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AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
ASPEC TECHNOLOGY, INC.,
ASPEC ACQUISITION THREE CORPORATION,
NOVO SYSTEMS CORPORATION
OCTOBER 20, 1999
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TABLE OF CONTENTS
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1. Certain Definitions ......................................................... 6
2. The Merger .................................................................. 7
2.1 Merger; Effective Time of the Merger .................................. 7
2.2 Closing ............................................................... 8
2.3 Effect of the Merger .................................................. 8
2.4 Tax-Free Reorganization ............................................... 8
2.5 Novo Stock Options and Convertible Securities. ........................ 8
3. Effect of Merger on the Capital Stock of Novo; Exchange of Certificates ..... 8
3.1 Exchange of Stock ..................................................... 8
3.2 Fractional Shares ..................................................... 8
3.3 Exchange of Certificates .............................................. 9
3.4 Taking of Necessary Action; Further Action ............................ 10
4. Securities Act Compliance ................................................... 10
4.1 Securities Act Exemption .............................................. 10
4.2 Stock Restrictions .................................................... 10
5. Representations and Warranties of Novo and the Majority Shareholders ........ 11
5.1 Organization, Qualification, and Corporate Power ...................... 11
5.2 Authorization ......................................................... 11
5.3 Capitalization ........................................................ 11
5.4 Noncontravention ...................................................... 12
5.5 Broker's Fees ......................................................... 12
5.6 Financial Statements .................................................. 13
5.7 Subsidiaries .......................................................... 13
5.8 Title to Assets ....................................................... 13
5.9 Events Subsequent to Most Recent Fiscal Period End .................... 13
5.10 Undisclosed Liabilities ............................................... 16
5.11 Legal Compliance ...................................................... 16
5.12 Tax Matters ........................................................... 16
5.13 Properties ............................................................ 17
5.14 Intellectual Property ................................................. 18
5.15 Tangible Assets ....................................................... 20
5.16 Inventory ............................................................. 20
5.17 Contracts ............................................................. 20
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5.18 Notes and Accounts Receivable ......................................... 22
5.19 Power of Attorney ..................................................... 22
5.20 Insurance ............................................................. 22
5.21 Litigation ............................................................ 22
5.22 Product Warranty ...................................................... 22
5.23 Product Liability ..................................................... 23
5.24 Employees ............................................................. 23
5.25 Employee Benefits ..................................................... 23
5.26 Guaranties ............................................................ 25
5.27 Environment, Health, and Safety ....................................... 25
5.28 Certain Business Relationships With Novo .............................. 27
5.29 No Adverse Developments ............................................... 27
5.30 Full Disclosure ....................................................... 27
6. Representations and Warranties of Aspec ..................................... 27
6.1 Organization, Qualification, and Corporate Power ...................... 28
6.2 Authorization ......................................................... 28
6.3 Capitalization ........................................................ 28
6.4 Noncontravention ...................................................... 29
6.5 Brokers' Fees ......................................................... 29
6.6 SEC Filings ........................................................... 29
6.7 Financial Statements .................................................. 29
6.8 Litigation ............................................................ 29
6.9 No Adverse Developments ............................................... 30
7. Pre-Closing Covenants ....................................................... 30
7.1 General ............................................................... 30
7.2 Notices and Consents .................................................. 30
7.3 Conduct of Business ................................................... 30
7.4 Preservation of Business .............................................. 31
7.5 Access to Information ................................................. 31
7.6 Notice of Developments ................................................ 31
7.7 Exclusivity ........................................................... 31
8. Post-Closing Covenants ...................................................... 32
8.1 General ............................................................... 32
8.2 Litigation Support .................................................... 32
8.3 Transition ............................................................ 32
8.4 Confidentiality ....................................................... 33
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8.5 Novo Employees; Employee Stock Options ................................ 33
9. Conditions to Obligations to Close .......................................... 33
9.1 Conditions to Aspec's Obligation to Close ............................. 33
9.2 Conditions to Novo's Obligation ....................................... 34
10. Survival of Representations, Indemnification ................................ 35
10.1 Limited Survival of Representations and Warranties .................... 35
10.2 Indemnification by Aspec .............................................. 35
10.3 Indemnification by Majority Shareholders .............................. 36
10.4 Notice of Claims ...................................................... 36
10.5 Third Party Claims .................................................... 36
10.6 Limitation of Claims .................................................. 36
11. Termination ................................................................. 37
11.1 Termination of the Agreement .......................................... 37
11.2 Effect of Termination ................................................. 38
12. Miscellaneous ............................................................... 38
12.1 Publicity ............................................................. 38
12.2 No Third-Party Beneficiaries .......................................... 38
12.3 Entire Agreement ...................................................... 38
12.4 Succession and Assignment ............................................. 39
12.5 Counterparts .......................................................... 39
12.6 Headings .............................................................. 39
12.7 Notices ............................................................... 39
12.8 Governing Law; Dispute Resolution ..................................... 40
12.9 Amendments and Waivers ................................................ 41
12.10 Severability .......................................................... 41
12.11 Expenses .............................................................. 41
12.12 Construction .......................................................... 42
12.13 Incorporation of Exhibits and Schedules ............................... 42
EXHIBITS
Exhibit A Certificate of Merger
Exhibit B List of Novo Shareholders
Exhibit C Novo Disclosure Schedule
Exhibit D Aspec Disclosure Schedule
Exhibit E Opinion of Counsel for Novo
Exhibit F Opinion of Counsel for Aspec
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AGREEMENT AND PLAN OF REORGANIZATION
This Agreement and Plan of Reorganization (the "AGREEMENT") is entered
into as of October 20, 1999, by and among Aspec Technology, Inc., a Delaware
corporation ("ASPEC"), Aspec Acquisition Three Corporation, a California
corporation and a wholly-owned subsidiary of Aspec ("MERGER SUB"), Novo System
Corporation, a California corporation ("NOVO"). Aspec, Merger Sub, Novo are
sometimes referred to herein individually as a "PARTY" and collectively as the
"PARTIES."
RECITALS
A. Pursuant to a Certificate of Merger (together with any Articles
of Merger required by the CBCA) providing for the merger of Merger Sub with and
into Novo pursuant to the California Business Corporation Act (the "CBCA") and
the Delaware General Corporation Law (the "DGCL"), the shares of Common Stock of
Novo, no par value, issued and outstanding immediately prior to the effective
time of the Merger will be converted into an aggregate of 1,600,000 shares of
Common Stock of Aspec and $1,000,000 cash, and Novo will become a wholly-owned
subsidiary of Aspec.
B. The Parties desire to enter into this Agreement for the purpose
of setting forth certain representations, warranties and covenants made by each
to the other as an inducement to the execution and delivery of this Agreement,
and to serve as conditions precedent to the consummation of the merger of Merger
Sub with and into Novo.
C. The respective Boards of Directors of Aspec and Novo have
approved and adopted this Agreement, and the Agreement is intended to be a plan
of reorganization under the provisions of Section 368(a) of the Internal Revenue
Code of 1986, as amended.
NOW, THEREFORE, in consideration of these premises and of the mutual
agreements, representations, warranties and covenants herein contained, the
parties hereto do hereby agree as follows:
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AGREEMENT
1. Certain Definitions. As used in this Agreement, the following
terms have the following meanings (terms defined in the singular to have a
correlative meaning when used in the plural and vice versa). Certain other terms
are defined in the text of this Agreement.
"AFFILIATE" of a Person means any other Person that directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with such Person.
"BUSINESS CONDITION" means the business, financial condition,
results of operations and assets of such corporate entity.
"EMPLOYEE BENEFIT PLAN" means any (a) nonqualified deferred
compensation, retirement plan, severance plan or similar plan or arrangement;
(b) Employee Pension Benefit Plan; (c) Employee Welfare Benefit Plan; and (d)
any other nonqualified plan providing welfare benefits, including but not
limited to medical, dental, life insurance and disability benefits.
"EMPLOYEE PENSION BENEFIT PLAN" has the meaning set forth in
ERISA Sec. 3(2).
"EMPLOYEE WELFARE BENEFIT PLAN" has the meaning set forth in
ERISA Sec. 3(1).
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"GROSS NEGLIGENCE" consists of an intentional act, or the
failure to perform a duty, with reckless disregard for the consequences of such
act or failure.
"INTELLECTUAL PROPERTY" means (a) all inventions (whether
patentable or unpatentable and whether or not reduced to practice), all
improvements thereto, and all patents, patent applications, and patent
disclosures, together with all reissuances, continuations,
continuations-in-part, revisions, extensions, and reexaminations thereof, (b)
all trademarks, service marks, trade dress, logos, trade names, and corporate
names, together with all translations, adaptations, derivations, and
combinations thereof and including all goodwill associated therewith, (c) all
copyrightable works, all copyrights, and all applications, registrations, and
renewals in connection therewith, (d) all trade secrets and confidential
business information (including ideas, research and development, know-how,
formulas, compositions, drawings, specifications, customer and supplier lists,
pricing and cost information, financial information, and business and marketing
plans and proposals), (e) all computer
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software (including data and related documentation), (f) all other proprietary
rights, and (g) all copies and tangible embodiments thereof (in whatever form or
medium).
"LOSSES" shall mean any and all actions, suits, proceedings,
hearings, investigations, charges, complaints, claims, demands, injunctions,
judgments, orders, decrees, rulings, damages, dues, penalties, fines, costs,
reasonable amounts paid in settlement, liabilities, obligations, taxes, liens,
losses, expenses, and fees, including court costs and reasonable attorneys' fees
and expenses in connection with any action, suit or proceeding to the extent of
the amount of such actions, suits, proceedings, hearings, investigations,
charges, complaints, claims, demands, injunctions, judgments, orders, decrees,
rulings, damages, dues, penalties, fines, costs, reasonable amounts paid in
settlement, liabilities, obligations, taxes, liens, losses, expenses or fees.
"MATERIAL ADVERSE EFFECT" shall mean a material adverse effect
on the Business Condition of the corporate entity and its subsidiaries.
"MULTIEMPLOYER PLAN" has the meaning set forth in ERISA Sec.
3(37) and Code Sec. 414(f).
"NOVO SHAREHOLDERS" shall mean the shareholders of record of
Novo immediately prior to the Effective Time of the Merger (other than the
holders of Dissenting Shares (as defined herein)).
"ORDINARY COURSE OF BUSINESS" means the ordinary course of
business consistent with past custom and practice (including with respect to
quantity and frequency).
"PERSON" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization, or a governmental entity (or any department, agency, or political
subdivision thereof).
"SECURITY INTEREST" means any mortgage, pledge, lien,
encumbrance, charge, or other security interest, other than (a) mechanic's,
materialmen's, and similar liens, (b) liens for taxes not yet due and payable,
(c) purchase money liens and liens securing rental payments under capital lease
arrangements, and (d) other liens arising in the Ordinary Course of Business and
not incurred in connection with the borrowing of money.
2. The Merger.
2.1 Merger; Effective Time of the Merger. Subject to the
terms and conditions of this Agreement, Merger Sub will be merged with and into
Novo (the "MERGER") in accordance with the CBCA and the DGCL, and, as a result,
Novo will become a wholly-owned subsidiary of Aspec. In accordance with the
provisions of this Agreement, a Certificate of Merger in the form attached
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hereto as Exhibit A shall be filed with the California Secretary of State in
accordance with the CBCA (or, to the extent required by the CBCA, Articles of
Merger in form and substance mutually acceptable to counsel for Novo and counsel
for Aspec) on the Closing Date (as defined in Section 2.2) and each issued and
outstanding share of Common Stock, no par value, of Novo ("NOVO COMMON STOCK")
shall be converted into a fraction of a share of Common Stock, $0.001 par value,
of Aspec ("ASPEC COMMON STOCK") in the manner contemplated by Section 3. The
Merger shall become effective at the time of the filing of the Merger Agreement
with the California Secretary of State (the date of such filing being
hereinafter referred to as the "EFFECTIVE DATE OF THE MERGER" and the time of
such filing being hereinafter referred to as the "EFFECTIVE TIME OF THE
MERGER").
2.2 Closing. The closing of the Merger (the "CLOSING") will
take place as soon as practicable after satisfaction or waiver of the latest to
occur of the conditions set forth in Section 9 (the "CLOSING DATE"), at the
offices of Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, Professional Corporation, 000 Xxxx
Xxxx Xxxx, Xxxx Xxxx, Xxxxxxxxxx 00000-0000, but no later than October 15, 1999.
2.3 Effect of the Merger. At the Effective Time of the
Merger, (i) the separate existence of Merger Sub shall cease and Merger Sub
shall be merged with and into Novo (Merger Sub and Novo are sometimes referred
to herein as the "CONSTITUENT CORPORATIONS" and Novo after the Merger is
sometimes referred to herein as the "SURVIVING CORPORATION"), (ii) the
Certificate of Incorporation of Merger Sub shall be the Certificate of
Incorporation of the Surviving Corporation, (iii) the Bylaws of Merger Sub shall
be the Bylaws of the Surviving Corporation, (iv) the directors of Merger Sub
shall be the directors of the Surviving Corporation and (v) the Merger shall,
from and after the Effective Time of the Merger, have all the effects provided
by applicable law.
2.4 Tax-Free Reorganization. The Merger is intended to
qualify as a tax free reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "CODE").
2.5 Novo Stock Options and Convertible Securities. On or
prior to the Effective Time of the Merger, all outstanding options, warrants and
convertible securities of Novo shall terminate unless otherwise exercised prior
to such time.
3. Effect of Merger on the Capital Stock of Novo; Exchange of
Certificates
3.1 Exchange of Stock and Cash Consideration. As of the
Effective Time of the Merger, each share of Novo Common Stock that is issued and
outstanding immediately prior to the Effective Time of the Merger as provided
for in Section 3.2 below), shall, by virtue of the Merger and without any action
on the part of Novo Shareholders, be converted into (i) shares of Aspec Common
Stock, and (ii) cash payment determined by dividing 2,600,000 by the aggregate
number of shares of Novo Common Stock (the "EXCHANGE RATIO") issued and
outstanding immediately prior to the
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Effective Time of the Merger (including any shares issued upon the exercise of
outstanding Novo options or Novo convertible securities and any Dissenting
Shares). Attached as Exhibit B is a Novo shareholder list showing the shares of
Aspec Common Stock and cash to be exchanged for the shares of Novo Common Stock
held by each Novo Shareholder.
3.2 Fractional Shares. No fractional shares of Aspec Common
Stock shall be issued in the Merger. In lieu thereof, each holder of shares of
Novo Common Stock who would otherwise be entitled to receive a fraction of a
share of Aspec Common Stock shall receive from Aspec an amount of cash (rounded
to the nearest whole cent) equal to the product of the fraction of a share of
Aspec Common Stock to which such holder would otherwise be entitled, multiplied
by $1.00. For the purpose of determining fractional shares, all shares of Aspec
Common Stock to be issued to any Novo shareholder shall be aggregated.
3.3 Exchange of Certificates.
(a) Exchange Agent. Prior to the Closing Date, Aspec
shall appoint itself or ChaseMellon Shareholder Services, L.L.C. to act as the
exchange agent (the "EXCHANGE AGENT") in the Merger.
(b) Aspec to Provide Aspec Common Stock. Promptly
after the Effective Date of the Merger, Aspec shall make available for exchange
in accordance with this Section 3, through such reasonable procedures as Aspec
may adopt, the shares of Aspec Common Stock issuable pursuant to Section 3.1 in
exchange for outstanding shares of Novo Common Stock.
(c) Exchange Procedures. Within ten (10) days after
the Effective Date of the Merger, the Exchange Agent shall mail to each holder
of record of a certificate or certificates which immediately prior to the
Effective Date of the Merger represented outstanding shares of Novo Common Stock
(the "CERTIFICATES") whose shares are being converted into shares of Aspec
Common Stock pursuant to Section 3.1 hereof (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 which shall be in such form and have such other provisions as Aspec
may reasonably specify, including appropriate investment representations to be
made by each such shareholder) (the "LETTER OF TRANSMITTAL") and (ii)
instructions for use in effecting the surrender of the Certificates in exchange
for shares of Aspec Common Stock. Upon surrender of a Certificate for
cancellation to the Exchange Agent or to such other agent or agents as may be
appointed by Aspec, together with such letter of transmittal, duly executed, the
holder of such Certificate shall be entitled to receive in exchange therefor the
number of shares of Aspec Common Stock to which the holder of Novo Common Stock
is entitled pursuant to Section 3.1 hereof. The Certificate so surrendered shall
forthwith be canceled. No interest will accrue or be paid to the holder of any
outstanding Novo Common Stock. From and after the Effective Date of the Merger,
until
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surrendered as contemplated by this Section 3.4, each Certificate shall be
deemed for all corporate purposes to evidence the number of shares of Aspec
Common Stock into which the shares of Novo Common Stock represented by such
Certificate have been converted. Notwithstanding the foregoing procedures, Aspec
shall use its reasonable efforts to provide the form of Letter of Transmittal to
Novo as soon as practical after the date hereof, and Novo shall provide such
Letter of Transmittal to each Novo shareholder. The parties agree that in the
event Aspec makes such Letter of Transmittal available to Novo, any Exchange
Agent shall not be obligated to mail such Letter of Transmittal to the Novo
shareholders.
(d) No Further Ownership Rights in Capital Stock of
Novo. The shares of Aspec Common Stock delivered upon the surrender for exchange
of shares of Novo Common Stock in accordance with the terms hereof shall be
deemed to have been delivered in full satisfaction of all rights pertaining to
such Novo Common Stock. There shall be no further registration of transfers on
the stock transfer books of the Surviving Corporation of Novo Common Stock which
were outstanding immediately prior to the Effective Date of the Merger. If,
after the Effective Date of the Merger, Certificates are presented to the
Surviving Corporation for any reason, they shall be canceled and exchanged as
provided in this Section 3.4, provided that the presenting holder is listed on
Novo's shareholder list as a holder of Novo Common Stock.
3.2 Taking of Necessary Action; Further Action. Aspec,
Merger Sub, Novo shall take all such actions as may be necessary or appropriate
in order to effect the Merger as promptly as possible. If, at any time after the
Effective Date of the Merger, any further action is necessary or desirable to
carry out the purposes of this Agreement and to vest the Surviving Corporation
with full right, title and possession to all assets, property, rights,
privileges, powers and franchises of Novo, the officers and directors of the
Surviving Corporation are fully authorized in the name of the corporation or
otherwise to take, and shall take, all such action.
4. Securities Act Compliance.
4.1 Securities Act Exemption. The issuance of the Aspec
Common Stock in the Merger shall not be registered under the Securities Act of
1933, as amended (the "SECURITIES ACT"), in reliance upon Section 4(2) and/or
Regulation D of the Securities Act.
4.2 Stock Restrictions. The certificates representing the
shares of Aspec Common Stock issued pursuant to this Agreement shall bear a
restrictive legend (and stop transfer orders shall be placed against the
transfer thereof with Aspec's transfer agent), stating substantially as follows:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF
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1933, AS AMENDED. SUCH SHARES MAY NOT BE SOLD, OFFERED
FOR SALE, TRANSFERRED, ASSIGNED OR OTHERWISE DISPOSED OF
EXCEPT (I) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT RELATED THERETO, (II) IN COMPLIANCE WITH RULE
144 OR (III) PURSUANT TO AN OPINION OF COUNSEL FOR ASPEC
THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE
SECURITIES ACT OF 1933."
5. Representations and Warranties of Novo . Novo represents and
warrants to Aspec and Merger Sub that the statements contained in this Section 5
are correct and complete as of the date of this Agreement and will be correct
and complete as of the Closing Date (as though made then and as though the
Closing Date were substituted for the date of this Agreement throughout this
Section 5), except as set forth in the disclosure schedule delivered by Novo to
Aspec on the date hereof (and initialed by Aspec), a copy of which is attached
hereto as Exhibit C (referred to herein as the "NOVO DISCLOSURE SCHEDULE"). The
Novo Disclosure Schedule will be arranged in paragraphs corresponding to the
lettered and numbered paragraphs contained in this Section 5.
5.1 Organization, Qualification, and Corporate Power. Novo
is a corporation duly organized, validly existing, and in good standing under
the laws of the State of California. Novo is duly authorized to conduct business
and is in good standing under the laws of each other jurisdiction where such
qualification is required. Except as disclosed in Section 5.1 of the Novo
Disclosure Schedule, there is no state, other than California, in which Novo
owns any property or in which it has any employees, offices or operations. Novo
has full corporate power and authority, and has all necessary and material
licenses and permits, to carry on the businesses in which it is engaged and to
own and use the properties owned and used by it. Section 5 of the Novo
Disclosure Schedule lists the directors and officers of Novo. The operations now
being conducted by Novo have not been conducted under any other name during the
past five (5) years, except as disclosed in Section 5.1 of the Novo Disclosure
Schedule.
5.2 Authorization. Novo has full power and authority to
execute and deliver this Agreement and the Merger Agreement, and, subject to
receipt of the requisite approval of its shareholders, to consummate the
transactions contemplated hereunder and to perform its obligations hereunder and
no other proceedings on the part of Novo are necessary to authorize the
execution, delivery and performance of this Agreement and the Merger Agreement.
This Agreement and the Merger Agreement and the transactions contemplated
thereby have been approved by the Novo's Board of Directors and Shareholders.
This Agreement and the Merger Agreement constitute the valid and legally binding
obligations of Novo, enforceable against Novo in accordance with their
respective terms and conditions. Novo need not give any notice to, make any
filing with, or obtain
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any authorization, consent, or approval of any government or governmental agency
in order to consummate the transactions contemplated by this Agreement.
5.3 Capitalization.
(a) Capital Stock. As of the date of this Agreement,
the entire authorized capital stock of Novo consists of 10,000,000 shares of
Common Stock, 1,972,000 of which are issued and outstanding. In addition no
stock options are currently outstanding and all options have been exercised or
terminated. All of the issued and outstanding shares of capital stock have been
duly authorized, are validly issued, fully paid, and non-assessable, and are
held of record by the respective shareholders as set forth in Section 5.3(a) of
the Novo Disclosure Schedule. All of the outstanding shares of capital stock
have been offered, issued and sold by Novo in compliance with applicable Federal
and state securities laws. As of the Closing Date, the entire authorized capital
stock of Novo shall consist of 10,000,000 shares of Common Stock, 1,972,000 of
which shall be issued and outstanding. As of the Closing Date, all of the then
issued and outstanding shares of capital stock shall have been duly authorized,
shall be validly issued, fully paid, and non-assessable, and shall be held of
record by the respective shareholders as set forth in Section 5.3(a) of the Novo
Disclosure Schedule. As of the Closing Date, all of the then outstanding shares
of capital stock shall have been offered, issued and sold by Novo in compliance
with applicable Federal and state securities laws.
(b) No Other Rights or Agreements. As of the date of
this Agreement, Section 5.3(b) of the Novo Disclosure Schedule lists all of the
holders of options, warrants, purchase rights, subscription rights, conversion
rights, convertible debentures or other securities, exchange rights and other
rights that could require Novo to issue, sell or otherwise cause to become
outstanding any of its capital stock (the "STOCK RIGHTS"), and the number of
shares of Novo Common Stock subject to such Stock Rights. Except as set forth in
Section 5.3(b) of the Novo Disclosure Schedule, there are no other outstanding
or authorized Stock Rights. Except as set forth in Section 5.3(b) of the Novo
Disclosure Schedule, there are no outstanding or authorized stock appreciation,
phantom stock, profit participation, or similar rights with respect to Novo.
There are no voting trusts, proxies, or other agreements or understandings with
respect to the voting of the capital stock of Novo. All of the Novo Stock Rights
will be fully exercised or canceled prior to the Effective Time of the Merger.
As of the Effective Time of the Merger, there will be (i) no outstanding or
authorized Stock Rights, (ii) no outstanding or authorized stock appreciation,
phantom stock, profit participation, or similar rights with respect to Novo and
(iii) no voting trusts, proxies, or other agreements or understandings with
respect to the voting of the capital stock of Novo.
5.4 Noncontravention. Neither the execution and the delivery
of this Agreement by Novo nor the consummation by Novo of the transactions
contemplated hereby, will (A) violate any constitution, statute, regulation,
rule, injunction, judgment, order, decree, ruling, charge, or other restriction
of any government, governmental agency, or court to which Novo is subject or any
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provision of its Articles of Incorporation or bylaws, or (B) (i) conflict with,
(ii) result in a breach of, (iii) constitute a default under, (iv) result in the
acceleration of, (v) create in any party the right to accelerate, terminate,
modify, or cancel, or (vi) except as set forth in Section 5.4 of the Novo
Disclosure Schedule, require any notice under, any agreement, contract, lease,
license, instrument, franchise permit or other arrangement to which Novo is a
party or by which it is bound or to which any of its assets is subject (or
result in the imposition of any Security Interest upon any of its assets).
5.5 Broker's Fees. Novo has no liability or obligation to
pay any fees or commissions to any broker, finder or agent with respect to the
transactions contemplated by this Agreement.
5.6 Financial Statements. Section 5.6 of the Novo Disclosure
Schedule contains the following financial statements (collectively the
"FINANCIAL STATEMENTS"): (i) unaudited balance sheets and statements of income
and cash flows as of and for the fiscal year ended December 31, 1998 (the "MOST
RECENT FISCAL YEAR END") for Novo; and (ii) an unaudited balance sheet and
statements of income and cash flows (the "MOST RECENT FINANCIAL STATEMENTS") as
of and for the fiscal period ended March 31, 1999 and June 30, 1999 (the "MOST
RECENT FISCAL PERIOD ENDS") for Novo. The Financial Statements (including the
notes thereto) have been prepared in accordance with generally accepted
accounting principles ("GAAP") applied on a consistent basis throughout the
periods covered thereby and present fairly the financial condition of Novo as of
such dates and the results of operations of Novo for such periods; provided,
however, that the Most Recent Financial Statements lack footnotes and certain
other presentation items and are subject to normal year end adjustments. Except
as set forth in Section 5.6 of the Novo Disclosure Schedule, the books of
account of Novo reflect as of the dates shown thereon all items of income and
expenses, and all assets, liabilities and accruals of Novo required to be
reflected therein, in accordance with generally accepted accounting principles
consistently applied.
5.7 Subsidiaries. Novo has a wholly subsidiary in Japan
called Zycad TSS KK and has not been a subsidiary of another company.
5.8 Title to Assets. Novo has good and marketable title to,
or a valid leasehold interest in, the properties and assets (including, without
limitation, all Intellectual Property) used by it, located on its premises, or
shown on the balance sheet contained within the Most Recent Financial Statements
(the "MOST RECENT BALANCE SHEET") or acquired after the date thereof, free and
clear of all Security Interests, except for properties and assets disposed of in
the Ordinary Course of Business since the date of the Most Recent Balance Sheet
and except as set forth in Section 5.8 of the Novo Disclosure Schedule. No
Person other than Novo will own at the time of the Closing any assets or
properties currently utilized in or necessary to the operations or business of
Novo or situated on any of the premises of Novo. There are no existing
contracts, agreements, commitments or arrangements with any Person to acquire
any of the assets or properties of Novo (or any interest therein) except for
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this Agreement.
5.9 Events Subsequent to Most Recent Fiscal Period End.
Since the Most Recent Fiscal Period End, there has not been any material adverse
change in the Business Condition of Novo, except as disclosed in Section 5.9 of
the Novo Disclosure Schedule. Without limiting the generality of the foregoing,
since that date:
(a) Novo has not sold, leased, transferred, or
assigned any assets or properties, tangible or intangible, outside the Ordinary
Course of Business;
(b) except for those agreements, contracts, leases
and commitments identified in Section 5.17 of the Novo Disclosure Schedule, Novo
has not entered into, assumed or become bound under or obligated by any
agreement, contract, lease or commitment (collectively a "NOVO AGREEMENT") or
extended or modified the terms of any Novo Agreement which (i) involves the
payment of greater than $10,000 per annum or which extends for more than one (1)
year, (ii) involves any payment or obligation to any Affiliate of Novo other
than in the Ordinary Course of Business, (iii) involves the sale of any material
assets, (iv) involves any OEM relationship, or (v) involves any license of
Novo's technology;
(c) to the knowledge of Novo, no party (including
Novo) has accelerated, terminated, made modifications to, or canceled any
agreement, contract, lease, or license to which Novo is a party or by which it
is bound and Novo has not modified, canceled or waived or settled any debts or
claims held by it, outside the Ordinary Course of Business, or waived or settled
any rights or claims of a substantial value, whether or not in the Ordinary
Course of Business;
(d) none of the assets of Novo, tangible or
intangible, has become subject to any Security Interest, except as set forth on
Section 5.8 of the Novo Disclosure Schedule;
(e) Novo has not made any capital expenditures
except in the Ordinary Course of Business and not exceeding $10,000 in the
aggregate of all such capital expenditures;
(f) Novo has not made any capital investment in, or
any loan to, any other Person;
(g) Novo has not created, incurred, assumed, prepaid
or guaranteed any indebtedness for borrowed money and capitalized lease
obligations, or extended or modified any existing indebtedness, except as
provided in Section 9.1(i) hereof;
(h) Novo has not granted any license or sublicense
of any rights under or with respect to any Intellectual Property;
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(i) there has been no change made or authorized in
the Articles of Incorporation or bylaws of Novo;
(j) Novo has not issued, sold, or otherwise disposed
of any of its capital stock, or granted any options, warrants, or other rights
to purchase or obtain (except upon the conversion, exchange or exercise of any
such securities which are described on Section 5.3 of the Novo Disclosure
Schedule) any of its capital stock;
(k) Novo has not declared, set aside, or paid any
dividend or made any distribution with respect to its capital stock (whether in
cash or in kind) or redeemed, purchased, or otherwise acquired any of its
capital stock (other than with respect to any Dissenting Shares (as defined
herein));
(l) Novo has not experienced any damage,
destruction, or loss (whether or not covered by insurance) to its property in
excess of $10,000 in the aggregate of all such damage, destruction and losses;
(m) Novo has not suffered any repeated, recurring or
prolonged shortage, cessation or interruption of inventory shipments, supplies
or utility services;
(n) Novo has not made any loan to, or entered into
any other transaction with, or paid any bonuses in excess of an aggregate of
$10,000 to, any of its Affiliates, directors, officers, or employees or their
Affiliates, and, in any event, any such transaction was on fair and reasonable
terms no less favorable to Novo than would be obtained in a comparable arm's
length transaction with a Person which is not such a director, officer or
employee or Affiliate thereof;
(o) Novo has not entered into any employment
contract or collective bargaining agreement, written or oral, or modified the
terms of any existing such contract or agreement;
(p) Novo has not granted any increase in the base
compensation of any of its directors or officers, or, except in the Ordinary
Course of Business, any of its employees;
(q) Novo has not adopted, amended, modified, or
terminated any bonus, profit-sharing, incentive, severance, or other plan,
contract, or commitment for the benefit of any of its directors, officers, or
employees (or taken any such action with respect to any other Employee Benefit
Plan);
(r) Novo has not made any other change in employment
terms for any of
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its directors or officers, and Novo has not made any other change in employment
terms for any other employees outside the Ordinary Course of Business;
(s) Novo has not suffered any material adverse
change or any threat of any material adverse change in its relations with, or
any loss or threat of loss of, any of its major customers, distributors or
dealers;
(t) Novo has not suffered any material adverse
change or any threat of any material adverse change in its relations with, or
any loss or threat of loss of, any of it major suppliers;
(u) Novo has not received notice or had knowledge of
any actual or threatened labor trouble or strike, or any other occurrence, event
or condition of a similar character;
(v) Novo has not changed any of the accounting
principles followed by it or the method of applying such principles, except as
described on Schedule 5.6 of the Novo Disclosure Schedule;
(w) Novo has not made a change in any of its banking
or safe deposit arrangements;
(x) Novo has not entered into any transaction other
than in the Ordinary Course of Business; and
(y) Novo has not committed to any of the foregoing.
5.10 Undisclosed Liabilities. Except as disclosed in Section
5.1 of the Novo Disclosure Schedule, Novo has no material liability (whether
known or unknown, whether asserted or unasserted, whether absolute or
contingent, whether accrued or unaccrued, whether liquidated or unliquidated,
and whether due or to become due, including any liability for taxes) of a
character which, under GAAP, should be accrued, shown or disclosed on a balance
sheet of Novo, except for (i) liabilities set forth on the Most Recent Balance
Sheet and (ii) liabilities which have arisen after the Most Recent Fiscal Period
End in the Ordinary Course of Business.
5.11 Legal Compliance. Novo has complied in all material
respects with all applicable laws (including rules, regulations, codes, plans,
injunctions, judgments, orders, decrees, rulings, and charges thereunder) of
federal, state, local, and foreign governments (and all agencies thereof). To
the knowledge of Novo, no action, suit, proceeding, hearing, investigation,
charge, complaint, claim, demand, notice or inquiry has been filed or commenced
by or against, or received by, any governmental body alleging any failure to so
comply. Novo has all licenses, permits,
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approvals, registrations, qualifications, certificates and other governmental
authorizations that are necessary for the operations of Novo as they are
presently conducted, except for any such licenses, permits, approvals,
registrations, qualifications, certificates and other governmental
authorizations which, if not obtained, would not individually or in the
aggregate be likely to result Material Adverse Effect on Novo.
5.12 Tax Matters.
(a) For purposes of this Agreement, "TAXES" means
all federal, state, municipal, local or foreign income, gross receipts, windfall
profits, severance, property, production, sales, use, value added, license,
excise, franchise, employment, withholding, capital stock, levies, imposts,
duties, transfer and registration fees or similar taxes or charges imposed on
the income, payroll, properties or operations of Novo, together with any
interest, additions or penalties, deficiencies or assessments with respect
thereto and any interest in respect of such additions or penalties.
(b) Novo has filed all reports and returns with
respect to any Taxes ("TAX RETURNS") that it was required to file. All such Tax
Returns were correct and complete in all material respects, and no such Tax
Returns are currently the subject of audit. All Taxes owed by Novo (whether or
not shown on any Tax Return) were paid in full when due or are being contested
in good faith and are supported by adequate reserves on the Most Recent
Financial Statements, except any state Taxes (other than California related
Taxes) which are not individually or in the aggregate material to Novo. Novo
has provided adequate reserves on its Financial Statements for the payment of
any taxes accrued but not yet due and payable. Novo is not currently the
beneficiary of any extension of time within which to file any Tax Return, and
Novo has not waived any statute of limitations in respect of Taxes or agreed to
any extension of time with respect to any Tax assessment or deficiency.
(c) There is no dispute or claim concerning any Tax
liability of Novo either (A) claimed or raised by any authority in writing or
(B) based upon personal contact with any agent of such authority. There are no
tax liens of any kind upon any property or assets of Novo, except for inchoate
liens for taxes not yet due and payable.
(d) Novo has not filed a consent under Sec. 341(f)
of the Internal Revenue Code of 1986, as amended (the "CODE") concerning
collapsible corporations. Novo has not made any payments, is not obligated to
make any payments, and is not a party to any agreement that under any
circumstances could obligate it to make any payments as a result of the
consummation of the Merger that will not be deductible under Code Sec. 280G.
Novo has not been a United States real property holding corporation within the
meaning of Code Sec. 897(c)(2) during the applicable period specified in Code
Sec. 897(c)(1)(A)(ii). Novo is not a party to any tax allocation or sharing
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agreement. Novo (A) has not been a member of any affiliated group within the
meaning of Code Sec. 1504 or any similar group defined under a similar provision
of state, local, or foreign law (an "AFFILIATED GROUP") filing a consolidated
federal Income Tax Return and (B) has no any liability for the taxes of any
Person under Treas. Reg. Section 1.1502-6 (or any similar provision of state,
local, or foreign law), as a transferee or successor, by contract, or otherwise.
(e) The unpaid Taxes of Novo (A) did not, as of the
Most Recent Fiscal Period End, exceed by any amount the reserve for Tax
liability (other than any reserve for deferred taxes established to reflect
timing differences between book and tax income) set forth on the face of the
Most Recent Balance Sheet (rather than in any notes thereto) and (B) will not
exceed that reserve as adjusted for operations and transactions through the
Closing Date in accordance with the past custom and practice of Novo in filing
its Tax Returns.
5.13 Properties.
(a) Novo does not currently own and has never
previously owned any real property.
(b) Section 5.13 of the Novo Disclosure Schedule
lists and describes briefly all real property leased or subleased to Novo. Novo
has delivered to Aspec correct and complete copies of the leases and subleases
listed in Section 5.13 of the Novo Disclosure Schedule (as amended to date).
With respect to each lease and sublease listed in Section 5.13 of the Novo
Disclosure Schedule to the knowledge of Novo:
(i) the lease or sublease is legal, valid,
binding, enforceable, and in full force and effect in all respects;
(ii) no party to the lease or sublease is in
breach or default, and no event has occurred which, with notice or lapse of
time, would constitute a breach or default or permit termination, modification,
or acceleration thereunder;
(iii) no party to the lease or sublease has
repudiated any provision thereof;
(iv) there are no disputes, oral agreements,
or forbearance programs in effect as to the lease or sublease:
(v) Novo has not assigned, transferred,
conveyed, mortgaged, deeded in trust, or encumbered any interest in the
leasehold or subleasehold; and
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(vi) all facilities leased or subleased
thereunder have received all approvals of governmental authorities (including
licenses and permits) required in connection with the operation thereof, and
have been operated and maintained in accordance with applicable laws, rules, and
regulations in all material respects.
5.14 Intellectual Property.
(a) To the knowledge of Novo, Novo has not
interfered with, infringed upon, misappropriated or violated any Intellectual
Property rights of third parties. Novo has not received since its inception any
charge, complaint, claim, demand, or notice alleging any such interference,
infringement, misappropriation, or violation (including any claim that Novo must
license or refrain from using any Intellectual Property rights of any third
party), except as disclosed in Section 5.14 of the Novo Disclosure Schedule. To
the knowledge of Novo, no third party has interfered with, infringed upon,
misappropriated, or violated any Intellectual Property rights of Novo. Each
employee of Novo has signed an invention assignment and/or confidentiality
agreement with Novo that provides that any Intellectual Property developed by
such employee while employed by Novo is the sole property of Novo.
(b) Section 5.14(b) of the Novo Disclosure Schedule
identifies (i) all Intellectual Property owned by Novo and (ii) each patent or
registration which has been issued to Novo or any Affiliate of Novo with respect
to any of the Intellectual Property used in Novo's business, (iii) each pending
patent application or application for registration which Novo or any Affiliate
of Novo has made with respect to any of the Intellectual Property used in Novo's
business, and (iv) each material license, agreement, or other permission which
Novo or any Affiliate of Novo has granted to any third party with respect to any
of the Intellectual Property used in Novo's business (together with any
exceptions). Novo has delivered to Aspec correct and complete copies of all such
patents, registrations, applications, licenses, agreements, and permissions (as
amended to date). Section 5.14(b) of the Novo Disclosure Schedule also
identifies (i) each trade name or unregistered trademark used by Novo or any
Affiliate of Novo which is material to the business of Novo and (ii) each
unregistered copyright or trade secret owned by Novo or any Affiliate of Novo
with respect to Intellectual Property which is material to the business of Novo.
With respect to each item of Intellectual Property required to be identified in
Section 5.14(b) of the Novo Disclosure Schedule, to the knowledge of Novo:
(i) Novo possesses all right, title, and
interest in and to the item, free and clear of any Security Interest (except as
disclosed in Section 5.8 of the Novo Disclosure Schedule), license or other
restriction;
(ii) the item is legal and valid and in full
force and effect and is not subject to any outstanding injunction, judgment,
order, decree, ruling, or charge;
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(iii) no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand is pending or, to the
knowledge of Novo, threatened which challenges the legality, validity,
enforceability, use or ownership of the item; and
(iv) Novo has never agreed to indemnify any
Person for or against any interference, infringement, misappropriation, or other
conflict with respect to the item, except pursuant to the contracts set forth in
Section 5.17 of the Novo Disclosure Schedule.
(c) Section 5.14(c) of the Novo Disclosure Schedule
identifies each material item of Intellectual Property that any third party owns
and that Novo uses pursuant to license, sublicense, agreement, or permission.
Novo has delivered to Aspec correct and complete copies of all such licenses,
sublicenses, agreements, and permissions (as amended to date). With respect to
each item of Intellectual Property required to be identified in Section 5.14(c)
of the Novo Disclosure Schedule, to the knowledge of Novo:
(i) the license, sublicense, agreement or
permission covering the item is legal, valid, binding, enforceable, and in full
force and effect in all material respects;
(ii) no party to the license, sublicense,
agreement, or permission is in breach or default, and, to the knowledge of Novo,
no event has occurred which with notice or lapse of time would constitute a
breach or default or permit termination, modification or acceleration
thereunder;
(iii) no party to the license, sublicense,
agreement, or permission has repudiated any provision thereof; and
(iv) Novo has not granted any sublicense or
similar right with respect to the license, sublicense, agreement, or permission.
5.15 Tangible Assets. The buildings, machinery, equipment,
and other tangible assets that Novo owns and leases are free from material
defects (patent and latent) and are in good operating condition and repair
(subject to normal wear and tear) and are usable in the Ordinary Course of
Business.
5.16 Inventory. In all material respects, all of the
inventory of Novo and any supplies, manufactured and processed parts, work in
process or finished goods, is usable, merchantable and fit for the purpose for
which it was procured or manufactured, and none of such inventory is
slow-moving, obsolete, damaged, or defective, subject to adjustments for
operations and transactions through the Closing Date in accordance with the past
custom and practice of Novo.
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5.17 Contracts. Section 5.17 of the Novo Disclosure Schedule
lists the following contracts, agreements, commitments and other arrangements to
which Novo is a party or by which Novo or any of its assets is bound:
(a) any agreement (or group of related agreements)
for the lease of personal property to or from any Person or license of any
software or Intellectual Property which involves the payment by or to Novo of
more than $10,000 per year;
(b) any agreement (or group of related agreements)
for the purchase or sale of raw materials, commodities, supplies, products, or
other personal property, or for the furnishing or receipt of services, the
performance of which will extend over a period of more than one year or involve
consideration in excess of $10,000;
(c) any agreement for the purchase of supplies,
components, products or services from single source suppliers, custom
manufacturers or subcontractors which involves the payment by Novo of more than
$10,000 per year;
(d) any agreement concerning a partnership or joint
venture;
(e) any agreement (or group of related agreements)
under which it has created, incurred, assumed, or guaranteed any indebtedness
for borrowed money or any capitalized lease obligation in excess of $10,000 or
under which a Security Interest has been imposed on any of its assets, tangible
or intangible;
(f) any agreement concerning noncompetition or
restraint of trade or any agreement on currently active projects which involves
confidentiality;
(g) any agreement with any Novo shareholder or any
of such shareholder's Affiliates (other than Novo) or with any Affiliate of
Novo;
(h) any profit sharing, stock option, stock
purchase, stock appreciation, deferred compensation, severance, or other plan or
arrangement for the benefit of its current or former directors, officers or
employees;
(i) any collective bargaining agreement;
(j) any agreement for the employment of any
individual on a full-time, part-time, consulting, or other basis;
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(k) any agreement under which it has advanced or
loaned any amount to any of its directors, officers, and employees;
(l) any agreement pursuant to which Novo is
obligated to provide services, maintenance, support or training which involves
payments to Novo of more than $50,000 per year;
(m) any standard form agreement used by Novo,
including, but not limited to, any purchase order, statement of standard terms
and conditions of sale, or employment offer letter; and
(n) any other agreement (or group of related
agreements) the performance of which involves consideration in excess of $10,000
or which is expected to continue for more than six (6) months from the date
hereof.
Novo has delivered to Aspec a correct and complete copy of each written
agreement listed in Section 5.17 of the Novo Disclosure Schedule (as amended to
date) and a written summary setting forth the terms and conditions of each oral
agreement referred to in Section 5.17 of the Novo Disclosure Schedule. With
respect to each such agreement: (A) the agreement is legal, valid, binding,
enforceable, and in full force and effect in all respects against Novo and, to
the knowledge of Novo, the other parties thereto; (B) Novo is not and, to the
knowledge of Novo, no other party is in breach or default, and no event has
occurred, which with notice or lapse of time would constitute a breach or
default, or permit termination, modification, or acceleration, under the
agreement; (C) Novo has not and, to the knowledge of Novo, no other party has
repudiated any provision of the agreement; and (D) Novo does not have any reason
to believe that the service called for thereunder cannot be supplied in
accordance with its terms and without resulting in a loss to any of Novo.
5.18 Notes and Accounts Receivable. All notes and accounts
receivable of Novo, all of which are reflected properly on the books and records
of Novo in all material respects, are, to the knowledge of Novo, (i) valid
receivables subject to no setoffs, defenses or counterclaims, and are current
and collectible, and (ii) will be collected in accordance with their terms at
their recorded amounts, subject only to adjustments for operations and
transactions through the Closing Date in accordance with the past custom and
practice of Novo.
5.19 Power of Attorney. There are no outstanding powers of
attorney executed on behalf of Novo.
5.20 Insurance. Novo has delivered to Aspec copies of each
insurance policy (including policies providing property, casualty, liability,
and workers' compensation coverage and bond and surety arrangements) with
respect to which Novo is a party, a named insured, or otherwise the beneficiary
of coverage. With respect to each such insurance policy: (A) the policy is
legal, valid,
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binding, enforceable, and in full force and effect (and there has been no notice
of cancellation or nonrenewal of the policy received) with respect to Novo and,
to the knowledge of Novo, the other parties thereto; (B) neither Novo nor, to
the knowledge of Novo, any other party to the policy is in breach or default
(including with respect to the payment of premiums or the giving of notices),
and no event has occurred which, with notice or the lapse of time, would
constitute such a breach or default, or permit termination, modification, or
acceleration, under the policy; (C) neither Novo nor, to the knowledge of Novo,
any other party to the policy has repudiated any provision thereof; and (D)
there has been no failure by Novo to give any notice or present any claim under
the policy in due and timely fashion. Section 5.20 of the Novo Disclosure
Schedule describes any self-insurance arrangements presently maintained by Novo.
5.21 Litigation. Section 5.21 of the Novo Disclosure Schedule
sets forth each instance in which Novo (or any of its assets) (i) is subject to
any outstanding injunction, judgment, order, decree, ruling, or charge or (ii)
is a party or, to the knowledge of Novo, is threatened to be made a party, to
any action, suit, proceeding, hearing, arbitration, or investigation of, in, or
before any court or quasi-judicial or administrative agency of any federal,
state, local, or foreign jurisdiction or before any arbitrator. To the knowledge
of Novo, there are no facts or circumstances which would form the basis of any
claim against Novo, except as disclosed in Section 5.21 of the Novo Disclosure
Schedule.
5.22 Product Warranty. All of the services performed and
products licensed, manufactured, sold, leased, and delivered by Novo have
conformed in all material respects with all applicable contractual commitments
and all express and implied warranties, and, to the knowledge of Novo, Novo has
no liability (whether asserted or unasserted, whether absolute or contingent,
whether accrued or unaccrued, whether liquidated or unliquidated, and whether
due or to become due) for replacement or repair thereof or other damages in
connection therewith, other than in the Ordinary Course of Business in an
aggregate amount not exceeding $10,000. Section 5.17(o) of the Novo Disclosure
Schedule includes copies of the standard terms and conditions of license for
Novo (containing applicable guaranty, warranty, and indemnity provisions).
5.23 Product Liability. To the knowledge of Novo, Novo has no
material liability (whether asserted or unasserted, whether absolute or
contingent, whether accrued or unaccrued, whether liquidated or unliquidated,
and whether due or to become due) arising out of any injury to individuals or
property as a result of the ownership, possession, or use of any product
licensed, manufactured, sold, leased, or delivered by Novo.
5.24 Employees. No executive, key employee, or significant
group of employees has advised any executive officer of Novo that he, she or
they plan to terminate employment with Novo during the next six (6) months. Novo
is not a party to or bound by any collective bargaining agreement, nor has it
experienced any strike or grievance, claim of unfair labor practices, or other
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collective bargaining dispute. To the knowledge of Novo, Novo has not committed
any unfair labor practice. To the knowledge of Novo, there is no organizational
effort presently being made or threatened by or on behalf of any labor union
with respect to employees of Novo.
5.25 Employee Benefits.
(a) Section 5.25(a) of the Novo Disclosure Schedule
lists each Employee Benefit Plan that Novo maintains or to which Novo
contributes or is obligated to contribute.
(i) Each such Employee Benefit Plan (and
each related trust, or fund established by Novo) complies in form and in
operation in all material respects with their terms, the applicable requirements
of ERISA, the Code, and other applicable laws.
(ii) All required reports and descriptions
(including Form 5500 Annual Reports, Summary Annual Reports, PBGC-1's, and
Summary Plan Descriptions) have been filed or distributed appropriately with
respect to each such Employee Benefit Plan. The requirements of Code Sec. 4980B
have been met in all material respects with respect to each such Employee
Benefit Plan which is an Employee Welfare Benefit Plan. No event has occurred
and no condition exists with respect to any Employee Benefit Plan that would
subject Novo to any tax under Code Sections 4972, 4976 or 4979 or to a fine
under ERISA Sections 502(i) or 502(l).
(iii) All contributions, premiums or other
payments (including all employer contributions and employee salary reduction
contributions) which are due have been paid to each Employee Benefit Plan and
all contributions, premiums or other payments for any period ending on or before
the Closing Date which are not yet due shall been paid to each such Employee
Benefit Plan or shall be accrued in accordance with the custom and practice of
Novo.
(iv) Each such Employee Benefit Plan which is
an Employee Pension Benefit Plan and which is intended to qualify under Code
Sec. 401(a), has received a favorable determination letter from the Internal
Revenue Service with respect to the qualification of the plan under Code Section
401(a) and the exemption of any corresponding trust under Code Section 501,
unless the Internal Revenue Service is deemed to have approved the form of such
Plan under applicable IRS Revenue Procedures. A copy of such determination
letters have been provided to Aspec and nothing has occurred since the date of
each such determination letter that would cause such Employee Pension Benefit
Plan to lose its ability to rely on such letter. Each Employee Pension Benefit
Plan has been restated to comply with the 1986 Tax Reform Act and subsequent
applicable tax legislation to the extent required by governing tax law. A copy
of any determination letters applicable to such restatement which have been
received by Novo has been provided to Aspec.
(v) Neither Novo nor any other Person or
entity under common
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control with Novo within the meaning of Section 414(b), (c) or (m) of the Code
and the regulations thereunder has now or at any previous time, maintained,
established, sponsored, participated in, or contributed to, any Employee Pension
Benefit Plan that is subject to Part 3 of Subtitle B of Title I of ERISA, Title
IV of ERISA or Section 412 of the Code. No Employee Welfare Benefit Plan or
other Employee Benefit Plan providing welfare benefits is funded with a trust or
other funding vehicle, other than insurance policies or contracts with a health
maintenance organization or similar health care delivery entity.
(vi) Novo has delivered to Aspec correct and
complete copies of the plan documents and summary plan descriptions, the most
recent determination letter received from the Internal Revenue Service, if any,
the most recent Form 5500 Annual Report, and all related trust agreements,
insurance contracts, and other funding agreements which implement each
maintained Employee Benefit Plan. The terms of any such documentation or other
communication do not prohibit Aspec from amending or terminating any such
Employee Benefit Plan.
(b) With respect to each Employee Benefit Plan that
Novo, and/or any controlled group of corporations within the meaning of Code
Sec. 1563 (a "CONTROLLED GROUP OF CORPORATIONS") which includes Novo, maintains
or ever has maintained or to which any of them contributes, ever contributed, or
ever has been required to contribute:
(i) There have been no prohibited
transactions within the meaning of ERISA Sec 406 and Code Sec. 4975 with respect
to any such Employee Benefit Plan. No fiduciary within the meaning of ERISA Sec.
3(21) (a "FIDUCIARY"), has any liability for breach of fiduciary duty or any
other failure to act or comply in connection with the administration or
investment of the assets of any such Employee Benefit Plan. No action, suit,
proceeding, hearing, or investigation with respect to the administration or the
investment of the assets of any such Employee Benefit Plan (other than routine
claims for benefits) is pending or threatened.
(c) Except as disclosed in Schedule 5.25(c) of the
Novo Disclosure Schedule, Novo does not maintain or contribute to, has never
maintained or contributed to, and has never been required to contribute to, any
Employee Welfare Benefit Plan or any other Employee Benefit Plan providing
medical, health, or life insurance or other welfare-type benefits for current or
future retired or terminated employees, their spouses, or their dependents
(other than in accordance with Code Sec. 4980B or Part 6 of Subtitle B of Title
I of ERISA).
(d) There is no liability in connection with any
Employee Benefit Plan that is not fully disclosed or provided for on the Most
Recent Balance Sheet for which disclosure would be required under generally
accepted accounting principles.
(e) No Employee Benefit Plan or Novo has any
liability to any plan
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participant, beneficiary or other person by reason of the payment of benefits or
the failure to pay benefits with respect to benefits under or in connection with
any such Employee Benefit Plan, other than claims in the normal administration
of such plans.
5.26 Guaranties. Novo is not a guarantor or otherwise
responsible for any liability or obligation (including indebtedness) of any
other Person.
5.27 Environment, Health, and Safety.
(a) For purposes of this Agreement, the following
terms have the following meanings:
"ENVIRONMENTAL, HEALTH, AND SAFETY LAWS" means any and
all federal, state, local or municipal laws, rules, orders, regulations,
statutes, ordinances, codes, plans, injunctions, judgments, decrees,
requirements or rulings now or hereafter in effect, imposed by any governmental
authority regulating, relating to, or imposing liability or standards of conduct
relating to pollution or protection of the environment (including, without
limitation, ambient air, surface water, groundwater, land surface or subsurface
strata), public health and safety, or employee health and safety, concerning any
Hazardous Materials or Extremely Hazardous Substances, as such terms as defined
herein, or otherwise regulated, under any Environmental, Health and Safety Laws.
The term "ENVIRONMENTAL, HEALTH AND SAFETY LAWS" shall include, without
limitation, the Clean Water Act (also known as the Federal Water Pollution
Control Act), 33 U.S.C. Section 1251 et seq., the Toxic Substances Control Act,
15 U.S.C. Section 2601 et seq., the Clean Air Act, 42 U.S.C. Section 7401 et
seq., the Federal Insecticide, Fungicide and Rodenticide Act, 7 U.S.C. Section
136 et seq., the Safe Drinking Water Act, 42 U.S.C. Section 300f et seq., the
Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C.
Section 9601 et seq., the Superfund Amendment and Reauthorization Act of 1986,
Public Law 99-4, 99, 100 Stat. 1613, the Emergency Planning and Community Right
to Know Act, 42 U.S.C. Section 11001 et seq., the Resource Conservation and
Recovery Act, 42 U.S.C. Section 6901 et seq., and the Occupational Safety and
Health Act, 29 U.S.C. Section 651 et seq., all as amended, together with any
amendments thereto, regulations promulgated thereunder and all substitutions
thereof.
"EXTREMELY HAZARDOUS SUBSTANCE" means a substance on the
list described in Section 302 (42 U.S.C. Section 11002(a)(2)) of the Emergency
Planning and Community Right to Know Act, 42 U.S.C. Section 11001 et seq., as
amended.
"HAZARDOUS MATERIAL" means any material or substance
that, whether by its nature or use, is now or hereafter defined as a pollutant,
dangerous substance, toxic substance, hazardous waste, hazardous material,
hazardous substance or contaminant under any Environmental, Health and Safety
Laws, or which is toxic, explosive, corrosive, flammable, infectious,
radioactive, carcinogenic, mutagenic or otherwise hazardous and which is now or
hereafter regulated under any
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Environmental, Health and Safety Laws, or which is or contains petroleum,
gasoline, diesel fuel or other petroleum hydrocarbon product.
(b) To the knowledge of Novo, each of Novo and its
predecessors and Affiliates (A) has complied with the Environmental, Health, and
Safety Laws (and no action, suit, proceeding, hearing, investigation, charge,
complaint, claim, demand, directive or notice has been filed or commenced
against any of them alleging any such failure to comply), (B) has obtained and
been in substantial compliance with all of the terms and conditions of all
permits, licenses, certificates and other authorizations which are required
under the Environmental, Health, and Safety Laws, and (C) has complied in all
material respects with all other limitations, restrictions, conditions,
standards, prohibitions, requirements, obligations, schedules, and timetables
which are contained in the Environmental, Health, and Safety Laws.
(c) To the knowledge of Novo, Novo has no liability
(whether asserted or unasserted, whether absolute or contingent, whether accrued
or unaccrued, whether liquidated or unliquidated, and whether due or to become
due), and none of Novo and its predecessors and Affiliates has handled or
disposed of any Hazardous Materials or extremely Hazardous Substances, arranged
for the disposal of any Hazardous Materials or Extremely Hazardous Substances,
exposed any employee or other individual to any Hazardous Materials or Extremely
Hazardous Substances, or owned or operated any property or facility in any
manner that could give rise to any liability, for damage to any site, location,
surface water, groundwater, land surface or subsurface strata, for any illness
of or personal injury to any employee or other individual, or for any reason
under any Environmental, Health, and Safety Law.
(d) To the knowledge of Novo, no Extremely Hazardous
Substances are currently, or have been, located at, on, in, under or about all
properties and equipment used in the business of Novo and its predecessors and
Affiliates.
(e) To the knowledge of Novo, no Hazardous Materials
are currently located at, on, in, under or about all properties and equipment
used in the business of Novo and its predecessors and Affiliates in a manner
which violates any Environmental, Health and Safety Laws or which requires
cleanup or corrective action of any kind under any Environmental, Health and
Safety Laws.
5.28 Certain Business Relationships With Novo. Neither Novo
nor any director or officer of Novo, nor any member of their immediate families,
nor any Affiliate of any of the foregoing, owns, directly or indirectly, or has
an ownership interest in any business (corporate or otherwise) which is a party
to, or in any property which is the subject of, any business arrangement or
relationship of any kind with Novo.
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5.29 No Adverse Developments. To the knowledge of Novo, there
is no development (exclusive of general economic factors affecting business in
general) or threatened development affecting Novo (or affecting customers,
suppliers, employees, and other Persons which have relationships with Novo) that
(i) is having or is reasonably likely to have a Material Adverse Effect on Novo,
or (ii) would prevent Aspec from conducting the business of the Surviving
Corporation following the Closing in the manner in which it was conducted or
planned to be conducted by Novo prior to the Closing.
5.30 Full Disclosure. No representation or warranty in this
Section 5 or in any document delivered by Novo pursuant to the transactions
contemplated by this Agreement, and no statement, list, certificate or
instrument furnished to Aspec pursuant hereto or in connection with this
Agreement, when taken as a whole, contains any untrue statement of a material
fact, or omits to state any fact necessary to make any statement herein or
therein not materially misleading. There is no fact, development or threatened
development (excluding general economic factors affecting business in general)
known to Novo which Novo has not disclosed to Aspec and which is having or may
have a Material Adverse Effect on Novo. Novo has delivered to Aspec true,
correct and complete copies of all documents, including all amendments,
supplements and modifications thereof or waivers currently in effect thereunder,
described in the Novo Disclosure Schedule.
6. Representations and Warranties of Aspec. Aspec represents and
warrants to Novo that the statements contained in this Section 6 are correct and
complete as of the date of this Agreement and will be correct and complete as of
the Closing Date (as though made then and as though the Closing Date were
substituted for the date of this Agreement throughout this Section 6), except as
set forth in the disclosure schedule delivered by Aspec to Novo on the date
hereof (and initialed by Aspec and Novo), a copy of which is attached hereto as
Exhibit D (referred to herein as the "ASPEC DISCLOSURE SCHEDULE"). The Aspec
Disclosure Schedule will be arranged in paragraphs corresponding to the numbered
paragraphs contained in this Section 6.
6.31 Organization, Qualification, and Corporate Power. Aspec
is a corporation duly organized, validly existing, and in good standing under
the laws of the State of Delaware. Aspec is duly authorized to conduct business
and is in good standing under the laws of each other jurisdiction where such
qualification is required. Aspec has full corporate power and authority, and has
all necessary and material licenses and permits, to carry on the businesses in
which it is engaged and to own and use the properties owned and used by it.
6.32 Authorization. Aspec has full power and authority to
execute and deliver this Agreement and the Merger Agreement, and to consummate
the transactions contemplated hereunder and to perform its obligations hereunder
and no other proceedings on the part of Aspec is necessary to authorize the
execution, delivery and performance of this Agreement and the Merger Agreement.
This Agreement and the Merger Agreement and the transactions contemplated
thereby have been
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approved by the unanimous vote of Aspec's Board of Directors. This Agreement and
the Merger Agreement constitute the valid and legally binding obligations of
Aspec enforceable against Aspec in accordance with their respective terms and
conditions. Aspec need not give any notice to, make any filing with, or obtain
any authorization, consent, or approval of any government or governmental agency
in order to consummate the transactions contemplated by this Agreement.
6.33 Capitalization.
(a) As of May 31, 1999, the authorized capital stock
of Aspec consisted of (i) 75,000,000 shares of Common Stock, of which 28,066,000
shares were issued and outstanding, (iii) 5,000,000 shares of undesignated
preferred stock, none of which were issued and outstanding, and (iv) an
aggregate of approximately 2,773,150 shares were subject to outstanding options
or reserved for issuance pursuant to Aspec's employee and director stock plans.
All of the outstanding shares of Aspec's capital stock have been duly authorized
and validly issued and are fully paid and nonassessable. Except as set forth in
this Section 6.3, there are no options, warrants or other rights, agreements,
arrangements or commitments of any character relating to the issued or unissued
capital stock of Aspec or obligating Aspec to issue or sell any shares of
capital stock of, or other equity interests in, Aspec. The authorized capital
stock of Merger Sub consists of 1,000 shares of common stock, all of which are
held of record by Aspec.
(b) The shares of Aspec Common Stock to be issued
pursuant to Section 3.1 of this Agreement are duly authorized and reserved for
issuance, and upon issuance thereof will be validly issued, fully paid and
nonassessable.
6.34 Noncontravention. Neither the execution and the delivery
of this Agreement nor the consummation of the transactions contemplated hereby,
will (A) violate any constitution, statute, regulation, rule, injunction,
judgment, order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which Aspec is subject or any provision of its
Certificate of Incorporation or bylaws, or (B) (i) conflict with, (ii) result in
a breach of, (iii) constitute a default under, (iv) result in the acceleration
of, (v) create in any party the right to accelerate, terminate, modify, or
cancel, or (vi) require any notice under, any agreement, contract, lease,
license, instrument, or other arrangement to which Aspec is a party or by which
it is bound or to which any of its assets is subject.
6.35 Brokers' Fees. Aspec has no liability or obligation to
pay any fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement.
6.36 SEC Filings. ASPEC has filed all forms, reports and
documents required to be filed with the SEC since April 1, 1998, and has made
available to Novo such forms, reports and
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documents in the form filed with the SEC. All such required forms, reports and
documents (including those that ASPEC may file subsequent to the date hereof)
are referred to herein as the "ASPEC SEC Reports". As of their respective dates,
the ASPEC SEC Reports (i) were prepared in accordance with the requirements of
the Securities Act or the Exchange Act, as the case may be, and the rules and
regulations of the SEC thereunder applicable to such ASPEC SEC Reports, and (ii)
did not at the time they were filed (or if amended or superseded by a filing
prior to the date of this Agreement, then on the date of such filing) contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading. None of ASPEC's subsidiaries is required to file any forms, reports
or other documents with the SEC.
6.37 Financial Statements. Each of the consolidated
financial statements (including, in each case, any related notes thereto)
contained in ASPEC SEC Reports ( the "ASPEC Financials"), including any ASPEC
SEC Reports filed after the date hereof until the Closing, (i) was compiled as
to form in all material respects with the published rules and regulations of the
SEC with respect thereto, (ii) was prepared in accordance with GAAP applied on a
consistent basis throughout the periods involved (except as may be indicated in
the notes thereto or, in the case of unaudited interim financial statements, as
may be permitted by the SEC on Form 10-Q under the Exchange Act) and (iii)
fairly presented the consolidated financial position of ASPEC and it's
subsidiaries as at the respective dates thereof and the consolidated results of
ASPEC's operations and cash flows for the periods indicated, except that the
unaudited interim financial statements were or are subject to normal and
recurring year-end adjustments. The balance sheet of ASPEC contained in ASPEC
SEC Form 10Q Report as of May 31, 1999 is hereinafter referred to as the "ASPEC
Balance Sheet."
6.38 Litigation. Section 6.8 of the Aspec Disclosure Schedule
sets forth each instance in which Aspec (or any of its assets) (i) is subject to
any outstanding injunction, judgment, order, decree, ruling, or charge or (ii)
is a party or, to the knowledge of Aspec, is threatened to be made a party, to
any action, suit, proceeding, hearing, arbitration, or investigation of, in, or
before any court or quasi-judicial or administrative agency of any federal,
state, local, or foreign jurisdiction or before any arbitrator.
6.9 No Adverse Developments. To the knowledge of Aspec,
there is no development (exclusive of general economic factors affecting
business in general) or threatened development affecting Aspec (or affecting
customers, suppliers, employees, and other Persons which have relationships with
Aspec) that (i) is having or is reasonably likely to have a Material Adverse
Effect on Aspec, or (ii) would prevent Aspec from conducting its business
following the Closing in the manner in which it was conducted or planned to be
conducted by Aspec prior to the Closing.
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7. Pre-Closing Covenants. With respect to the period between the
execution of this Agreement and the earlier of the termination of this Agreement
in accordance with Section 11 hereof and the Effective Time of the Merger:
7.1 General. Each of the Parties will use their reasonable
best efforts to take all actions and to do all things necessary, proper, or
advisable in order to consummate and make effective the transactions
contemplated by this Agreement (including satisfaction, but not waiver, of the
closing conditions set forth in Section 9 below).
7.2 Notices and Consents. Except as otherwise agreed to by
Aspec, Novo will give any notices to third parties and will use its best efforts
to obtain any third party consents that are required in connection with the
matters identified in Section 5.4 of the Novo Disclosure Schedule. Each of the
Parties will give any notices to, make any filings with, and use its best
efforts to obtain any authorizations, consents, and approvals of governments and
governmental agencies in connection with the matters identified in Section 5.4
of the Novo Disclosure Schedule.
7.3 Conduct of Business. Novo will not engage in any
practice, take any action, or enter into any transaction outside the Ordinary
Course of Business. Without limiting the generality of the foregoing, Novo will
not (a) issue or sell, or contract to issue or sell, any shares of its capital
stock or that of any of its subsidiaries or any securities convertible into to
exchangeable for shares of capital stock of it or any of its subsidiaries, or
securities, warrants, options or rights to purchase any of the foregoing (other
than shares issued upon exercise of outstanding options or upon the conversion
of outstanding convertible securities described on the Novo Disclosure
Schedule), (b) purchase or redeem any shares of its capital stock, (c) declare
or pay any dividends or agree to make any other distribution with respect to any
shares of its capital stock, (d) amend its Articles of Incorporation or Bylaws,
or (e) enter into or propose to enter into an agreement with any other person
providing for the possible acquisition by it or any of its subsidiaries (whether
by way of merger, purchase of capital stock, purchase of assets or otherwise) of
any material portion of the capital stock or assets of another entity. In
addition, Novo will comply with all laws, statutes, ordinances, rules,
regulations and orders applicable to it or to the conduct of its business,
except for violations that could not subject Novo to a penalty or loss that
could constitute a Material Adverse Effect on Novo.
7.4 Preservation of Business. Novo will use its best efforts
to keep its business and properties substantially intact, including its present
operations, physical facilities, working conditions, and relationships with
lessors, licensors, suppliers, customers and employees. Aspec will use its best
efforts to keep its business and properties substantially intact, including its
present operations, physical facilities, working conditions, and relationships
with lessors, licensors, suppliers, customers and employees.
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7.5 Access to Information. Novo will permit Aspec and its
representatives to have access at all reasonable times, and in a manner so as
not to interfere with the normal business operations of Novo, to the business
and operations of Novo. Neither such access, inspection and furnishing of
information to Aspec and its representatives, nor any investigation by Aspec and
its representatives, shall in any way diminish or otherwise effect Aspec's right
to rely on any representation or warranty made by Novo hereunder. Aspec will
permit Novo and its representatives to have access at all reasonable times, and
in a manner so as not to interfere with the normal business operations of Aspec,
to the business and operations of Aspec. Neither such access, inspection and
furnishing of information to Novo and its representatives, nor any investigation
by Novo and its representatives, shall in any way diminish or otherwise effect
Novo's right to rely on any representation or warranty made by Aspec hereunder.
7.6 Notice of Developments. Each Party will give prompt
written notice to the others of any adverse development causing a material
breach of any of its own representations and warranties in Section 5 or Section
6 above. No disclosure by any Party pursuant to this Section 7.6, however, shall
be deemed to amend or supplement the Novo Disclosure Schedule or the Aspec
Disclosure Schedule or to prevent or cure any misrepresentation, breach of
warranty, or breach of covenant.
7.7 Exclusivity. From and after the date hereof through the
date which is thirty (30) days following the termination of this Agreement
pursuant to Section 11 hereof, without the prior written consent of Aspec,
neither Novo nor any of Novo's other officers, directors, shareholders, agents
or Affiliates shall, directly or indirectly, (a) solicit, conduct discussions
with or engage in negotiations with any person, other than Aspec, relating to
the possible acquisition of Novo or any of its subsidiaries (whether by way of
merger, purchase of capital stock, purchase of assets or otherwise) or any
material portion of its or their capital stock or assets, (b) provide
information with respect to Novo or any of its subsidiaries to any person, other
than Aspec, relating to the possible acquisition of Novo or any of its
subsidiaries (whether by way of merger, purchase of capital stock, purchase of
assets or otherwise) or any material portion of its or their capital stock or
assets, (c) enter into an agreement with any person, other than Aspec, providing
for the acquisition of Novo or any of its subsidiaries (whether by way of
merger, purchase of capital stock, purchase of assets or otherwise) or any
material portion of its or their capital stock or assets, (d) make or authorize
any statement, recommendation or solicitation in support of any possible
acquisition of Novo or any of it subsidiaries (whether by way of merger,
purchase of capital stock, purchase of assets or otherwise) or any material
portion of its or their capital stock or assets by any person, other than by
Aspec, (e) enter into any agreement with any person, other than Aspec, providing
for any extension of credit (other than trade credit in the ordinary course of
business) or other debt investment in Novo, or (f) enter into any additional
agreement for the licensing or distribution of products, technology, or
intellectual property of Novo, whether now existing or hereafter created. In
addition to the foregoing, if Novo or any of its subsidiaries receives any
unsolicited offer or proposal to enter negotiations relating to any
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of the above, Novo shall immediately notify Aspec thereof, including information
as to the identity of the offeror or the party making any such offer or proposal
and the specific terms of such offer or proposal, as the case may be. From and
after the date hereof until the first to occur of the Closing of the Merger or
the termination of this Agreement pursuant to Section 11 hereof, no shareholders
will transfer or offer to transfer any of their Novo Common Stock except to
Aspec pursuant to the Merger.
8. Post-Closing Covenants. With respect to the period following the
Effective Time of the Merger:
8.1 General. In case at any time after the Effective Time of
the Merger any further action is necessary to carry out the purposes of this
Agreement, each of the Parties will take such further action (including the
execution and delivery of such further instruments and documents) as any other
Party reasonably may request, all at the sole cost and expense of the requesting
Party (unless the requesting Party is entitled to indemnification therefor under
Section 10 below).
8.2 Litigation Support. In the event and for so long as any
Party actively is contesting or defending against any action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand in connection with
(i) any transaction contemplated under this Agreement or (ii) any fact,
situation, circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act, or transaction (A) on or
prior to the Effective Time of the Merger involving Novo or (B) arising out of
Aspec's operation of the business of the Surviving Corporation following the
Effective Time of the Merger in the manner in which it is presently conducted
and planned to be conducted, each of the other Parties will cooperate with the
party, its counsel in the contest or defense, make available their personnel,
and provide such testimony and access to their books and records as shall be
reasonably necessary in connection with the contest or defense, all at the sole
cost and expense of the contesting or defending Party (unless the contesting or
defending Party is entitled to indemnification therefor under Section 10 below).
8.3 Transition. None of the current officers of Novo will
take any action that is designed or intended to have the effect of discouraging
any lessor, licensor, customer, supplier, or other business associate of Novo
from maintaining the same business relationships with the Surviving Corporation
after the Effective Time of the Merger as it maintained with Novo prior to the
Effective Time of the Merger.
8.4 Confidentiality. Each of the parties hereto hereby
agrees to keep such information or knowledge obtained in any due diligence or
other investigation pursuant to the negotiation and execution of this Agreement
or the effectuation of the transactions contemplated hereby, confidential.
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8.5 Novo Employees; Employee Stock Options. Upon the
Effective Date of the Merger, all employees of Novo shall be offered employment
with the Surviving Corporation. In addition, upon the Effective Date of the
Merger, Novo employees and certain future employees shall be granted options to
purchase an aggregate of 500,000 shares of Aspec Common Stock (in such amounts
to be mutually determined by the Chief Executive Officer of Novo and Aspec). In
each case, such options shall be granted at the fair market value of the Aspec
Common Stock at the date of grant and shall vest monthly over a four-year
period. The options shall also be subject to the other terms and conditions of
Aspec's 1996 Stock Option Plan (the "STOCK PLAN"). All employees of Novo that
are employees of the Surviving Corporation following the Closing shall execute
Aspec's standard form of employee confidentiality and inventions assignment
agreement.
9. Conditions to Obligations to Close.
9.1 Conditions to Aspec's Obligation to Close. The
obligations of Aspec to consummate the transactions to be performed by it in
connection with the Closing is subject to satisfaction of the following
conditions:
(a) the representations and warranties of Novo set
forth in Section 5 above shall be true and correct in all material respects at
and as of the Closing Date;
(b) Novo shall have performed and complied with all
of its respective covenants hereunder in all material respects through the
Closing;
(c) Novo shall have signed the CVI License Agreement
with Sun Microsystems with terms and in a form acceptable to Aspec and shall
have obtained such of the third party consents listed on Section 5.4 of the Novo
Disclosure Schedule as may be mutually agreed to by Aspec and Novo;
(d) no action, suit, or proceeding shall be pending
before any court or quasi-judicial or administrative agency of any federal,
state, local, or foreign jurisdiction or before any arbitrator (other than such
an action initiated by Aspec or Merger Sub) wherein an unfavorable injunction,
judgment, order, decree, ruling, or charge would (A) prevent consummation of any
of the transactions contemplated by this Agreement, (B) cause any of the
transactions contemplated by this Agreement to be rescinded following
consummation, or (C) affect materially and adversely the right of Aspec or
Merger Sub to control Novo following the Effective Time of the Merger, and no
law, statute, ordinance, rule, regulation or order shall have been enacted,
enforced or entered which has caused or will likely cause any of the effects
under clause (A), (B) or (C) of this Section 9.1(d) to occur.
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(e) the President and the Chief Financial Officer of
Novo shall have delivered to Aspec a certificate to the effect that each of the
conditions specified above in Section 9.1(a) to 9.1(d) (inclusive) is satisfied
in all material respects;
(f) No Material Adverse Effect shall have occurred
with respect to Novo;
(g) Aspec shall have received from counsel to Novo
an opinion in form and substance as set forth in Exhibit E attached hereto,
addressed to Aspec, and dated as of the Closing Date;
(h) this Agreement and the Merger shall have been
approved by the vote of the holders of 100% of the outstanding shares of Common
Stock of Novo.
(i) all outstanding options, convertible securities
and other Stock Rights to purchase securities of Novo shall have been exercised
or canceled; and
(j) Xxxx Xxxxx, Xxxx Xxxxxx, Xxxx Xxxxxxxxxx and
Xxxxx Xxxxxx shall have executed an employment agreement and accepted employment
with the Surviving Corporation.
Aspec may waive any condition (in whole or in part) specified in
this Section 9.1 if it executes a writing so stating at or prior to the Closing.
9.2 Conditions to Novo's Obligation. The obligation of Novo
to consummate the transactions to be performed by each of them in connection
with the Closing is subject to satisfaction of the following conditions:
(a) the representations and warranties of Aspec set
forth in Section 6 above shall be true and correct in all material respects at
and as of the Closing Date;
(b) Aspec shall have performed and complied with all
of its covenants hereunder in all material respects through the Closing;
(c) no action, suit, or proceeding shall be pending
before any court or quasi-judicial or administrative agency of any federal,
state, local, or foreign jurisdiction or before any arbitrator (other than such
an action initiated by Novo ) wherein an unfavorable injunction, judgment,
order, decree, ruling, or charge would (A) prevent consummation of any of the
transactions contemplated by this Agreement or (B) cause any of the transactions
contemplated by this Agreement to be rescinded following consummation (and no
such injunction, judgment, order, decree, ruling, or charge shall be in effect);
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(d) the Chief Executive Officer or other duly
authorized officer of Aspec shall have delivered to Novo a certificate to the
effect that each of the conditions specified above in Section 9.2(a) to 9.2(c)
(inclusive) is satisfied in all material respects;
(e) Novo shall have received from counsel to Aspec
an opinion in form and substance as set forth in Exhibit F attached hereto,
addressed to Novo, and dated as of the Closing Date;
(f) No Material Adverse Change shall have occurred
with respect to Aspec.
Novo may waive any condition (in whole or in part) specified in
this Section 9.2 if Novo executes a writing so stating at or prior to the
Closing.
10. Survival of Representations, Indemnification.
10.1 Limited Survival of Representations and Warranties. All
covenants of Aspec, Merger Sub and Novo to be performed prior to the Effective
Time of the Merger, and all representations and warranties of Aspec, Novo in
this Agreement or in any instrument delivered pursuant to this Agreement shall
survive the Merger for a period of one year from the Effective Time of the
Merger (the "EXPIRATION DATE"), and, notwithstanding anything to the contrary in
this Agreement, no claim for breach of any representation, warranty or covenant
by any Party and no claim for indemnification by Aspec hereunder shall be
brought at any time after the Expiration Date.
10.2 Indemnification by Aspec.
(a) From and after the Effective Time of the Merger,
Aspec shall indemnify and hold harmless each of the former Novo Shareholders in
proportion to their individual holdings in Novo at the date of the Merger and
each of the heirs, executors, successors and assigns of any of the foregoing,
from and against any and all Losses arising out of, or in connection with, any
breach of any representation or warranty or of any covenant, agreement, or
undertaking made by Aspec in this Agreement.
10.3 Indemnification by Novo Shareholders, Shares in Escrow.
(a) From and after the Effective Time of the Merger,
each of the Novo Shareholders shall indemnify and hold harmless Aspec, Merger
Sub and each of their respective
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Affiliates, and each of their respective directors, officers, employees and
agents, and each of the heirs, executors, successors and assigns of any of the
foregoing, from and against any and all Losses arising out of, or in connection
with, any breach of any representation or warranty or of any covenant,
agreement, or undertaking made by Novo in this Agreement. The liability of the
Novo Shareholders hereunder shall be several in proportion to number of shares
of Aspec Common Stock received by each such Novo Shareholder and his Affiliates
as a result of the Merger, and not joint.
(b) Ten percent (10%) of the Aspec Shares issued to
the Novo Shareholders shall be placed in escrow for a period of twelve (12)
months to satisfy any claim for indemnification pursuant to this Section 10.
Notwithstanding any provision to the contrary in this Agreement, the maximum
obligation and liability of each of the Novo Shareholders hereunder shall be
limited to the forfeiture to Aspec of escrowed shares of Aspec Common Stock. Any
shares of Aspec Common Stock returned to Aspec shall be valued at the then fair
market value of the Aspec Common Stock.
(c) Any payment made pursuant to this Section 10.3
or Section 10.2 hereof shall be treated by the Parties as an adjustment to the
purchase price provided for herein, and the Parties agree not to take any
position inconsistent therewith for any purpose.
10.4 Notice of Claims. No action or proceeding may be brought
by a party seeking indemnification hereunder (the "INDEMNIFIED PARTY") with
respect to any breach of the representations, warranties, covenants or
agreements made hereunder unless written notice thereof, setting forth in
reasonable detail (to the extent then known) the amount of the claim and the
claimed misrepresentation or breach of warranty or breach of covenant or
agreement, or the reasons for which such Indemnified Party believes there has
been or may have been a breach of representation, warranty, covenant or
agreement, shall have been delivered to the party alleged to have breached such
representation, warranty, covenant or agreement (the "INDEMNIFYING PARTY") on or
prior to the Expiration Date. If the Indemnifying Party contests the assertion
of the claim, then the parties shall act in good faith to reach agreement
regarding such claim.
10.5 Third Party Claims. If a claim by a third party is made
against an Indemnified Party, and if such Indemnified Party intends to seek
indemnity with respect thereto under this Section 10, such Indemnified Party
shall promptly notify the Indemnifying Party in writing of such claims setting
forth such claims in reasonable detail; provided, however, that failure of such
Indemnified Party to give such notice shall not result in a waiver of its
indemnity rights except to the extent that such failure prejudices the
Indemnifying Party's ability to respond to or defend the claim. The Indemnifying
Party shall have thirty (30) days after receipt of such notice to undertake,
through counsel of its own choosing and at its own expense, the settlement or
defense thereof, and the Indemnified Party shall cooperate with it in connection
therewith; provided, however, that the Indemnified Party may participate in such
settlement or defense through counsel chosen by such
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Indemnified Party, provided that the fees and expenses of such counsel shall be
borne by such Indemnified Party. The Indemnified Party shall not pay or settle
any claim without the written consent of the Indemnifying Party, which consent
shall not be unreasonably withheld. The Indemnifying Party will not pay or
settle any claim unless it contains an unconditional release of the Indemnified
Party. If the Indemnifying Party does not within thirty (30) days after the
receipt of the Indemnified Party's notice of a claim of indemnity hereunder
undertake the defense thereof or if the Indemnified Party must obtain separate
legal counsel due to an actual or potential conflict arising from such claim (as
determined in good faith by the Indemnified Party's legal counsel), the
Indemnified Party shall have the right to contest, settle or compromise the
claim but shall not thereby waive any right to indemnity therefor (and for all
associated reasonable costs and attorney's fees which, in the case of such costs
and fees, shall be reimbursed by the Indemnifying Party as incurred) pursuant to
this Agreement.
10.6 Limitation of Claims. The Novo Shareholders shall not be
liable for any claims by Aspec made hereunder unless and until the aggregate
amount of all such exceeds $10,000, provided that in the event such claims
exceed $10,000, Aspec shall be entitled to recover for the full amount of such
claims (including the $10,000 limitation). Aspec and Merger Sub shall not be
liable for any claims by the Novo Shareholders made hereunder unless and until
the aggregate amount of all such claims against Aspec and Merger Sub exceeds
$10,000, provided that in the event such claims exceed $10,000, the Novo
Shareholders shall be entitled to recover for the full amount of such claims
(including the $10,000 limitation).
11. Termination.
11.1 Termination of the Agreement. This Agreement may be
terminated at any time prior to the Closing as follows:
(a) Aspec and Novo may terminate this Agreement as
to all Parties by mutual written consent at any time prior to the Closing.
(b) Aspec may terminate this Agreement by giving
written notice to Novo at any time prior to the Closing (A) in the event Novo
has materially breached any representation, warranty, or covenant contained in
this Agreement and Aspec has notified Novo of the breach or (B) if the Closing
shall not have occurred on or before September 30, 1999, by reason of the
failure of any condition precedent under Section 9.1 hereof (unless the failure
results primarily from Aspec itself materially breaching any representation,
warranty, or covenants contained in this Agreement).
(c) Aspec may terminate this Agreement by giving
written notice to Novo at any time prior to 5:00 p.m. (California time) on the
date that the CVI License Agreement is signed
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39
with Sun Microsystems in the event that Aspec is not satisfied in its sole
discretion with the results of its due diligence investigation regarding the
business and financial and corporate records of Novo.
(d) Novo may terminate this Agreement by giving
written notice to Aspec at any time prior to the Closing (A) in the event Aspec
has materially breached any representation, warranty, or covenant contained in
this Agreement and Novo has notified Aspec of the breach, or (B) if the Closing
shall not have occurred on or before September 30, 1999, by reason of the
failure of any condition precedent under Section 9.2 hereof (unless the failure
results primarily from Novo materially breaching any representation, warranty,
or covenants contained in this Agreement).
11.2 Effect of Termination.
(a) If any Party terminates this Agreement pursuant to Section 11
above, all rights and obligations of the Parties hereunder shall terminate
without any liability of any Party to any other Party (except for any liability
of any Party then in breach); provided, however, that the Confidentiality
Agreement shall survive in accordance with its terms.
(b) In the event that Aspec terminates this Agreement without cause
prior to Closing but after the date that the CVI license agreement is signed
with Sun Microsystem, Aspec agrees to pay NOVO the sum of $200,000 in return for
a 5% equity interest in NOVO. In the event that Aspec fails to fund the Novo
business operations in accordance with the agreed upon business plan during a
period of 4 years after Closing, Novo has the option for a period of 60 days to
tender back to Aspec all 1,600,000 shares of Aspec Common Stock in exchange for
an 81% of the issued and outstanding shares of Novo Common Stock.
12. Miscellaneous.
12.1 Publicity. No Party shall issue any press release or
make any public announcement relating to the subject matter of this Agreement
prior to the Closing without the prior written approval of Aspec and Novo.
Notwithstanding the foregoing, Aspec may disclose the Merger in its filings with
the Securities and Exchange Commission to the extent required by applicable
securities laws.
12.2 No Third-Party Beneficiaries. This Agreement shall not
confer any rights or remedies upon any Person other than the Parties, the
shareholders of Novo and their respective successors and permitted assigns.
12.3 Entire Agreement. This Agreement (including the exhibits
and schedules hereto) constitutes the entire agreement among the Parties and
supersedes any prior understandings, agreements, or representations by or among
the Parties, written or oral, to the extent they related in any way to the
subject matter hereof (including that certain letter agreement between Aspec and
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Novo dated June 29, 1999). Notwithstanding the foregoing, Novo and Aspec agree
that the terms of the Confidentiality Agreement shall remain in effect.
12.4 Succession and Assignment. This Agreement shall be
binding upon and inure to the benefit of the Parties named herein and their
respective successors and permitted assigns. No Party may assign either this
Agreement or any of its rights, interests, or obligations hereunder without the
prior written approval of the other Parties.
12.5 Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
12.6 Headings. The Section headings contained in this
Agreement are inserted for convenience only and shall not affect in any way the
meaning or interpretation of this Agreement.
12.7 Notices. All notices and other communications required
or permitted hereunder shall be in writing, shall be effective when given, and
shall in any event be deemed to be given upon receipt or, if earlier, (a) five
(5) days after deposit with the U.S. Postal Service or other applicable postal
service, if delivered by first class mail, postage prepaid, (b) upon delivery,
if delivered by hand, (c) one (1) business day after the business day of deposit
with Federal Express or similar overnight courier, freight prepaid or (d) one
(1) business day after the business day of facsimile transmission, if delivered
by facsimile transmission with copy by first class mail, postage prepaid, and
shall be addressed to the intended recipient as set forth below:
If to Aspec or Merger Sub:
Aspec Technology, Inc.
000 Xxxx Xxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxx, President and Chief Executive
Officer
Copy to:
Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx
Professional Corporation
000 Xxxx Xxxx Xxxx
Xxxx Xxxx, Xxxxxxxxxx 00000-0000
Attention: J. Xxxxxx Xxxxxxxxxx, Esq.
If to Novo :
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41
Novo Systems Corporation
0000 Xxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxx Xxxxx, President and Chief Executive
Officer
Copy to:
Xxxxx Xxxxx Xxxxxxx
Cummins & Xxxxxx
00 Xxxx Xxxxxx Xxxxx, Xxxxx 000
Xxx Xxxxx, XX 00000
Any Party may change the address to which notices, requests, demands, claims,
and other communications hereunder are to be delivered by giving the other
Parties written notice of such change in accordance with the above provisions.
12.8 Governing Law; Dispute Resolution.
(a) This Agreement shall be governed by and
construed in accordance with the domestic laws of the State of California
without giving effect to any choice or conflict of law provision or rule
(whether of the State of California or any other jurisdiction) that would cause
the application of the laws of any jurisdiction other than the State of
California.
(b) It is the express intention of the Parties to
this Agreement to make a good faith effort to resolve, without resort to
arbitration, any dispute arising under or related to this Agreement. In the
event of a dispute relating to any provision of this Agreement which cannot be
resolved promptly by negotiations between the Parties involved directly in the
dispute, any Party to the dispute may give the other Party written notice of its
intent to arbitrate, as provided in this Section 12.8. No arbitration may
commence earlier than thirty (30) days after the delivery of the notice of
intent to arbitrate, unless the failure to commence arbitration is reasonably
likely to result in some demonstrable harm.
(c) The Parties hereto agree that the appropriate
and exclusive forum for any disputes among any of the Parties hereto arising out
of this Agreement or the transactions contemplated hereby, shall be settled by
arbitration in Santa Xxxxx County, California, in accordance with the rules of
the American Arbitration Association, and judgment upon any award rendered by
the arbitrator or arbitrators may be entered in any court having jurisdiction
thereof. The arbitration panel will consist of three (3) people to be mutually
selected by the Parties to the dispute. In the event that the Parties to the
dispute cannot agree upon the arbitrators within ten (10) days after the
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commencement of the arbitration procedures, one (1) arbitrator shall be selected
by Aspec, one (1) arbitrator shall be selected by the Novo Shareholders involved
in the dispute and one (1) arbitrator shall be selected by the two (2) other
arbitrators so designated. The parties further agree, to the extent permitted by
law, that final and non-appealable judgment against any of them in any action or
proceeding contemplated above shall be conclusive and may be enforced in any
other jurisdiction within or outside the United States by suit on the judgment,
a certified or exemplified copy of which shall be conclusive evidence of the
fact and amount of such judgment. The Parties hereby consent to the jurisdiction
of the Superior Court of the State of California and the United States District
Courts of California and waive any objections or rights as to forum
nonconvenience, lack of personal jurisdiction or similar grounds with respect to
the enforcement of any such judgment.
(d) In the event of any arbitration proceeding
hereunder, the arbitrator(s) shall have the discretion to award the prevailing
party reimbursement of all costs and expenses incurred in connection with said
action, including reasonable attorney's fees.
(e) To the extent that Aspec or the Novo
Shareholders have or hereafter may acquire any immunity from jurisdiction of any
court or from any legal process (whether through service or notice, attachment
prior to judgment, attachment in aid of execution, execution or otherwise) with
respect to itself or its property, Aspec and the Novo Shareholders (as the case
may be) hereby irrevocably waive such immunity in respect of its obligations
with respect to this Agreement.
12.9 Amendments and Waivers. No amendment of any provision of
this Agreement shall be valid unless the same shall be in writing and signed by
Aspec, Merger Sub and Novo. No waiver by any Party of any default,
misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent
occurrence.
12.10 Severability. Any term or provision of this Agreement
that is invalid or unenforceable in any situation in any jurisdiction shall not
affect the validity or enforceability of the remaining terms and provisions
hereof or the validity or enforceability of the offending term or provision in
any other situation or in any other jurisdiction.
12.11 Expenses. Each of Aspec and Novo will bear its or their
own costs and expenses (including legal and accounting fees and expenses)
incurred in connection with this Agreement and the transactions contemplated
hereby; provided, however, that Novo will be responsible for (i) any brokers',
finders' or advisory fees payable on behalf of Novo in connection with the
Agreement and the transactions contemplated hereby, and (ii) any legal or
accounting fees undertaken on behalf of Novo in connection with the Agreement
and the transactions contemplated hereby in excess of $50,000 which may be paid
by Novo.
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12.12 Construction. The Parties have participated jointly in
the negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean including without limitation.
12.13 Incorporation of Exhibits and Schedules. The Exhibits
identified in this Agreement are incorporated herein by reference and made a
part hereof.
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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on
as of the date first above written.
Aspec: ASPEC TECHNOLOGY, INC.
By:
-----------------------------------
Xxxxxxx X. Xxxxx
President and Chief Executive
Officer
Merger Sub: ASPEC ACQUISITION THREE CORPORATION
By:
-----------------------------------
Xxxxxx X. Dell'Oca
President
Novo: NOVO SYSTEMS CORPORATION
By:
-----------------------------------
Xxxx X. Xxxxx
President and Chief Executive
Officer
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[AGREEMENT AND PLAN OF REORGANIZATION SIGNATURE PAGE]
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