marketing, distribution or similar rights of any type or scope with
respect to any products of 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 Disclosure Schedule;
(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 Company
Capital Stock, or split, combine or reclassify any Company Capital Stock or
issue or authorize the issuance of any other securities in respect of, in lieu
of or in substitution for shares of Company Capital Stock, or repurchase, redeem
or otherwise acquire, directly or indirectly, any shares of Company Capital
Stock (or options, warrants or other rights exercisable therefor);
(g) except for the issuance of shares of Company Capital Stock upon
exercise or conversion of presently outstanding Company Options or Company
Preferred Stock, issue, grant, deliver or sell or authorize or propose the
issuance, grant,
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delivery or sale of, or purchase or propose the purchase of, any shares of
Company Capital Stock or securities convertible into, or subscriptions, rights,
warrants or options to acquire, or other agreements or commitments of any
character obligating it to issue any such shares or other convertible
securities;
(h) except as specifically contemplated hereby, cause or permit any
amendments to its Articles of Incorporation or Bylaws or changes to its capital
structure;
(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;
(j) sell, lease, license or otherwise dispose of any of its properties
or assets, other than immaterial dispositions in the ordinary course of business
consistent with past practices;
(k) grant any loan to any Person, purchase any debt securities of
another, amend the terms of any outstanding indebtedness or any agreement
related thereto, forgive any outstanding indebtedness, incur any indebtedness
for borrowed money or guarantee any indebtedness of the Company or any other
Person, or issue or sell any debt securities of the Company (in each case other
than the incurrence of secured loans from Parent to be funded at Parent's option
and in Parent's sole discretion);
(l) grant any severance or termination pay to any director, officer,
employee or consultant, except payments made pursuant to standard written
agreements outstanding on the date hereof;
(m) adopt or amend any employee benefit plan, hire or terminate any
director, officer, employee or consultant other than a termination for cause,
encourage any director, officer, employee or consultant to resign, enter into or
amend any employment or consulting contract, extend employment offers, pay or
agree to pay any special bonus or special remuneration to or increase the salary
or wage rate of director, officer, employee or consultant;
(n) revalue any of its assets, including without limitation writing
down the value of inventory or writing off notes or accounts receivable;
(o) pay, discharge or satisfy, in an amount in excess of $10,000 in the
aggregate, any claim, liability or obligation (absolute, accrued, asserted or
unasserted, contingent or otherwise), other than (i) the payment, discharge or
satisfaction in the ordinary course of business of liabilities reflected or
reserved against in the Company Financials (or the notes thereto) or Third Party
Expenses (as defined below) set forth in the Statement of Expenses (as defined
below); and (ii) only to the extent that the Company's cash on hand (not
including any amount funded by [***] or by Parent) exceeds $320,052, the
repayment of any Bridge Debt;
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*** Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
(p) make or change any material 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 dealer, distribution, joint marketing, joint venture
or development agreement, strategic alliance, or any other agreement (noncompete
or otherwise) that reasonably could be expected to have the effect of
prohibiting or impairing any business practice of the Company, any acquisition
of property by the Company, the conduct of business by the Company, or the
manufacture, sale, licensing or distribution by the Company of any product,
service, Technology or Intellectual Property Right in any manner, or otherwise
limiting the freedom of the Company to engage in any line of business or compete
with any Person;
(r) fail to pay or otherwise satisfy its monetary obligations as they
become due, except such as are being contested in good faith;
(s) knowingly waive or enter into a binding commitment to waive any
rights with a value in excess of $10,000 in the aggregate;
(t) enter into any contract or transaction in which any director or
officer of the Company or any member of their immediate family has an interest;
or
(u) take, or agree in writing or otherwise to take, any of the actions
described in Sections 4.1(a) through (t) 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.
(a) From and after the date of this Agreement until the earlier of the
Effective Time or the termination of this Agreement pursuant to Section 8.1
hereof, the Company shall not, nor shall the Company authorize or permit any of
its directors, officers, employees, investment bankers, attorneys, accountants
or other advisors or representatives (such directors, officers, employees,
investment bankers, affiliates, attorneys, accountants, other advisors and
representatives, collectively, "Representatives") to, directly or indirectly:
(i) solicit, initiate, encourage or take any other action to facilitate any
inquiries or the making of any proposal or offer that constitutes, or could
reasonably be expected to lead to, any Acquisition Proposal, including, without
limitation, amending or granting any waiver or release under any standstill or
similar agreement with respect to any Company Capital Stock; or (ii) enter into,
continue or otherwise participate in any discussions or negotiations regarding,
furnish to any person any information with respect to, assist or participate in
any effort or attempt by any Person with respect to, or otherwise cooperate in
any way with, any Acquisition Proposal.
(b) In the event an officer or director of the Company shall receive,
or shall become aware that any of the Company's Representatives or stockholders
has received, directly or indirectly, any Acquisition Proposal, or any request
for disclosure or access that would be prohibited
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pursuant to clause (ii) above, such officer or director shall promptly (and in
any event within 24 hours) inform Parent as to the existence of any such
Acquisition Proposal or request and shall cooperate with Parent by furnishing
any information Parent may reasonably request (including the identity of the
proposing or requesting party). It is understood that any violation of the
restrictions set forth above by any Company Representative shall be deemed to be
a breach of this Agreement by the Company.
(c) For purposes of this Section 4.2, "Acquisition Proposal" shall mean
(i) any inquiry, proposal or offer for a merger, consolidation, dissolution,
sale of substantial assets, tender offer, recapitalization, share exchange or
other business combination involving the Company, (ii) any inquiry or proposal
for the issuance by the Company of any of its equity securities or (iii) any
inquiry, proposal or offer to acquire in any manner, directly or indirectly, any
of the equity securities or consolidated total assets of the Company, in each
case other than the Merger contemplated by this Agreement.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Shareholder Meeting.
(a) As promptly as practicable after the execution of this Agreement,
the Company shall submit (i) this Agreement and the transactions contemplated
hereby, including the Merger, and (ii) a proposed amendment to its Articles of
Incorporation such that the Merger will not constitute a "liquidation,
dissolution or winding up of the Corporation" thereunder, and such that the
existing liquidation preferences of the Company Preferred Stock shall not be
triggered by or apply to the Merger (or an amendment and restatement of such
Articles of Incorporation conforming the above-referenced provisions to Article
I hereof and approved in form and substance by each of Parent and the Company)
(the "Articles Amendment"), to its shareholders for approval and adoption as
required by the California Corporations Code and the Company's Articles of
Incorporation and Bylaws. In this regard the Company shall prepare, and Parent
shall assist in preparing, a proxy statement (the "Proxy Statement") relating to
the solicitation of the consent of the shareholders of the Company as required
above. The Company shall use its commercially reasonable efforts to cause the
Proxy Statement to be mailed to the Company's shareholders at the earliest
practicable time. Whenever any event occurs which should be set forth in a
supplement to the Proxy Statement, Parent or the Company, as the case may be,
shall promptly inform the other company of such occurrence and cooperate in
preparing such supplement.
(b) The Company shall use its commercially reasonable efforts to
solicit and obtain the consent of all of its shareholders to approve and adopt
the Articles Amendment, the Merger, this Agreement and the transactions
contemplated thereby as required by the California Corporations Code and the
Company's Articles of Incorporation and Bylaws and to enable the Closing to
occur as promptly as practicable. The materials submitted to the Company's
shareholders, including the Proxy Statement, shall be subject to prior review
and approval by Parent,
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shall include the unanimous recommendation of the Board of Directors of the
Company in favor of the Articles Amendment, the Merger, this Agreement and the
transactions contemplated thereby, and shall not contain any untrue statement of
a material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading.
(c) As promptly as practicable after the date of this Agreement,
Parent and the Company shall prepare and make such filings, if any, as are
required under, and agree to take all actions necessary to comply with,
applicable federal and state securities laws relating to the transactions
contemplated by this Agreement.
5.2 Access to Information. Subject to any applicable contractual
confidentiality obligations (which the Company shall use its commercially
reasonable efforts to cause to be waived) 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 its properties, books, contracts, agreements and records, and (b) all other
information concerning the business, properties and personnel (subject to
restrictions imposed by applicable law) of it as Parent may reasonably request.
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 and
reaffirms the terms and provisions of the letter agreement regarding mutual
nondisclosure obligations between Parent and the Company dated as of June 26,
2002.
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 Agreement and the transactions contemplated hereby, shall be the obligation
of the respective party incurring such fees and expenses; provided, however,
that in the event that the Merger is consummated, Parent agrees to pay at
Closing up to an aggregate of $100,000 in reasonable and documented fees and
expenses (including Third Party Expenses) incurred by the Company in connection
with the Merger and listed on the Statement of Expenses (as defined below); and
provided, further, that to the extent the fees and expenses (including Third
Party Expenses) listed on the Statement of Expenses exceed $100,000 in the
aggregate, the Merger Consideration shall be reduced dollar-for-dollar as
provided in Section 1.7 hereof. As used herein, "Statement of Expenses" shall
mean a written statement of all fees and expenses (including Third Party
Expenses) incurred by the Company in connection with the Merger, including an
estimate of any such expenses yet to be incurred or invoiced, in form reasonably
satisfactory to Parent and accompanied by a certificate signed by the Chief
Financial Officer of the Company stating that the calculation contained therein
is true and correct as of the Effective Time, which shall be delivered to
Parent's Chief Financial Officer at the Closing (and a draft of which shall be
delivered to Parent's Chief Financial Officer three (3) business days prior to
the Closing Date), and which shall include copies of any invoices or
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other supporting documents referred to therein. Any fees and expenses (including
Third Party Expenses) incurred by the Company in connection with the Merger and
not reflected in full on the Statement of Expenses (collectively the
"Undisclosed Excess Expense Amount") shall be paid to the Parent from the Escrow
Fund (as defined in Section 7.2 hereof).
5.5 Public Disclosure. Upon execution and delivery of this Agreement by
the parties hereto, Parent and the Company shall release a jointly prepared
announcement describing the Merger. Except as aforesaid, unless otherwise
required by law (including, without limitation, securities laws) or, as to
Parent, by the rules and regulations of the National Association of Securities
Dealers, Inc., 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 use its commercially reasonable efforts to
obtain all such consents, waivers and approvals under any of the Listed
Contracts as may be required in connection with the Merger (all of such
consents, waivers and approvals are set forth in Schedule 2.6 of the Disclosure
Schedule) so as to preserve all rights of, and benefits to, the Company
thereunder.
5.7 FIRPTA Compliance. On 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 commercially reasonable
efforts 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 and
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 capital
stock.
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 or Parent
and Merger Sub, respectively, contained in this Agreement to be untrue or
inaccurate at or prior to the Effective Time except as contemplated by this
Agreement (including the Disclosure Schedule) and (ii) any failure of the
Company or Parent, as the case may be, to comply with or satisfy in any material
respect any covenant, condition or agreement to be complied with or satisfied by
it hereunder; provided, however, that the delivery of any notice pursuant to
this
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Section 5.9 shall not limit or otherwise affect any remedies available to the
party receiving such notice.
5.10 Additional Documents and Further Assurances. The Company, at the
reasonable request of Parent, shall execute and deliver such other instruments
and do and perform such other acts and things as may be reasonably necessary or
desirable for effecting completely the consummation of this Agreement and the
transactions contemplated hereby.
5.11 Financial Statements. The Company shall, and shall cause its
independent auditors to, reasonably cooperate with and assist Parent and its
independent auditors in the preparation of financial statements of the Company
sufficient for the requirements of the U.S. Securities and Exchange Commission
to enable Parent to timely comply with its reporting obligations under the U.S.
federal securities laws following the Effective Time.
5.12 Company Employee Plan Terminations. Effective no later than the day
immediately preceding the Closing Date, the Company and its ERISA Affiliates, as
applicable, shall each terminate any and all group severance, separation or
salary continuation plans, programs or arrangements and any and all plans
intended to include a Code Section 401(k) arrangement (unless Parent provides
written notice to the Company that such 401(k) plans shall not be terminated)
(collectively, "Company Employee Plans"). Unless Parent provides such written
notice to the Company, no later than five (5) business days prior to the Closing
Date, the Company shall provide Parent with evidence that such Company Employee
Plan(s) have been terminated (effective as of the day immediately preceding the
Closing Date) pursuant to resolutions of the Company's Board of Directors. The
form and substance of such resolutions shall be subject to review and approval
of Parent. The Company also shall take such other actions in furtherance of
terminating such Company Employee Plan(s) as Parent may reasonably require. Upon
termination of any Company Employee Plans intended to include a Code Section
401(k) arrangement (a "Company 401(k)"), Parent shall use commercially
reasonable efforts to facilitate participant rollovers from such Company 401(k)
into a Parent plan intended to include a Code Section 401(k) arrangement
consistent with the terms of both the Company 401(k) and the Parent plan.
5.13 Termination of Microsemi Agreement. Between the date of this Agreement
and the Effective Time, the Company shall use its commercially reasonable
efforts to terminate and cancel the Xemod/Microsemi Technology Transfer,
Technical Assistance & Training Agreement, dated as of March 1, 1998, and all
obligations of the Company thereunder, and to obtain all consents of Microsemi
and its affiliates necessary for such action.
5.14 Termination of Assumed Warrants. Between the date of this Agreement
and the Effective Time, the Company shall use its commercially reasonable
efforts to terminate and cancel the Assumed Warrants, and to obtain all consents
of Silicon Valley Bank and its affiliates necessary for such action.
5.15 Company Option Exercises. In the event any holder of a Company Option
exercises such Company Option by delivery to the Company of a promissory note
for all or part of such Company Option's exercise price, the Company shall only
accept such promissory note if, by its
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terms, it (A) provides the lender with full recourse against such holder, (B)
provides the lender (and Parent explicitly) a right to offset any payments that
would otherwise be due to such holder (under this Agreement or otherwise)
against any amount due under the note, and (C) becomes due and payable in full
upon the Closing.
5.16 Termination of Amsterdam Engagement Letter. Between the date of this
Agreement and the Effective Time, the Company shall use its commercially
reasonable efforts to terminate in writing and cancel in all respects the letter
agreement dated as of May 31, 2000 by and between the Company and Amsterdam
Pacific Securities LLC, as amended on January 3, 2002 and January 23, 2002, and
all obligations of the Company thereunder and related thereto.
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) Shareholder Approval; Approval of Articles Amendment. The
Articles Amendment, this Agreement and the Merger shall have been approved and
adopted by the shareholders of the Company by the requisite vote under
applicable law and the Company's Articles of Incorporation and Bylaws.
(b) No Injunctions or Restraints; Illegality. No Governmental Entity
of competent jurisdiction shall have (i) enacted, issued, promulgated, enforced
or entered any order, executive order, stay, decree, judgment or injunction
(preliminary or permanent) or statute, rule or regulation which is in effect and
which has the effect of making the Merger illegal or otherwise prohibiting or
preventing consummation of the Merger or the other transactions contemplated by
this Agreement, or (ii) commenced or threatened any action or proceeding seeking
any of the foregoing.
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 and Merger Sub contained in this Agreement and in any
certificate or other writing delivered by Parent or Merger Sub pursuant hereto
shall be true and correct as of the Closing Date as though made on and as of the
Closing Date, except to the extent that such representations and warranties
refer to a specific date, in which case such representations and warranties
shall have been true and correct as of such date; provided, however, that this
Section 6.2(a) shall be deemed to be satisfied so
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long as any failures of such representations and warranties to be true and
correct, in the aggregate, have not had, and are not reasonably likely to have,
a Material Adverse Effect on Parent (it being understood that, for purposes of
determining the accuracy of the representations and warranties of Parent and
Merger Sub, all "Material Adverse Effect" and "Knowledge" qualifications and all
other qualifications based on the word "material" or "knowledge" contained in
such representations and warranties shall be disregarded). The Company shall
have received a certificate with respect to the foregoing signed on behalf of
Parent by the President and the Chief Financial Officer of Parent.
(b) Agreements and Covenants. Parent and Merger Sub shall have
performed or complied (which performance or compliance shall be subject to
Parent's or Merger Sub's ability to cure as provided in Section 8.1(e) below) 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.
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 and in any certificate or
other writing delivered by the Company pursuant hereto shall be true and correct
as of the Closing Date as though made on and as of the Closing Date, except to
the extent that such representations and warranties refer to a specific date, in
which case such representations and warranties shall have been true and correct
as of such date; provided, however, that this Section 6.3(a) shall be deemed to
be satisfied so long as any failures of such representations and warranties to
be true and correct, in the aggregate, have not had, and are not reasonably
likely to have, a Material Adverse Effect on the Company (it being understood
that, for purposes of determining the accuracy of the representations and
warranties of the Company, all "Material Adverse Effect" and "Knowledge"
qualifications and all other qualifications based on the word "material" or
"knowledge" contained in such representations and warranties shall be
disregarded). Notwithstanding the foregoing, the representation and warranty of
the Company contained in Section 2.2 of this Agreement shall have been true and
correct in all material respects as of the date of this Agreement and as of the
Closing Date as though made on and as of the Closing Date. Parent shall have
received a certificate with respect to the foregoing signed on behalf of the
Company by the President and the Chief Financial Officer of the Company.
(b) Agreements and Covenants. The Company shall have performed or
complied (which performance or compliance shall be subject to the Company's
ability to cure as provided in Section 8.1(d) below) 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 and Merger Sub
shall have received a certificate to such effect signed by a duly authorized
officer of the Company.
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(c) Governmental Approvals. Other than the filing of the Agreement of
Merger with the Secretary of State of the State of California, all
authorizations, consents, orders or approvals of, or declarations or filings
with, or expirations of waiting periods imposed by, any Governmental Entity in
connection with the Merger and the consummation of the other transactions
contemplated by this Agreement shall have been filed, have been obtained or have
occurred.
(d) Third Party Consents; Notices and Filings. Parent shall have been
furnished with evidence satisfactory to it that the Company has (i) complied
with the notice requirements disclosed on Schedule 2.6 and (ii) obtained the
consents, approvals and waivers disclosed on Schedule 2.6.
(e) Legal Opinion. Parent shall have received a legal opinion from
Xxxxxx, Xxxxxxxxxx & Xxxxxxxxx LLP, legal counsel to the Company, in
substantially the form attached hereto as Exhibit B.
(f) Material Adverse Effect. There shall not have occurred, or be
reasonably likely to occur, any Material Adverse Effect on the Company since the
date of this Agreement.
(g) Employment and Noncompetition Agreements. Xxxxxx X. Xxxxxxx,
Xxxxx X. D'Xxxx, Xxxxx X. Xxxxxxxxxxxxx and Xxxxxxx X. Xxxxx shall each have
executed and delivered to Parent an Employment and Noncompetition Agreement in
substantially the form of Exhibit C and all of the Employment and Noncompetition
Agreements shall be in full force and effect.
(h) Dissenters' Rights. Holders of more than 10% of the outstanding
shares of Company Capital Stock shall not have exercised, nor shall they have
any continued right to exercise, appraisal, dissenters' or similar rights under
applicable law with respect to their shares by virtue of the Merger.
(i) Wafer Supply Agreement. The Company and [***] shall each have
executed and delivered a Wafer Supply Agreement in a form acceptable to Parent.
(j) Termination of Microsemi Agreement. The Xemod/Microsemi
Technology Transfer, Technical Assistance & Training Agreement, dated as of
March 1, 1998, and all obligations of the Company thereunder shall have been
terminated in writing and cancelled in all respects.
(k) Deliveries. The Statement of Closing Bridge Debt Amount and
Statement of Expenses shall have been delivered to Parent by the Company. The
Company shall have delivered to Parent a schedule in form reasonably
satisfactory to Parent, listing, as of the Effective Time: (i) each series and
class of outstanding Company Capital Stock and Assumed Warrants, including each
individual holder's full name, address, and number of shares of Company Capital
Stock held, segregated by class, (ii) the percent that each such holder's shares
represent of each such series and class, as applicable, and (iii) a computation
in accordance with Section 1.7 hereof of (A) the dollar amount to be paid to
each such holder at Closing, (B) the percent such amount represents of the total
Merger Consideration, (C) the amount, if any, owed by such holder pursuant to a
promissory note
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*** Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
delivered to the Company prior to Closing in connection with the exercise of a
Company Option, (D) the dollar amount to be contributed to the Escrow Fund on
behalf of each such holder at Closing and (E) the percent such amount represents
of the total Escrow Amount, which in each case shall be solely for Parent's
reference and shall not create any binding obligation on Parent.
(l) Termination of Xxxx Engagement Letter. The letter agreement dated
as of January 3, 2002 by and between the Company and Xxxx Capital Partners and
all obligations of the Company thereunder and related thereto (other than any
right on the part of Xxxx to a fee from the Company in an amount equal to three
percent (3%) of the consideration paid in the Merger, to the extent such fee
constitutes a Third Party Expense hereunder) shall have been terminated in
writing and cancelled in all respects.
(m) Buy-Sell Agreement Termination(n) . The Company and the other
parties to that certain Stock Buy-Sell Agreement dated as of April 8, 1994 among
the Company and certain of the Shareholders (together with all Addenda thereto,
the "Buy-Sell Agreement") shall have duly consented in writing by the vote
required therein to validly amend the Buy-Sell Agreement such that it shall not
apply to the Merger and shall terminate in all respects upon the Closing, and
such amendment shall be effective prior to the Closing.
ARTICLE VII
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ESCROW; INDEMNITY
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 Disclosure Schedule) shall
survive the Merger and continue until 5:00 p.m., California time, on the date
which is eighteen months following the Closing Date. For purposes of this
Agreement, the "Expiration Date" shall mean the date that is eighteen months
following the Closing Date.
7.2 Escrow Arrangements.
(a) Escrow Fund. At the Effective Time the Company's shareholders and
holders of Assumed Warrants will be deemed to have received and deposited with
the Escrow Agent (as defined below) the Escrow Amount without any act of any
such holder. As soon as practicable after the Effective Time, the Escrow Amount,
without any act of any shareholder or holder of Assumed Warrants, will be
deposited with U.S. Bank, N.A. (or other institution acceptable to Parent and
the Securityholder Agent (as defined in Section 7.2(g) below)), as Escrow Agent
(the "Escrow Agent"), such deposit to constitute an escrow fund (the "Escrow
Fund") to be governed by the terms set forth herein. The portion of the Escrow
Amount contributed on behalf of each holder of Company Capital Stock shall be
equal to the sum of the Common Per Share Escrow Amount, Series A Per Share
Escrow Amount, Series B Per Share Escrow Amount, Series C Per Share Escrow
Amount, Series D Per Share Escrow Amount and / or Series E Per Share Escrow
Amount otherwise payable to such holder under Section 1.7 hereof in respect of
the shares of Company Capital Stock held by such
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holder (the "Aggregate Per Shareholder Escrow Amount"). The portion of the
Escrow Amount contributed on behalf of each holder of an Assumed Warrant shall
be equal to the Aggregate Per Shareholder Escrow Amount that such holder would
have been entitled to receive in respect of the shares of Company Capital Stock
subject to such Assumed Warrant pursuant to Section 1.7 hereof if the Assumed
Warrant had been exercised in full prior to the Effective Time (the "Aggregate
Per Warrantholder Escrow Amount"). The Escrow Fund shall be available to
indemnify, hold harmless and compensate Parent, its officers, directors,
employees, agents and affiliates, including the Surviving Corporation (each an
"Indemnified Party" and collectively the "Indemnified Parties"), for and against
any claims, losses, liabilities, damages, deficiencies, costs and expenses,
including reasonable attorneys' fees and expenses and expenses of investigation
and defense (each a "Loss" and collectively "Losses"), incurred, directly or
indirectly, by any Indemnified Party as a result or arising out of: (i) any
inaccuracy or breach of any representation or warranty of the Company contained
herein (it being understood that for purposes of determining the accuracy of
such representations and warranties under this Section 7.2, such determination
shall be made without giving effect to any materiality, Material Adverse Effect
or Knowledge qualifications contained in such representations and warranties);
(ii) any failure by the Company to perform or comply with any covenant contained
in this Agreement that is required to be performed or complied with by the
Company prior to the Closing (it being understood that for purposes of
determining whether any such failure has occurred under this Section 7.2, no
effect shall be given to any materiality or Material Adverse Effect
qualifications contained in any such covenant); (iii) any Dissenting Share
Costs; (iv) any Excess Bridge Debt Amount; or (v) any Undisclosed Excess Expense
Amount. Notwithstanding the foregoing, there shall be no right to
indemnification pursuant to clauses (i) and (ii) of this Section 7.2(a) until
one or more Officer's Certificates (as defined in Section 7.2(d) hereof)
identifying aggregate Losses incurred thereunder in excess of $67,500 (the
"Deductible Amount") shall have been delivered to the Escrow Agent as provided
in Section 7.2(d) hereof, in which event the Indemnified Parties shall be
entitled to recover only such Losses as in the aggregate exceed the Deductible
Amount. Nothing herein shall limit the liability of the Company for any breach
of any representation, warranty or covenant if the Merger does not close.
(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 as 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 Officer's 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 shareholders of the Company and
the holders of any Assumed Warrants exercised since the Effective Time their
respective remaining Pro Rata Portions (as defined below) of the Escrow Fund not
required to satisfy such claims. With respect to any holder of Company Capital
Stock, "Pro Rata Portion" shall mean an amount equal to the product of (x) the
remaining Escrow Fund, multiplied by (y) a fraction, the numerator of which
shall be such holder's Aggregate Per Shareholder Escrow Amount, and the
denominator of which shall be the Escrow Amount. With
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respect to any holder of an Assumed Warrant, "Pro Rata Portion" shall mean an
amount equal to the product of (x) the remaining Escrow Fund, multiplied by (y)
a fraction, the numerator of which shall be such holder's Aggregate Per
Warrantholder Escrow Amount, and the denominator of which shall be the Escrow
Amount. Any Pro Rata Portion of the remaining Escrow Fund allocable to an
unexercised Assumed Warrant shall be delivered to Parent, which thereafter shall
act as Escrow Agent subject to the rights of holders of unexercised Assumed
Warrants under this Article VII. Thereafter such holders shall be entitled to
look to Parent and the Surviving Corporation (subject to abandoned property,
escheat and other similar laws) only as general creditors thereof with respect
to any Pro Rata Portion that may be payable upon due exercise and surrender of
the Assumed Warrants held by them. Such Pro Rata Portion shall not bear or
accrue interest while held by Parent.
(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) The Escrow Amount shall be invested in tax-free government
securities with maturities of not more than thirty (30) days, and any interest
paid on such Escrow Amount shall be added to the Escrow Fund and deemed part
thereof; provided, however, that the parties agree that all income, gain, loss
and deductions derived from the investment of the Escrow Fund shall be reported
as allocated to Parent. For any period of time before such tax-free government
securities can be purchased by the Escrow Agent or after such securities mature,
the Escrow Amount shall be invested in an account of the Escrow Agent, and any
interest paid on such Escrow Amount during such time shall be added to the
Escrow Fund and deemed part thereof.
(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 "Officer's Certificate"): (A) stating that Parent has paid or
properly accrued or reasonably anticipates that it will 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 or properly
accrued, or the basis for such anticipated liability, and the nature of the
misrepresentation, breach of warranty or covenant or failure to disclose or
other basis for indemnification 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, cash held in the Escrow Fund in
an amount equal to such Losses.
(e) Objections to Claims. At the time of delivery of any Officer's
Certificate to the Escrow Agent, a duplicate copy of such certificate shall be
delivered to the Securityholder Agent 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 Agent to make such
delivery. After the expiration of such thirty (30) day period, the Escrow Agent
shall make payment of cash from the
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Escrow Fund in accordance with Section 7.2(d) hereof, provided that no such
payment may be made if the Securityholder Agent shall object in a written
statement to the claim made in the Officer's Certificate, and such written
statement of objection 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 Officer's 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 to pay cash 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,
each of which arbitrators shall be independent. 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 Officer's
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
San Mateo or Santa Xxxxx Counties, California under the rules then in effect of
the Judicial Arbitration and Mediation Services, Inc. For purposes of this
Section 7.2(f), in any arbitration hereunder in which any claim or the amount
thereof stated in the Officer's 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 two-thirds (2/3) of the disputed amount plus any amounts
not in dispute; otherwise, the shareholders of the Company as represented by the
Securityholder Agent shall be deemed to be the Non-Prevailing Party. The
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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 Shareholders; Power of Attorney.
(i) In the event that the Merger is approved, effective upon
such vote, and without further act of any shareholder or holder of Assumed
Warrants, Xxxxxx Xxxxxxx shall be appointed as agent and attorney-in-fact (the
"Securityholder Agent") for each shareholder and holder of Assumed Warrants of
the Company (except such shareholders, if any, as shall have perfected their
appraisal or dissenters' rights under the California Code), for and on behalf of
shareholders of the Company, to give and receive notices and communications, to
authorize payment and delivery to Parent of cash 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 shareholders of the Company 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 two-thirds interest
of the Escrow Fund agree to such removal and to the identity of the substituted
agent. The Securityholder Agent may resign upon not less than thirty (30) days
prior written notice to Parent and to all holders of an interest in the Escrow
Fund. 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 shareholders or holder of Assumed Warrants of the Company.
(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. The shareholders and holders of Assumed
Warrants of the Company 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
shareholders for whom a portion of the Escrow Amount otherwise issuable to them
are deposited in the Escrow Fund and shall be final, binding and conclusive upon
each of such shareholders and holders of Assumed Warrants, 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 holder.
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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 shareholders and holders of
Assumed Warrants 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 (such consent not to be unreasonably
withheld or delayed), 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
and acknowledged that the claim is a valid claim against the Escrow Fund, 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.
(i) 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
disregard any and all warnings given by any of the parties hereto or by any
other person, excepting only orders or process of courts of law, and is hereby
expressly authorized to comply with and obey orders, judgments or decrees of any
court. 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.
(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.
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(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 of 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 cash included in the Escrow Fund 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 cash 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/its 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 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
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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.
(j) Fees. All fees of the Escrow Agent for performance of its duties
hereunder shall be paid out of the Escrow Fund. 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 to the
extent there are insufficient funds in the Escrow Fund.
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 by October 15, 2002 (provided that the right to terminate this
Agreement under this clause 8.1(b)(i) shall not be available to any party whose
willful 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
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 any portion of the business of the
Company or (ii) compel Parent or the Company to dispose of or hold separate, as
a result of the Merger, any portion of the business or assets of the Company or
Parent.
(d) by Parent if it is not in material breach of its obligations
under this Agreement and there has been a breach of any representation,
warranty, covenant or agreement contained in this Agreement on the part of the
Company and as a result of such breach the conditions set forth in Section
6.3(a) or 6.3(b), as the case may be, would not then be satisfied; provided,
however, that if
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such breach is curable by the Company within thirty (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
thirty (30) days (but no cure period shall be required for a breach which by its
nature cannot be cured);
(e) by the Company if it is not in material breach of its obligations
under this Agreement and there has been a breach of any representation,
warranty, covenant or agreement contained in this Agreement on the part of
Parent or Merger Sub and as a result of such breach the conditions set forth in
Section 6.2(a) or 6.2(b), as the case may be, would not then be satisfied;
provided, however, that if such breach is curable by Parent or Merger Sub within
thirty (30) days through the exercise of its reasonable best efforts, then for
so long as Parent or Merger Sub 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 thirty (30) days (but no cure period
shall be required for a breach which by its nature cannot be cured).
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, Merger Sub or the
Company, or their respective officers, directors or shareholders, provided that
each party shall remain liable for any breaches of this Agreement prior to its
termination; and provided further that, the provisions of this Section 8.2,
Sections 5.4 (Confidentiality), 5.5 (Expenses) and 5.6 (Public Disclosure) and
Article IX 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
shareholders of the Company 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 and
Merger Sub, 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.
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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 or Merger Sub, to:
Sirenza Microdevices, Inc.
000 Xxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Attention: Chief Financial Officer
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
with a copy to:
Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, P.C.
000 Xxxx Xxxx Xxxx
Xxxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxx
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
(b) if to the Company, to:
Xemod Incorporated
0000 X. XxXxxx Xxxxxx
Xxxxx, XX 00000
Attention: Chief Financial Officer
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
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with a copy to:
Xxxxxx, Xxxxxxxxxx & Xxxxxxxxx LLP
0000 Xxxxx Xxxx
Xxxxx Xxxx, XX 00000
Attention: Xxxxx Xxxx
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
(c) if to the Securityholder Agent:
Xxxxxx Xxxxxxx
0000 X. XxXxxx Xxxxxx
Xxxxx, XX 00000
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
(d) if to the Escrow Agent:
U.S Bank, N.A.
Xxx Xxxxxxxxxx Xxxxxx, Xxxxx 0000
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." The word "agreement" when used herein shall be deemed in each case
to mean any contract, commitment or other agreement, whether oral or written,
that is legally binding. 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: (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
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except as otherwise specifically provided, except that Parent and Merger Sub 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 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.
9.9 Specific Performance. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof in any court of the United States
or any state having jurisdiction, this being in addition to any other remedy to
which they are entitled at law or in equity.
(Remainder of page intentionally left blank)
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IN WITNESS WHEREOF, Parent, Merger Sub, the Company, the Securityholder
Agent (as to Article VII only) and the Escrow Agent (as to matters set forth in
Article VII only) have caused this Agreement to be signed by their duly
authorized respective officers, all as of the date first written above.
XEMOD INCORPORATED SIRENZA MICRODEVICES, INC.
By: /s/ Xxxxxx Xxxxxxx By: /s/ Xxxxxx Xxx Xxxxxxx
------------------------------------- ---------------------------
Xxxxxx Xxxxxxx Xxxxxx Xxx Xxxxxxx
President and Chief Executive Officer President and Chief
Executive Officer
SECURITYHOLDER AGENT: XAVIER MERGER SUB, INC.
By: /s/ Xxxxxx Xxxxxxx By: /s/ Xxxxxx Xxxxxxxx
------------------------------------- ---------------------------
Xxxxxx Xxxxxxx Xxxxxx Xxxxxxxx
President and Secretary
ESCROW AGENT
By: /s/ Xxx Xxxxxx
-------------------------------------
Xxx Xxxxxx
Authorized Signatory
***REORGANIZATION AGREEMENT***
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INDEX OF EXHIBITS
Exhibit Description
------- -----------
Exhibit A - Form of Voting Agreement
Exhibit B - Form of Legal Opinion of Counsel to the Company
Exhibit C - Form of Employment and Noncompetition Agreement
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