EXHIBIT 2.1
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AGREEMENT AND PLAN OF MERGER
BY AND
AMONG
OMNIVISION TECHNOLOGIES, INC.;
SKI-JUMP ACQUISITION CORP.;
X.X. XXXXXXX, XX.; W. XXXXXX XXXXXX, XX.; AND XXXXXX XXXXXX, XX.;
CDM OPTICS, INC.;
AND
X.X. XXXXXXX, XX., AS REPRESENTATIVE OF THE CDM OPTICS, INC. SECURITYHOLDERS
DATED AS OF MARCH 25, 2005
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TABLE OF CONTENTS
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ARTICLE 1 CERTAIN DEFINITIONS..................................................................... 2
ARTICLE 2 THE MERGER.............................................................................. 14
2.1 Closing....................................................................................... 14
2.2 Effects of the Merger......................................................................... 14
2.3 Conversion of Shares in Merger................................................................ 15
2.4 CDM Options; CDM Warrants and Other Rights Not Assumed........................................ 18
2.5 Contingent Stock Arrangement.................................................................. 18
2.6 Exchange of Certificates...................................................................... 22
2.7 Tax Consequences, Withholding and Reporting................................................... 24
2.8 Adjustments for Capital Changes............................................................... 25
2.9 Further Assurances............................................................................ 25
ARTICLE 3 CONTINGENT CONSIDERATION................................................................ 25
3.1 Contingent Consideration Payment; Post-Closing Assistance..................................... 25
3.2 Limitations on Contingent Consideration....................................................... 26
3.3 Contingent Consideration Reporting............................................................ 26
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF CDM................................................... 28
4.1 Organization and Good Standing................................................................ 28
4.2 Subsidiaries.................................................................................. 28
4.3 Power, Authorization and Validity............................................................. 28
4.4 Capitalization of CDM......................................................................... 29
4.5 No Conflict................................................................................... 31
4.6 Litigation.................................................................................... 32
4.7 Taxes......................................................................................... 32
4.8 CDM Financial Statements...................................................................... 33
4.9 Title to Properties........................................................................... 34
4.10 Absence of Certain Changes.................................................................... 34
4.11 Contracts, Agreements, Arrangements, Commitments and Undertakings............................. 36
4.12 No Default; No Restrictions................................................................... 38
4.13 Intellectual Property......................................................................... 38
4.14 Compliance with Laws.......................................................................... 43
4.15 Certain Transactions and Agreements........................................................... 44
4.16 Employees, ERISA and Other Compliance......................................................... 44
4.17 Corporate Documents........................................................................... 48
4.18 No Brokers.................................................................................... 48
4.19 Insurance..................................................................................... 49
4.20 Environmental Matters......................................................................... 49
4.21 Board Actions................................................................................. 49
4.22 No Existing Discussions....................................................................... 49
4.23 Disclosure.................................................................................... 49
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF OMNIVISION............................................ 50
5.1 Organization and Good Standing................................................................ 50
5.2 Power, Authorization and Validity............................................................. 50
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TABLE OF CONTENTS
(Continued)
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5.3 No Conflict................................................................................... 51
ARTICLE 6 SECURITIES LAW COMPLIANCE; REGISTRATION OF INITIAL STOCK CONSIDERATION.................. 52
6.1 Private Placement............................................................................. 52
6.2 Blue Sky Laws; Information Statement.......................................................... 53
6.3 Registration of OmniVision Common Stock....................................................... 54
ARTICLE 7 CDM COVENANTS........................................................................... 54
7.1 Advice of Changes............................................................................. 54
7.2 Maintenance of Business....................................................................... 54
7.3 Conduct of Business........................................................................... 55
7.4 Regulatory Approvals.......................................................................... 57
7.5 Necessary Consents............................................................................ 57
7.6 Litigation.................................................................................... 57
7.7 No Other Negotiations......................................................................... 58
7.8 Access to Information......................................................................... 59
7.9 Satisfaction of Conditions Precedent.......................................................... 59
7.10 CDM Benefit Arrangements...................................................................... 59
7.11 Approval of the CDM Stockholders.............................................................. 59
7.12 Notices to CDM Securityholders and Employees.................................................. 60
7.13 CDM Securityholder Documents and Letters of Transmittal and Related Documents................. 60
7.14 Proprietary Information and Inventions Agreements............................................. 60
ARTICLE 8 OMNIVISION COVENANTS.................................................................... 61
8.1 (A) Advice of Changes......................................................................... 61
8.2 (A) Regulatory Approvals...................................................................... 61
8.3 (A) Satisfaction of Conditions Precedent...................................................... 62
8.4 (B) Employee Benefit Matters.................................................................. 62
8.5 (B) NASDAQ Listing............................................................................ 62
8.6 (B) Satisfaction of Certain Indebtedness...................................................... 62
ARTICLE 9 CONDITIONS TO OBLIGATIONS OF CDM........................................................ 63
9.1 Accuracy of Representations and Warranties.................................................... 63
9.2 Covenants..................................................................................... 63
9.3 Compliance with Law; No Legal Restraints; No Litigation....................................... 63
9.4 Government Consents........................................................................... 63
9.5 Secretary Certificate......................................................................... 64
9.6 Listing of Additional Shares.................................................................. 64
9.7 Employment Matters............................................................................ 64
9.8 Put Agreement................................................................................. 64
9.9 Registration Rights Agreement................................................................. 64
9.10 Letter Agreement Regarding CDM Warrants....................................................... 64
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TABLE OF CONTENTS
(Continued)
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ARTICLE 10 CONDITIONS TO OBLIGATIONS OF OMNIVISION AND MERGER SUB.................................. 64
10.1 Accuracy of Representations and Warranties.................................................... 64
10.2 Covenants..................................................................................... 65
10.3 No Material Adverse Change.................................................................... 65
10.4 Compliance with Law; No Legal Restraints; No Litigation....................................... 65
10.5 Government Consents........................................................................... 65
10.6 Opinion of CDM's Legal Counsel................................................................ 65
10.7 Consents...................................................................................... 65
10.8 CDM Stockholder Approval and Voting Agreements................................................ 65
10.9 Employment Matters; Proprietary Information and Inventions Agreements......................... 66
10.10 Cancellation of CDM Options, Purchase of CDM Warrants and Termination of Other Rights......... 66
10.11 CDM Securityholder Documents.................................................................. 66
10.12 Spreadsheet................................................................................... 66
10.13 Section 280G Approval......................................................................... 67
10.14 CDM Good Standing Certificates................................................................ 67
10.15 FIRPTA........................................................................................ 67
10.16 Secretary Certificate......................................................................... 67
10.17 IP Option Agreement; ULEHI Consent Letter..................................................... 67
10.18 Resignations of Directors and Officers........................................................ 67
10.19 Put Agreement................................................................................. 67
10.20 Registration Rights Agreement................................................................. 67
10.21 Letter Agreement Regarding CDM Warrants....................................................... 67
ARTICLE 11 TERMINATION OF AGREEMENT................................................................ 68
11.1 Termination by Mutual Consent................................................................. 68
11.2 Unilateral Termination........................................................................ 68
11.3 Effect of Termination......................................................................... 69
ARTICLE 12 SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS; COVENANT OF
INDEMNIFICATION; REMEDIES; AND OTHER CONTINUING COVENANTS............................... 70
12.1 Survival...................................................................................... 70
12.2 Agreement to Indemnify........................................................................ 71
12.3 Remedies and Limitations...................................................................... 71
12.4 Appointment of Representative................................................................. 76
12.5 Notice of Claim............................................................................... 77
12.6 Defense of Third-Party Claims................................................................. 79
12.7 Contents of Notice of Claim................................................................... 79
12.8 Resolution of Notice of Claim................................................................. 80
12.9 Tax Consequences of Indemnification Payments.................................................. 80
ARTICLE 13 MISCELLANEOUS........................................................................... 81
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(Continued)
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13.1 Governing Law................................................................................. 81
13.2 Assignment; Binding Upon Successors and Assigns............................................... 81
13.3 Severability.................................................................................. 81
13.4 Counterparts.................................................................................. 81
13.5 Specific Performance.......................................................................... 81
13.6 Amendments and Waivers........................................................................ 81
13.7 Expenses...................................................................................... 82
13.8 Attorneys' Fees............................................................................... 82
13.9 Notices....................................................................................... 82
13.10 Rules of Construction......................................................................... 84
13.11 No Joint Venture.............................................................................. 84
13.12 Third Party Beneficiary Rights................................................................ 84
13.13 Public Announcement........................................................................... 84
13.14 Confidentiality............................................................................... 84
13.15 Entire Agreement.............................................................................. 85
Exhibit List
Exhibit 2.1 Form of Certificate of Merger
Exhibit 2.2(d) Initial Officers of Surviving Corporation
Exhibit 2.2(e) Initial Directors of Surviving Corporation
Exhibit 3.1 Post-Closing Assistance Covenants
Exhibit 6.1 Form of Securityholder Representation Agreement
Exhibit 6.3 Form of Registration Rights Agreement
Exhibit 9.8 Form of Put Agreement
Exhibit 9.10 Form of Warrant Letter Agreement
Exhibit 10.6 Matters to be Covered in the Opinion of Xxxxx & Xxxxxxx
L.L.P.
Exhibit 10.8(A) Signatories to Voting Agreement
Exhibit 10.8(B) Form of Voting Agreement
Exhibit 10.9(A) Signatories to Employment Agreement and Non-Competition
Agreement
Exhibit 10.9(B) Form of Employment Agreement
Exhibit 10.9(C) Form of Non-Competition Agreement
Exhibit 10.9(D) Forms of Proprietary Information and Inventions
Agreement (for nonexecutive employees, executive
employees and consultants)
Exhibit 10.12 Form of Spreadsheet
Exhibit 10.17(A) Form of IP Option Agreement (including forms of two
license agreements)
Exhibit 10.17(B) ULEHI Consent Letter
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AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this "AGREEMENT") is made and entered
into as of March 25, 2005 (the "AGREEMENT DATE") by and among OmniVision
Technologies, Inc., a Delaware corporation ("OMNIVISION"), Ski-Jump Acquisition
Corp., a Delaware corporation and a wholly owned subsidiary of OmniVision
("MERGER SUB"), X.X. Xxxxxxx, Xx., W. Xxxxxx Xxxxxx, Xx., and Xxxxxx Xxxxxx, Xx.
(each, a "CDM OFFICER" and together, the "CDM OFFICERS"), CDM Optics, Inc., a
Delaware corporation ("CDM"), and X.X. Xxxxxxx, Xx., as representative of the
CDM Securityholders (the "REPRESENTATIVE").
RECITALS
A. The parties intend that, subject to the terms and conditions
hereinafter set forth, Merger Sub shall merge with and into CDM in a reverse
triangular merger (the "MERGER"), with CDM to be the surviving corporation of
the Merger, on the terms and subject to the conditions of this Agreement and
pursuant to a Certificate of Merger substantially in the form attached hereto as
Exhibit 2.1, with such changes as may be mutually agreed between Merger Sub and
CDM (the "CERTIFICATE OF MERGER"), and the applicable provisions of the laws of
the State of Delaware.
B. The Boards of Directors of OmniVision, Merger Sub and CDM have
determined that the Merger is in the best interests of their respective
companies and stockholders and have approved and declared advisable this
Agreement and the Merger. OmniVision, as the sole stockholder of Merger Sub, has
approved this Agreement and the Merger.
C. Concurrently with the execution and delivery of this Agreement, and as
a condition and inducement to OmniVision's willingness to enter into this
Agreement, each CDM Stockholder listed on Exhibit 10.8(A) is executing and
delivering to OmniVision a Voting Agreement substantially in the form attached
hereto as Exhibit 10.8(B) (the "VOTING AGREEMENT").
D. Concurrently with the execution and delivery of this Agreement, and as
a condition and inducement to the parties' willingness to enter into this
Agreement, each employee of CDM listed on Exhibit 10.9(A) is executing and
delivering to OmniVision and CDM an Employment Agreement substantially in the
form attached hereto as Exhibit 10.9(B) (the "EMPLOYMENT AGREEMENT"), which
agreements shall become effective upon the Effective Time.
E. Concurrently with the execution and delivery of this Agreement, and as
a condition and inducement to OmniVision's willingness to enter into this
Agreement, each employee of CDM listed on Exhibit 10.9(A) is executing and
delivering to OmniVision and CDM a Non-Competition and Non-Solicitation
Agreement substantially in the form attached hereto as Exhibit 10.9(C) (the
"NON-COMPETITION AGREEMENT"), which agreements shall become effective upon the
Effective Time.
F. Prior to the execution and delivery of this Agreement, and as a
condition and inducement to OmniVision's willingness to enter into this
Agreement, CDM and OmniVision have entered into an Intellectual Property Option
Agreement permitting OmniVision to acquire a
fully paid-up license to certain patents and other intellectual property of CDM
and a fully paid-up sublicense under certain third party intellectual property
in substantially the form attached hereto as Exhibit 10.17(A) (the "IP Option
Agreement") and, concurrently with the execution and delivery of the IP Option
Agreement, University License Equity Holdings, Inc. ("ULEHI") and certain other
parties executed and delivered to OmniVision and CDM a consent letter regarding
the IP Option Agreement and certain intellectual property licensed to CDM by
ULEHI in substantially the form attached hereto as Exhibit 10.17(B) (the "ULEHI
Consent Letter").
G. OmniVision, Merger Sub, CDM and the CDM Officers desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger and to prescribe various conditions to the Merger.
NOW, THEREFORE, in consideration of the foregoing and the mutual promises,
covenants and conditions contained herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereby agree as follows:
ARTICLE 1
CERTAIN DEFINITIONS
As used in this Agreement, the following terms shall have the meanings set
forth below. Unless indicated otherwise, all mathematical calculations
contemplated hereby shall be made to the fifth decimal place.
"ACCREDITED INVESTOR" has the meaning set forth in Rule 501 promulgated
under the Securities Act.
"ACQUISITION PROPOSAL" means any inquiry, offer or proposal, or any public
announcement of an intention to make any inquiry, offer or proposal, by a Person
or "group" (as defined under Section 13(d) of the Exchange Act and the rules and
regulations promulgated thereunder) (other than OmniVision or any of its
subsidiaries) relating to or involving: (A) any acquisition or purchase by any
Person or "group" (as defined under Section 13(d) of the Exchange Act and the
rules and regulations thereunder) of 10% or more of the voting interest in the
total outstanding voting securities of CDM; (B) any tender offer or exchange
offer that, if consummated, would result in any Person or "group" (as defined
under Section 13(d) of the Exchange Act and the rules and regulations
thereunder) beneficially owning 10% or more of the voting interest in the total
outstanding voting securities of CDM; (C) any merger, consolidation, business
combination or similar transaction involving CDM pursuant to which the
stockholders of CDM immediately preceding such transaction hold less than 90% of
the equity interests in (x) the surviving or resulting entity of such
transaction or (y) the parent entity of the surviving or resulting entity of
such transaction, in either case, in substantially the same proportions as they
held the voting equity interests of CDM immediately preceding such transaction;
(D) any sale, lease, exchange, transfer, license, sub-license, pledge, mortgage,
acquisition or disposition of at least a significant portion of the assets,
business or technology of CDM; or (E) any liquidation or dissolution of CDM or
any extraordinary dividend, whether of cash or other property.
"AFFIDAVIT" means an affidavit of lost CDM Certificate and an indemnity or
bond in form and substance reasonably satisfactory to OmniVision.
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"AFFILIATE" shall have the meaning set forth in Rule 405 of Regulation C
promulgated under the Securities Act.
"AGREEMENT DATE" shall have the meaning set forth in the first paragraph
of this Agreement.
"APPLICABLE LAW" means, collectively, all foreign, federal, state, local
or municipal laws, statutes, ordinances, regulations, and rules, and all orders,
writs, injunctions, awards, judgments and decrees applicable to CDM or
OmniVision or any of their respective assets, properties and businesses (and any
regulations promulgated thereunder).
"AVERAGE OMNIVISION STOCK PRICE" shall mean the average of the last
reported trade prices at the close of the regular trading day (excluding after
hours and extended trading periods) for a share of OmniVision Common Stock as
quoted on the NASDAQ Stock Market (or other principal exchange or market on
which OmniVision Common Stock is then listed) for five consecutive trading days.
"BALANCE SHEET DATE" means December 31, 2004, the date of the CDM Balance
Sheet.
"BASKET" has the meaning set forth in Section 12.3(c) of this Agreement.
"CDM ANCILLARY AGREEMENTS" means, collectively, each certificate to be
delivered on behalf of CDM by an officer or officers of CDM at the Closing
pursuant to Article 10 and each agreement and document (other than this
Agreement) that CDM is to enter into as a party thereto pursuant to this
Agreement.
"CDM BALANCE SHEET" means CDM's unaudited balance sheet as of December 31,
2004 attached to the CDM Disclosure Letter and included in the CDM Financial
Statements.
"CDM BENEFIT ARRANGEMENTS" has the meaning set forth in Section 4.16(f) of
this Agreement.
"CDM BUSINESS" means the business of CDM as presently conducted and
presently proposed to be conducted.
"CDM CAPITAL STOCK" means the capital stock of CDM.
"CDM CERTIFICATES" means certificates evidencing the securities held by
holders of record of CDM Capital Stock that were outstanding immediately prior
to the Effective Time.
"CDM COMMON STOCK" means the CDM Voting Common Stock and CDM Non-voting
Common Stock, collectively.
"CDM DISCLOSURE LETTER" means the disclosure letter of CDM and the CDM
Officers, signed by CDM's Chief Executive Officer and the CDM Officers and
addressed to the OmniVision Indemnified Persons, dated as of the Agreement Date
and delivered to the OmniVision Indemnified Persons concurrently with the
parties' execution of this Agreement and specifically referencing a
representation or warranty set forth in Article 4 (each of which
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exceptions, in order to be effective, shall indicate the section and, if
applicable, the subsection of Article 4 to which it relates (unless and to the
extent the relevance to other representations and warranties is reasonably
apparent from the face of the disclosed exception or another section of this
Agreement to which it applies), and each of which exceptions shall also be
deemed to be representations and warranties made by CDM and the CDM Officers
under Article 4).
"CDM FINANCIAL STATEMENTS" means (A) CDM's unaudited balance sheets dated
September 30, 2003 and September 30, 2004 and the CDM Balance Sheet and (B)
CDM's unaudited statements of operations and statements of cash flows for the
years ended September 30, 2003 and September 30, 2004 and the three-month period
ended December 31, 2004, in each case as attached to the CDM Disclosure Letter.
"CDM IP RIGHTS" means Intellectual Property used in the conduct of the CDM
Business.
"CDM IP RIGHTS AGREEMENTS" means any instruments, licenses, sub-licenses
or other Contracts governing any CDM IP Rights.
"CDM-LICENSED IP RIGHTS" means CDM IP Rights that are not CDM-Owned IP
Rights.
"CDM MATERIAL CONTRACT" has the meaning set forth in Section 4.11 of this
Agreement.
"CDM NON-VOTING COMMON STOCK" means the non-voting common stock of CDM.
"CDM-OWNED IP RIGHTS" means CDM IP Rights that are or are purportedly
owned or exclusively licensed to CDM.
"CDM OPTION PLAN" means the 2000 Stock Option and Incentive Plan of CDM.
"CDM OPTIONHOLDERS" means the holders of CDM Options.
"CDM OPTIONS" means options to purchase shares of CDM Capital Stock.
"CDM PREFERRED STOCK" means the preferred stock of CDM.
"CDM PRODUCT" means each of the products currently produced, manufactured,
marketed, licensed, sold, furnished or distributed by CDM and each product
currently under development by CDM, but excludes prototypes.
"CDM REPRESENTATIVES" means, collectively, any of CDM's officers,
directors, employees, stockholders, Affiliates, agents, advisors (including any
attorneys, financial advisors, investment bankers, consultants or accountants)
or other representatives.
"CDM SECURITYHOLDERS" means the CDM Stockholders, CDM Optionholders and
CDM Warrantholders, collectively.
"CDM SERVICE" means those activities of CDM to support, maintain, upgrade
and/or refurbish CDM Products.
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"CDM SOURCE CODE" means, collectively, any human readable software source
code, or any material portion or aspect of the software source code, or any
material proprietary information or algorithm contained in or relating to any
software source code, that constitutes CDM-Owned IP Rights.
"CDM STOCKHOLDERS" means the holders of shares of CDM Capital Stock.
"CDM STOCKHOLDER APPROVAL" means the approval of the Merger and the
adoption of this Agreement by holders of a majority of the outstanding shares of
CDM Voting Common Stock.
"CDM STOCKHOLDERS CONSENT" means the written consent of the CDM
Stockholders obtaining the CDM Stockholder Approval.
"CDM SECURITYHOLDER DOCUMENTS" means the Securityholder Representation
Agreements and any Purchaser Representative Agreements.
"CDM STOCKHOLDERS MEETING" means a meeting of the CDM Stockholders held
for the purpose of voting upon and obtaining the CDM Stockholder Approval.
"CDM VOTING COMMON STOCK" means the voting common stock of CDM.
"CDM WARRANTS" means warrants exercisable for the purchase shares of CDM
Capital Stock.
"CDM WARRANTHOLDERS" means the holders of CDM Warrants.
"CLAIM" or "CLAIMS" means a claim or claims for indemnification by
OmniVision or any other OmniVision Indemnified Person for Damages under Article
12.
"CLAIMS PERIOD" has the meaning set forth in Section 12.5 of this
Agreement.
"CLOSING" means the closing of the transactions to consummate the
Merger.
"CLOSING DATE" means a time and date to be specified by the parties, which
shall be no later than the second business day after the satisfaction or waiver
of the conditions set forth in Article 9 and Article 10, or at such other time
and date as the parties hereto agree in writing.
"CLOSING STOCK PRICE" means the Average OmniVision Stock Price for the
period ending on (and including) the trading day that is one trading day prior
to the Closing Date.
"COBRA" means the Consolidated Omnibus Budget Reconciliation Act of 1985,
as amended.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COLORADO LAW" means the Colorado Business Corporation Act.
"CONTINGENT CASH" has the meaning set forth in Section 2.5(g)(ii) of this
Agreement.
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"CONTINGENT CONSIDERATION NOTICE" has the meaning set forth in Section
3.3(c) of this Agreement.
"CONTINGENT CONSIDERATION PAYMENT" means the payment of an aggregate of
$10,000,000 in cash to Effective Time Securityholders upon, and subject to, the
occurrence of the Milestone Event.
"CONTINGENT DIVIDENDS" means cash dividends and any other dividends or
distributions in kind on or with respect to the Contingent Shares that are
declared or paid between the Effective Time and the time of issuance of the
Contingent Shares.
"CONTINGENT SHARES" means that number of shares of OmniVision Common Stock
with a combined value equal to $2,850,000, with each such share being valued at
140% of the Closing Stock Price. In addition, for purposes of Article 12, the
term "Contingent Shares" shall be deemed to include any Escrow Consideration.
"CONTINUING EMPLOYEES" means those Persons who were employees of CDM
immediately prior to the Effective Time and who become employees of the
Surviving Corporation or OmniVision immediately following the Effective Time.
"CONTESTED CLAIM" has the meaning set forth in Section 12.8(b) of this
Agreement.
"CONTRACT" means any written or oral legally binding contract, agreement,
instrument, arrangement, commitment or undertaking (including leases, licenses,
mortgages, notes, guarantees, sublicenses, subcontracts and purchase orders).
"DAMAGES" means, collectively, any and all losses, reductions in value,
costs, damages (whether direct, indirect or incidental, but excluding
consequential damages), Liabilities and expenses (including reasonable
attorneys' fees, other professionals' and experts' fees, costs of investigation
and other costs incurred in connection with investigating, defending, settling
or satisfying any and all demands, claims, actions, causes of action, suits,
proceedings, assessments, judgments and appeals, and in seeking indemnification
therefor), calculated net of insurance coverage that is actually available to
OmniVision or any other OmniVision Indemnified Person (net of any applicable
collection costs and reserves, deductibles, premium adjustments and
retrospectively rated premiums).
"DELAWARE LAW" means the General Corporation Law of the State of Delaware.
"DISSENTERS DEADLINE DATE" means the first date at or after the Effective
Time on which no holder of CDM Capital Stock (or if applicable, other CDM
securities, if any, that may be entitled to appraisal rights under applicable
law), as of immediately prior to the Effective Time has an opportunity to
perfect appraisal rights in accordance with Delaware Law or, if and only to the
extent applicable, Colorado Law, in connection with the Merger in respect of any
shares of CDM Capital Stock.
"DISSENTING SHARES" means any shares of CDM Capital Stock (or if
applicable, other CDM securities, if any, that may be entitled to appraisal
rights under applicable law) that are issued and outstanding immediately prior
to the Effective Time and in respect of which appraisal
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rights shall have been perfected prior to the Dissenters Deadline Date in
accordance with Delaware Law or, if and only to the extent applicable, Colorado
Law, in connection with the Merger.
"DISSENTING SHARES EXCESS PAYMENTS" means any payment in respect of
Dissenting Shares in excess of the sum of (A) the amount of cash that would have
been paid pursuant to Section 2.3 in respect of such shares had they never been
Dissenting Shares and (B) the product of (x) the aggregate number of shares of
OmniVision Common Stock that would have been issuable pursuant Section 2.3 in
respect of such shares had they never been Dissenting Shares and (y) 140% of the
Closing Stock Price. Dissenting Shares Excess Payments shall constitute
"Damages" for purposes of Article 12 without regard to the Basket.
"DOCUMENTATION" means, collectively, programmers' notes or logs, source
code annotations, user guides, manuals, instructions, software architecture
designs, layouts, any know-how, and any other designs, plans, drawings,
documentation, materials, supplier lists, software source code and object code,
net lists, photographs, development tools, blueprints, media, memoranda and
records that are related to or otherwise necessary for the use and exploitation
of any products of CDM used in the CDM Business or under development, whether in
tangible or intangible form, whether owned by CDM or held by CDM under any
licenses or sublicenses (or similar grants of rights).
"EFFECTIVE TIME" means the time of acceptance by the Secretary of State of
the State of Delaware of the filing of the Certificate of Merger (or such later
time as may be mutually agreed in writing by CDM and OmniVision and specified in
such Certificate of Merger).
"EFFECTIVE TIME SECURITYHOLDERS" means CDM Securityholders as of
immediately prior to the Effective Time (other than holders of shares of CDM
Capital Stock which constitute and remain Dissenting Shares).
"ENCUMBRANCE" means, with respect to any asset, any mortgage, deed of
trust, lien, pledge, charge, security interest, title retention device,
collateral assignment, adverse claim, restriction or other encumbrance of any
kind in respect of such asset (including any restriction on the voting of any
security, any restriction on the transfer of any security or other asset, any
restriction on the receipt of any income derived from any asset, any restriction
on the use of any asset and any restriction on the possession, exercise or
transfer of any other attribute of ownership of any asset).
"ENVIRONMENTAL LAW" means any federal, state or local statute, law,
regulation or other legal requirement relating to pollution or protection of
human health or the environment (including ambient air, surface water, ground
water, land surface or subsurface strata), including any law or regulation
relating to emissions, discharges, releases or threatened releases of Materials
of Environmental Concern or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Materials of Environmental Concern.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
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"ERISA AFFILIATE" means any entity which is a member of: (A) a "controlled
group of corporations," as defined in Section 414(b) of the Code; (B) a group of
entities under "common control," as defined in Section 414(c) of the Code; or
(C) an "affiliated service group," as defined in Section 414(m) of the Code, or
treasury regulations promulgated under Section 414(o) of the Code, any of which
includes CDM.
"ESCROW CASH" has the meaning set forth in Section 2.5(g)(i) of this
Agreement.
"ESCROW CONSIDERATION" means any Escrow Cash and any Contingent Cash.
"ESCROW EARNINGS" has the meaning set forth in Section 2.5(g)(i) of this
Agreement.
"ESCROW PERIOD" means the period beginning at the Effective Time through
eighteen months following the Effective Time, except as set forth herein.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"EXCLUSIVITY AGREEMENT" means that certain letter agreement regarding
exclusivity between OmniVision and CDM dated January 14, 2005, as amended on
January 31, 2005 and as amended thereafter from time-to-time.
"FAR" means the Federal Acquisition Regulation, as may be amended or
supplemented from time-to-time.
"FULLY-DILUTED CDM COMMON STOCK" means the aggregate number of shares of
CDM Common Stock that are issued and outstanding immediately prior to the
Effective Time, plus the aggregate number of shares of CDM Common Stock that are
issuable upon the exercise of CDM Options and CDM Warrants that are issued,
outstanding and unexercised immediately prior to the Effective Time (including
any CDM Options cancelled and CDM Warrants purchased pursuant to Section
2.3(b)(i) and Section 2.3(b)(ii), respectively, of this Agreement).
"GAAP" means United States generally accepted accounting principles
applied on a consistent basis.
"GOVERNMENTAL AUTHORITY" means any court or tribunal, governmental or
regulatory body, administrative agency, commission or other governmental
authority.
"GOVERNMENTAL PERMITS" has the meaning set forth in Section 4.14(c) of
this Agreement.
"GUST" means, collectively, the Uruguay Round Agreements Act, the
Uniformed Services Employment and Reemployment Rights Act of 1994, the Small
Business Job Protection Act of 1996 and the Taxpayer Relief Act of 1997.
"INFORMATION STATEMENT" has the meaning set forth in Section 6.2 of this
Agreement.
8
"INITIAL CASH CONSIDERATION" means $10,000,000, less any amount of Merger
Expenses known to OmniVision prior to the Spreadsheet Submission Date and not
paid separately by the CDM Securityholders on or prior to the Closing Date.
"INITIAL CASH CONVERSION NUMBER" means (A) the Initial Cash Consideration
divided by (B) the Fully-Diluted CDM Common Stock.
"INITIAL STOCK CONSIDERATION" means the number of shares of OmniVision
Common Stock equal to (A) $10,000,000 divided by (B) 140% of the Closing Stock
Price.
"INITIAL STOCK CONVERSION NUMBER" means (A) the Initial Stock
Consideration divided by (B) the Fully-Diluted CDM Common Stock.
"INTELLECTUAL PROPERTY" means, collectively, all worldwide industrial and
intellectual property rights, including (A) all patents, patent applications,
and patent rights, (B) all registered and unregistered trademarks, trade dress,
trade names, service marks, and logos, including all goodwill associated
therewith, and all applications, registrations and renewals in connection
therewith, (C) all Internet domain names, Internet and World Wide Web URLs or
addresses, and web sites, (D) all copyrights, mask work rights and all
registrations, applications and renewals therefor, and all moral rights, (E) all
confidential information (including without limitation, franchises, licenses,
inventions, trade secrets, ideas, research and development, know-how, customer
lists, supplier lists, proprietary processes and formulae, technology, software
source code and object code, algorithms, net lists, architectures, structures,
screen displays, photographs, images, layouts, development tools, designs,
blueprints, libraries, notebooks, specifications, and technical drawings) and
(F) all copies or tangible embodiments of the foregoing in any form or medium.
"KNOWLEDGE" means the knowledge of a particular fact, circumstance, event
or other matter in question of the officers, directors and legal personnel of an
entity (and with respect to Section 4.13, any of the persons engaged in
technology development activity for CDM) (collectively, the "ENTITY
REPRESENTATIVES") after reasonable inquiry. Any such Entity Representative will
be deemed to have knowledge of a particular fact, circumstance, event or other
matter if: (A) such fact, circumstance, event or other matter is reflected in
one or more documents (whether written or electronic, including electronic mails
received or sent by such Entity Representative) in, or that have been in, the
possession of such Entity Representative, including his or her personal files;
(B) such fact, circumstance, event or other matter is reflected in one or more
documents (whether written or electronic) contained in books and records of such
entity that would reasonably be expected to be reviewed by an individual who has
the duties and responsibilities of such Entity Representative in the customary
performance of such duties and responsibilities; or (C) such knowledge could be
obtained from reasonable inquiry of the persons employed by such entity charged
with operational responsibility for such matters for such entity.
"LIABILITIES" means debts, liabilities and obligations, whether accrued or
fixed, absolute or contingent, matured or unmatured, determined or determinable,
known or unknown, including those arising under any law, action or governmental
order and those arising under any Contract.
9
"MATERIAL ADVERSE CHANGE" and "MATERIAL ADVERSE EFFECT" when used in
connection with an entity means any change, event, circumstance, condition or
effect (regardless of whether or not such change, event, circumstance, condition
or effect is inconsistent with the representations or warranties made by such
entity in this Agreement) that is or is reasonably likely to be, individually or
in the aggregate, materially adverse in relation to the condition (financial or
otherwise), capitalization, properties, assets (including intangible assets),
liabilities, business, prospects, licensing or sub-licensing arrangements,
employees, management, operations or results of operations of such entity and
its subsidiaries, taken as a whole, except to the extent that any such change,
event, condition or effect directly results from: (A) changes in general
economic conditions (provided that such changes do not affect such entity
disproportionately as compared to such entity's competitors); or (B) changes
affecting the industry generally in which such entity operates (provided that
such changes do not affect such entity disproportionately as compared to such
entity's competitors).
"MATERIALS OF ENVIRONMENTAL CONCERN" include chemicals, pollutants,
contaminants, wastes, toxic substances, petroleum and petroleum products and any
other substance that is currently regulated by an Environmental Law or that is
otherwise a danger to health, reproduction or the environment.
"MERGER EXPENSES" means all costs, fees and expenses incurred by CDM or
the CDM Securityholders in connection with the Merger, this Agreement, the
ancillary agreements and exhibits to this Agreement and the transactions
contemplated by this Agreement, (including, without limitation, any fees and
expenses of Xxxxx & Xxxxxxx L.L.P., Xxxxxxx & Xxxx XX, and any other legal
counsel, financial advisors, investment bankers and accountants). Any Merger
Expenses not (A) separately paid by the CDM Securityholders prior to the Closing
or (B) deducted in the calculation of the Initial Cash Consideration are
collectively referred to as "INDEMNIFIABLE MERGER EXPENSES" and shall constitute
Damages for purposes of Article 12 without regard to the Basket. Notwithstanding
the foregoing, Merger Expenses shall not include the fees and expenses of
Xxxxxxx & Xxxx XX relating to patent prosecution and licensing transactions
services performed by such firm in the ordinary course of CDM's business
consistent with past practices (including, without limitation, any fees and
expenses related to the negotiation and drafting of the IP Option Agreement and
any licenses or amendments to licenses with ULEHI or the University of Colorado)
and unrelated to the transactions set forth in this Agreement, provided that
such counsel provides documented and itemized bills for services to CDM prior to
the Effective Time and CDM provides true and accurate copies thereof to
OmniVision prior to the Effective Time.
"MERGER SUB ANCILLARY AGREEMENTS" means, collectively, each certificate to
be delivered on behalf of Merger Sub or by an officer or officers of Merger Sub
at the Closing pursuant to Article 9 and each agreement and document (other than
this Agreement) that Merger Sub is to enter into as a party thereto pursuant to
this Agreement.
"MERGER SUB COMMON STOCK" means the common stock of Merger Sub.
"MILESTONE EVENT" has the meaning set forth in the Post-Closing Assistance
Covenants.
10
"NDAs" means, collectively, that certain Technology Evaluation Agreement
between CDM and OmniVision dated September 20, 2003 (as extended pursuant to the
confidentiality provision of the Term Sheet) and that certain Non-Disclosure
Agreement made April 7, 2003 between OmniVision and CDM.
"NOTICE OF CLAIM" has the meaning set forth in Section 12.5 of this
Agreement.
"OMNIVISION ANCILLARY AGREEMENTS" means, collectively, each certificate to
be delivered on behalf of OmniVision by an officer or officers of OmniVision at
the Closing pursuant to Article 9 and each agreement and document (other than
this Agreement) that OmniVision is to enter into as a party thereto pursuant to
this Agreement.
"OMNIVISION COMMON STOCK" means the common stock, par value $0.001 per
share, of OmniVision.
"OMNIVISION DISCLOSURE LETTER" means the disclosure letter of OmniVision,
signed by an authorized officer of OmniVision and addressed to CDM, dated as of
the Agreement Date and delivered to CDM concurrently with the parties' execution
of this Agreement and specifically referencing a representation or warranty set
forth in Article 5 (each of which exceptions, in order to be effective, shall
indicate the section and, if applicable, the subsection of Article 5 to which it
relates (unless and to the extent the relevance to other representations and
warranties is reasonably apparent from the face of the disclosed exception or
another section of this Agreement to which it applies), and each of which
exceptions shall also be deemed to be representations and warranties made by
OmniVision under Article 5).
"OMNIVISION INDEMNIFIED PERSON" means OmniVision and its officers,
directors, agents, representatives, stockholders and employees, and each Person,
if any, who controls or may control OmniVision within the meaning of the
Securities Act or the Exchange Act (collectively, "OMNIVISION INDEMNIFIED
PERSONS").
"OMNIVISION PLANS" means OmniVision's employee benefit plans.
"PERMITTED ENCUMBRANCES" means: (A) statutory liens for Taxes that are not
yet due and payable; (B) statutory liens to secure obligations to landlords,
lessors or renters under leases or rental agreements; (C) deposits or pledges
made in connection with, or to secure payment of, workers' compensation,
unemployment insurance or similar programs mandated by Applicable Law; and (D)
statutory liens in favor of carriers, warehousemen, mechanics and materialmen,
to secure claims for labor, materials or supplies and other like liens.
"PERSON" means any individual, corporation, company, limited liability
company, partnership, limited liability partnership, trust, estate,
proprietorship, joint venture, association, organization, entity or Governmental
Authority.
"POST-CLOSING ASSISTANCE COVENANTS" means the post-closing assistance
covenants attached hereto as Exhibit 3.1.
"PRO RATA SHARE" has the meaning set forth in Section 2.5(a) of this
Agreement.
11
"PUBLIC SOFTWARE" means any software that (A) contains, or is derived in
any manner (in whole or in part) from, any software that is distributed as free
software, open source software (e.g., Linux) or (B) requires as a condition of
its use, modification or distribution that it be disclosed or distributed in
source code form or made available at no charge. Public Software includes
without limitation software licensed under the GNU's General Public License
(GPL) or Lesser/Library GPL, the Mozilla Public License, the Netscape Public
License, the Sun Community Source License, the Sun Industry Standards License,
the BSD License, and the Apache License.
"PURCHASER REPRESENTATIVE AGREEMENT" has the meaning set forth in Section
6.1(b) of this Agreement.
"PUT AGREEMENT" means the agreement to be entered into between OmniVision
and each CDM Securityholder, substantially in the form attached hereto as
Exhibit 9.8, pursuant to which OmniVision will grant each CDM Securityholder, on
the terms and subject to the conditions set forth therein, the Put Right.
"PUT RIGHT" shall have the meaning set forth in the Put Agreement.
"QUALIFYING PRODUCTS" has the meaning set forth in the Post-Closing
Assistance Covenants.
"QUARTERLY REPORTS" has the meaning set forth in Section 3.3(a) of this
Agreement.
"REGISTRATION RIGHTS AGREEMENT" has the meaning set forth in Section 6.3
of this Agreement.
"REGISTRATION STATEMENT" has the meaning set forth in Section 6.3 of this
Agreement.
"REGULATION D" means Regulation D promulgated under the Securities Act.
"RETURNS" means all foreign, federal, state, local and municipal Tax and
information returns.
"SEC" means the Securities and Exchange Commission.
"SECTION 4.13(r) DOCUMENTS" has the meaning set forth in Section 4.13(r)
of this Agreement.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SECURITYHOLDER REPRESENTATION AGREEMENT" means the Securityholder
Representation Agreement in substantially the form attached hereto as Exhibit
6.1.
"SPREADSHEET" means a spreadsheet dated as of the Closing Date, in
substantially the form attached hereto as Exhibit 10.12, setting forth, as of
the Closing Date and immediately prior to the Effective Time, information
relating to the Effective Time Securityholders. Such spreadsheet shall also
reflect the withholding obligations for the Effective Time Securityholders.
12
If any information set forth in such spreadsheet changes because a CDM
Securityholder that held Dissenting Shares fails to perfect appraisal rights or
any Dissenting Shares shall otherwise lose their status as Dissenting Shares, or
for any other reason, then the Chief Executive Officer of CDM as of immediately
prior to the Effective Time shall deliver a revised Spreadsheet to OmniVision
setting forth the corrected information and the effective date of the revision.
"SPREADSHEET SUBMISSION DATE" means the later of (A) the date on which CDM
delivers the Spreadsheet to OmniVision, (B) the Closing Date, or (C) the
Dissenters Deadline Date.
"SUBSIDIARY" of an entity means a corporation or other business entity in
which such entity owns, directly or indirectly, at least a 50% interest or that
is otherwise, directly or indirectly, controlled by such entity.
"TAX" (and, with correlative meaning, "TAXES") means (A) any net income,
alternative or add-on minimum tax, gross income, gross receipts, sales, use, ad
valorem, transfer, franchise, profits, license, withholding, payroll,
employment, excise, severance, stamp, occupation, premium, property,
environmental or windfall profit tax, custom duty or other tax, governmental fee
or other like assessment or charge of any kind whatsoever, together with any
interest or any penalty, addition to tax or additional amount imposed by any
governmental entity responsible for the imposition of any such tax (domestic or
foreign), (B) any liability for the payment of any amounts of the type described
in clause (A) of this sentence as a result of being a member of an affiliated,
consolidated, combined, unitary or aggregate group for any taxable period, and
(C) any liability for the payment of any amounts of the type described in clause
(A) or (B) of this sentence as a result of being a transferee of or successor to
any Person or as a result of any express or implied obligation to indemnify any
other Person.
"TAX REPORTING DOCUMENTATION" means, collectively, an original Form W-9
(or Form W-8, in the case of non-U.S. persons) and other forms and documents
that OmniVision may reasonably request.
"TENDERING CDM STOCKHOLDER" means an Effective Time Securityholder
tendering a CDM Certificate or an Affidavit.
"TERM SHEET" means the Non-Binding "Project Ski-Jump" Term Sheet the
executed by officers of OmniVision and CDM relating to the transactions
contemplated by this Agreement.
"THIRD-PARTY CLAIM" means a claim, demand, suit, action, arbitration,
investigation, inquiry or proceeding brought by a third party against OmniVision
or such other OmniVision Indemnified Person.
"THIRD PARTY PRODUCT TECHNOLOGY" has the meaning set forth in Section
4.13(e) of this Agreement.
"TOTAL CAP" means $10,000,000 (referred to, for purposes of this
definition only, as the "INITIAL $10,000,000"), plus an additional $10,000,000
which will be added to the Initial $10,000,000 retroactive to the Effective Time
only if and when the Milestone Event occurs.
"2003 POLICY" has the meaning set forth in Section 4.16(l) of this
Agreement.
13
Other capitalized terms defined elsewhere in this Agreement and not
defined in this Article 1 shall have the meanings assigned to such terms in this
Agreement.
ARTICLE 2
THE MERGER
2.1 Closing. Absent the termination of this Agreement as provided in
Article 11, the Closing shall take place at the offices of O'Melveny & Xxxxx
LLP, 0000 Xxxx Xxxx Xxxx, Xxxxx Xxxx, Xxxxxxxxxx, on the Closing Date.
Concurrently with the Closing or at such later date and time as may be mutually
agreed in writing by CDM, OmniVision and the Representative, the Certificate of
Merger shall be filed with the Delaware Secretary of State in accordance with
Delaware Law.
2.2 Effects of the Merger. At and upon the Effective Time:
(a) the separate existence of Merger Sub shall cease and Merger Sub
shall be merged with and into CDM, and CDM shall be the surviving corporation
(the "SURVIVING CORPORATION") pursuant to the terms of this Agreement and the
Certificate of Merger;
(b) the Certificate of Incorporation of the Surviving Corporation
shall be amended and restated to read as did the Certificate of Incorporation of
the Merger Sub, as in effect immediately prior to the Effective Time, until
thereafter amended in accordance with its terms and Delaware Law; provided that
Article I of such Certificate of Incorporation shall be amended to read in its
entirety as follows: "The name of the Corporation is CDM Optics, Inc.";
(c) the Bylaws of the Surviving Corporation shall be amended and
restated to read as did the Bylaws of Merger Sub, as in effect immediately prior
to the Effective Time, until thereafter amended in accordance with its terms and
Delaware Law; provided that such Bylaws shall be amended to reflect the name of
the Surviving Corporation is "CDM Optics, Inc.";
(d) the officers of the Surviving Corporation immediately after the
Effective Time shall be as set forth on Exhibit 2.2(d) hereto until their
earlier death, resignation or removal in accordance with the Amended and
Restated Certificate of Incorporation and Amended and Restated Bylaws of the
Surviving Corporation;
(e) the members of the Board of Directors of the Surviving
Corporation immediately after the Effective Time shall be as set forth on
Exhibit 2.2(e) hereto until their earlier death, resignation or removal in
accordance with the Amended and Restated Certificate of Incorporation and
Amended and Restated Bylaws of the Surviving Corporation; and
(f) the Merger shall, from and after the Effective Time, have all of
the effects provided by Delaware Law. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time, all the property, rights,
privileges, powers and franchises of CDM and Merger Sub shall vest in the
Surviving Corporation, and all debts, liabilities and duties of CDM and Merger
Sub shall become the debts, liabilities and duties of the Surviving Corporation.
At the Effective Time, the Surviving Corporation shall become a wholly-owned
subsidiary of OmniVision.
14
2.3 Conversion of Shares in Merger.
(a) Conversion of Merger Sub Common Stock; Treatment of CDM Treasury
Stock; Treatment of Rights to Acquire CDM Capital Stock Owned by OmniVision. At
the Effective Time, each share of Merger Sub Common Stock that is issued and
outstanding immediately prior to the Effective Time shall, by virtue of the
Merger and without any action on the part of the holder thereof, be converted
into and exchanged for one validly issued, fully paid and nonassessable share of
common stock of the Surviving Corporation, and the shares of common stock of the
Surviving Corporation into which the shares of Merger Sub Common Stock are so
converted shall be the only shares of capital stock of Surviving Corporation
that are issued and outstanding immediately after the Effective Time. Each stock
certificate of Merger Sub evidencing ownership of any such shares shall continue
to evidence ownership of such shares of capital stock of the Surviving
Corporation. At the Effective Time, each share of CDM Capital Stock, if any,
held in the treasury of CDM shall be cancelled without any conversion thereof
and no payment or distribution shall be made with respect thereto. At the
Effective Time, any rights to acquire CDM Capital Stock held or acquired by
OmniVision prior to the Effective Time, if any (including, without limitation,
any CDM Warrants purchased by OmniVision pursuant to Section 2.3(b)(ii)), shall
be cancelled without any conversion thereof and no payment or distribution shall
be made with respect thereto.
(b) Conversion of CDM Capital Stock.
(i) CDM Options. Subject to the terms and conditions of this
Agreement and the applicable Contracts with respect to each CDM Option
(including, without limitation, the CDM Option Plan), at the Effective Time,
each CDM Option that is both disclosed in Section 4.4(b) and properly reflected
on the Spreadsheet and that remains issued, outstanding and unexercised
immediately prior to the Effective Time shall, by virtue of the Merger and
without the need for further action on the part of the holder thereof (except as
expressly provided herein), be cancelled and shall represent the right to
receive in exchange for such cancellation (1) a number of shares of OmniVision
Common Stock for each share of CDM Common Stock which would have been issued
upon the exercise in full immediately prior to the Effective Time of such CDM
Option equal to the Initial Stock Conversion Number and (2) an amount of cash,
without interest, equal to (X) the Initial Cash Conversion Number less (Y) the
aggregate exercise price of such CDM Option had such CDM Option been exercised
in full immediately prior to the Effective Time. CDM shall advise OmniVision on
the adequate and accurate withholding obligations with respect to the
cancellation of the CDM Options. Based on the foregoing, OmniVision will, and
hereby covenants to, properly withhold for all income and employment-related
Taxes imposed in connection with the payments to the holders of all unexercised
CDM Options on or after the Closing Date. The preceding provisions of this
Section 2.3(b)(i) are subject to the provisions of Section 2.3(b)(v) (regarding
delivery of cash in lieu of fractional shares), Section 2.3(c) (regarding rights
of holders of Dissenting Shares), Section 2.5 (regarding the Contingent Shares)
and the Put Right.
(ii) CDM Warrants. Subject to the terms and conditions of this
Agreement and the applicable Contracts with respect to each CDM Warrant,
immediately prior to the Effective Time, OmniVision shall purchase all CDM
Warrants that are both disclosed in Section 4.4(c) and properly reflected on the
Spreadsheet that remain issued, outstanding and
15
unexercised immediately prior to the Effective Time, and each CDM Warrantholder
shall, without need for any further action on the part of the holder thereof
(except as expressly provided herein), sell, assign and convey such issued,
outstanding and unexercised CDM Warrants to OmniVision. As the sole
consideration for the sale of each such CDM Warrant to OmniVision, the CDM
Warrantholder shall have the right to receive in exchange for such sale to
OmniVision, (1) a number of shares of OmniVision Common Stock for each share of
CDM Common Stock which would have been issued upon the exercise in full
immediately prior to the Effective Time of such CDM Warrant equal to the Initial
Stock Conversion Number and (2) an amount of cash, without interest, equal to
(X) the Initial Cash Conversion Number less (Y) the aggregate exercise price of
such CDM Warrant had such CDM Warrant been exercised in full immediately prior
to the Effective Time. The preceding provisions of this Section 2.3(b)(ii) are
subject to the provisions of Section 2.3(b)(v) (regarding delivery of cash in
lieu of fractional shares), Section 2.3(c) (regarding rights of holders of
Dissenting Shares), Section 2.5 (regarding the Contingent Shares) and the Put
Right. At the Effective Time, all CDM Warrants purchased by OmniVision pursuant
to this Section 2.3(b)(ii) shall be cancelled in accordance with Section 2.3(a).
(iii) CDM Common Stock. Subject to the terms and conditions of
this Agreement, at the Effective Time, each share of CDM Common Stock (including
CDM Common Stock issued upon exercise of CDM Options and CDM Warrants before the
Effective Time in accordance with Applicable Law and applicable Contracts (but
excluding any CDM Options cancelled in accordance with Section 2.3(b)(i) and any
CDM Warrants purchased by OmniVision in accordance with Section 2.3(b)(ii)),
each as in effect on the date of such exercise) that is issued and outstanding
immediately prior to the Effective Time shall, by virtue of the Merger and
without the need for any further action on the part of the holder thereof
(except as expressly provided herein), cease to exist and shall be converted
into and represent the right to receive (1) a number of shares of OmniVision
Common Stock equal to the Initial Stock Conversion Number and (2) an amount of
cash, without interest, equal to the Initial Cash Conversion Number. The amount
of cash each CDM Stockholder is entitled to receive for the shares of CDM Common
Stock held by such CDM Stockholder shall be rounded to the nearest cent and
computed after aggregating cash amounts for all shares of CDM Common Stock held
by such CDM Stockholder. The preceding provisions of this Section 2.3(b)(iii)
are subject to the provisions of Section 2.3(b)(v) (regarding the delivery of
cash in lieu of any fractional shares), Section 2.3(c) (regarding rights of
holders of Dissenting Shares), Section 2.5 (regarding the Contingent Shares),
and the Put Right.
(iv) Contingent Consideration. In addition to the Initial
Stock Consideration and Initial Cash Consideration payable pursuant to Section
2.3(b)(i)-(iii), upon the occurrence of the Milestone Event, OmniVision shall
distribute additional cash to the former CDM Securityholders, all in accordance
with the terms and conditions set forth in this Agreement. Subject to the
provisions of this Agreement, the portion of the additional cash payable by
OmniVision to each CDM Securityholder upon the occurrence of the Milestone Event
will be in proportion to the number of shares of CDM Common Stock owned by such
CDM Securityholder immediately prior to the Effective Time, the number of shares
of CDM Common Stock issuable upon the exercise of any issued, outstanding
and unexercised CDM Options held by such CDM Securityholder immediately prior to
the Effective Time and the number of shares of CDM Common Stock issuable upon
the exercise of any issued, outstanding
16
and unexercised CDM Warrants held by such CDM Securityholder immediately prior
to the Effective Time.
(v) Fractional Shares. No fractional shares of OmniVision
Common Stock will be issued in connection with the Merger, but in lieu thereof
each holder of CDM Common Stock who would otherwise be entitled to receive a
fraction of a share of OmniVision Common Stock (after aggregating all fractional
shares of OmniVision Common Stock to be received by such holder at that time)
will receive from OmniVision an amount of cash (rounded to the nearest whole
cent) equal to 140% of the Closing Stock Price multiplied by the fraction of a
share of OmniVision Common Stock to which such holder would otherwise be
entitled.
(c) Dissenting Shares. If, in connection with the Merger, holders of
CDM Capital Stock, CDM Options or CDM Warrants are entitled to appraisal rights
pursuant to Delaware Law or, if and only to the extent applicable, Colorado Law,
any Dissenting Shares shall not be converted into a right to receive shares of
OmniVision Common Stock and cash as provided in Section 2.3(b), but shall be
converted into the right to receive such consideration as may be determined to
be due with respect to such Dissenting Shares pursuant to Delaware Law or, if
and only to the extent applicable, Colorado Law. Each holder of Dissenting
Shares who, pursuant to the provisions of Delaware Law or, if and only to the
extent applicable, Colorado Law, becomes entitled to payment of the fair value
of such shares shall receive payment therefor in accordance with Delaware Law
or, if and only to the extent applicable, Colorado Law (but only after the value
therefor shall have been agreed upon or finally determined pursuant to Delaware
Law or, if and only to the extent applicable, Colorado Law). In the event that
any CDM Securityholder eligible for appraisal rights fails to make an effective
demand for payment or fails to perfect its appraisal rights as to its shares of
CDM Capital Stock (or if applicable, other CDM securities, if any, that entitled
to appraisal rights under applicable law) or any Dissenting Shares shall
otherwise lose their status as Dissenting Shares, then any such shares shall
immediately be converted into the right to receive the consideration issuable
pursuant to Articles 2 and 3 in respect of such shares as if such shares had
never been Dissenting Shares, and OmniVision shall issue and deliver to the
holder thereof, at (or as promptly as reasonably practicable after) the
applicable time or times specified in Section 2.6, following the satisfaction of
the applicable conditions set forth in Section 2.6, the shares of OmniVision
Common Stock and cash, without interest thereon, to which such CDM
Securityholder would have been entitled under Section 2.3(b) with respect to
such shares, subject to the provisions of Section 2.3(b)(i) (regarding
deductions from Initial Cash Consideration payable to any CDM Securityholder
equal to the aggregate exercise price of any outstanding and unexercised CDM
Options held by him immediately prior to the Effective Time and not directly
paid for in cash by such CDM Securityholder), Section 2.3(b)(ii) (regarding
deductions from Initial Cash Consideration payable to any CDM Securityholder
equal to the aggregate exercise price of any outstanding and unexercised CDM
Warrant held by him immediately prior to the Effective Time and not directly
paid for in cash by such CDM Warrantholder); Section 2.3(b)(v) (regarding the
delivery of cash in lieu of any fractional shares), Section 2.5 (regarding the
Contingent Shares), the Put Right and any tax withholding obligations. CDM shall
give OmniVision prompt notice (and in no event more than two business days) of
any demand received by CDM for appraisal of CDM Capital Stock or notice of
exercise of a CDM Stockholder's appraisal rights, and OmniVision shall have the
right to control all negotiations and proceedings with respect to any such
demand. CDM agrees that, except with OmniVision's prior written consent, it
shall not voluntarily make any
17
payment or offer to make any payment with respect to, or settle or offer to
settle, any such demand for appraisal.
2.4 CDM Options; CDM Warrants and Other Rights Not Assumed. Except as
expressly provided herein with respect to CDM Options disclosed in Section
4.4(b) and the Spreadsheet that are cancelled in accordance with Section
2.3(b)(i) and CDM Warrants disclosed in Section 4.4(c) and properly reflected on
the Spreadsheet that are purchased by OmniVision in accordance with Section
2.3(b)(ii) and cancelled in accordance with Section 2.3(a), OmniVision is not
assuming, and shall not assume, any obligations or Liabilities under (a) the CDM
Option Plan, (b) any outstanding CDM Options, (c) any outstanding CDM Warrants,
or (c) any other direct or indirect rights to acquire shares of CDM Capital
Stock. On the Closing Date, the CDM Option Plan, any CDM Options, any CDM
Warrants and any other direct or indirect rights to acquire shares of CDM
Capital Stock shall be terminated without further obligation (other than the
specific obligations of OmniVision set forth in Sections 2.3(b)(i) and
2.3(b)(ii) and Article 3), or Liability of CDM, OmniVision or the Surviving
Corporation. Other than the consideration payable pursuant to Sections 2.3(b)(i)
and 2.3(b)(ii) and Article 3 (which must be set forth on the Spreadsheet), with
respect to CDM Options and CDM Warrants which remain outstanding and unexercised
immediately prior to the Effective Time, OmniVision shall not substitute any
equivalent option, warrant or right for any such terminated CDM Option, CDM
Warrant or right.
2.5 Contingent Stock Arrangement.
(a) Contingent Shares. At the Effective Time, the number of shares
of OmniVision Common Stock issuable pursuant to Section 2.3(b)(i)-(iii) to the
Effective Time Securityholders shall be reduced, on a pro rata basis based upon
the number of shares and amount of cash each such holder is entitled to receive
pursuant to Section 2.3(b)(i)-(iii) with respect to the shares of CDM Capital
Stock and shares of CDM Capital Stock issuable with respect to outstanding and
unexercised CDM Options and CDM Warrants that remain outstanding and unexercised
as of immediately prior to the Effective Time (other than Dissenting Shares)
relative to the number of shares and amount of cash all such holders are
entitled to receive pursuant to Section 2.3(b)(i)-(iii) with respect to their
shares of CDM Capital Stock and shares of CDM Capital Stock issuable with
respect to outstanding and unexercised CDM Options and CDM Warrants that remain
outstanding and unexercised as of immediately prior to the Effective Time (and
prior to the cancellation of such CDM Options pursuant to Section 2.3(b)(i) and
the purchase of such CDM Warrants pursuant to Section 2.3(b)(ii)) (other than,
in each case, Dissenting Shares) ("PRO RATA SHARE"), by the number of Contingent
Shares. For purposes of calculating the Pro Rata Share for an Effective Time
Securityholder, the amount of cash taken into consideration shall be determined
prior to giving effect to the amount of offset equal to the aggregate exercise
price otherwise payable with respect to the CDM Options and CDM Warrants.
Subject to Article 12 and Section 2.5(g), OmniVision shall reserve the issuance
of the Contingent Shares until the completion of the Escrow Period as security
for the Effective Time Securityholders' indemnification obligations for Damages
under Article 12 and subject to deduction pursuant to Article 12.
(b) Adjustments for Capital Changes. In the event that prior to the
date of issuance of the Contingent Shares, any stock split, combination,
reclassification, stock dividend, recapitalization or similar event with respect
to the OmniVision Common Stock or any change or
18
conversion of OmniVision Common Stock into other securities, cash or property
should occur or, if a record date with respect to any of the foregoing should
occur, appropriate and proportionate adjustments shall be made to the Contingent
Shares as provided in this Section 2.5 and thereafter all references to the
Contingent Shares shall be deemed to be such consideration as so adjusted.
(c) Distributions on Contingent Shares. Subject to the terms of this
Agreement, any Contingent Dividends shall be held by OmniVision for the benefit
of the Effective Time Securityholders and distributed to the Effective Time
Securityholders in accordance with their respective Pro Rata Share within five
business days following the expiration of the Escrow Period.
(d) Voting of Contingent Shares. The Effective Time Securityholders
shall not be entitled to any voting rights with respect to the Contingent
Shares, until such time or times that the Contingent Shares are issued in
accordance with this Section 2.5.
(e) Approval of Contingent Share Arrangement. By approving the
Merger and/or accepting the consideration set forth in any of Section
2.3(b)(i)-(iii), the Effective Time Securityholders will have (i) irrevocably
and unconditionally approved the retention by OmniVision of any Contingent
Shares and any Escrow Consideration in satisfaction of any indemnification
obligations of the Effective Time Securityholders under Article 12, (ii)
irrevocably and unconditionally authorized the Representative to make, on behalf
of all of the Effective Time Securityholders, either of the elections set forth
in Section 2.5(g) with respect to substituting Escrow Consideration for
Contingent Shares, and (iii) irrevocably and unconditionally agreed to take such
other actions, if any, with respect to the issuance (or non-issuance and
retention by OmniVision) of the Contingent Shares or Escrow Consideration
(including, without limitation, with respect to any election by the
Representative to substitute Escrow Cash or Contingent Cash for Contingent
Shares pursuant to Section 2.5(g)) as may be necessary, in OmniVision's
reasonable opinion, to effect the proper treatment of the Contingent Shares or
Escrow Consideration pursuant to the terms of this Agreement.
(f) Issuance of Contingent Shares. Subject to Article 12 and
Sections 2.5(e) and 2.5(g), within five business days following the expiration
of the Escrow Period, OmniVision shall make payment of any Contingent Dividends
and issue certificates representing the Contingent Shares to the Effective Time
Securityholders at their respective addresses as reflected in the records of
OmniVision and, in each case, in accordance with such Effective Time
Securityholder's respective Pro Rata Share. Subject to Article 12 and Sections
2.5(e) and 2.5(g), payment of any Contingent Dividends and issuance of
certificates representing the Contingent Shares shall be made if the amount of
Contingent Dividends and the number of Contingent Shares exceeds, as applicable,
(i) any Contingent Dividends and Contingent Shares retained by OmniVision in
satisfaction of Claims for Damages by OmniVision Indemnified Persons and (ii)
any amount of Contingent Dividends and Contingent Shares that is necessary to
satisfy all unresolved, unsatisfied or disputed Claims for Damages specified in
any Notice of Claim delivered to the Representative before the expiration of the
Escrow Period. Subject to Article 12 and Sections 2.5(e) and 2.5(g), if any
Claims are unresolved, unsatisfied or disputed as of the expiration of the
Escrow Period, then OmniVision shall not issue that amount of Contingent Shares
(which shall be deemed to have a per share value equal to 140% of the Closing
Stock
19
Price) and Contingent Dividends that equals the total maximum amount of Damages
then being claimed by OmniVision Indemnified Persons in all such unresolved,
unsatisfied or disputed Claims, and within five business days following
resolution of any such Claims, OmniVision shall issue to the Effective Time
Securityholders, at their respective addresses as reflected in the records of
OmniVision and in accordance with their respective Pro Rata Share, any remaining
Contingent Shares and Contingent Dividends, if any, not required to satisfy
remaining unresolved, unsatisfied or disputed Claims. Payment of Contingent
Dividends, if any, shall be made by check or property, as applicable. If the
number of Contingent Shares to be issued to any Effective Time Securityholder is
not evenly divisible by one, OmniVision shall round down the number of shares to
be distributed to the nearest whole share. In lieu of the fractional interest
not distributed, OmniVision shall distribute to such Effective Time
Securityholder cash in an amount (rounded to the nearest whole cent) equal to
the product of (i) such fractional interest and (ii) 140% of the Closing Stock
Price. OmniVision shall be deemed to have purchased all such fractional
interests which it has distributed cash in lieu of (rounded down to the nearest
whole share after aggregating all such fractional interests).
(g) Substitution of Escrow Consideration in Replacement of
Contingent Shares. In the event that any of the Contingent Shares are not issued
to the Effective Time Securityholders because OmniVision retains or makes a
Notice of Claim and does not issue such Contingent Shares pursuant to one or
more Contested Claim(s) delivered on or prior to the eighteen-month anniversary
of the Effective Time in compliance with Article 12 and prior to the final
resolution of such Contested Claim(s), the Representative (on behalf of all
Effective Time Securityholders) shall have the right (but not the obligation),
by written notice to OmniVision signed by the Representative and delivered to
OmniVision within five business days following the eighteen-month anniversary of
the Effective Time to either:
(i) elect by such written notice, accompanied by a bona fide
cashier's check drawn by the Representative and payable to OmniVision or wire
transfer to an account designated by OmniVision (for which the Representative
shall have been remunerated by the Effective Time Securityholders in accordance
with their respective Pro Rata Share) from a bank of nationally recognized
standing in an aggregate amount equal to the aggregate value of the Contingent
Shares (valuing each such share at 140% of the Closing Stock Price) retained and
not issued by OmniVision pursuant to such Contested Claim(s) (such payment
amount, collectively, the "ESCROW CASH") to have OmniVision replace such
Contingent Shares with the Escrow Cash. Within three business days after
OmniVision's receipt of such notice of election of the Representative and Escrow
Cash, each in form and substance reasonably acceptable to OmniVision, OmniVision
shall substitute the Escrow Cash included with the notice for the applicable
number of Contingent Shares and shall issue such Contingent Shares, in the names
of the Effective Time Securityholders as reflected on the Spreadsheet in
accordance with their Pro Rata Share, to the Representative for delivery by the
Representative to the Effective Time Securityholders, and OmniVision shall have
no further obligation with respect to such Contingent Shares except as may exist
under the Put Agreement or Registration Rights Agreement. OmniVision shall
deposit any Escrow Cash received by it in a segregated interest-bearing account
at a nationally-recognized bank of its selection. Any interest, earnings or
other income that accrues upon the Escrow Cash, during the period of time which
the Escrow Cash is held in such account (the "ESCROW EARNINGS") shall not be
deemed to be part of the Escrow Cash, but instead shall be the property of
OmniVision as compensation for maintaining and
20
administering the Escrow Cash account. Effective Time Securityholders will not
be entitled to and will not be paid any interest on the Escrow Cash. For tax
reporting purposes, all Escrow Earnings, if any, attributable to the Escrow Cash
shall be allocable to OmniVision. The Escrow Cash shall be considered
"Contingent Shares" for all purposes in Article 12 of this Agreement and Escrow
Cash will only be released to the Effective Time Securityholders when, if, and
to the extent the Contingent Shares for which such Escrow Cash was substituted
would have been issued to the Effective Time Securityholders pursuant to Article
12 (and subject to any deduction for Damages in accordance with Article 12); or
(ii) elect by such written notice to have OmniVision replace
the Contingent Shares retained by OmniVision and not issued by OmniVision
pursuant to such Contested Claim(s), with an obligation of OmniVision to pay,
when, if and to the extent due pursuant to Article 12 (and subject to any
deduction for Damages in accordance with Article 12), an amount of cash to the
Effective Time Securityholders (the "CONTINGENT CASH") equal to the value of
their respective Pro Rata Share of the retained Contingent Shares (valuing each
such share at 140% of the Closing Stock Price). Immediately upon OmniVision's
receipt of such notice of election of the Representative in form and substance
reasonably acceptable to OmniVision, OmniVision shall substitute its obligations
with respect to the Contingent Shares with an obligation to issue Contingent
Cash as set forth in the immediately preceding sentence and subject to the terms
and conditions of Article 12, and no Effective Time Securityholder shall have
any right or interest in or to the Contingent Shares that are replaced by such
Contingent Cash obligation, and any and all obligations of OmniVision with
respect to such Contingent Shares will terminate and be of no further force or
effect. The Effective Time Securityholders will not be entitled to and will not
be paid any interest with respect to the Contingent Cash. Contingent Cash shall
be considered "Contingent Shares" for all purposes in Article 12 of this
Agreement and Contingent Cash will only be paid to the Effective Time
Securityholders when, if, and to the extent the Contingent Shares for which such
Contingent Cash was substituted would be issued to the Effective Time
Securityholders pursuant to Article 12 (and subject to any deduction for Damages
in accordance with Article 12).
(h) No Transfer or Encumbrance. No Contingent Shares, Escrow
Consideration, Contingent Dividends or any beneficial interest therein may be
pledged, encumbered, sold, assigned or transferred (including any transfer by
operation of law) by OmniVision or an Effective Time Securityholder or be taken
or reached by any legal or equitable process in satisfaction of any debt or
other liability of OmniVision or such Effective Time Securityholder, prior to
(i) in the case of OmniVision, the retention of Contingent Shares, Escrow
Consideration or Contingent Dividends in satisfaction of a resolved Claim for
Damages in accordance with this Agreement or (ii) in the case of the Effective
Time Securityholders, the issuance and payment by OmniVision to the Effective
Time Securityholders of Contingent Shares or Contingent Dividends in accordance
with this Agreement, except that Effective Time Securityholders shall be
entitled to assign their rights to the Contingent Shares and Contingent
Dividends by will or by the laws of intestacy.
(i) No Liability of OmniVision. In holding and administering the
Contingent Shares, Escrow Consideration and Contingent Dividends, OmniVision
will incur no liability with respect to any action taken (or not taken) or
suffered by it in reliance upon any notice, direction, instruction, consent,
statement or other document believed by it to be genuine and to have been
21
signed or approved by the Representative (and shall have no responsibility to
determine the authenticity thereof), nor for any other action or inaction,
except OmniVision's own willful misconduct or gross negligence. In all questions
arising under this Agreement with respect to the Contingent Shares, Escrow
Consideration and Contingent Dividends, OmniVision may rely on the written
opinion of counsel, and OmniVision will not be liable to anyone for anything
done, omitted or suffered in good faith by OmniVision based on such advice.
2.6 Exchange of Certificates.
(a) CDM Certificates. OmniVision shall provide CDM with the
following materials to be mailed by CDM prior to the Closing Date on behalf of
OmniVision to each holder of record of CDM Capital Stock that was outstanding
immediately prior to the Effective Time, and each holder of CDM Warrants and CDM
Options which will be, at the Effective Time, converted into, exchanged for, or
represent the right to receive shares of OmniVision Common Stock and cash
pursuant to Section 2.3(b): (i) a letter of transmittal in customary form
(including appropriate Tax Reporting Documentation to be completed by each
Effective Time Securityholder); and (ii) instructions for use in effecting the
surrender of the CDM Certificates in exchange for the number of shares of
OmniVision Common Stock and amount of cash specified in this Article 2. Upon
surrender of a CDM Certificate for cancellation or upon delivery of an Affidavit
to OmniVision (in the case of a Tendering CDM Stockholder), together with such
letter of transmittal, any required Tax Reporting Documents, each duly completed
and validly executed in accordance with the instructions thereto, OmniVision
shall issue or cause to be issued to each Tendering CDM Stockholder, each CDM
Optionholder entitled to payment under Section 2.3(b)(i) and each CDM
Warrantholder entitled to payment under Section 2.3(b)(ii) the number of shares
of OmniVision Common Stock and amount of cash to which such Effective Time
Securityholder is entitled pursuant to Section 2.3(b), subject to the provisions
of Section 2.3(c) (regarding rights of holders of Dissenting Shares) and Section
2.5 (regarding the Contingent Shares) as set forth herein. If an Effective Time
Securityholder returns the requisite materials, in proper and complete form, to
OmniVision at least five days prior to the Closing Date, OmniVision shall, (i)
on the Closing Date, cause the portion of the Initial Cash Consideration payable
to such Effective Time Securityholder pursuant to Section 2.3(b) and the
Spreadsheet to be delivered, at OmniVision's election, by (x) cashier's checks
to the Representative at O'Melveny & Xxxxx LLP's or OmniVision's offices on the
Closing Date (who shall in turn deliver such checks to the other Effective Time
Securityholders), (y) wire transfer pursuant to valid wire transfer instructions
received by OmniVision at least two business days prior to the Closing Date or
(z) cashier's check by overnight courier the following business day to such
Effective Time Securityholder (or, if the requisite materials are not received
in proper and complete form at least five days prior to the Effective Time,
OmniVision shall deliver such portion of the Initial Cash Consideration within a
reasonable time following receipt of such properly completed materials by
OmniVision, but in any case within five business days after receipt by
OmniVision of properly completed materials from such Tendering CDM Stockholder
as required by this Section 2.6(a)), and (ii) within 20 business days after the
later of the Closing Date or OmniVision's receipt from the Effective Time
Securityholder of properly completed materials as required by this Section
2.6(a), deliver a certificate representing the number of shares of OmniVision
Common Stock to which such Effective Time Securityholder is due (other than the
Contingent Shares) pursuant to Section 2.3(b). Until CDM Certificates are
surrendered or an Affidavit is delivered pursuant to this Section 2.6(a),
together with such other documents
22
required pursuant to this Section 2.6(a), such CDM Certificates shall be deemed,
for all purposes, to evidence ownership of the number of shares of OmniVision
Common Stock and amount of cash which CDM Capital Stock shall have been
converted pursuant to Section 2.3(b), subject to the provisions of Section
2.3(c) (regarding rights of holders of Dissenting Shares) and Section 2.5
(regarding the Contingent Shares).
(b) Distributions with Respect to Unsurrendered Certificates. No
dividends or other distributions declared or made after the Effective Time with
respect to OmniVision Common Stock with a record date after the Effective Time
shall be paid to the holder of any unsurrendered CDM Certificate with respect to
the shares of OmniVision Common Stock represented thereby until the holder of
record of such CDM Certificate shall surrender such CDM Certificate as provided
in this Section 2.6. Following surrender of any such CDM Certificate, there
shall be paid to the record holder of the certificates representing whole shares
of OmniVision Common Stock issued in exchange therefor, without interest, (i)
the amount of dividends or other distributions with a record date after the
Effective Time theretofore paid with respect to such whole shares of OmniVision
Common Stock, and (ii) at the appropriate payment date, the amount of dividends
or other distributions with a record date after the Effective Time but prior to
surrender and a payment date subsequent to surrender payable with respect to
such whole shares of OmniVision Common Stock.
(c) CDM Stock Transfer Books. All shares of OmniVision Common Stock
and cash issued upon the surrender for exchange of shares of CDM Capital Stock
in accordance with the terms of this Agreement shall be deemed to have been
issued in full satisfaction of all rights pertaining to such shares of CDM
Capital Stock. After the Effective Time, there shall be no further registration
of transfers on the stock transfer books of CDM or its transfer agent of any CDM
Capital Stock that was outstanding immediately prior to the Effective Time. If,
after the Effective Time, any CDM Certificates or Affidavits are presented for
any reason, they shall be cancelled and exchanged as provided in this Section
2.6.
(d) No Liability of OmniVision. Neither OmniVision nor the Surviving
Corporation shall be liable to any holder of shares of CDM Capital Stock for any
amount delivered in good faith to a public official pursuant to any applicable
abandoned property, escheat or similar law. Notwithstanding anything to the
contrary contained herein, if any CDM Certificate has not been surrendered prior
to the fifth anniversary of the Effective Time (or immediately prior to such
earlier date on which the Merger consideration contemplated by this Agreement in
respect of such CDM Certificate would otherwise escheat to or become the
property of any Governmental Authority), any amounts payable in respect of such
CDM Certificate shall, to the extent permitted by Applicable Law, become the
property of OmniVision, free and clear of all claims or interests of any Person
previously entitled thereto. OmniVision shall be entitled to rely without
inquiry or investigation on the information contained in the Spreadsheet and
shall make the payments and distributions contemplated by Article 2 and Article
3 in accordance with such information, and neither OmniVision nor the Surviving
Corporation shall have any liability to any Person for making such payments and
distributions in accordance with such information.
23
2.7 Tax Consequences, Withholding and Reporting.
(a) Tax Consequences. It is acknowledged by the parties hereto that
the Merger shall constitute a taxable transaction to the CDM Securityholders for
federal and state tax purposes. OmniVision makes no representations or
warranties to CDM or to any CDM Stockholder, CDM Optionholder or CDM
Warrantholder regarding any of the tax consequences to CDM or any CDM
Stockholder, CDM Warrantholder or CDM Optionholder of this Agreement, the Merger
or any of the other transactions or agreements contemplated hereby. CDM and, by
virtue of the CDM Stockholders approving the Merger, this Agreement and the
other transactions or agreements contemplated hereby, the CDM Securityholders,
acknowledge that CDM and the CDM Securityholders are relying solely on their own
tax advisors in connection with the Merger, this Agreement and the other
transactions or agreements contemplated hereby.
(b) Tax Withholding. OmniVision or OmniVision's agents will be
entitled to deduct and withhold from any shares or cash otherwise distributable
pursuant to this Agreement to any CDM Securityholder (including with respect to
any payment pursuant to Section 2.5 or Contingent Consideration Payment), the
amounts required to be deducted and withheld under the Code, or any provision of
state, local or foreign Tax law, with respect to the making of such payment and
the Spreadsheet shall correctly reflect the requisite deductions and
withholdings with respect to the payments to be made pursuant to Sections 2.3
and 2.6 (but not any payments, if any, made pursuant to Section 2.5 or Article
3). OmniVision or OmniVision's agents shall first make such deduction and
withholding against any cash otherwise distributable pursuant to this Agreement
to any CDM Securityholder and to the extent cash shall not be available shall
make such deduction and withholding from any OmniVision shares (valued per share
at 140% of the Closing Stock Price) otherwise distributable pursuant to this
Agreement to any CDM Securityholder. To the extent that amounts are so withheld,
such withheld amounts will be treated for all purposes of this Agreement as
having been paid to the CDM Securityholder in respect of whom such deduction and
withholding was made.
(c) Tax Reporting. The Representative will provide OmniVision with
tax identification numbers for each of the Effective Time Securityholders by
furnishing appropriate Tax Reporting Documentation within 30 calendar days after
the Closing Date (to the extent such Tax Reporting Documentation has not already
been furnished by an Effective Time Securityholder with its letter of
transmittal pursuant to Section 2.6(a)). The Representative and the Effective
Time Securityholders shall also provide appropriate Tax Reporting Documentation
to OmniVision, which information shall be accurate and complete when provided,
after the Milestone Event and prior to OmniVision's payment of the Contingent
Consideration Payment in order to enable OmniVision to properly calculate and
make any required withholdings and deductions from the Contingent Consideration
Payment. The parties hereto understand that, if such Tax Reporting Documentation
is not so provided to OmniVision, OmniVision shall be required by the Code to
withhold a portion of any interest or other income earned on the investment of
monies or other property held by OmniVision if and to the extent such interest
or other income is payable to any of the Effective Time Securityholders pursuant
to this Agreement, as well as on the portion of any installment payments of cash
or shares to the CDM Stockholders and the CDM Warrantholders characterized as
imputed interest pursuant to Sections 483 or 1274 of the Code, if any.
24
(d) Tax Treatment. For federal and state income Tax purposes, the
Merger is intended to constitute a taxable purchase of the CDM Capital Stock and
the CDM Warrants by OmniVision. The parties hereby agree that the obligations to
issue the Contingent Shares and pay the Contingent Consideration Payment to the
CDM Stockholders with respect to their CDM Capital Stock and to the CDM
Warrantholders with respect to their CDM Warrants shall be treated as
installment obligations for purposes of Section 453 of the Code.
2.8 Adjustments for Capital Changes. Any provision of this Agreement shall
be adjusted to appropriately reflect any stock split, stock dividend, reverse
stock split, combination, recapitalization or other similar event affecting
OmniVision Common Stock or CDM Capital Stock occurring on or after the date
hereof and prior to the Effective Time and shall be reflected in an updated
Spreadsheet as appropriate.
2.9 Further Assurances. If, at any time before or after the Effective
Time, any party reasonably believes or is advised that any further instruments,
deeds, assignments or assurances are reasonably necessary or desirable to
consummate the Merger or to carry out the purposes and intent of this Agreement
at or after the Effective Time, then the other parties and their respective
officers and directors shall execute and deliver all such proper deeds,
assignments, instruments and assurances and do all other things reasonably
necessary or desirable to consummate the Merger and to carry out the purposes
and intent of this Agreement.
ARTICLE 3
CONTINGENT CONSIDERATION
3.1 Contingent Consideration Payment; Post-Closing Assistance. On or
before the twenty-fifth calendar day following the end of OmniVision's fiscal
quarter in which the Milestone Event occurs, OmniVision shall distribute to the
Effective Time Securityholders, at their respective addresses as reflected in
the records of OmniVision and in accordance with their respective Pro Rata
Share, the Contingent Consideration Payment, subject to deduction and/or offset,
if any, in accordance with Article 12 and/or this Article 3. In the event that
OmniVision fails to make the Contingent Consideration Payment within 90 days
after the date that such payment is due to be paid and uncontested pursuant to
Article 12 and/or this Article 3, then the Contingent Consideration Payment
shall accrue simple interest at an annual interest rate (calculated daily on the
basis of a year of 365 days and the actual number of days elapsed) equal to the
rate of interest published by the Wall Street Journal as the "prime rate" in
effect on the date the Contingent Consideration Payment was first due and
uncontested, with the accrual of such interest commencing on the date that such
Contingent Consideration Payment was first due and uncontested and ceasing to
accrue the day before such Contingent Consideration Payment (together with any
accrued and unpaid interest incurred by OmniVision pursuant to this sentence) is
actually paid by OmniVision. Following the Closing, OmniVision and/or the
Surviving Corporation shall provide the post-Closing assistance to the Surviving
Corporation as set forth in the Post-Closing Assistance Covenants. The
distribution of the Contingent Consideration Payment (and any interest thereon
as set forth above) will be subject to any applicable Tax withholding.
25
3.2 Limitations on Contingent Consideration.
(a) Dollar Limitation. The Contingent Consideration Payment, in the
event the Milestone Event occurs, shall be subject to deduction and/or offset
pursuant to Article 12. In no event shall more than one Contingent Consideration
Payment be made.
(b) Milestone Limitation. In the event that the Milestone Event does
not occur between the Effective Time and the fourth anniversary of the Closing
Date, all rights to receive any Contingent Consideration Payment shall be
forfeited, no Contingent Consideration Payment shall be made to any Effective
Time Securityholder and OmniVision shall have no obligation to make the
Contingent Consideration Payment to the Effective Time Securityholders pursuant
to this Agreement or otherwise.
(c) Indemnification Claims. If prior to the date scheduled for
distribution of the Contingent Consideration Payment, OmniVision delivers a
Notice of Claim to the Representative specifying that any earned but unpaid
Contingent Consideration Payment is necessary to satisfy a Claim for Damages,
such Claim remains unresolved, unsatisfied or disputed as of the date scheduled
for payment of the Contingent Consideration Payment, and the amount of such
Claim, combined with any other unresolved, unsatisfied or disputed Claims, is
greater than the value of the Contingent Shares (if any) and the Escrow
Consideration (if any) then held pursuant to Section 2.5, then OmniVision shall
retain possession and custody of that amount of the Contingent Consideration
Payment that equals the total maximum amount of Damages then being claimed by
the OmniVision Indemnified Persons in all such unresolved, unsatisfied or
disputed Claims, that are not then adequately secured by any Contingent Shares
(if any) and any Escrow Consideration (if any) then being held by OmniVision,
and within 10 business days following resolution of all such Claims, OmniVision
shall release to the Effective Time Securityholders, after the scheduled
distribution date, at their respective addresses as reflected in the records of
OmniVision and in accordance with their respective Pro Rata Share of the
Contingent Consideration Payment, any remaining amounts due under the Contingent
Consideration Payment, if any, not required to satisfy such Damages. Such
releases of the Contingent Consideration Payment, if any, shall be made by
check.
(d) Contingent Consideration Rights Not Transferable. No portion of
the Contingent Consideration Payment may be pledged, encumbered, sold, assigned
or transferred (including any transfer by operation of law), by an Effective
Time Securityholder or be taken or reached by any legal or equitable process in
satisfaction of any debt or other liability of such holder, prior to the actual
distribution to such holder of such Contingent Consideration Payment in
accordance with this Agreement, except that an Effective Time Securityholder
shall be entitled to assign his rights to such Contingent Consideration Payment
by will or the laws of intestacy.
3.3 Contingent Consideration Reporting.
(a) Quarterly Reports. Within 25 calendar days following the end of
each of OmniVision's fiscal quarters following the Closing Date during which
fiscal quarter there have been sales of Qualifying Products, OmniVision will
deliver to the Representative a report showing the number of units of Qualifying
Products sold during such fiscal quarter and cumulative number of units of
Qualifying Products sold since the Closing Date through the end
26
of such fiscal quarter that, in each case, qualify towards the Milestone Event
(the "QUARTERLY REPORTS"). OmniVision shall have no obligation to prepare or
deliver Quarterly Reports following the earlier of (i) the date the Contingent
Consideration Payment is made by OmniVision and (ii) the fourth anniversary of
the Closing Date plus the completion of one full OmniVision fiscal quarter
following the fourth anniversary of the Closing Date; provided that unless the
Contingent Consideration Payment is made by OmniVision prior to the fourth
anniversary of the Closing Date plus the completion of one full OmniVision
fiscal quarter following the fourth anniversary of the Closing Date, OmniVision
shall prepare and deliver to the Representative within 25 calendar days
following the fourth anniversary of the Closing Date plus the completion of one
full OmniVision fiscal quarter following the fourth anniversary of the Closing
Date a final report containing the same information as set forth in the
Quarterly Reports for any stub period between the last delivered Quarterly
Report and the fourth anniversary of the Closing Date (such final stub period
report is also considered a "Quarterly Report" hereunder).
(b) Representative Objection to Quarterly Report. The Representative
shall, within 25 calendar days after delivery of any Quarterly Report, deliver
to OmniVision in writing any objection thereto. Any such objection shall be in
reasonable detail and include the specific component or components of
OmniVision's calculation in dispute. To the extent not specifically and
expressly disputed in a timely manner, OmniVision's Quarterly Report shall be
conclusive, accepted and binding on the Representative and the Effective Time
Securityholders and neither the Representative nor the Effective Time
Securityholders shall be entitled to raise any objection (whether in connection
with a subsequent Quarterly Report or otherwise) with respect to the
calculations set forth in such Quarterly Report. If the Representative objects
in writing to OmniVision's calculations contained in a Quarterly Report prior to
the expiration of such 25 calendar day period, OmniVision and the Representative
shall resolve such conflict in accordance with the procedures set forth in
Section 12.8 for Contested Claims. OmniVision shall provide the Representative
with reasonable access to the relevant books and records during normal business
hours and with reasonable advanced notice with respect to matters concerning the
calculation of the Milestone Event, subject to the Representative entering into
customary confidentiality agreements with respect thereto.
(c) Contingent Consideration Notice. Within 25 calendar days
following the end of the month in which the Milestone Event occurs, OmniVision
shall deliver to the Representative a written notice (the "CONTINGENT
CONSIDERATION NOTICE") stating that the Milestone Event has occurred and
specifying in reasonable detail, if applicable under Article 12, any proposed
recovery for Damages, if any.
(d) Representative Objection to Contingent Consideration Payment
Deductions. The Representative shall, within 25 calendar days after delivery of
the Contingent Consideration Notice, deliver to OmniVision in writing any
objection to any proposed deduction or offset against the Contingent
Consideration Payment contained in the Contingent Consideration Notice. Any such
objection shall be in reasonable detail and include the specific component or
components of OmniVision's proposed deduction in dispute. To the extent not
specifically and expressly disputed in a timely manner, OmniVision's proposed
deduction shall be conclusive, accepted and binding on the Representative and
the Effective Time Securityholders. If the Representative objects in writing to
OmniVision's proposed deduction prior to the expiration of such 25 calendar day
period, no portion of the Contingent
27
Consideration Payment shall be distributed to the Effective Time Securityholders
or deducted and/or offset against by OmniVision, and OmniVision and the
Representative shall resolve such conflict in accordance with the procedures set
forth in Section 12.8 for Contested Claims.
(e) Contingent Consideration as Merger Consideration. Except for any
payments made with respect to the CDM Options, any Contingent Consideration
Payment payable to the Effective Time Securityholders pursuant to this Article 3
will not constitute compensation for services but rather will constitute part of
the consideration for the CDM Capital Stock and CDM Warrants acquired by
OmniVision in the Merger.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF CDM
Subject to the exceptions set forth in a numbered or lettered section of
the CDM Disclosure Letter, CDM and each CDM Officer represents and warrants to
OmniVision and Merger Sub as follows:
4.1 Organization and Good Standing. CDM is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
CDM has been, and CDM's predecessor (while in existence) was at all times during
its existence, continuously in good standing under the laws of their respective
jurisdictions of incorporation since their respective dates of incorporation.
CDM has the corporate power and authority to own, operate and lease its
properties and to carry on the CDM Business. CDM is duly qualified or licensed
to do business, and is in good standing, in each jurisdiction where the
character of the properties owned, leased or operated by it or the nature of its
activities makes such qualification or licensing necessary (each such
jurisdiction being listed on Schedule 4.1 of the CDM Disclosure Letter). CDM has
delivered to OmniVision's legal counsel true and complete copies of the
currently effective Certificate of Incorporation and Bylaws of CDM, each as
amended to date. CDM is not in violation of its Certificate of Incorporation or
Bylaws, each as amended to date.
4.2 Subsidiaries. CDM does not have any Subsidiary or any equity or
ownership interest (or any interest convertible or exchangeable or exercisable
for, any equity or ownership interest), whether direct or indirect, in any
Person. CDM is not obligated to make nor is it bound by any agreement or
obligation to make any investment in or capital contribution in or on behalf of
any other Person.
4.3 Power, Authorization and Validity.
(a) Power and Authority. Subject to receipt of the CDM Stockholder
Approval, CDM has all requisite corporate power and authority to enter into,
execute, deliver and perform its obligations under this Agreement and each of
the CDM Ancillary Agreements and to consummate the Merger. The Merger and the
execution, delivery and performance by CDM of this Agreement, each of the CDM
Ancillary Agreements and all other agreements, transactions and actions
contemplated hereby or thereby, have been duly and validly approved and
authorized by CDM's Board of Directors. CDM and the CDM Stockholders listed on
Exhibit 10.8(A) have executed and delivered to OmniVision the Voting Agreement
under which such CDM Stockholders have agreed, among other things, to vote their
shares of CDM Capital
28
Stock in favor of the Merger, the adoption and approval of this Agreement and
the other actions contemplated by this Agreement and required in furtherance of
this Agreement, which votes are sufficient to obtain the CDM Stockholder
Approval. No state takeover statute is applicable to the Merger or other
transactions contemplated by this Agreement.
(b) No Consents. No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Authority, or any
other Person, governmental or otherwise, is necessary or required to be made or
obtained by CDM to enable CDM to lawfully execute and deliver, enter into, and
perform its obligations under this Agreement and each of the CDM Ancillary
Agreements or to consummate the Merger, except for (i) the filing of the
Certificate of Merger with the Delaware Secretary of State and (ii) the CDM
Stockholder Approval.
(c) Enforceability. This Agreement has been duly executed and
delivered by CDM. This Agreement and each of the CDM Ancillary Agreements are,
or when executed by CDM will be, valid and binding obligations of CDM,
enforceable against CDM in accordance with their respective terms, subject to
the effect of (i) applicable bankruptcy, insolvency, reorganization, moratorium
or other similar laws now or hereafter in effect relating to rights of creditors
generally and (ii) rules of law and equity governing specific performance,
injunctive relief and other equitable remedies.
4.4 Capitalization of CDM.
(a) Authorized and Outstanding Capital Stock of CDM. The authorized
capital stock of CDM consists solely of 60,000,000 shares, of which 50,000,000
shares are designated as CDM Common Stock and 10,000,000 shares are designated
as CDM Preferred Stock. Of the 50,000,000 shares of authorized CDM Common Stock,
49,000,000 shares are designated as CDM Voting Common Stock and 1,000,000 shares
are designated as CDM Non-voting Common Stock. A total of 5,599,100 shares of
CDM Common Stock are issued and outstanding as of the Agreement Date, 5,519,100
shares of which are CDM Voting Common Stock and 80,000 shares of which are CDM
Non-voting Common Stock. No shares of CDM Preferred Stock are issued and
outstanding as of the Agreement Date. Schedule 4.4(a) of the CDM Disclosure
Letter sets forth, for issued and outstanding shares of CDM Capital Stock, (i)
the name of each CDM Stockholder, (ii) the numbers and kind of shares of CDM
Capital Stock held by each CDM Stockholder, (iii) the vesting schedule, if any,
for such CDM Capital Stock, (iv) the extent such CDM Capital Stock is vested and
unvested as of the Agreement Date, (v) whether the vesting of such CDM Capital
Stock shall be accelerated in any manner by any of the transactions contemplated
by this Agreement or upon any other event or condition and the extent of
acceleration, if any, and (vi) whether an election under Section 83(b) of the
Code with respect to such CDM Capital Stock has been timely filed with the
Internal Revenue Service. No shares of CDM Capital Stock are issued or
outstanding as of the Agreement Date that are not set forth on Schedule 4.4(a)
of the CDM Disclosure Letter and no such shares shall be issued or outstanding
as of the Closing Date that are not set forth on Schedule 4.4(a) of the CDM
Disclosure Letter, except for shares of CDM Common Stock issued pursuant to the
exercise of outstanding CDM Options listed on Schedule 4.4(b) of the CDM
Disclosure Letter or pursuant to the exercise of outstanding CDM Warrants listed
on Schedule 4.4(c) of the CDM Disclosure Letter. CDM holds no treasury shares.
To CDM's Knowledge, each CDM Stockholder has
29
good and marketable title to that number of shares of CDM Capital Stock as set
forth beside such CDM Stockholder's name on Schedule 4.4(a) of the CDM
Disclosure Letter, free and clear of any Encumbrance. All issued and outstanding
shares of CDM Capital Stock have been duly authorized and validly issued, are
fully paid and nonassessable, were not issued in violation of and are not
subject to any right of rescission, right of first refusal or preemptive right,
and have been offered, issued, sold and delivered by CDM in compliance with all
requirements of Applicable Law and all requirements set forth in applicable
Contracts. There is no Liability for dividends accrued and unpaid by CDM.
(b) Options. CDM has reserved an aggregate of 938,700 shares of CDM
Common Stock for issuance pursuant to the CDM Option Plan (including shares
subject to outstanding CDM Options). A total of 746,800 shares of CDM Common
Stock are subject to outstanding CDM Options as of the date of this Agreement,
each of which have been issued under the CDM Option Plan and no shares of CDM
Common Stock will be subject to outstanding CDM Options as of immediately
following the Effective Time. The Spreadsheet fully reflects the treatment of
all outstanding CDM Options pursuant to Section 2.3(b)(i), including all
applicable tax withholding amounts, and the CDM Option Plan and all applicable
Contracts with respect to outstanding CDM Options have been or will be, as, if
and to the extent necessary, duly and properly amended prior to the Effective
Time to provide for the treatment of CDM Options in connection with the Merger
as set forth in Section 2.3(b)(i). Schedule 4.4(b) of the CDM Disclosure Letter
sets forth, for each issued and outstanding CDM Option, (i) the name of the
holder of such CDM Option, (ii) the exercise price per share of such CDM Option,
(iii) the number of shares covered by such CDM Option and (iv) whether such CDM
Option is an incentive stock option or non-statutory stock option under the
Code. The terms of the CDM Option Plan permit the early exercise of CDM Options
for CDM Common Stock as provided in this Agreement, without the consent or
approval of the holders of such CDM Options, the CDM Stockholders or any other
action. Correct and complete copies of the CDM Option Plan, the standard
agreement under the CDM Option Plan, and each agreement for each CDM Option that
does not conform to the standard agreement under the CDM Option Plan have been
delivered by CDM to OmniVision's legal counsel. All CDM Options have been issued
and granted in compliance with Applicable Law and all requirements set forth in
applicable Contracts. On the Closing Date, the CDM Option Plan will terminate in
accordance with its terms and the CDM Options and any other direct or indirect
rights to acquire shares of CDM Capital Stock will terminate in accordance with
their terms and the terms of the CDM Option Plan, in each case, without further
obligation or Liability of CDM, OmniVision or the Surviving Corporation, other
than the expressly stated obligations set forth in this Agreement and the
OmniVision Ancillary Agreements. The CDM Option Plan and each Contract with
respect to outstanding CDM Options permits the treatment of the CDM Options in
the Merger as set forth in Section 2.3(b)(i) and such treatment will not
constitute a breach or violation of any Contract applicable to any of the CDM
Options. The cancellation of CDM Options in accordance with, and in exchange for
the consideration set forth in, Section 2.3(b)(i) will not violate Applicable
Law, including, without limitation, any federal or state securities laws or Tax
laws.
(c) Warrants. A total of 400,000 shares of CDM Common Stock are
subject to outstanding CDM Warrants as of the date of this Agreement, and no
shares of CDM Common Stock will be subject to outstanding CDM Warrants as of
immediately following the Effective Time. The Spreadsheet fully reflects the
treatment of all outstanding CDM Warrants pursuant to
30
Section 2.3(b)(ii), including all applicable tax withholding amounts, if any,
and all applicable Contracts with respect to outstanding CDM Warrants will be,
as, if and to the extent necessary, duly and properly amended prior to the
Effective Time to provide for the treatment of CDM Warrants in connection with
the Merger as set forth in Section 2.3(b)(ii). Schedule 4.4(c) of the CDM
Disclosure Letter sets forth, for each issued and outstanding CDM Warrant, (i)
the name of the holder of such CDM Warrant, (ii) the exercise price per share of
such CDM Warrant and (iii) the number of shares covered by such CDM Warrant.
Correct and complete copies of each CDM Warrant have been delivered by CDM to
OmniVision's legal counsel. All CDM Warrants have been issued and granted in
compliance with Applicable Law and all requirements set forth in applicable
Contracts. On the Closing Date, the CDM Warrants and any other direct or
indirect rights to acquire shares of CDM Capital Stock shall be terminated
without further obligation or Liability of CDM, OmniVision or the Surviving
Corporation, other than the expressly stated obligations set forth in this
Agreement and the OmniVision Ancillary Agreements. On the Closing Date, each
Contract with respect to outstanding CDM Warrants shall permit the treatment of
the CDM Warrants in the Merger as set forth in Section 2.3(b)(ii) and such
treatment will not constitute a breach or violation of any Contract applicable
to any of the CDM Warrants. The sale to OmniVision of CDM Warrants in accordance
with, and in exchange for the consideration set forth in, Section 2.3(b)(ii)
will not violate Applicable Law, including, without limitation, any federal or
state securities laws or Tax laws.
(d) No Other Rights. Except for the outstanding CDM Options
disclosed in Section 4.4(b) and the outstanding CDM Warrants disclosed in
Section 4.4(c), there are no stock appreciation rights, options, warrants,
calls, rights, commitments, conversion privileges or preemptive or other rights
or Contracts outstanding to purchase or otherwise acquire any shares of CDM
Capital Stock or any securities or debt convertible into or exchangeable for CDM
Capital Stock or obligating CDM to grant, extend or enter into any such option,
warrant, call, right, commitment, conversion privilege or preemptive or other
right or Contract. Except as set forth on Schedule 4.4 of the CDM Disclosure
Letter, there are no voting agreements, registration rights, rights of first
refusal, preemptive rights, co-sale rights or other restrictions applicable to
any outstanding securities of CDM.
4.5 No Conflict. Neither the execution and delivery of this Agreement or
any of the CDM Ancillary Agreements by CDM, nor the consummation of the Merger
or any other transaction contemplated hereby or thereby, will conflict with, or
(with or without notice or lapse of time, or both) result in a termination,
breach, impairment or violation of, or constitute a default under: (a) any
provision of the Certificate of Incorporation or Bylaws of CDM, each as
currently in effect; (b) any Applicable Law applicable to CDM or any of its
assets or properties; or (c) any Contract to which CDM is a party or by which
CDM or any of its assets or properties are bound. Neither CDM's entering into
this Agreement nor the consummation of the Merger or the transactions
contemplated thereby shall give rise to, or trigger the application of, any
rights of any third party that would come into effect upon the consummation of
the Merger. The consummation of the Merger by CDM shall not require the consent,
release, waiver or approval of any third party (including the consent of any
party required to be obtained in order to keep any agreement between such party
and CDM in effect following the Merger or to provide that CDM is not in breach
or violation of any such agreement following the Merger), other than the CDM
Stockholder Approval.
31
4.6 Litigation. There is no action, suit, arbitration, mediation,
proceeding, claim or, to the Knowledge of CDM, investigation pending against CDM
(or against any officer, director or employee of CDM in their capacity as such
or relating to their employment, services or relationship with CDM) before any
Governmental Authority, arbitrator or mediator, nor, to the Knowledge of CDM,
has any such action, suit, arbitration, mediation, proceeding, claim or
investigation been threatened. There is no judgment, decree, injunction, rule or
order of any Governmental Authority, arbitrator or mediator outstanding against
CDM. To the Knowledge of CDM or any CDM Officer, there is no basis for any
Person to assert a claim against CDM. CDM does not have any action, suit,
arbitration, mediation, proceeding, claim or investigation pending against any
Governmental Authority or other Person. To the Knowledge of CDM or any CDM
Officer, there is no basis for any indemnity claim to be asserted against CDM or
any Affiliate of CDM.
4.7 Taxes. CDM (and any consolidated, combined, unitary or aggregate group
for Tax purposes of which CDM is or has been a member), (a) has properly
completed and timely filed all Returns required to be filed by it, (b) has
timely paid all Taxes required to be paid by it for which payment was due, (c)
has established an adequate accrual or reserve for the payment of all Taxes
payable in respect of the periods or portions thereof ending on or prior to the
Balance Sheet Date (which accrual or reserve as of the Balance Sheet Date is
fully reflected on the CDM Balance Sheet), (d) has made all necessary estimated
Tax payments, and (e) has no Liability for Taxes in excess of the amount so paid
or accruals or reserves so established except for Taxes subsequent to the
Balance Sheet Date incurred in the ordinary course of business. All such Returns
are true, correct and complete in all material respects, and CDM has provided
OmniVision with correct and complete copies of such Returns. CDM is not
delinquent in the payment of any Tax or in the filing of any Returns, and no
deficiencies for any Tax have been threatened, claimed, proposed or assessed
against CDM or any of its officers, employees or agents in their capacity as
such. CDM has not received any written or oral notification from the Internal
Revenue Service or any other taxing authority questioning any Returns, positions
taken by CDM with respect to Returns or requesting additional information with
respect to any Returns. No Return of CDM is under audit by the Internal Revenue
Service or any other taxing agency or authority and any such past audits (if
any) have been completed and fully resolved to the satisfaction of the
applicable taxing agency or authority conducting such audit and all Taxes
determined by such audit to be due from CDM have been paid in full to the
applicable taxing agencies or authorities. No Tax liens are currently in effect
against any of the assets of CDM other than liens that arise by operation of law
for Taxes not yet due and payable. There is not in effect any waiver by CDM of
any statute of limitations with respect to any Taxes nor has CDM agreed to any
extension of time for filing any Return that has not been filed. CDM has
complied (and until the Closing Date will comply) in all material respects with
all Applicable Laws relating to the payment and withholding of Taxes (including
withholding of Taxes pursuant to Sections 1441, 1442, 1445 and 1446 of the Code
or similar provisions under any foreign law), has, within the time and in the
manner prescribed by law, withheld from employee wages and paid over to the
proper taxing agencies and authorities all amounts required to be so withheld
and paid over under all Applicable Laws, including federal and state income
Taxes, and has timely filed all withholding Tax Returns and complied in all
material respects with all applicable record keeping requirements. CDM is not a
party to or bound by any Tax sharing, Tax indemnity, or Tax allocation agreement
nor does CDM have any liability or potential liability to another party under
any such agreement. CDM has not filed any disclosures under Section 6662 of the
Code
32
or comparable provisions of state, local or foreign law to prevent the
imposition of penalties with respect to any Tax reporting position taken on any
Return. CDM has not consummated, has not participated in, and is not currently
participating in any transaction which was or is a "tax shelter" transaction as
defined in Sections 6662, 6011, 6012 or 6111 of the Code or the Treasury
Regulations promulgated thereunder. CDM has never been a member of a
consolidated, combined, unitary or aggregate group of which CDM was not the
ultimate parent corporation. CDM has no liability for the Taxes of any Person
(other than CDM) under Section 1.1502-6 of the Treasury Regulations (or any
similar provision of state, local or foreign law) as a transferee or successor,
by contract or otherwise. Neither CDM, nor any "dual resident corporation"
(within the meaning of Section 1503(d) of the Code) in which CDM is considered
to hold an interest, has incurred a dual consolidated loss within the meaning of
Section 1503 of the Code. CDM has not filed any election under Section 341(f) of
the Code. CDM is not a "personal holding company" within the meaning of the
Code. CDM has never been a "United States real property holding corporation"
within the meaning of Section 897 of the Code, and CDM has filed with the
Internal Revenue Service all statements, if any, which are required under
Section 1.897-2(h) of the Treasury Regulations. There is currently no limitation
on the utilization of net operating losses, capital losses, built-in losses, Tax
credits or similar items of CDM under Sections 269, 382, 383, 384 or 1502 of the
Code (and any comparable provisions of foreign, state, local or municipal law).
CDM has not constituted either a "distributing corporation" or a "controlled
corporation" in a distribution of stock qualifying for tax-free treatment under
Section 355 of the Code (a) in the two years prior to the Agreement Date or (b)
in a distribution that could otherwise constitute part of a "plan" or "series of
related transactions" (within the meaning of Section 355(e) of the Code) in
conjunction with the Merger. CDM has not in the past been, and is not currently,
a "Subchapter S" corporation and has not filed an election with the Internal
Revenue Service or any state tax agency to be treated as a "Subchapter S"
corporation.
4.8 CDM Financial Statements.
(a) Schedule 4.8 of the CDM Disclosure Letter includes the CDM
Financial Statements. The CDM Financial Statements: (i) are derived from and are
in accordance with the books and records of CDM; (ii) fairly present the
financial condition of CDM at the dates therein indicated and the results of
operations and cash flows of CDM for the periods therein specified (subject to
normal recurring year-end adjustments, none of which individually or in the
aggregate will be material in amount, except as set forth in Schedule 4.8(a) of
the CDM Disclosure Letter); (iii) complied as to form in all material respects
with applicable accounting requirements with respect thereto as of their
respective dates, and (iv) have been prepared in accordance with GAAP applied on
a basis consistent with prior periods (except that the unaudited financial
statements do not have notes thereto). Except as set forth on Schedule 4.8 of
the CDM Disclosure Letter, CDM has no Liability, except for those (a) shown on
the CDM Balance Sheet or (b) that were incurred after the Balance Sheet Date in
the ordinary course of CDM's business consistent with its past practices, that
(i) are not individually in excess of $15,000, or collectively in excess of
$30,000, and (ii) do not result from any breach of Contract, tort or violation
of law, and (iii) are not required to be set forth in the CDM Balance Sheet
under GAAP. All reserves established by CDM that are set forth in or reflected
in the CDM Balance Sheet have been established in accordance with GAAP and are
adequate. At the Balance Sheet Date, there were no material loss contingencies
(as such term is used in Statement of Financial Accounting
33
Standards No. 5 issued by the Financial Accounting Standards Board in March
1975) that are not adequately provided for in the CDM Balance Sheet as required
by said Statement No. 5.
(b) The books, records and accounts of CDM (i) are in all material
respects true, complete and correct, (ii) have been maintained in accordance
with good business practices on a basis consistent with prior years, (iii) are
stated in reasonable detail and accurately and fairly reflect the transactions
and dispositions of the assets and properties of CDM, and (iv) accurately and
fairly reflect the basis for the CDM Financial Statements.
(c) CDM has established and maintains a system of internal
accounting controls sufficient to provide reasonable assurances that: (i) CDM's
transactions are executed in accordance with management's general or specific
authorization; (ii) CDM's transactions are recorded as necessary to permit the
preparation of financial statements in conformity with GAAP and to maintain
accountability for assets; (iii) access to CDM's assets is permitted only in
accordance with management's general or specific authorization; and (iv) the
recorded accountability for CDM's assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
4.9 Title to Properties. CDM has good and marketable title to, or a valid
leasehold interest in, all of its assets and properties (including those shown
on the CDM Balance Sheet), free and clear of all Encumbrances, other than
Permitted Encumbrances. Such assets include all of the assets necessary for the
continued operation of the CDM Business. All properties used in the operations
of the CDM Business are reflected on the CDM Balance Sheet to the extent
required under GAAP to be so reflected. All tangible personal property owned or
leased by CDM or used in the CDM Business are (a) in good condition and repair,
normal wear and tear excepted, and (b) not obsolete, dangerous or in need of
renewal or replacement, except for renewal or replacement in the ordinary course
of business. All leases of real or personal property to which CDM is a party are
fully effective and afford CDM valid leasehold possession of the real or
personal property that is the subject of the lease. CDM is not in violation of
any zoning, building or safety ordinance, regulation or requirement or other law
or regulation applicable to the operation of its owned or leased properties, nor
has CDM received any written notice of violation of law with which it has not
complied. Schedule 4.9 of the CDM Disclosure Letter sets forth a complete and
accurate list of all personal property owned or leased by CDM with an individual
value of $5,000 or greater. CDM has access to all products and services
reasonably necessary to carry on the CDM Business, and neither CDM nor any of
the CDM Officers know of any reason why it will not continue to have such
access.
4.10 Absence of Certain Changes. Except as set forth on Schedule 4.10 of
the CDM Disclosure Letter, since September 30, 2004, CDM has operated its
business in the ordinary course consistent with its past practices, and since
such date there has not been with respect to CDM any:
(a) Material Adverse Change or any change, event, circumstance,
condition or effect that could reasonably be expect to result in a Material
Adverse Effect;
(b) incurrence, creation or assumption of (i) any Encumbrance on any
of its assets or properties with a carrying value in excess of $10,000 (other
than Permitted
34
Encumbrances), (ii) any Liability or any indebtedness for borrowed money in
excess of $10,000, or (iii) any Liability as a guarantor or surety with respect
to the obligations of others;
(c) acceleration or release of any vesting condition to the right to
exercise any option or other right to purchase or otherwise acquire any shares
of its capital stock, or any acceleration or release of any right to repurchase
shares of its capital stock upon the stockholder's termination of employment or
services with it or pursuant to any right of first refusal;
(d) purchase, license, sale, grant, assignment or other disposition
or transfer, or any agreement or other arrangement for the purchase, license,
sale, assignment or other disposition or transfer, of any of its material assets
(including CDM IP Rights and other intangible assets), properties or goodwill
other than the sale or nonexclusive license of its products to its customers in
the ordinary course of its business consistent with its past practices;
(e) change or increase in the compensation payable or to become
payable to any of its officers, directors, employees or consultants, or in any
bonus, pension, severance, retention, insurance or other benefit payment or
arrangement (including stock awards, stock option grants, stock appreciation
rights or stock option grants) made to or with any of such officers, directors,
employees or consultants;
(f) change with respect to its management, supervisory or other key
personnel, any termination of employment of a material number of employees, or
any labor dispute or claim of unfair labor practices;
(g) Liability incurred by it to any of its officers, directors or
stockholders, except for normal and customary compensation, employee benefits,
and expense allowances payable to officers in the ordinary course of its
business consistent with its past practices;
(h) entering into, amendment of, relinquishment, termination or
nonrenewal by it of any Contract, other than in the ordinary course of its
business consistent with its past practices, any default by it under such
Contract, or any written (or to CDM's and each of the CDM Officers' Knowledge,
oral) indication or assertion by the other party thereto of such other party's
desire to so amend, relinquish, terminate or not renew any such Contract;
(i) material change in the manner in which it extends discounts,
credits or warranties to customers or otherwise deals with its customers;
(j) except for the Exclusivity Agreement and the Term Sheet, making
or entering into any Contract with respect to any acquisition, sale or transfer
of any material asset of CDM;
(k) change in accounting methods, practices or elections (including
any change in depreciation or amortization policies or rates or revenue
recognition policies) or any revaluation of any of its assets;
(l) deferral of the payment of any accounts payable other than in
the ordinary course of business, consistent with past practices, or in an amount
in excess of $10,000, or any
35
discount, accommodation or other concession made other than in the ordinary
course of business, consistent with past practices, in order to accelerate or
induce the collection of any receivable;
(m) Contract made by it to take any action that, if taken prior to
the Agreement Date, would have made any representation or warranty set forth in
this Article 4 untrue or incorrect as of the date when made; or
(n) announcement of, any negotiation by or any entry into any
Contract to do any of the things described in the preceding clauses (a) through
(m) (other than negotiations and agreements with OmniVision and its
representatives regarding the transactions contemplated by this Agreement).
4.11 Contracts, Agreements, Arrangements, Commitments and Undertakings.
Schedule 4.11 of the CDM Disclosure Letter set forth a list of each of the
following Contracts to which CDM is a party or to which CDM or any of its assets
or properties is bound, specifically referencing or organized under the
subsections of this Section 4.11 which apply to such Contracts (each a "CDM
MATERIAL CONTRACT"):
(a) any Contract providing for payments (whether fixed, contingent
or otherwise) by or to it in an aggregate amount of $15,000 or more;
(b) any dealer, distributor, OEM (original equipment manufacturer),
VAR (value added reseller), sales representative or similar Contract under which
any third party is authorized to sell, sublicense, lease, distribute, market or
take orders for any of its products, services or technology;
(c) any Contract providing for the development of any software,
content (including textual content and visual, photographic or graphics
content), technology or intellectual property for it, or providing for the
purchase by or license to it of any software, content (including textual content
and visual, photographic or graphics content), technology or intellectual
property, which software, content, technology or intellectual property is in any
manner used or incorporated (or is contemplated by it to be used or
incorporated) in connection with any aspect or element of any product, service
or technology of it (other than software licenses generally available to the
public at a per copy license fee of less than $1,000 per copy);
(d) any joint venture or partnership Contract that has involved, or
is reasonably expected to involve, a sharing of revenues, profits, cash flows,
expenses or losses with any other party or a payment of royalties to any other
party;
(e) any Contract for or relating to the employment by it of any
director, officer, employee or consultant, or any other type of Contract with
any of its officers, employees or consultants that is not immediately terminable
by it without cost or other Liability, including any contract requiring it to
make a payment to any director, officer, employee or consultant on account of
the Merger, any transaction contemplated by this Agreement or any Contract that
is entered into in connection with this Agreement;
(f) any indenture, mortgage, trust deed, promissory note, loan
agreement, security agreement, guarantee or other Contract for or with respect
to the borrowing of money, a
36
line of credit, any currency exchange, commodities or other hedging arrangement,
or a leasing transaction of a type required to be capitalized in accordance with
Statement of Financial Accounting Standards No. 13 of the Financial Accounting
Standards Board;
(g) any lease or other Contract under which it is lessee of or holds
or operates any items of tangible personal property or real property owned by
any third party;
(h) any Contract that restricts it from engaging in any aspect of
its business; from participating or competing in any line of business or market;
from freely setting prices for its products, services or technologies (including
most favored customer pricing provisions); from engaging in any business in any
market or geographic area or that grants any exclusive rights, rights of
refusal, rights of first negotiation or similar rights to any party; or from
soliciting potential employees, consultants, contractors or other suppliers or
customers;
(i) any CDM IP Rights Agreement;
(j) any Contract relating to the sale, issuance, grant, exercise,
award, purchase, repurchase or redemption of any shares of its capital stock or
other securities or any options, warrants or other rights to purchase or
otherwise acquire any such shares of capital stock, other securities or options,
warrants or other rights therefor, except for those Contracts conforming to the
standard agreement under the CDM Option Plan and except for the CDM Warrants
disclosed on Schedule 4.4(c) of the CDM Disclosure Letter;
(k) any Contract of guarantee, support, indemnification, assumption
or endorsement of, or any similar commitment with respect to, the obligations,
liabilities (whether accrued, absolute, contingent or otherwise) or indebtedness
of any other Person;
(l) any Contract providing for indemnification or warranting by it;
(m) any Contract in which its officers, directors, employees or
stockholders or any member of their immediate families is directly or indirectly
interested (whether as a party or otherwise);
(n) any Contract pursuant to which it has acquired a business or
entity, or assets of a business or entity, whether by way of merger,
consolidation, purchase of stock, purchase of assets, license or otherwise;
(o) any Contract with a Governmental Authority or any Governmental
Permit; or
(p) any other Contract that is material to it or its business,
operations, financial condition, properties or assets.
A true and complete copy of each agreement or document required by these
subsections (a)-(p) of this Section 4.11 to be listed on Schedule 4.11 of the
CDM Disclosure Letter has been delivered to OmniVision's legal counsel. All CDM
Material Contracts are in written form.
37
4.12 No Default; No Restrictions.
(a) CDM has performed all of the material obligations required to be
performed by it and is entitled to all material benefits under each CDM Material
Contract. Each of the CDM Material Contracts is in full force and effect. There
exists no default or event of default or event, occurrence, condition or act,
with respect to CDM or to the Knowledge of CDM, with respect to any other
contracting party, which, with the giving of notice, the lapse of time or the
happening of any other event or conditions, would reasonably be expected to (i)
become a default or event of default under any CDM Material Contract or (ii)
give any third party (1) the right to declare a default or exercise any remedy
under any CDM Material Contract, (2) the right to a rebate, chargeback, refund,
credit, penalty or change in delivery schedule under any CDM Material Contract,
(3) the right to accelerate the maturity or performance of any obligation of CDM
under any CDM Material Contract, or (4) the right to cancel, terminate or modify
any CDM Material Contract. CDM has not received any written, or, to CDM's
Knowledge, oral notice or other communication regarding any actual or possible
violation or breach of or default under, or intention to cancel or modify, any
CDM Material Contract. Except as set forth on Schedule 4.12 of the CDM
Disclosure Letter, the consummation of the Merger and other transactions
contemplated hereby by CDM shall not require the consent, release, waiver or
approval of any third party (including the consent of any party required to be
obtained in order to keep any Material Contract between such party and CDM in
effect following the Merger). CDM has no Liability for renegotiation of
government contracts or subcontracts or any payments made or to be made
thereunder.
(b) Except as listed in Schedule 4.11(h) of the CDM Disclosure
Letter, CDM is not a party to, and no asset or property of CDM is bound or
affected by, any judgment, injunction, order, decree, Contract (noncompete or
otherwise) that restricts or prohibits, or purports to restrict or prohibit, CDM
or, following the Effective Time of the Merger, the Surviving Corporation or
OmniVision, from freely engaging in the CDM Business or from competing anywhere
in the world (including any judgments, injunctions, orders, decrees, Contracts
restricting the geographic area in which CDM may sell, license, market,
distribute or support any products or technology or provide services or
restricting the markets, customers or industries that CDM may address in
operating the CDM Business or restricting the prices which CDM may charge for
its products, technology or services (including most favored customer pricing
provisions)), or includes any grants by CDM of exclusive rights or licenses,
rights of refusal, rights of first negotiation or similar rights.
4.13 Intellectual Property.
(a) Except as set forth on Schedule 4.13(a) of the Disclosure
Letter, CDM (i) exclusively owns or (ii) has the valid right or license to use,
possess, develop, sell, license, copy, distribute, market or dispose of all CDM
IP Rights. The CDM IP Rights are sufficient for such conduct of the CDM
Business.
(b) Neither the execution, delivery and performance of this
Agreement or the CDM Ancillary Agreements nor the consummation of the Merger and
the other transactions contemplated by this Agreement and/or by the CDM
Ancillary Agreements shall, in accordance with their terms: (i) constitute a
material breach of or default under any CDM IP Rights
38
Agreements; (ii) cause the forfeiture or termination of, or give rise to a right
of forfeiture or termination of, any CDM IP Right; or (iii) materially impair
any existing right of CDM or the Surviving Corporation to use, possess, sell or
license any CDM IP Right or portion thereof. Except as set forth on Schedule
4.13(b)-1 of the Disclosure Letter, there are no royalties, honoraria, fees or
other payments payable by CDM to any third Person (other than salaries payable
to employees and independent contractors not contingent on or related to use of
their work product) as a result of the ownership, use, possession, licensing,
sale, marketing, advertising or disposition of any CDM IP Rights by CDM to the
extent necessary for the conduct of the CDM Business and none shall become
payable as a result of the consummation of the transactions contemplated by this
Agreement. Except as set forth on Schedule 4.13(b)-2 of the Disclosure Letter,
after the Closing, all CDM-Owned IP Rights will be fully transferable, alienable
or licensable by the Surviving Corporation without restriction and without
payment of any kind to any third party.
(c) Schedule 4.13(c)-1 of the CDM Disclosure Letter sets forth a
list (by name and product SKU or version number) of each CDM Product or CDM
Service. Neither the operation of the CDM Business nor the use, development,
manufacture, marketing, license, sale or furnishing of any CDM Product or CDM
Service currently licensed, utilized, sold, provided or furnished by CDM or
currently under development by CDM (i) violates any license or other Contract
between CDM and any third party, or (ii) to the Knowledge of CDM or any of the
CDM Officers, infringes or misappropriates any Intellectual Property rights of
any other party. There is no pending, or to the Knowledge of CDM or any of the
CDM Officers, threatened, claim or litigation contesting the validity ownership
or right of CDM to exercise any CDM IP Right, nor to the Knowledge of CDM or any
of the CDM Officers, is there any reasonable basis for any such claim, nor has
CDM received any notice asserting that any CDM IP Right or the proposed use,
sale, license or disposition thereof conflicts with or infringes or shall
conflict with or infringe the rights of any other party, nor to the Knowledge of
CDM or any of the CDM Officers, is there any reasonable basis for any such
assertion and CDM has not received any notice from any third party offering a
license under any such third party patents. Except as set forth on Schedule
4.13(c)-2 of the Disclosure Letter, none of the CDM-Owned IP Rights,
CDM-Licensed IP Rights, the CDM Products or CDM Services or CDM is subject to
any proceeding or outstanding order, contract or stipulation (i) restricting in
any manner the use, distribution, transfer, or licensing by CDM of any CDM-Owned
IP Rights, any CDM-Licensed IP Rights or any CDM Product or CDM Service, or
which may affect the validity, use or enforceability of any such CDM-Owned IP
Rights, CDM-Licensed IP Rights or CDM Product or CDM Service, or (ii)
restricting the conduct of the CDM Business in order to accommodate Intellectual
Property rights of a third party.
(d) To the Knowledge of CDM or any of the CDM Officers, no current
or former employee, consultant or independent contractor of CDM: (i) is in
material violation of any term or covenant of any employment contract, patent
disclosure agreement, invention assignment agreement, nondisclosure agreement,
noncompetition agreement or any other Contract with any other party by virtue of
such employee's, consultant's or independent contractor's being employed by, or
performing services for, CDM or using trade secrets or proprietary information
of others without permission; or (ii) has developed any technology, software or
other copyrightable, patentable or otherwise proprietary work for CDM that is
subject to any Contract under which such employee, consultant or independent
contractor has
39
assigned or otherwise granted to any third party any rights (including
Intellectual Property) in or to such technology, software or other
copyrightable, patentable or otherwise proprietary work. Neither the employment
of any employee of CDM, nor the use by CDM of the services of any consultant or
independent contractor subjects CDM to any Liability to any third party for
improperly soliciting such employee, consultant or independent contractor to
work for CDM, whether such Liability is based on contractual or other legal
obligations to such third party.
(e) CDM has taken reasonable and appropriate steps to protect,
preserve and maintain the secrecy and confidentiality of the CDM IP Rights and
to preserve and maintain all CDM's interests, proprietary rights and trade
secrets in the CDM IP Rights. All current and former officers, employees,
consultants and independent contractors of CDM having access to trade secrets or
proprietary information of CDM, its customers or business partners have executed
and delivered to CDM an agreement regarding the protection of such trade secrets
or proprietary information (in the case of trade secrets or proprietary
information of CDM's customers and business partners, to the extent required by
such customers and business partners); and copies of all such agreements have
been delivered to OmniVision's legal counsel. CDM has secured valid written
assignments from all of CDM's current and former consultants, independent
contractors and employees who were involved in, or who contributed to, the
creation or development of any CDM-Owned IP Rights, of the rights to such
contributions that may be owned by such Persons or that CDM does not already own
by operation of law. No current or former employee, officer, director,
consultant or independent contractor of CDM has any right, license, claim or
interest whatsoever in or with respect to any CDM-Owned IP Rights. Except as set
forth on Schedule 4.13(e)-2 of the Disclosure Letter, to the extent that any
technology, software or Intellectual Property developed or otherwise owned by a
third party is incorporated into, integrated or bundled with, or used by CDM in
the development, manufacture or compilation of any of the CDM Products or CDM
Services ("THIRD PARTY PRODUCT TECHNOLOGY"), CDM has a written agreement with
such third party with respect thereto pursuant to which CDM either (i) has
obtained complete, unencumbered and unrestricted ownership of, and is the
exclusive owner of, or (ii) has obtained perpetual, irrevocable, non terminable
licenses (sufficient for the conduct of the CDM Business and the use,
development, manufacture, marketing, license, sale, furnishing or intended or
contemplated use of any CDM Product or CDM Service) to, all such third party's
Intellectual Property in such Third Party Product Technology by operation of law
or by valid Contract.
(f) Schedule 4.13(f) of the CDM Disclosure Letter contains a true
and complete list of (i) all worldwide registrations made by or on behalf of CDM
of any patents, copyrights, mask works, trademarks, service marks, Internet
domain names or Internet or World Wide Web URLs or addresses with any
Governmental Authority or quasi-governmental authority, including Internet
domain name registries, (ii) all applications, filings and other formal written
governmental actions made or taken pursuant to Applicable Law by CDM to secure,
perfect or protect its interest in the CDM IP Rights, including all patent
applications, copyright applications, mask work applications and applications
for registration of trademarks and service marks, and where applicable the
jurisdiction in which each of the items of the CDM IP Rights has been applied
for, filed or issued, and (iii) descriptions of all inter parties proceedings or
actions before any court or tribunal (including the United States Patent and
Trademark Office) or equivalent authority anywhere else in the world) related to
any of the CDM IP Rights. To the Knowledge of CDM and each of the CDM Officers,
all registered patents, trademarks, service
40
marks, Internet domain names, Internet or World Wide Web URLs or addresses,
copyrights and mask work rights held by CDM are valid and enforceable and CDM is
the record owner thereof. CDM is the exclusive owner of all trademarks and trade
names used in connection with the operation or conduct of the CDM Business,
including the sale, licensing, distribution or provision of any CDM Products or
CDM Services by CDM. CDM owns exclusively, and has good title to, all
copyrighted works that are included or incorporated into CDM Products or CDM
Services or which CDM otherwise purports to own. To the extent that any patents
would be infringed by any CDM Products or CDM Services or the operation or
conduct of the CDM Business, CDM is the exclusive owner or exclusive licensee of
such patents.
(g) CDM owns all right, title and interest in and to or is the sole
exclusive licensee of the CDM Owned IP Rights, all free and clear of all
Encumbrances and licenses (other than licenses and rights listed in Schedule
4.13(h)-1 of the CDM Disclosure Letter and Permitted Encumbrances). To the
Knowledge of CDM and each of the CDM Officers, the right, license and interest
of CDM in and to all CDM-Licensed IP Rights are free and clear of all
Encumbrances and licenses (other than licenses and rights set forth in the terms
and conditions of the Contracts under which CDM-Licensed IP Rights are licensed
to CDM, all of which Contracts are listed in Schedule 4.13(h)-2 of the CDM
Disclosure Letter (and complete and correct copies of such Contracts have been
provided to counsel to OmniVision), and Permitted Encumbrances).
(h) Schedule 4.13(h)-1 of the CDM Disclosure Letter contains a true
and complete list of all licenses, sublicenses and other Contracts as to which
CDM is a party and pursuant to which any Person is authorized to use, acquire,
license or sublicense (whether through the exercise of an option or otherwise)
any CDM-Owned IP Rights. Schedule 4.13(h)-2 of the CDM Disclosure Letter
contains a true and complete list of all licenses, sublicenses and other
Contracts as to which CDM is a party and pursuant to which CDM is authorized to
use any CDM-Licensed IP Rights (other than licenses of software generally
available to the public at a per copy license fee of less than $1,000 per copy).
Except as set forth on Schedule 4.13(h)-3 of the CDM Disclosure Letter, none of
the licenses or other Contracts listed in Schedule 4.13(h)-1 of the CDM
Disclosure Letter grants any third party exclusive rights to or under any
CDM-Owned IP Rights or grants any third party the right to sublicense any of
such CDM-Owned IP Rights. CDM has not transferred ownership of any Intellectual
Property that is or was owned by CDM, to any third party, or knowingly decided
to permit CDM's rights in such Intellectual Property to lapse or enter the
public domain, other than (i) through the expiration of registered Intellectual
Property at the end of its statutory term; (ii) the publication of applications
or registrations relating to Intellectual Property as required by Applicable
Law); or (iii) the abandonment of patent applications that were not, in the
considered judgment of CDM and its patent counsel, worth pursuing to issuance.
(i) Except as described on Schedule 4.13(i)-1 of the CDM Disclosure
Letter, neither CDM nor any other party acting on its behalf has disclosed or
delivered to any party, or permitted the disclosure or delivery to any escrow
agent or other party of, any CDM Source Code; and no event has occurred, and no
circumstance or condition exists, that (with or without notice or lapse of time,
or both) shall, or would reasonably be expected to, result in the disclosure or
delivery by CDM or any other party acting on its behalf to any party of any CDM
Source Code. Schedule 4.13(i)-2 of the CDM Disclosure Letter identifies each
Contract (whether
41
written or oral) pursuant to which CDM has deposited, or is or may be required
to deposit, with an escrow agent or other party, any CDM Source Code.
(j) To the Knowledge of CDM or any of the CDM Officers, there is no
unauthorized use, disclosure, infringement or misappropriation of any CDM IP
Rights by any third party, including any employee or former employee of CDM. CDM
has not agreed to indemnify any Person for any infringement of any Intellectual
Property of any third party by any CDM Product or CDM Service that has been
sold, licensed to third parties, leased to third parties, supplied, marketed,
distributed or provided by CDM.
(k) All CDM Products or CDM Services provided by or through CDM to
customers on or prior to the Closing Date conform in all material respects to
applicable Contract commitments, warranties (to the extent not expressly
disclaimed) and representations provided to customers. To the Knowledge of CDM,
CDM has no material Liability and there is no reasonable basis for any present
or future action, suit, proceeding, hearing, investigation, charge, complaint,
claim or demand against CDM giving rise to any material Liability for
replacement or repair thereof or other damages in connection therewith in excess
of any reserves therefor reflected on the CDM Balance Sheet. CDM has not had any
of its products returned by a purchaser thereof except for normal warranty
returns consistent with past history and those returns that would not result in
a reversal of any revenue by CDM. CDM has made available to OmniVision all
Documentation relating to the CDM Products and CDM Services currently available
or under development. CDM has a policy and procedure for tracking material bugs,
errors and defects of which it becomes aware in any CDM Products or CDM
Services, and maintains a database covering the foregoing. For all software used
by CDM in providing CDM Products or CDM Services, or in developing or making
available any of the CDM Products or CDM Services, CDM has implemented any and
all security patches or upgrades that are generally available for that software.
(l) No government funding, facilities of a university, college,
other educational institution or research center was used in the development of
the CDM Products or CDM Services, computer software programs or applications
owned by CDM. To CDM's Knowledge, no current or former employee, consultant or
independent contractor of CDM who was involved in, or who contributed to, the
creation or development of any CDM-Owned IP Rights has performed services for
the government, for a university, college or other educational institution or
for a research center during a period of time during which such employee,
consultant or independent contractor was also performing services for CDM.
(m) No software covered by any CDM-Owned IP Right has been
distributed in whole or in part or used, or is being used in conjunction with
any Public Software in a manner which would require that such software be
disclosed or distributed in source code form or made available at no charge.
(n) CDM has not assigned or otherwise transferred, and is not
obligated to assign or otherwise transfer, any CDM IP Rights to Ball Aerospace
and Technologies Corporation.
42
(o) Except as set forth on Schedule 4.13(o) of the CDM Disclosure
Letter, CDM has no current offers to license, has not granted any options to
license, and is otherwise under no obligation to license, CDM IP Rights to any
third party in the future, whether with or without agreed upon financial terms.
(p) Except as set forth on Schedule 4.13(p) of the CDM Disclosure
Letter, CDM is not obligated to provide "most favored customer" or "most favored
nation" rights or benefits, or any substantially similar rights or benefits
related to CDM IP Rights, to any third party, and CDM is not obligated to do so
in the future.
(q) CDM does not have any outstanding offers or agreements to
license its products or IP Rights to any third party at more favorable economic
terms to such third party than as are set forth in Schedule 4.13(q) of the CDM
Disclosure Letter in the field of use specifically set forth in Schedule 4.13(q)
of the CDM Disclosure Letter.
(r) The agreement set forth in Section 4.13(r) of the CDM Disclosure
Letter and all related agreements, letters and documents (including all rights
and obligations therein) (collectively, the "SECTION 4.13(r) DOCUMENTS") have
been terminated in their entirety and are no longer in effect or valid, and none
of CDM or any CDM Officer nor, by virtue of the transactions set forth herein,
any OmniVision Indemnified Person has or will have any liability or obligation
pursuant to any Section 4.13(r) Document to any party.
(s) Effective as of the Closing Date, each former and current
service provider of CDM who developed any of the CDM IP Rights has entered into
an effective and legally binding agreement that validly assigned all such CDM IP
Rights to CDM.
4.14 Compliance with Laws.
(a) CDM has materially complied, and is now and at the Closing Date
shall be in material compliance with, all Applicable Law.
(b) All materials, products and services distributed or marketed by
CDM have at all times made all material disclosures to users or customers
required by Applicable Law, and none of such disclosures made or contained in
any such materials have been inaccurate, misleading or deceptive in any material
respect.
(c) CDM holds all material governmental permits, that are necessary
and/or legally required to be held by it to conduct the CDM Business without any
violation of Applicable Law, including without limitation the U.S. Export
Administration Act and implementing U.S. Export Administration Regulations, the
FAR, agency supplements to the FAR, the Arms Export Control Act (22 U.S.C. 277,
et seq.), and agency export regulations and any similar state or local law or
regulation governing any contract, subcontract, bid, or proposal with any
Governmental Authority, as applicable ("GOVERNMENTAL PERMITS"), and all such
material Governmental Permits are valid and in full force and effect. CDM has
not received any notice or other communication from any Governmental Authority
regarding (i) any actual or possible violation of law or any Governmental Permit
or any failure to comply with any term or requirement of any Governmental Permit
or (ii) any actual or possible revocation, withdrawal, suspension, cancellation,
termination or modification of any Governmental Permit.
43
(d) Neither CDM, nor to CDM's Knowledge, any director, officer or
employee of CDM has, for or on behalf of CDM, (i) used any funds for unlawful
contributions, gifts, entertainment or other unlawful expenses relating to
political activity, (ii) made any unlawful payment to foreign or domestic
government officials or employees or to foreign or domestic political parties or
campaigns or violated any provision of the Foreign Corrupt Practices Act of
1977, as amended, or (iii) made any other payment in violation of Applicable
Law.
4.15 Certain Transactions and Agreements. None of the officers, directors
or employees of CDM and, to the Knowledge of CDM, none of stockholders of CDM or
the immediate family members of an officer, director, employee or stockholder of
CDM, has any direct ownership interest in any firm or corporation that competes
with, or does business with, or has any contractual arrangement with, CDM
(except with respect to any interest in less than 1% of the stock of any
corporation whose stock is publicly traded). To the Knowledge of CDM or any of
the CDM Officers, none of the officers, directors, employees or stockholders of
CDM, nor any member of their immediate families, has any indirect ownership
interest in any firm or corporation that competes with, or does business with,
or has any contractual arrangement with, CDM (except with respect to any
interest in less than 1% of the stock of any corporation whose stock is publicly
traded). Except as set forth on Schedule 4.15 of the CDM Disclosure Letter, none
of said officers, directors, employees or stockholders or, to the Knowledge of
CDM, any member of their immediate families, is a party to, or otherwise
directly or indirectly interested in, any Contract with CDM, except for normal
compensation for services as an officer, director or employee thereof that have
been disclosed to OmniVision. None of said officers, directors, employees,
stockholders or immediate family members has any interest in any property, real
or personal, tangible or intangible (including any CDM IP Rights or any other
Intellectual Property), that is used in, or that pertains to, the CDM Business,
except for the rights of a stockholder or the rights to acquire CDM Capital
Stock under Applicable Law.
4.16 Employees, ERISA and Other Compliance.
(a) CDM has complied, and is in compliance in all material respects,
with all Applicable Law and Contracts relating to employment, equal opportunity,
nondiscrimination, employment practices, immigration, wages, hours, the payment
of social security and similar Taxes, income Tax withholding, occupational
safety and health, privacy rights of employees, and terms and conditions of
employment, including employee compensation and benefits matters, and has
correctly classified employees as exempt employees or nonexempt employees under
all Applicable Laws. All employees of CDM are exempt employees under all
Applicable Laws. A complete list of all employees, officers and consultants of
CDM and their current title and/or job description, compensation (base
compensation and bonuses) and benefits is set forth on Schedule 4.16(a) of the
CDM Disclosure Letter. All employees of CDM are legally permitted to be employed
by CDM in the jurisdiction in which such employee is employed in their current
job capacities for the maximum period allowed under Applicable Law. All
independent contractors providing services to CDM have been properly classified
as independent contractors for purposes of federal and applicable state Tax
laws, laws applicable to employee benefits and other Applicable Law. CDM does
not have any employment or consulting Contracts currently in effect that are not
terminable at will (other than agreements with the sole purpose of providing for
the confidentiality of proprietary information or assignment of inventions).
44
(b) CDM reasonably believes it has good labor relations with its
employees, and neither CDM nor any of the CDM Officers has any Knowledge of any
facts indicating that the consummation of the Merger or any of the other
transactions contemplated hereby will have a material adverse effect on such
labor relations, and neither CDM nor any of the CDM Officers has any Knowledge
that any of its employees intends to leave CDM's employ either before or after
the Effective Time.
(c) CDM is not a party to any contract, agreement, or arrangement
with any employee of CDM that (i) restricts CDM's right to terminate the
employment of any employee without cause or without a specified notice period or
(ii) obligates CDM to pay severance to any employee of CDM upon termination of
such employee's employment with CDM.
(d) CDM has not been, and is not, a party to any court, arbitration,
or administrative proceeding in which CDM was, or is, alleged to have violated
any statutes, laws, ordinances, rules or regulations, or any orders, rulings,
decrees, judgments or arbitration awards of any court, arbitrator or any
government agency relating to employment, equal opportunity, nondiscrimination,
immigration, wages, hours, benefits, collective bargaining, the payment of
social security and similar Taxes, income Tax withholding, occupational safety
and health, and/or privacy rights of employees.
(e) Neither CDM nor any ERISA Affiliate maintains or contributes to,
nor has it ever maintained or contributed to, any "pension plan" within the
meaning of Section 3(2) of ERISA which is subject to Title IV of ERISA or
Section 412 of the Code. Neither CDM nor any ERISA Affiliate maintains or
contributes to, nor has it ever maintained or contributed to, or been required
to contribute to, any "multiemployer plan" as defined in Section 3(37) of ERISA.
(f) (i) Schedule 4.16(f) of the CDM Disclosure Letter lists each
employment, consulting, severance or other similar Contract, each "employee
benefit plan" as defined in Section 3(3) of ERISA and each plan or arrangement
(written or oral) providing for insurance coverage (including any self-insured
arrangements that are clearly identified as such), workers' benefits, vacation
benefits, severance benefits, disability benefits, death benefits,
hospitalization benefits, retirement benefits, deferred compensation,
profit-sharing, bonuses, stock options, stock purchase, phantom stock, stock
appreciation or other forms of incentive compensation or post-retirement
insurance, compensation or benefits for employees, consultants or directors that
is entered into, maintained or contributed to by CDM or any ERISA Affiliate and
covers any employee or former employee of CDM or with respect to which CDM could
have any liability. Such Contracts, plans and arrangements as are described in
this Section 4.16(f) are hereinafter collectively referred to as "CDM BENEFIT
ARRANGEMENTS."
(ii) Each CDM Benefit Arrangement has been maintained in
compliance in all material respects with its terms and with the requirements
prescribed by any and all Applicable Law that is applicable to such CDM Benefit
Arrangement. Each such CDM Benefit Arrangement that is an "employee pension
benefit plan" as defined in Section 3(2) of ERISA that is intended to qualify
under Section 401(a) of the Code is so qualified. Unless otherwise indicated in
Schedule 4.16(f) of the CDM Disclosure Letter, with respect to each such CDM
Benefit Arrangement that is an "employee pension benefit plan" as defined in
Section 3(2) of ERISA that is intended to qualify under Section 401(a) of the
Code, CDM (1) has received a
45
favorable opinion, advisory, notification and/or determination letter, as
applicable, that such plan satisfied the requirements of GUST, the Tax Reform
Act of 1986, the IRS Restructuring and Reform Act of 1998 and the Community
Renewal Tax Relief Act of 2000 (a copy of which letter(s) have been delivered to
OmniVision and its counsel), and nothing has occurred since the issuance of such
opinion, advisory, notification and/or determination letter, as applicable,
which would reasonably be expected to cause the loss of the Tax-qualified status
of such CDM Benefit Arrangement, (2) CDM has applied timely to the Internal
Revenue Service for such letter, (3) CDM has a remaining period of time to apply
for such letter, or (4) if reliance is permitted under IRS Announcement 2001-77,
CDM relies on the favorable opinion letter or advisory letter of the master and
prototype or volume submitter plan sponsor of such employee plan. No CDM Benefit
Arrangement shall be subject to any surrender fees or services fees upon
termination other than the normal and reasonable administrative fees associated
with the termination of benefit plans. No employee plan covers any Persons
employed or providing services outside the United States.
(iii) CDM has delivered to OmniVision and its legal counsel a
complete and correct copy of each CDM Benefit Arrangement (or a written
description of any CDM Benefit Arrangement not in writing), including the most
recent version of any and all trust documents, insurance policies and Contracts,
employee booklets or other employee communications, summary plan descriptions,
summary of material modifications and other authorizing documents applicable to
any CDM Benefit Arrangement.
(iv) CDM has timely filed and delivered to OmniVision and its
legal counsel the three most recent annual reports (Form 5500) and all schedules
attached thereto for each CDM Benefit Arrangement that is subject to ERISA and
Code reporting requirements, and all material written communications with
participants, the Internal Revenue Service, the U.S. Department of Labor or any
other Governmental Authority, administrators, trustees, beneficiaries and
alternate payees relating to any CDM Benefit Arrangement.
(v) No suit, administrative proceeding, action or other
litigation has been brought, or to the Knowledge of CDM or any of the CDM
Officers, is threatened against or with respect to any CDM Benefit Arrangement,
including any audit or inquiry by the Internal Revenue Service or the U.S.
Department of Labor. CDM has never been a participant in any "prohibited
transaction" within the meaning of Section 406 of ERISA or Section 4975 of the
Code with respect to any employee pension benefit plan (as defined in Section
3(2) of ERISA) that CDM sponsors as employer or in which CDM participates as an
employer which was not otherwise exempt pursuant to Section 408 of ERISA
(including any individual exemption granted under Section 408(a) of ERISA) or
that could result in an excise Tax under the Code or the assessment of a civil
penalty under Section 502(i) of ERISA against CDM.
(vi) All contributions due from CDM with respect to any of the
CDM Benefit Arrangements have been timely made or, if not yet due, have been
accrued on CDM's financial statements (including the CDM Financial Statements),
and no further contributions shall be due or shall have accrued thereunder as of
the Closing Date (other than contributions accrued in the ordinary course of
business, consistent with past practices, after the Balance Sheet Date as a
result of the operations of CDM after the Balance Sheet Date). All contributions
due from CDM with respect to any CDM Benefit Arrangement qualified under Section
401(a) of the
46
Code and containing a Code Section 401(k) cash or deferred arrangement have been
timely made. All claims as of the Closing Date made under any self-insured CDM
Benefit Arrangement that is an "employee welfare benefit plan" as defined in
Section 3(1) of ERISA will have been paid by CDM as of the Closing Date.
(vii) CDM shall not have any Liability to any employee or to any
organization or any other entity as a result of the termination of any employee
leasing arrangement.
(g) There has been no amendment to, written interpretation or
announcement (whether or not written) by CDM relating to any CDM Benefit
Arrangement. There has been no change in employee participation or coverage
under any CDM Benefit Arrangement that would increase materially the expense of
maintaining such CDM Benefit Arrangement above the level of the expense incurred
in respect thereof during the calendar year 2003.
(h) Each CDM Benefit Arrangement, to the extent applicable, is in
compliance, in all material respects, with the continuation coverage
requirements of Section 4980B of the Code, Sections 601 through 608 of ERISA,
the Americans with Disabilities Act of 1990, as amended, and the regulations
thereunder, the Health Insurance Portability and Accountability Act of 1996, as
amended, the Women's Health and Cancer Rights Act of 1998, and the Family
Medical Leave Act of 1993, as amended, and the regulations thereunder, as such
requirements affect CDM and its employees. There are no outstanding, uncorrected
violations under COBRA, with respect to any of the CDM Benefit Arrangements,
covered employees or qualified beneficiaries that could reasonably be expected
to result in a Material Adverse Effect on CDM or OmniVision.
(i) No benefit payable or that may become payable by CDM pursuant to
any CDM Benefit Arrangement or as a result of, in connection with or arising
under this Agreement or the Certificate of Merger shall constitute a "parachute
payment" (as defined in Section 280G(b)(2) of the Code) that is subject to the
imposition of an excise Tax under Section 4999 of the Code or that would not be
deductible by reason of Section 280G of the Code. Except for any acceleration
contemplated by this Agreement, including, but not limited to, the acceleration
of vesting of the unvested CDM Options disclosed in Section 4.4(b), and other
than the Employment Agreements, CDM is not a party to any: (i) Contract with any
executive officer or other key employee thereof (A) the benefits of which are
contingent, or the terms of which are materially altered, upon the occurrence of
a transaction involving CDM in the nature of the Merger or any of the other
transactions contemplated by this Agreement or any CDM Ancillary Agreement, (B)
providing any term of employment or compensation guarantee, or (C) providing
severance benefits or other benefits after the termination of employment of such
employee regardless of the reason for such termination of employment; or (ii)
Contract or plan, including any stock option plan, stock appreciation rights
plan or stock purchase plan, any of the benefits of which shall be increased, or
the vesting of benefits of which shall be accelerated, by the occurrence of the
Merger or any of the other transactions contemplated by this Agreement, or any
event subsequent to the Merger such as the termination of employment of any
Person, or the value of any of the benefits of which shall be calculated on the
basis of any of the transactions contemplated by this Agreement. CDM has no
obligation to pay any material amount or provide any material benefit to any
former employee or officer, other than obligations (i) for which CDM
47
has established a reserve for such amount on the CDM Balance Sheet, (ii)
pursuant to Contracts entered into after the Balance Sheet Date and disclosed on
Schedule 4.16(i) of the CDM Disclosure Letter, or (iii) the Employment
Agreements.
(j) No employee or consultant of CDM is in material violation of (i)
any term of any employment or consulting Contract or (ii) any term of any other
Contract or any restrictive covenant relating to the right of any such employee
or consultant to be employed by CDM or to use trade secrets or proprietary
information of others. The employment of any employee or consultant by CDM does
not subject it to any Liability to any third party.
(k) No CDM Benefit Arrangement provides, or reflects or represents
any liability to provide, benefits, including, without limitation, death or
medical benefits (whether or not insured) with respect to any former or current
employee, the employee's spouse or dependents, beyond the employee's retirement
or other termination of employment with CDM or any of its subsidiaries other
than (i) coverage mandated by Part 6 of Title I of ERISA or Section 4980B of the
Code, (ii) retirement or death benefits under any plan intended to be qualified
under Section 401(a) of the Code, (iii) disability benefits that have been fully
provided for by insurance under a CDM Benefit Arrangement that constitutes an
"employee welfare benefit plan" within the meaning of Section (3)(1) of ERISA,
or (iv) benefits in the nature of severance pay with respect to one or more of
the employment contracts set forth in Schedule 4.16(f) of the CDM Disclosure
Letter.
(l) No CDM employee has more than 40 days of accrued and unpaid
vacation time and other paid time off or more than 80 hours of compensatory time
under the Compensatory Time and Charging Procedures dated May 31, 2003 (the
"2003 POLICY") and no CDM Benefit Arrangement permits CDM employees to accrue
more than 40 days of vacation time and other paid time off or more than 80 hours
of compensatory time under the 2003 Policy. Schedule 4.16(1) of the CDM
Disclosure Letter sets forth the accrued vacation time and other paid time off
of each current CDM employee as of January 31, 2005 and compensatory time under
the 2003 Policy as of February 1, 2005.
4.17 Corporate Documents. CDM has delivered to OmniVision or OmniVision's
legal counsel for examination true and correct copies of all documents and
information listed in the CDM Disclosure Letter (including any Schedule thereto)
or in any other exhibit or schedule called for by this Agreement, including the
following: (a) the minute book(s) containing all records of all proceedings,
consents, actions and meetings of the Board of Directors and any committees
thereof and stockholders of CDM; (b) the stock ledger, option ledger and warrant
ledger and journal reflecting all stock issuances and transfers and all grants
of options and warrants relating to CDM; and (c) all permits, orders and
consents issued by, and filings by CDM with, any regulatory agency with respect
to CDM, or any securities of CDM, and all applications for such permits, orders
and consents.
4.18 No Brokers. Neither CDM nor any Affiliate of CDM is obligated for
the payment of any fees or expenses of any investment banker, broker, finder or
similar party in connection with the origin, negotiation or execution of this
Agreement or in connection with the Merger or any other transaction contemplated
by this Agreement. Neither OmniVision nor the Surviving
48
Corporation shall incur any Liability, either directly or indirectly, to any
such investment banker, broker, finder or similar party as a result of this
Agreement or the Merger.
4.19 Insurance. CDM maintains the policies of insurance and bonds set
forth in Schedule 4.19 of the CDM Disclosure Letter, including all legally
required workers' compensation insurance and errors and omissions, casualty,
fire and general liability insurance. Schedule 4.19 sets forth the name of the
insurer under each such policy and bond, the type of policy or bond, the
coverage amount and any applicable deductible and any other material provisions
as of the date hereof as well all material claims made under such policies and
bonds since January 1, 2003. There is no material claim pending under any of
such policies or bonds as to which coverage has been questioned, denied or
disputed by the underwriters of such policies or bonds. All premiums due and
payable under all such policies and bonds have been timely paid, and CDM is
otherwise in compliance with the terms of such policies and bonds. All such
policies and bonds remain in full force and effect, and the neither CDM nor any
of the CDM Officers has any Knowledge of any threatened termination of, or
material premium increase with respect to, any of such policies or bonds. CDM
has delivered to OmniVision correct and complete copies of all such policies of
insurance and bonds issued at the request or for the benefit of CDM.
4.20 Environmental Matters. CDM is in material compliance with all
Environmental Laws, which compliance includes the possession by CDM of all
permits and other governmental authorizations required under Environmental Laws
and compliance with the terms and conditions thereof. CDM has not received any
written notice or other written communication, whether from a Governmental
Authority, citizens groups, employee or otherwise, that alleges that CDM is not
in compliance with any Environmental Law. To the Knowledge of CDM and each of
the CDM Officers, no current or prior owner of any property leased or possessed
by CDM has received any written notice or other written communication, whether
from a Governmental Authority, citizens group, employee or otherwise, that
alleges that such current or prior owner or CDM is not in compliance with any
Environmental Law. All Governmental Permits held by CDM pursuant to any
Environmental Law (if any) are identified in Schedule 4.20 of the CDM Disclosure
Letter.
4.21 Board Actions. CDM's Board of Directors (a) has unanimously
determined that the Merger is advisable and in the best interests of the CDM
Stockholders and is on terms that are fair to the CDM Stockholders, and has
determined to recommend the Merger to the CDM Stockholders, and (b) shall submit
the Merger, this Agreement, each of the CDM Ancillary Agreements and all other
agreements, transactions and actions contemplated hereby and thereby, to the
extent that stockholder approval is required thereof under Applicable Law or
CDM's Certificate of Incorporation or Bylaws, each as currently in effect, to
the vote and approval of the CDM Stockholders.
4.22 No Existing Discussions. Neither CDM nor any CDM Representative is
engaged, directly or indirectly, in any discussions or negotiations with any
third party relating to any Acquisition Proposal.
4.23 Disclosure. Neither this Agreement (including its exhibits and
schedules and the CDM Disclosure Letter) nor any of the CDM Ancillary Agreements
delivered by CDM or the
49
CDM Officers to Omni Vision under this Agreement or any other written
information, including royalty rates, provided by CDM, its employees or its
agents to OmniVision or OmniVision's legal counsel or accountants, taken
together, contains any untrue statement of a material fact by CDM or omits to
state any material fact with respect to CDM necessary in order to make the
statements contained herein and therein, in light of the circumstances under
which such statements were made, not misleading.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF OMNIVISION
Subject to the exceptions set forth in a numbered or lettered section of
OmniVision Disclosure Letter (if any), OmniVision represents and warrants to CDM
as follows:
5.1 Organization and Good Standing. OmniVision is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has the corporate power and authority to own, operate and lease its
properties and to carry on its business as now conducted and as presently
proposed to be conducted. Merger Sub is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and has no
material assets and has not conducted business prior to the Agreement Date. Each
of OmniVision and Merger Sub is duly qualified or licensed to do business, and
is in good standing, in each jurisdiction where the character of the properties
owned, leased or operated by it or the nature of its activities makes such
qualification or licensing necessary, except where the failure to be so
qualified or licensed would not individually or in the aggregate be material to
OmniVision's or Merger Sub's ability to consummate the Merger or to perform
their respective obligations under this Agreement, the OmniVision Ancillary
Agreements and the Merger Sub Ancillary Agreements. OmniVision has delivered or
made available to CDM or CDM's legal counsel true and complete copies of the
currently effective Certificates of Incorporation and Bylaws of OmniVision and
Merger Sub, each as amended to date. Neither OmniVision nor Merger Sub is in
violation of its Certificate of Incorporation or Bylaws, each as amended to
date.
5.2 Power, Authorization and Validity.
(a) Power and Authority. OmniVision has all requisite corporate
power and authority to enter into, execute, deliver and perform its obligations
under this Agreement and each of the OmniVision Ancillary Agreements and to
consummate the Merger. The execution, delivery and performance by OmniVision of
this Agreement, each of the OmniVision Ancillary Agreements and all other
agreements, transactions and actions contemplated hereby or thereby have been
duly and validly approved and authorized by all necessary corporate action on
the part of OmniVision. Merger Sub has all requisite corporate power and
authority to enter into, execute, deliver and perform its obligations under this
Agreement and each of the Merger Sub Ancillary Agreements and to consummate the
Merger. The execution, delivery and performance by Merger Sub of this Agreement,
each of the Merger Sub Ancillary Agreements and all other agreements,
transactions and actions contemplated hereby or thereby have been duly and
validly approved and authorized by all necessary corporate action on the part of
Merger Sub. The shares of OmniVision Common Stock to be issued to the Effective
Time Securityholders in connection with the Merger will, upon such issuance, be
duly authorized, validly issued, fully paid, and non-
50
assessable and free and clear of all Encumbrances, other than Encumbrances
created by this Agreement (including without limitation Section 2.5) and the
ancillary agreements hereto to which the Effective Time Securityholders are a
party.
(b) No Consents. No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Authority, or any
other Person, governmental or otherwise, is necessary or required to be made or
obtained by OmniVision or Merger Sub or to enable OmniVision or Merger Sub to
lawfully execute and deliver, enter into, and perform its obligations under this
Agreement, each of the OmniVision Ancillary Agreements and each of the Merger
Sub Ancillary Agreements or to consummate the Merger, except for: (i) the filing
by OmniVision of such reports and information with the SEC under the Exchange
Act, and the rules and regulations promulgated by the SEC thereunder, as may be
required in connection with this Agreement, the Merger and the other
transactions contemplated by this Agreement; (ii) the filing of the Certificate
of Merger with the Delaware Secretary of State; (iii) the filing of a Form D
with the SEC after the Closing Date with respect to the private placement of
OmniVision Common Stock pursuant to this Agreement; (iv) the filing of the
Registration Statement with the SEC after the Closing Date covering the resale
of such shares of OmniVision Common Stock; (v) such consents, approvals, orders,
authorizations, registrations, declarations and filings as may be required under
applicable state securities laws and the securities laws of any foreign country;
(vi) the filing with the NASDAQ Stock Market of a Notification Form for Listing
of Additional Shares with respect to the shares of OmniVision Common Stock
issuable in connection with the Merger (if required); and (vii) such other
consents, approvals, orders, authorizations, registrations, declarations and
filings, if any, that if not made or obtained by OmniVision or Merger Sub would
not be material to OmniVision's or Merger Sub's ability to consummate the Merger
or to perform their respective obligations under this Agreement, the OmniVision
Ancillary Agreements and the Merger Sub Ancillary Agreements.
(c) Enforceability. This Agreement has been duly executed and
delivered by OmniVision and Merger Sub. This Agreement and each of the
OmniVision Ancillary Agreements are, or when executed by OmniVision shall be,
valid and binding obligations of OmniVision, enforceable against OmniVision in
accordance with their respective terms, subject to the effect of (i) applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to rights of creditors generally and (ii) rules of
law and equity governing specific performance, injunctive relief and other
equitable remedies. This Agreement and each of the Merger Sub Ancillary
Agreements are, or when executed by Merger Sub shall be, valid and binding
obligations of Merger Sub, enforceable against Merger Sub in accordance with
their respective terms, subject to the effect of (i) applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or hereafter in
effect relating to rights of creditors generally and (ii) rules of law and
equity governing specific performance, injunctive relief and other equitable
remedies.
5.3 No Conflict. Neither the execution and delivery of this Agreement,
any of the OmniVision Ancillary Agreements or any of the Merger Sub Ancillary
Agreements by OmniVision or Merger Sub, nor the consummation of the Merger or
any other transaction contemplated hereby or thereby, shall conflict with, or
(with or without notice or lapse of time, or both) result in a termination,
breach, impairment or violation of, or constitute a default under:
51
(a) any provision of the Certificate of Incorporation or Bylaws of OmniVision or
Merger Sub, each as currently in effect; (b) any Applicable Law applicable to
OmniVision or Merger Sub or any of their respective material assets or
properties; or (c) any Contract to which OmniVision or Merger Sub is a party or
by which OmniVision or Merger Sub or any of their respective material assets or
properties are bound, except in the cases of clauses (b) and (c) where such
conflict, termination, breach, impairment, violation or default would not be
material to OmniVision's or Merger Sub's ability to consummate the Merger or to
perform their respective obligations under this Agreement, the OmniVision
Ancillary Agreements and the Merger Sub Ancillary Agreements.
ARTICLE 6
SECURITIES LAW COMPLIANCE; REGISTRATION OF INITIAL STOCK CONSIDERATION
6.1 Private Placement.
(a) Subject to the satisfaction of conditions precedent set forth in
this Section 6.1 and the other terms and conditions set forth in this Agreement,
OmniVision shall issue the OmniVision Common Stock to be issued in the Merger
pursuant to Section 2.3(b)(i)-(iii) in a private placement pursuant to an
exemption from registration under Section 4(2) of the Securities Act and/or
Regulation D. Accordingly, the shares of OmniVision Common Stock to be issued to
the Effective Time Securityholders in the Merger will be "restricted securities"
under Applicable Law, including the Securities Act, and the Effective Time
Securityholders may dispose of such shares only pursuant to an effective
registration statement under the Securities Act or an exemption therefrom and
subject to the additional restrictions set forth in this Agreement, the
Securityholder Representation Agreements and the Put Agreement.
(b) The parties hereto acknowledge and agree that (i) as a condition
to effecting such issuance as a private placement pursuant to Section 4(2) of
the Securities Act and/or Regulation D, OmniVision shall be entitled to obtain
at or prior to Closing and as a condition to Closing from each Effective Time
Securityholder a Securityholder Representation Agreement, and that OmniVision
will be relying upon the representations made by each Effective Time
Securityholder in the applicable Securityholder Representation Agreement in
connection with the issuance of OmniVision Common Stock to such Effective Time
Securityholder; (ii) OmniVision shall be entitled to obtain at or prior to
Closing and as a condition to Closing, with respect to each Effective Time
Securityholder that is reasonably deemed by OmniVision not to be an Accredited
Investor and not to have such knowledge and experience in financial matters as
to be capable of evaluating the risk and merits of an investment in OmniVision
Common Stock in accordance with Rule 506(b)(2)(ii) of the Securities Act, a
written agreement (each a "PURCHASER REPRESENTATIVE AGREEMENT") between such
Effective Time Securityholder and a purchaser representative (who shall make
written certifications reasonably satisfactory to OmniVision that such
individual is a purchaser representative within the meaning of Regulation D)
regarding the representation of such Effective Time Securityholder in connection
with this Agreement and the transactions contemplated hereby, together with such
other representations and agreements pursuant to the provisions of Regulation D
as OmniVision shall reasonably request; (iii) the shares of OmniVision Common
Stock issued pursuant to Section 2.3(b)(i)-(iii) will not be registered under
the Securities Act and will constitute "restricted securities" within the
meaning of the Securities Act and such shares may not be re-
52
offered or resold other than in conformity with the registration and/or
qualification requirements of the Securities Act and other applicable state blue
sky securities laws and regulations or pursuant to an exemption therefrom; and
(iv) the certificates representing the shares of OmniVision Common Stock shall
bear appropriate legends to identify such privately placed shares as being
restricted under the Securities Act and such other restrictions, if applicable,
as set forth in the Securityholder Representation Agreements, the Put Agreement
or otherwise required by law. In accordance with the foregoing, each certificate
representing shares of OmniVision Common Stock delivered pursuant to this
Agreement shall bear a legend in substantially the following form (together with
any additional legends required by applicable state securities laws, the Put
Agreement and the Securityholder Representation Agreements):
"THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR
ANY STATE SECURITIES LAWS, AND MAY NOT BE SOLD OR TRANSFERRED OR OFFERED
FOR SALE OR TRANSFER UNLESS A REGISTRATION STATEMENT UNDER THE SECURITIES
ACT AND OTHER APPLICABLE SECURITIES LAWS WITH RESPECT TO SUCH SECURITIES
IS THEN IN EFFECT, OR IN THE OPINION OF COUNSEL ACCEPTABLE TO OMNIVISION
TECHNOLOGIES, INC. SUCH REGISTRATION UNDER THE SECURITIES ACT AND OTHER
APPLICABLE SECURITIES LAWS IS NOT REQUIRED."
6.2 Blue Sky Laws; Information Statement. OmniVision shall take such
steps as may be necessary to comply with the securities and blue sky laws of all
jurisdictions which are applicable to the issuance of the OmniVision Common
Stock in connection with the Merger. CDM shall use its reasonable efforts to
assist OmniVision as may be necessary to comply with the securities and blue sky
laws of all jurisdictions which are applicable in connection with the issuance
of OmniVision Common Stock in connection with the Merger, including without
limitation, distributing to the CDM Securityholders prior to the CDM
Stockholders Meeting or the distribution of the CDM Stockholders Consent such
information, if and as deemed reasonably necessary or advisable by OmniVision,
and in consultation with and with the cooperation of OmniVision, for
distribution to such CDM Securityholders pursuant to Rule 502(b) of the
Securities Act (such information constituting the "INFORMATION STATEMENT"). CDM
shall cause the information relating to CDM, the transactions set forth herein,
this Agreement and the CDM Securityholders included in the Information Statement
to not, at the time the Information Statement is delivered to CDM
Securityholders and at all times subsequent thereto (through and including the
Effective Time of the Merger), contain as related to CDM, the transactions set
forth herein, this Agreement and the CDM Securityholders any untrue statement of
a material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made not misleading. CDM shall promptly
advise OmniVision in writing if at any time prior to the Effective Time of the
Merger CDM shall obtain knowledge of any facts that might make it necessary or
appropriate to amend or supplement the Information Statement, in order to make
the statements contained therein not misleading or to comply with Applicable
Law. CDM shall cause the information contained in the Information Statement
related to CDM, the transactions set forth herein, this Agreement and the CDM
Securityholders to comply with all requirements
53
of Applicable Law (including federal and state securities laws and the Code and
regulations promulgated thereunder), provided, however, that CDM is not
responsible for the information concerning OmniVision provided by OmniVision or
its counsel to CDM or its counsel in writing specifically for use in the
Information Statement. CDM shall provide promptly such information concerning
its business and financial statements and affairs as, in the reasonable judgment
of CDM or its counsel, may be required or appropriate for inclusion in the
Information Statement, or in any amendments or supplements thereto, and to cause
its counsel and auditors to cooperate with the other's counsel and auditors in
the preparation of the Information Statement.
6.3 Registration of OmniVision Common Stock. Promptly following the
Closing Date (and in any event not later than 30 days after the Closing Date),
OmniVision shall file with the SEC a registration statement on Form S-3 or any
successor short form registration statement involving a similar amount of
disclosure, or if OmniVision is then ineligible to use any such form, then any
other available form of registration statement (the "REGISTRATION STATEMENT")
registering for resale the OmniVision Common Stock issued or issuable to the
Effective Time Securityholders pursuant to Section 2.3(b)(i)-(iii), including,
but not limited to, the Contingent Shares. Such Registration Statement shall be
filed pursuant to the terms and conditions set forth in the Registration Rights
Agreement in substantially the form attached hereto as Exhibit 6.3 (the
"REGISTRATION RIGHTS AGREEMENT") to be entered into by OmniVision and the
Effective Time Securityholders at or prior to Closing.
ARTICLE 7
CDM COVENANTS
During the time period from the Agreement Date until the earlier to occur
of (a) the Effective Time or (b) the termination of this Agreement in accordance
with the provisions of Article 11, CDM covenants and agrees with OmniVision as
follows:
7.1 Advice of Changes. CDM shall promptly advise OmniVision in writing of
(a) any event occurring subsequent to the Agreement Date that would render any
representation or warranty of CDM contained in Article 4 untrue or inaccurate
such that the condition set forth in Section 10.1 would not be satisfied, (b)
any breach of any covenant or obligation of CDM pursuant to this Agreement or
any CDM Ancillary Agreement such that the condition set forth in Section 10.2
would not be satisfied, (c) any Material Adverse Change in CDM, or (d) any
change, event, circumstance, condition or effect that could reasonably be
expected to result in a Material Adverse Effect on CDM or cause any of the
conditions set forth in Article 10 not to be satisfied; provided, however, that
the delivery of any notice pursuant to this Section 7.1 shall not be deemed to
amend or supplement the CDM Disclosure Letter.
7.2 Maintenance of Business.
(a) CDM shall use its reasonable best efforts to carry on and
preserve the CDM Business and its relationships with customers, suppliers,
employees and others with whom CDM has contractual relations in substantially
the same manner as it has prior to the Agreement Date consistent with its past
practices. If CDM becomes aware of a material deterioration in the relationship
with any key customer, key supplier or key employee, it shall promptly bring
such information to OmniVision's attention in writing and, if requested by
OmniVision, shall exert
54
reasonable commercial efforts to promptly restore the relationship. At
OmniVision's request such cooperation may include joint customer calls and
cooperation in setting operating strategies.
(b) CDM shall (i) pay all of its debts and Taxes when due, subject
to good faith disputes over such debts or Taxes and (ii) pay or perform its
other Liabilities when due.
(c) CDM shall use its reasonable best efforts to assure that each of
its Contracts (other than with OmniVision) entered into after the Agreement Date
will not require the procurement of any consent, waiver or novation or provide
for any material change in the obligations of any party in connection with, or
terminate as a result of the consummation of, the Merger.
7.3 Conduct of Business. CDM shall continue to conduct the CDM Business
and maintain its business relationships in the ordinary and usual course
consistent with its past practices, and CDM shall not without OmniVision's prior
written consent (which consent shall not be unreasonably withheld or delayed):
(a) incur any indebtedness for borrowed money or guarantee any such
indebtedness of another Person or issue or sell any debt securities or guarantee
any debt securities of another Person;
(b) (i) lend any money, (ii) make any investments in or capital
contributions to, any Person, or (iii) forgive or discharge any outstanding
loans or advances;
(c) enter into any CDM Material Contract, violate, terminate, amend
or otherwise modify or waive any of the material terms of any CDM Material
Contract, or enter into any material transaction or take any other action not in
the ordinary course of business consistent with its past practices;
(d) place or allow the creation of any Encumbrance (other than a
Permitted Encumbrance) on any of its assets or properties;
(e) sell, lease, license, transfer or dispose of any assets material
to the CDM Business (except for sales of products in the ordinary course of
business consistent with its past practices);
(f) (i) pay any bonus, increased salary, severance or special
remuneration to any officer, director, employee or consultant, (ii) amend or
enter into any employment or consulting Contract with any Person, or (iii) adopt
or amend any employee or compensation benefit plan, including any stock
purchase, stock issuance or stock option plan, or amend any compensation,
benefit, entitlement, grant or award provided or made under any such plan
(except in each case as required under ERISA or as necessary to maintain the
qualified status of such plan under the Code and except for amendments (provided
that such amendments are approved in advance in writing by OmniVision, such
consent not to be unreasonably withheld, to the CDM Option Plan and/or Contracts
with respect to CDM Options necessary to effect the treatment of outstanding CDM
Options pursuant to Section 2.3(b)(i));
(g) change any of its accounting methods, except as required by
GAAP;
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(h) declare, set aside or pay any cash or stock dividend or other
distribution in respect of its capital stock, or redeem, repurchase or otherwise
acquire any of its capital stock or other securities (except for the repurchase
of stock from its employees, directors, consultants or contractors in connection
with the termination of their services at the original purchase price of such
stock), or pay or distribute any cash or property to any of its stockholders or
securityholders or make any other cash payment to any of its stockholders or
securityholders;
(i) merge, consolidate or reorganize with, acquire, or enter into
any other business combination with any corporation, partnership, limited
liability company or any other entity (other than OmniVision or Merger Sub),
acquire a substantial portion of the assets of any such entity, or enter into
any negotiations, discussions or agreement for such purpose;
(j) amend its Certificate of Incorporation or Bylaws;
(k) license any of its technology or Intellectual Property
(including without limitation to customers or potential customers), or acquire
any Intellectual Property (or any license thereto) from any third party (other
than licenses of software generally available to the public at a per copy
license fee of less than $1,000 per copy);
(l) materially change any insurance coverage;
(m) (i) agree to any audit assessment by any taxing authority, (ii)
file any Return or amendment to any Return unless copies of such Return or
amendment have first been delivered to OmniVision for its review and approval
(not to be unreasonably withheld) at a reasonable time prior to filing, (iii)
make or change any material election in respect of Taxes or adopt or change any
material accounting method in respect of Taxes, or (iv) enter into any closing
agreement, settle any claim or assessment in respect of Taxes, or consent to any
extension or waiver of the limitation period applicable to any claim or
assessment in respect of Taxes;
(n) modify or change the exercise or conversion rights or exercise
or purchase prices of any of its capital stock, any of its stock options, any of
its warrants or other securities, or accelerate or otherwise modify (i) the
right to exercise any option, warrant or other right to purchase any of its
capital stock or other securities or (ii) the vesting or release of any shares
of its capital stock or other securities from any repurchase options or rights
of refusal held by it or any other party or any other restrictions; except CDM
shall make any necessary amendments (subject to the prior written approval of
OmniVision, which such approval will not be unreasonably withheld) to the CDM
Option Plan and all Contracts relating to outstanding CDM Options and to all
Contracts relating to outstanding CDM Warrants, in each case to the extent
necessary to permit the cancellation of such CDM Options and the sale to
OmniVision of such CDM Warrants in exchange for the consideration set forth in
Section 2.3(b)(i) and Section 2.3(b)(ii), respectively;
(o) (i) initiate any litigation, action, suit, proceeding, claim or
arbitration (other than for the routine collection of bills) or (ii) settle or
agree to settle any litigation, action, suit, proceeding, claim or arbitration
(except where the amount in controversy does not exceed $10,000 and does not
involve injunctive or other equitable relief);
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(p) pay, discharge or satisfy, in an amount in excess of $15,000 in
any one case or $37,500 in the aggregate, any Liability arising otherwise than
in the ordinary course of business;
(q) extend any warranties, discounts or credits to customers;
(r) (i) agree to do any of the things described in the preceding
clauses (a)-(q), (ii) take or agree to take any action which could reasonably be
expected to make any of CDM's representations or warranties contained in this
Agreement materially untrue or incorrect, or (iii) take or agree to take any
action which could reasonably be expected to prevent CDM from performing or
cause CDM not to perform one or more covenants required hereunder to be
performed by CDM.
7.4 Regulatory Approvals. CDM shall promptly execute and file, or join in
the execution and filing of, any application, notification or other document
that may be necessary in order to obtain the authorization, approval or consent
of any Governmental Authority, whether federal, state, local or foreign, which
may be reasonably required, or which OmniVision may reasonably request, in
connection with the consummation of the Merger and the other transactions
contemplated by this Agreement or any CDM Ancillary Agreement. CDM shall use
diligent efforts to obtain, and to cooperate with OmniVision to promptly obtain,
all such authorizations, approvals and consents and shall pay any associated
filing fees payable by CDM with respect to such authorizations, approvals and
consents. CDM shall promptly inform OmniVision of any material communication
between CDM and any Governmental Authority regarding any of the transactions
contemplated hereby. If CDM or any affiliate of CDM receives any formal or
informal request for supplemental information or documentary material from any
Governmental Authority with respect to the transactions contemplated hereby,
then CDM shall make, or cause to be made, as soon as reasonably practicable, a
response in compliance with such request. CDM shall direct, in its sole
discretion, the making of such response, but shall consider in good faith the
views of OmniVision.
7.5 Necessary Consents. CDM shall use its reasonable best efforts to
promptly obtain such written consents and authorizations of third parties
(including, without limitation, any Governmental Authority) as specifically set
forth in the CDM Disclosure Letter, give notices to third parties and take such
other actions as may be necessary or appropriate in order to effect the
consummation of the Merger and the other transactions contemplated by this
Agreement, to enable the Surviving Corporation or OmniVision to carry on the CDM
Business immediately after the Effective Time in all material respects and to
keep in effect and avoid the breach, violation of, termination of, or adverse
change to any Contract to which CDM is a party or is bound or by which any of
its assets or properties is bound.
7.6 Litigation. CDM shall notify OmniVision in writing promptly after
learning of any claim, action, suit, arbitration, mediation, proceeding or
investigation (or any material development relating thereto) by or before any
court, arbitrator or arbitration panel, board or governmental agency, initiated
by or against it, or Known by CDM to be threatened against CDM or any of its
officers, directors, employees or stockholders in their capacity as such.
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7.7 No Other Negotiations.
(a) Prohibited Conduct. CDM shall not, and shall not authorize,
encourage or permit any CDM Representative to, directly or indirectly: (i)
solicit, initiate, encourage, facilitate or induce the making, submission or
announcement of any Acquisition Proposal or take any other action that could
reasonably be expected to lead to an Acquisition Proposal; (ii) consider or
entertain any correspondence or communications received from any Person
concerning any Acquisition Proposal (other than to respond to such
correspondence or communications by indicating that CDM is not interested in any
Acquisition Proposal); (iii) furnish any nonpublic information regarding CDM to
any Person (other than OmniVision and its agents and advisors) in connection
with or in response to any correspondence or communications concerning any
Acquisition Proposal (other than to respond to such correspondence or
communications by indicating that CDM is not interested in or cannot freely
discuss any Acquisition Proposal); (iv) enter into, participate in, maintain or
continue any discussions or negotiations with any Person (other than OmniVision
and its agents and advisors) concerning, or furnish to any Person (other than
OmniVision and its agents and advisors) any information with respect to, or take
any other action to facilitate any inquiries or the making of, any Acquisition
Proposal; (v) cooperate with, facilitate or encourage any effort or attempt by
any Person to effect any Acquisition Proposal; (vi) approve, endorse or
recommend any Acquisition Proposal; or (vii) execute, enter into or become bound
by any letter of intent, memorandum of understanding or similar document or any
Contract that provides for, contemplates, concerns or otherwise relates to any
Acquisition Proposal. If any CDM Representative, whether in his or her capacity
as such or in any other capacity, takes any action that CDM is obligated
pursuant to this Section 7.7(a) to cause such CDM Representative not to take,
then (i) CDM shall be deemed for all purposes of this Agreement to have breached
this Section 7.7(a), and (ii) CDM agrees, at its sole expense, to take all
reasonable measures (including without limitation court proceedings) to restrain
each CDM Representative from taking any such prohibited actions.
(b) Notification to OmniVision. CDM shall (i) immediately notify
OmniVision after receipt by CDM (or, to CDM's Knowledge, by any CDM
Representative) of any correspondence or communication that constitutes, or
could reasonably be expected to lead to, an Acquisition Proposal, or any other
notice that any Person is considering making an Acquisition Proposal, or any
request for nonpublic information relating to CDM or for access to any of the
properties, books or records of CDM by any Person or Persons other than
OmniVision (or its and its agents and advisors), which notice shall identify the
Person or Persons making, or considering making, such Acquisition Proposal or
request for information or access, (ii) shall keep OmniVision fully informed as
promptly as practicable of the status and details of any such Acquisition
Proposal (including amendments or proposed amendments) or request for
information or access and any correspondence or communications related thereto,
and (iii) shall provide to OmniVision a correct and complete copy of such
Acquisition Proposal or request for information or access and any amendments,
correspondence and communications related thereto (if in writing) or a written
summary thereof (if not in writing). CDM shall provide OmniVision with 24 hours
prior written notice (or such lesser prior notice as is provided to any of the
members of the Board of Directors of CDM) of any meeting of the Board of
Directors of CDM at which the Board of Directors of CDM is reasonably expected
to consider any Alternative Transaction. CDM shall, and shall cause the CDM
Representatives to, immediately cease and cause to be terminated (and shall not
resume or otherwise continue) any and all existing
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activities, discussions and negotiations with any Persons conducted heretofore
with respect to any Acquisition Proposal.
7.8 Access to Information. CDM, upon reasonable notice, shall allow
OmniVision and its agents and advisors access at reasonable times to the files,
books, records, technology, Contracts, personnel and offices of CDM, including
any and all information relating to CDM's Taxes, Contracts, Liabilities,
financial condition and real, personal and intangible property, subject to the
terms of the NDAs and provided that such access shall not unreasonably disrupt
CDM's normal business activities. CDM shall use its reasonable best efforts to
cause its accountants to cooperate with OmniVision and OmniVision's agents and
advisors (provided that, prior to any disclosure to such agents or advisors,
such agents or advisors are bound by the terms of a confidentiality agreement
with substantially similar restrictions as included in the NDAs to restrict the
use and disclosure of CDM's confidential information) in making available all
financial information reasonably requested by OmniVision and its agents and
advisors, including the right to examine all working papers pertaining to all
financial statements prepared or audited by such accountants.
7.9 Satisfaction of Conditions Precedent. CDM shall use its reasonable
best efforts to satisfy or cause to be satisfied all the conditions precedent
set forth in Article 10, and CDM shall use its reasonable best efforts to cause
the Merger and the other transactions contemplated by this Agreement to be
consummated in accordance with the terms of this Agreement. Prior to the
Effective Time, CDM will withhold for all income and employment-related Taxes
imposed in connection with any exercises of CDM Options and CDM Warrants prior
to the Effective Time.
7.10 CDM Benefit Arrangements. CDM shall terminate any and all group
severance, separation, retention and salary continuation plans, programs or
arrangements (other than the Employment Agreements) prior to the Closing Date.
Prior to the Effective Time, CDM shall provide such notices, obtain such
consents, and adopt such amendments to the CDM Options as are necessary to
effect the settlement and termination of such CDM Options as contemplated by
this Agreement.
7.11 Approval of the CDM Stockholders.
(a) Stockholder Meeting or Consent. CDM shall take all action
necessary in accordance with this Agreement, Delaware Law, Colorado Law (if and
to the extent applicable), and the Certificate of Incorporation and Bylaws of
CDM to (i) call, notice, convene, hold and conduct a CDM Stockholders Meeting or
(ii) secure a CDM Stockholders Consent. Prior to or concurrently with the
calling of the CDM Stockholders Meeting or the mailing of the CDM Stockholders
Consent, CDM shall distribute to the CDM Securityholders any Information
Statement provided to CDM by OmniVision for distribution to the CDM
Securityholders. CDM shall hold the CDM Stockholders Meeting or solicit the CDM
Stockholders Consent as soon as practicable (and in any event no later than 20
business days) after the Agreement Date. If CDM will call the CDM Stockholders
Meeting, then CDM shall consult with OmniVision regarding the date of the CDM
Stockholders Meeting and shall not postpone or adjourn the CDM Stockholders
Meeting without the prior written consent of OmniVision. If CDM will call the
CDM Stockholders Meeting, the CDM shall use its reasonable best efforts to
solicit from the CDM Stockholders proxies to be voted on the approval of the
Merger and adoption of this
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Agreement. CDM's obligation to call, give notice of, convene, hold and conduct
the CDM Stockholders Meeting or secure the CDM Stockholders Consent in
accordance with this Section 7.11(a) shall not be limited to or otherwise
affected by the commencement, disclosure, announcement or submission to CDM of
any Acquisition Proposal. CDM shall exercise reasonable best efforts to take all
other action necessary to secure the vote or consent of the CDM Stockholders
required to effect each of the transactions contemplated by this Agreement.
(b) Board Recommendation. In the notice of the CDM Stockholders
Meeting sent to CDM Stockholders and/or within the text of any CDM Stockholders
Consent, CDM's Board of Directors shall make a unanimous, unqualified
recommendation that the CDM Stockholders vote in favor of adoption of this
Agreement and approval of the Merger at the CDM Stockholders Meeting or pursuant
to the CDM Stockholders Consent and state that the Board of Directors has
concluded that the terms and conditions of the Merger and this Agreement are
fair, just, reasonable, equitable, advisable and in the best interests of the
CDM and its securityholders. Neither CDM's Board of Directors nor any committee
thereof shall withdraw, amend or modify, or propose or resolve to withdraw,
amend or modify, in a manner adverse to OmniVision, the unanimous recommendation
of CDM's Board of Directors that the CDM Stockholders vote in favor of adoption
of this Agreement and approval of the Merger.
7.12 Notices to CDM Securityholders and Employees.
(a) CDM shall timely provide to holders of CDM Capital Stock, CDM
Options and CDM Warrants all advance notices required to be given to such
holders in connection with this Agreement, the Merger and the transactions
contemplated by this Agreement under the CDM Option Plan, CDM Warrants or other
applicable Contracts and shall properly advise each holder of CDM Capital Stock,
CDM Options and CDM Warrants with respect to the federal income tax implications
to such holders of the transactions contemplated by the Merger.
(b) CDM shall give all notices and other information required to be
given to the employees of CDM and any applicable Governmental Authority under
the Code, COBRA and other Applicable Law in connection with the transactions
contemplated by this Agreement or other applicable Contracts.
7.13 CDM Securityholder Documents and Letters of Transmittal and Related
Documents. CDM will use reasonable best efforts to deliver or cause to be
delivered to OmniVision, as promptly as practicable on or following the date
hereof, from each Person who is a CDM Securityholder as of immediately prior to
the Effective Time (other than holders of Dissenting Shares), properly completed
and executed CDM Securityholder Documents and the documentation set forth in
Section 2.6 of this Agreement.
7.14 Proprietary Information and Inventions Agreements. Except as set
forth in Schedule 7.14 to the CDM Disclosure Letter, CDM will ensure that each
current employee and consultant of CDM who has not executed an offer letter and
accompanying proprietary information and inventions agreement with respect to
his, her or its continuing employment or contract with the Surviving Corporation
as set forth in Section 10.9 executes and delivers an effective proprietary
information and inventions agreement in customary form that provides that
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any inventions or other intellectual property developed by such individual while
employed or remunerated by CDM is assigned automatically to CDM.
ARTICLE 8
OMNIVISION COVENANTS
(A) During the time period from the Agreement Date until the earlier to
occur of (a) the Effective Time or (b) the termination of this Agreement in
accordance with the provisions of Article 11, OmniVision covenants and agrees
with CDM as follows:
8.1 (A) Advice of Changes. OmniVision shall promptly advise CDM in
writing of (a) any event occurring subsequent to the Agreement Date that would
render any representation or warranty of OmniVision contained in Article 5
untrue or inaccurate such that the condition set forth in Section 9.1 would not
be satisfied and (b) any breach of any covenant or obligation of OmniVision
pursuant to this Agreement or any OmniVision Ancillary Agreement such that the
condition set forth in Section 9.2 would not be satisfied.
8.2 (A) Regulatory Approvals. OmniVision shall promptly execute and file,
or join in the execution and filing of, any application, notification or other
document that may be necessary in order to obtain the authorization, approval or
consent of any Governmental Authority, whether foreign, federal, state, local or
municipal, which may be reasonably required in connection with the consummation
of the Merger and the other transactions contemplated by this Agreement, any
OmniVision Ancillary Agreement or any Merger Sub Ancillary Agreement. OmniVision
shall use diligent efforts to obtain all such authorizations, approvals and
consents and shall pay any associated filing fees payable by OmniVision with
respect to such authorizations, approvals and consents. OmniVision shall
promptly inform CDM of any material communication between OmniVision and any
Governmental Authority regarding any of the transactions contemplated hereby. If
OmniVision or any Affiliate of OmniVision receives any formal or informal
request for supplemental information or documentary material from any
Governmental Authority with respect to the transactions contemplated hereby,
then OmniVision shall make, or cause to be made, as soon as reasonably
practicable, a response in compliance with such request. OmniVision shall
direct, in its sole discretion, the making of such response, but shall consider
in good faith the views of CDM. Notwithstanding anything in this Agreement to
the contrary, if any administrative or judicial action or proceeding is
instituted (or threatened in writing to be instituted) challenging any
transaction contemplated by this Agreement as violative of any Applicable Law,
it is expressly understood and agreed that neither OmniVision nor any of its
Subsidiaries or Affiliates shall be under any obligation to: (a) litigate or
contest any administrative or judicial action or proceeding or any decree,
judgment, injunction or other order, whether temporary, preliminary or
permanent; or (b) make proposals, execute or carry out agreements or submit to
orders providing for (i) the sale or other disposition or holding separate
(through the establishment of a trust or otherwise) of any assets or categories
of assets of OmniVision, any of its Subsidiaries or Affiliates or CDM, or the
holding separate of the shares of CDM Capital Stock or (ii) the imposition of
any limitation on the ability of OmniVision or any of its Subsidiaries or
Affiliates to freely conduct their business or own such assets or to acquire,
hold or exercise full rights of ownership of the shares of CDM Capital Stock.
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8.3 (A) Satisfaction of Conditions Precedent. OmniVision shall use its
reasonable best efforts to satisfy or cause to be satisfied all of the
conditions precedent that are set forth in Article 9, and OmniVision shall use
its reasonable best efforts to cause the Merger and the other transactions
contemplated by this Agreement to be consummated in accordance with the terms of
this Agreement.
(B) OmniVision also covenants and agrees with CDM and the Representative
(in his capacity as such) as follows:
8.4 (B) Employee Benefit Matters.
(a) The Surviving Corporation shall maintain, in accordance with the
written terms thereof, the benefits plans (excluding equity benefits plans)
disclosed in the CDM Disclosure Letter that CDM has in place as of the Effective
Time for the benefit of the CDM employees who become employees of the Surviving
Corporation after the Effective Time for a period of four years after the
Closing Date, provided such employee is continuously employed with the Surviving
Corporation during such period. The provisions of this Section 8.4(B)(a) shall
not apply if employee works for the Surviving Corporation or OmniVision outside
of the Surviving Corporation's Colorado facility. Notwithstanding the foregoing,
such benefit plans may be amended or modified with the written consent of the
Representative, which consent will not be unreasonably withheld, OmniVision and
Surviving Corporation, and this Section 8.4(B) shall apply to such benefit plans
as so amended or modified.
(b) CDM Employee Participation in OmniVision Stock Option Plan. As
soon as reasonably practicable following the Closing, the Compensation Committee
of OmniVision's Board of Directors shall grant options to purchase up to an
aggregate of 250,000 shares of OmniVision's Common Stock (as adjusted for any
stock splits, stock dividends, combinations, forward or reverse stock splits,
recapitalizations and the like with respect to such shares between the Agreement
Date and the date of grant) under OmniVision's stock option plan to Continuing
Employees other than X.X. Xxxxxxx, Xx. and Xxxxxx X. Xxxxxx, Xx. Such stock
option grants will be subject to OmniVision's standard vesting terms and other
standard option terms and conditions and will have an exercise price equal to
the fair market value of OmniVision Common Stock on the date of grant. The
amount of such stock option grants to such individual employees will be
determined in good faith by OmniVision in consultation with the Representative.
8.5 (B) NASDAQ Listing. If required by applicable NASDAQ rules,
OmniVision shall file with the NASDAQ National Market a Notification Form for
Listing of Additional Shares with respect to the shares of OmniVision Common
Stock issuable in connection with the Merger.
8.6 (B) Satisfaction of Certain Indebtedness. Within two days following
the Effective Time, OmniVision shall provide capital to the Surviving
Corporation in immediately available funds in an amount equal to the aggregate
exercise price for all CDM Options cancelled pursuant to, and in exchange for
the consideration set forth in, Section 2.3(b)(i) and all CDM Warrants purchased
by OmniVision pursuant to, and in exchange for, the consideration set forth in
Section 2.3(b)(ii), in either case as reflected on the Spreadsheet. At any time
within two
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days following the Effective Time, and upon presentation of the original
promissory notes for cancellation or an affidavit of lost instrument in form
reasonably satisfactory to OmniVision, the Surviving Corporation shall repay all
unpaid principal and accrued interest due under those certain promissory notes
as set forth on Schedule 4.11 of the CDM Disclosure Letter.
ARTICLE 9
CONDITIONS TO OBLIGATIONS OF CDM
CDM's obligations to consummate the Merger and take the other actions
required to be taken by CDM at the Closing are subject to the fulfillment or
satisfaction as of the Closing, of each of the following conditions (it being
understood that any one or more of the following conditions may be waived by CDM
in a writing signed on behalf of CDM):
9.1 Accuracy of Representations and Warranties. The representations and
warranties of OmniVision set forth in Article 5 (a) that are qualified as to
materiality shall be true and correct and (b) that are not qualified as to
materiality shall be true and correct in all material respects, in each case on
and as of the Closing with the same force and effect as if they had been made on
the Closing Date (except for any such representations or warranties that by
their terms speak only as of a specific date or dates, in which case such
representations and warranties that are qualified as to materiality shall be
true and correct, and such representations and warranties that are not qualified
as to materiality shall be true and correct in all material respects, on and as
of such specified date or dates, except as set forth therein), except to the
extent the failure of such representations and warranties to be so true and
correct does not have a material adverse effect on OmniVision's or Merger Sub's
ability to consummate the Merger or to perform their respective obligations
under this Agreement, the OmniVision Ancillary Agreements and the Merger Sub
Ancillary Agreements, and at the Closing CDM shall have received a certificate
to such effect executed by an officer of OmniVision.
9.2 Covenants. OmniVision shall have performed and complied in all
material respects with all of its covenants contained in Article 8 on or before
the Closing (to the extent that such covenants require performance by OmniVision
on or before the Closing), except to the extent the failure to so perform and
comply with such covenants does not have a material adverse effect on
OmniVision's ability to consummate the Merger or to perform its obligations
under this Agreement and the OmniVision Ancillary Agreements, and at the Closing
CDM shall have received a certificate to such effect executed by an officer of
OmniVision.
9.3 Compliance with Law; No Legal Restraints; No Litigation. There shall
not be issued, enacted or adopted, or threatened in writing by any Governmental
Authority, any order, decree, temporary, preliminary or permanent injunction,
legislative enactment, statute, regulation, action or proceeding, or any
judgment or ruling by any Governmental Authority that prohibits or renders
illegal or imposes limitations on the Merger or any other material transaction
contemplated by this Agreement. No litigation or proceeding shall be threatened
or pending for the purpose or with the probable effect of enjoining or
preventing the consummation of the Merger or any of the other material
transactions contemplated by this Agreement.
9.4 Government Consents. There shall have been obtained at or prior to
the Closing Date such permits or authorizations, and there shall have been taken
all such other actions by any
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Governmental Authority or other regulatory authority having jurisdiction over
the parties and the actions herein proposed to be taken, as may be required to
lawfully consummate the Merger.
9.5 Secretary Certificate. CDM shall have received a certificate executed
by the Secretary of each of OmniVision and Merger Sub certifying copies of
resolutions adopted by the Boards of Directors of each of OmniVision and Merger
Sub and the sole stockholder of Merger Sub evidencing approval of the Merger and
the execution, delivery and performance of this Agreement, the OmniVision
Ancillary Agreements, the Merger Sub Ancillary Agreements and the transactions
contemplated hereby and thereby.
9.6 Listing of Additional Shares. If required pursuant to applicable
NASDAQ rules, OmniVision shall have filed with the NASDAQ National Market a
Notification Form for Listing of Additional Shares with respect to the shares of
OmniVision Common Stock issuable in connection with the Merger.
9.7 Employment Matters. OmniVision shall have executed and delivered the
Employment Agreement of each of the Persons identified on Exhibit 10.9(A) and
such Employment Agreements shall be in effect and enforceable against OmniVision
and/or CDM as of the Effective Time.
9.8 Put Agreement. OmniVision shall have executed and delivered to each
of the Effective Time Securityholders the Put Agreement.
9.9 Registration Rights Agreement. OmniVision shall have executed and
delivered to each of the Effective Time Securityholders the Registration Rights
Agreement.
9.10 Letter Agreement Regarding CDM Warrants. OmniVision shall have
executed and delivered to CDM and X.X. Xxxxxxx, Xx. a letter agreement, in the
form attached hereto as Exhibit 9.10, regarding the treatment of the CDM
Warrants in accordance with Section 2.3(b)(ii).
ARTICLE 10
CONDITIONS TO OBLIGATIONS OF OMNIVISION AND MERGER SUB
OmniVision's and Merger Sub's obligations to consummate the Merger and
take the other actions required to be taken by them at the Closing are subject
to the fulfillment or satisfaction, as of the Closing, of each of the following
conditions (it being understood that any one or more of the following conditions
may be waived by OmniVision, Merger Sub and in a writing signed by OmniVision):
10.1 Accuracy of Representations and Warranties. The representations and
warranties of CDM set forth in Article 4 (a) that are qualified as to
materiality shall be true and correct and (b) that are not qualified as to
materiality shall be true and correct in all material respects, in each case on
and as of the Closing with the same force and effect as if they had been made on
the Closing Date (except for any such representations or warranties that by
their terms speak only as of a specific date or dates, in which case such
representations and warranties that are qualified as to materiality shall be
true and correct, and such representations and warranties that are not qualified
as to materiality shall be true and correct in all material respects, on and as
of such specified date or dates and except for any changes expressly permitted
by and made in
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accordance with this Agreement), and at the Closing OmniVision shall have
received a certificate to such effect executed by CDM's Chief Executive Officer.
10.2 Covenants. CDM shall have performed and complied in all material
respects with all of its covenants contained in Article 7 at or before the
Closing (to the extent that such covenants require performance by CDM at or
before the Closing), and at the Closing OmniVision shall have received a
certificate to such effect executed by CDM's Chief Executive Officer.
10.3 No Material Adverse Change. There shall not have been any Material
Adverse Change in CDM, whether or not resulting from a breach in any
representation, warranty or covenant in this Agreement, and at the Closing
OmniVision shall have received a certificate to such effect executed by CDM's
Chief Executive Officer.
10.4 Compliance with Law; No Legal Restraints; No Litigation. There shall
not be issued, enacted or adopted, or threatened in writing by any Governmental
Authority, any order, decree, temporary, preliminary or permanent injunction,
legislative enactment, statute, regulation, action, proceeding, or any judgment
or ruling by any Governmental Authority that prohibits or renders illegal or
imposes limitations on: (a) the Merger or any other material transaction
contemplated by this Agreement; or (b) OmniVision's right (or the right of any
Subsidiary of OmniVision) to own, retain, use or operate any of its products,
services, properties or assets (including equity, properties or assets of CDM)
or conduct the CDM Business on or after consummation of the Merger or seeking a
disposition or divestiture of any such properties or assets. No litigation or
proceeding shall be threatened or pending for the purpose or with the probable
effect of enjoining or preventing the consummation of any of the transactions
contemplated by this Agreement.
10.5 Government Consents. There shall have been obtained at or prior to
the Closing Date such permits or authorizations, and there shall have been taken
all such other actions by any Governmental Authority or other regulatory
authority having jurisdiction over the parties and the actions herein proposed
to be taken, as may be required to consummate the Merger, including requirements
under applicable federal and state securities laws.
10.6 Opinion of CDM's Legal Counsel. OmniVision shall have received from
Xxxxx & Xxxxxxx L.L.P., legal counsel to CDM, an opinion opining to the matters
set forth in Exhibit 10.6.
10.7 Consents. OmniVision shall have received duly executed copies of all
third party consents, approvals, assignments, notices, waivers, authorizations
or other certificates as specifically required in Schedule 4.3(b) and Schedule
4.5 of the CDM Disclosure Letter.
10.8 CDM Stockholder Approval and Voting Agreements. The Merger and this
Agreement shall have been duly and validly approved and adopted, as required by
Delaware Law and CDM's Certificate of Incorporation and Bylaws, each as in
effect on the date of such approval and adoption, by the requisite vote or
written consent of the CDM Stockholders. The number of Dissenting Shares shall
not exceed 5% of all the CDM Capital Stock outstanding as of
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immediately prior to the Effective Time. The Voting Agreement of each of the
Persons identified on Exhibit 10.8(A) shall continue to be in full force and
effect.
10.9 Employment Matters; Proprietary Information and Inventions
Agreements. The Employment Agreements of each of the Persons identified on
Exhibit 10.9(A) shall continue to be in full force and effect pursuant to their
terms. The Non-Competition Agreements of each of the Persons identified on
Exhibit 10.9(A) shall continue to be in full force and effect pursuant to their
terms. Each employee identified in Schedule 4.16(a) of the CDM Disclosure Letter
shall be employed by CDM immediately prior to the Effective Time and shall have
(i) accepted the Surviving Corporation's offer of employment in a writing signed
by such employees and delivered to the Surviving Corporation and (ii) executed a
proprietary information and inventions agreement in one of the forms set forth
in Exhibit 10.9(D), and none of such employees shall have revoked or rescinded
their acceptances of the Surviving Corporation's offer of employment or their
obligations under such proprietary information and inventions agreement.
10.10 Cancellation of CDM Options, Purchase of CDM Warrants and
Termination of Other Rights. Other than CDM Options cancelled in accordance
with, and in exchange for the consideration set forth in, Section 2.3(b)(i) and
Article 3 and CDM Warrants purchased by OmniVision in exchange for the
consideration set forth in, Section 2.3(b)(ii) and Article 3 (and cancelled at
the Effective Time in accordance with Section 2.3(a), all direct or indirect
rights to acquire shares of CDM Capital Stock shall have been properly exercised
and converted into shares of CDM Capital Stock (which such shares must be
reflected on the Spreadsheet) or shall have been terminated without further
obligation or Liability of CDM, OmniVision or the Surviving Corporation. CDM
Options both disclosed in Section 4.4(b) and properly reflected on the
Spreadsheet which have not been properly exercised for shares of CDM Capital
Stock prior to the Effective Time will be cancelled in accordance with, and in
exchange for the consideration set forth in, Section 2.3(b)(i) and CDM Warrants
both disclosed in Section 4.4(c) and properly reflected on the Spreadsheet which
have not been properly exercised for shares of CDM Capital Stock prior to the
Effective Time will be purchased by OmniVision in accordance with, and in
exchange for the consideration set forth in, Section 2.3(b)(ii). OmniVision
shall have received duly executed copies of any consents, amendments, approvals
or waivers of (i) the CDM Optionholders necessary under the terms of the CDM
Option Plan or any Contract pertaining to CDM Options to allow for the treatment
of issued, outstanding and unexercised CDM Options in the manner contemplated by
Section 2.3(b)(i) and (ii) the CDM Warrantholders necessary under the terms of
any Contracts pertaining to CDM Warrants to allow for the treatment of CDM
Warrants in the manner contemplated by Section 2.3(b)(ii).
10.11 CDM Securityholder Documents. Each CDM Stockholder as of
immediately prior to the Effective Time (other than a holder of solely
Dissenting Shares) shall have completed, executed and delivered to OmniVision
the CDM Securityholder Documents.
10.12 Spreadsheet. OmniVision shall have received the Spreadsheet from
CDM; provided, however, that such receipt shall not be deemed to be an agreement
by OmniVision that the Spreadsheet is accurate and shall not diminish
OmniVision's remedies hereunder if the Spreadsheet is not accurate.
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10.13 Section 280G Approval. If applicable, if, in OmniVision's belief,
any Contract or arrangement to which CDM is a party would be reasonably likely
to give rise to or has given rise to the payment of any amount that would not be
deductible pursuant to Section 280G of the Code, such amount shall have been
subject to a vote by the CDM Stockholders and any "disqualified individuals"
shall have agreed to, and shall, forfeit any payments that would be
non-deductible if the stockholder approval is not obtained.
10.14 CDM Good Standing Certificates. OmniVision shall have received a
certificate from the Delaware Secretary of State and each other State in which
CDM is qualified to do business as a foreign corporation certifying that CDM is
in good standing and that all applicable Taxes and fees of CDM through a recent
date prior to the Closing Date have been paid.
10.15 FIRPTA. OmniVision shall have received from CDM a properly executed
Foreign Investment and Real Property Tax Act of 1980 Notification Letter, in
form and substance reasonably satisfactory to OmniVision, which states that
shares of CDM Capital Stock and the CDM Options and CDM Warrants do not
constitute "United States real property interests" under Section 897(c) of the
Code, for purposes of satisfying OmniVision's obligations under Treasury
Regulation Section 1.1445-2(c)(3).
10.16 Secretary Certificate. OmniVision shall have received a certificate
executed by the Secretary of CDM certifying copies of resolutions adopted by the
Board of Directors of CDM and the CDM Stockholders evidencing adoption and
approval of the Merger and the execution, delivery and performance of this
Agreement, the CDM Ancillary Agreements and the transactions contemplated hereby
and thereby.
10.17 IP Option Agreement; ULEHI Consent Letter. The ULEHI Consent Letter
and the IP Option Agreement (including the right to obtain the two underlying
license agreements attached thereto in the forms in place as of the execution
date of the IP Option Agreement) shall continue to be in full force and effect
and the IP Option Agreement shall be exercisable by OmniVision in accordance
with its terms until expiration in accordance with its terms.
10.18 Resignations of Directors and Officers. The members of the Board of
Directors of CDM in office immediately prior to the Effective Time, who are not
listed as directors of the Surviving Corporation on Exhibit 2.2(e) shall have
resigned from such positions in writing effective as of the Effective Time. The
officers of CDM in office immediately prior to the Effective Time, shall have
resigned in writing effective as of the Effective Time from each officer
position they hold with CDM except to the extent otherwise set forth on Exhibit
2.2(d).
10.19 Put Agreement. Each Effective Time Securityholder shall have
executed and delivered to OmniVision the Put Agreement.
10.20 Registration Rights Agreement. Each Effective Time Securityholder
shall have executed and delivered to OmniVision the Registration Rights
Agreement.
10.21 Letter Agreement Regarding CDM Warrants. CDM and X.X. Xxxxxxx, Xx.
shall have executed and delivered to OmniVision a letter agreement, in the form
attached hereto as Exhibit 9.10, regarding the treatment of the CDM Warrants in
accordance with Section 2.3(b)(ii).
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ARTICLE 11
TERMINATION OF AGREEMENT
11.1 Termination by Mutual Consent. This Agreement may be terminated at
any time prior to the Effective Time by the mutual written consent of OmniVision
and CDM.
11.2 Unilateral Termination.
(a) Either OmniVision or CDM, by giving written notice to the other,
may terminate this Agreement if a court of competent jurisdiction or other
Governmental Authority shall have issued a nonappealable final order, decree or
ruling or taken any other action, in each case having the effect of permanently
restraining, enjoining or otherwise prohibiting the Merger or any other material
transaction contemplated by this Agreement.
(b) Either OmniVision or CDM, by giving written notice to the other,
may terminate this Agreement if the Merger shall not have been consummated by
midnight Pacific Time on April 30, 2005; provided, however, that the right to
terminate this Agreement pursuant to this Section 11.2(b) shall not be available
to any party whose breach of a representation, warranty, covenant or agreement
made under this Agreement by such party results in the failure of any condition
set forth in Article 9 or Article 10 to be fulfilled or satisfied on or before
such date.
(c) Either OmniVision or CDM may terminate this Agreement at any
time prior to the Effective Time if (a) the other has committed a breach of (i)
any of its representations and warranties under Article 4 or Article 5, as
applicable, or (ii) any of its covenants under Article 7 or Article 8, as
applicable, and has not cured such breach within five business days after the
party seeking to terminate this Agreement has given the other party written
notice of the breach and its intention to terminate this Agreement pursuant to
this Section 11.2(c) (provided, however, that no such cure period shall be
available or applicable to any such breach which by its nature cannot be cured)
and (b) if not cured on or prior to the Closing Date, such breach would result
in the failure of any of the conditions set forth in Article 10 or Article 9, as
applicable, to be fulfilled or satisfied; provided, however, that the right to
terminate this Agreement under this Section 11.2(c) shall not be available to a
party if the party is at that time in material breach of this Agreement.
(d) OmniVision, by giving written notice to CDM, may terminate this
Agreement if (i) CDM's Board of Directors shall have for any reason recommended,
endorsed, accepted or agreed to an Alternative Transaction or shall have
resolved to do any of the foregoing; (ii) CDM shall have breached or be deemed
to have breached Section 7.7 (No Other Negotiations); (iii) CDM shall have for
any reason failed to obtain the CDM Stockholder Approval within 20 business days
following the Agreement Date (provided, however, that the right to terminate
this Agreement under this clause (iii) of Section 11.2(d) shall not be available
to OmniVision where the failure to obtain CDM Stockholder approval shall have
been caused by the action or failure to act of OmniVision and such action or
failure to act constitutes a breach by OmniVision of this Agreement); or (iv) if
an Acquisition Proposal shall have been made and CDM's Board of Directors in
connection therewith, does not within 5 business days of such
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occurrence reconfirm its approval and recommendation of this Agreement and the
transactions contemplated hereby and reject such Acquisition Proposal.
(e) OmniVision, by giving written notice to CDM, may terminate this
Agreement if, in the good faith judgment of OmniVision, upon the advice of
counsel, it is not possible to qualify the issuance of OmniVision Common Stock
in the Merger as a valid private placement pursuant to Section 4(2) of the
Securities Act and/or Regulation D.
11.3 Effect of Termination.
(a) In the event of termination of this Agreement as provided in
Section 11.2, this Agreement shall forthwith become void and, except as provided
in Section 11.3(b), Section 11.3(c) and Section 11.3(d), there shall be no
liability or obligation on the part of OmniVision, Merger Sub, CDM Officers,
Representative, or CDM or their respective officers, directors, stockholders or
Affiliates; provided, however, that (i) the provisions of this Section 11.3
(Effect of Termination) and Article 13 (Miscellaneous) shall remain in full
force and effect and survive any termination of this Agreement and (ii) the IP
Option Agreement (including the right to obtain the underlying license
agreements attached thereto in the forms in place as of the execution date of
the IP Option Agreement) shall remain in full force and effect pursuant to its
terms.
(b) Without limiting any other remedies that may be available to
OmniVision at law or equity, if OmniVision terminates this Agreement pursuant to
(i) Section 11.2(b) and the reason the Merger was not consummated on or before
April 30, 2005 was due to a breach by CDM or a CDM Officer of a representation,
warranty, covenant or agreement made under this Agreement that results in the
failure of any condition set forth in Article 10 to be fulfilled or satisfied on
or before the termination date; (ii) Section 11.2(c); or (iii) Section 11.2(d),
then in each such case CDM shall, within 10 business days of receipt from
OmniVision of written notice documenting the fees and expenses (including,
without limitation, legal and accounting fees) incurred by OmniVision with
respect to the negotiation and drafting of this Agreement, the OmniVision and
CDM Ancillary Agreements, and the transactions contemplated hereby and thereby
(including, without limitation, fees and expenses relating to any due diligence
investigation of CDM)), reimburse OmniVision in cash for all such documented
fees and expenses.
(c) Without limiting any other remedies that may be available to CDM
at law or equity, if CDM terminates this Agreement pursuant to (i) Section
11.2(b) and the reason the Merger was not consummated on or before April 30,
2005 was due to a breach by OmniVision or Merger Sub of a representation,
warranty, covenant or agreement made under this Agreement that results in the
failure of any condition set forth in Article 9 to be fulfilled or satisfied on
or before the termination date, or (ii) Section 11.2(c), then in each such case
OmniVision shall, within 10 business days of receipt from CDM of written notice
documenting the fees and expenses (including, without limitation, legal and
accounting fees) incurred by CDM with respect to the negotiation and drafting of
this Agreement, the CDM and OmniVision Ancillary Agreements, and the
transactions contemplated hereby and thereby (including, without limitation,
fees and expenses relating to any due diligence investigation of OmniVision)),
reimburse CDM in cash for all such documented fees and expenses
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(d) Nothing in this Section 11.3 shall relieve any party hereto from
liability in connection with any breach of any of such party's covenants or
agreements contained herein or related hereto.
ARTICLE 12
SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS;
COVENANT OF INDEMNIFICATION; REMEDIES; AND OTHER CONTINUING COVENANTS
12.1 Survival.
(a) The representations and warranties of CDM and the CDM Officers
contained in this Agreement and the other certificates and documents
contemplated hereby shall survive the Effective Time and remain in full force
and effect, regardless of any investigation or disclosure made by or on behalf
of any of the parties to this Agreement, until eighteen months following the
Effective Time; provided, however, that the representations and warranties of
CDM and the CDM Officers contained in (i) Section 4.4 (Capitalization of CDM)
(and contained in each of the related disclosures set forth in (A)
Section/Schedule 4.4 of the CDM Disclosure Letter and (B) any other
section/schedule of the CDM Disclosure Letter where the relevance of the
disclosed exception set forth in the CDM Disclosure Letter is reasonably
apparent to relate to Section 4.4 of this Agreement from the face of such
disclosed exception) will remain operative and in full force and effect,
regardless of any investigation or disclosure made by or on behalf of any of the
parties to this Agreement, until the earlier to occur of (I) the fifth
anniversary of the Effective Time and (II) the second anniversary of the
occurrence date of the Milestone Event; (ii) Section 4.7 (Taxes) (and contained
in each of the related disclosures set forth in (A) Section/Schedule 4.7 of the
CDM Disclosure Letter and (B) any other section/schedule of the CDM Disclosure
Letter where the relevance of the disclosed exception set forth in the CDM
Disclosure Letter is reasonably apparent to relate to Section 4.7 of this
Agreement from the face of such disclosed exception) will remain operative and
in full force and effect, regardless of any investigation or disclosure made by
or on behalf of any of the parties to this Agreement, until the expiration date
of the applicable statute of limitations period with respect to any Tax matters
thereunder; and (iii) Section 4.13 (Intellectual Property) (and contained in
each of the related disclosures set forth in (A) Section/Schedule 4.13 of the
CDM Disclosure Letter and (B) any other section/schedule of the CDM Disclosure
Letter where the relevance of the disclosed exception set forth in the CDM
Disclosure Letter is reasonably apparent to relate to Section 4.13 of this
Agreement from the face of such disclosed exception) will remain operative and
in full force and effect, regardless of any investigation or disclosure made by
or on behalf of any of the parties to this Agreement, until the earlier to occur
of (I) the fifth anniversary of the Effective Time and (II) the second
anniversary of the occurrence date of the Milestone Event; in each case for
claims against the Effective Time Securityholders which seek recovery of Damages
arising out of a failure of the representations and warranties of CDM and the
CDM Officers contained herein and therein to be true and correct (or any breach
thereof) as set forth herein and therein; provided further, that no right to
indemnification pursuant to Article 12 in respect of any claim based upon any
failure of a representation or warranty to be so true and correct (or any breach
thereof) that is set forth in a Notice of Claim delivered prior to the
applicable expiration date of such representation or warranty shall be affected
by the expiration of such representation or warranty; and provided, further,
that such expiration shall not affect the rights of any OmniVision Indemnified
Person under Article 12 or otherwise to seek recovery of Damages
70
arising out of any fraud, willful breach or intentional misrepresentation by
CDM, any of the CDM Officers or any CDM Representative (as to any certificate
executed by such CDM Representative pursuant to this Agreement), until the
expiration of the applicable statute of limitations. The representations and
warranties of OmniVision contained in this Agreement and the other agreements,
certificates and documents of OmniVision contemplated hereby shall expire and be
of no further force or effect as of the Effective Time. For the purposes of this
Article 12, any reference to Contingent Shares shall be deemed to include any
Escrow Consideration.
(b) All covenants and agreements of the parties hereto contained in
this Agreement, including any exhibit hereto, including the Post-Closing
Assistance Covenants, shall survive until such time as they are performed or
expire in accordance with their expressly stated terms or are waived in writing
by the other party(ies) thereto.
12.2 Agreement to Indemnify. Subject to the limitations set forth in this
Article 12, each Effective Time Securityholder shall severally, and not jointly,
indemnify and hold harmless each OmniVision Indemnified Person from and against
Damages arising from assessments, claims, demands, assertions of liability, or
actual or threatened actions, fines, penalties, defenses, judgments,
settlements, suits or proceedings (whether civil, criminal, administrative or
investigative) directly or indirectly arising out of, resulting from or in
connection with: (i) any failure of any representation or warranty made by CDM
or any of the CDM Officers in this Agreement, the CDM Disclosure Letter, any CDM
Ancillary Agreement or any exhibit or schedule to this Agreement to be true and
correct as of the date of this Agreement and as of the Closing Date (as though
such representation or warranty were made as of the Closing Date, except in the
case of representations and warranties which by their terms speak only as of a
specific date or dates) or any breach thereof; (ii) any failure of any
certification, representation or warranty made by CDM or any of the CDM Officers
in any certificate delivered to OmniVision pursuant to any provision of this
Agreement to be true and correct as of the date such certificate is delivered to
OmniVision; (iii) any breach of or default in connection with any of the
covenants or agreements made by CDM or any of the CDM Officers in this
Agreement, the CDM Disclosure Letter, any CDM Ancillary Agreement or any exhibit
or schedule to this Agreement; (iv) any inaccuracies in the Spreadsheet; (v) any
Indemnifiable Merger Expenses; (vi) any Dissenting Shares Excess Payments; and
(vii) any Damages as a result of or arising under or from, directly or
indirectly, (a) any government audit of CDM invoices pursuant to Contracts (for
audits relating to all fiscal years of CDM from incorporation of the predecessor
entity through September 30, 2004 and fifty percent of the amount of such
Damages for audit adjustments relating to fiscal year 2005 (beginning October 1,
2004 and ending September 30, 2005)) and (b) the Section 4.13(r) Documents.
12.3 Remedies and Limitations.
(a) Contingent Shares; Maximum Liability. Recovery from the
Contingent Shares shall be the sole and exclusive remedy under this Agreement
for the matters listed in the foregoing clauses (i)-(vii) of Section 12.2,
except in the case of (i) fraud, willful breach or intentional misrepresentation
by CDM, any of the CDM Officers or the CDM Representative (as to any certificate
executed by such CDM Representative pursuant to this Agreement); (ii) any
failure of any of the representations and warranties contained in Section 4.4
(Capitalization of
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CDM) (and contained in each of the related disclosures set forth in (A)
Section/Schedule 4.4 of the CDM Disclosure Letter and (B) any other
section/schedule of the CDM Disclosure Letter where the relevance of the
disclosed exception set forth in the CDM Disclosure Letter is reasonably
apparent to relate to Section 4.4 of this Agreement from the face of such
disclosed exception), Section 4.7 (Taxes) (and contained in each of the related
disclosures set forth in (A) Section/Schedule 4.7 of the CDM Disclosure Letter
and (B) any other section/schedule of the CDM Disclosure Letter where the
relevance of the disclosed exception set forth in the CDM Disclosure Letter is
reasonably apparent to relate to Section 4.7 of this Agreement from the face of
such disclosed exception) and Section 4.13 (Intellectual Property) (and
contained in each of the related disclosures set forth in (A) Section/Schedule
4.13 of the CDM Disclosure Letter and (B) any other section/schedule of the CDM
Disclosure Letter where the relevance of the disclosed exception set forth in
the CDM Disclosure Letter is reasonably apparent to relate to Section 4.13 of
the Agreement from the face of such disclosed exception) to be true and correct
as aforesaid or any breach thereof; (iii) any inaccuracies in the Spreadsheet;
(iv) any Indemnifiable Merger Expenses; (v) any Dissenting Shares Excess
Payments; and (vi) any Damages as a result of, relating to or arising under or
from, directly or indirectly, (a) any government audit of CDM invoices pursuant
to Contracts (for audits relating to all fiscal years of CDM from incorporation
of the predecessor entity through September 30, 2004 and fifty percent of the
amount of such Damages for audit adjustments relating to fiscal year 2005
(beginning October 1, 2004 and ending September 30, 2005)) and (b) the Section
4.13(r) Documents. The maximum aggregate Damages of the Effective Time
Securityholders under this Agreement, other than in the case of fraud, willful
breach or intentional misrepresentation (for which there shall be no limitation
of liability) by CDM, any of the CDM Officers or any CDM Representative (as to
any certificate executed by such CDM Representative pursuant to this Agreement),
shall be the Total Cap. Subject to the foregoing limitations, each Effective
Time Securityholder shall be liable for such holder's Pro Rata Share of the
amount of any Damages, except in the case of fraud, willful breach or
intentional misrepresentation by such individual (for which there shall be no
limitation of liability).
(b) Order of Recovery. In the case of (i) fraud, willful breach or
intentional misrepresentation by CDM, any of the CDM Officers or any CDM
Representative (as to any certificate executed by such CDM Representative
pursuant to this Agreement); (ii) any failure of any of the representations and
warranties contained in Section 4.4 (Capitalization of CDM) (and contained in
each of the related disclosures set forth in (A) Section/Schedule 4.4 of the CDM
Disclosure Letter and (B) any other section/schedule of the CDM Disclosure
Letter where the relevance of the disclosed exception set forth in the CDM
Disclosure Letter is reasonably apparent to relate to Section 4.4 of this
Agreement from the face of such disclosed exception), Section 4.7 (Taxes) (and
contained in each of the related disclosures set forth in (A) Section/Schedule
4.7 of the CDM Disclosure Letter and (B) any other section/schedule of the CDM
Disclosure Letter where the relevance of the disclosed exception set forth in
the CDM Disclosure Letter is reasonably apparent to relate to Section 4.7 of
this Agreement from the face of such disclosed exception) and Section 4.13
(Intellectual Property) (and contained in each of the related disclosures set
forth in (A) Section/Schedule 4.13 of the CDM Disclosure Letter and (B) any
other section/schedule of the CDM Disclosure Letter where the relevance of the
disclosed exception set forth in the CDM Disclosure Letter is reasonably
apparent to relate to Section 4.13 of this Agreement from the face of such
disclosed exception) to be true and correct as aforesaid or any breach thereof;
(iii) any inaccuracies in the Spreadsheet; (iv) any
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Indemnifiable Merger Expenses; (v) any Dissenting Shares Excess Payments; and
(vi) any Damages as a result of, relating to or arising under or from, directly
or indirectly, (a) any government audit of CDM invoices pursuant to Contracts
(for audits relating to all fiscal years of CDM from incorporation of the
predecessor entity through September 30, 2004 and fifty percent of the amount of
such Damages for audit adjustments relating to fiscal year 2005 (beginning
October 1, 2004 and ending September 30, 2005)) and (b) the Section 4.13(r)
Documents, after OmniVision has exhausted or made Claims upon all amounts of
Contingent Shares (with each Contingent Share deemed to have a value equal to
140% of the Closing Stock Price and after taking into account all other Claims
for indemnification from the Contingent Shares made by OmniVision), each
Effective Time Securityholder shall be liable for such holder's Pro Rata Share
of the amount of any additional or remaining Damages resulting therefrom that
have not otherwise been satisfied by the Effective Time Securityholders pursuant
to and in accordance with this Article 12; provided, however, that the maximum
aggregate Damages for the matters listed in the preceding clauses
12.3(b)(ii)-(vi) shall be the Total Cap. In determining the order of recovery
for Damages pursuant to preceding clauses 12.3(b)(ii)-(vi), after OmniVision has
exhausted or made claims upon all amounts of Contingent Shares, recovery shall
be made next by offset against the amount of any actually earned but unpaid
Contingent Consideration Payment, if then available, and next, if no earned but
unpaid Contingent Consideration Payment is then available for offset, or if such
amount is insufficient to satisfy all remaining Damages, each Effective Time
Securityholder must satisfy his, her or its Pro Rata Share of the amount of any
remaining unpaid Damages by (A) paying the OmniVision Indemnified Persons to
whom such Damages are owed cash, in immediately available funds in form
reasonably acceptable to such OmniVision Indemnified Persons, in an amount equal
in the aggregate to such Effective Time Securityholder's Pro Rata Share of the
amount of such Damages; or (B) only in the event that the Put Termination Date
(as such term is defined in the Put Agreement) has not occurred prior to the
date such indemnification payment is due pursuant to this Article 12, duly and
properly transferring and assigning to the OmniVision Indemnified Persons to
whom such Damages are owed, shares of OmniVision Common Stock that were
initially issued to such Effective Time Securityholder either as Initial Stock
Consideration or upon the release of Contingent Shares under Section 12.3(g)
(including any shares issued for any stock dividends, combinations, forward or
reverse stock splits, recapitalizations and the like with respect to such shares
occurring after the Effective Time) and not previously pledged, transferred,
sold, assigned or otherwise encumbered (including any transfer by operation of
law, any transfer by will or by the laws of intestacy, or otherwise (except that
if an Effective Time Securityholder is then deceased, his or her heirs may
satisfy any Damages for which such Effective Time Securityholder is responsible
with shares of OmniVision Common Stock meeting all the requirements set forth in
this Section 12.3(b) that were transferred to such heirs from the Effective Time
Securityholder by will or the laws of intestacy)) with an aggregate value equal
to such Effective Time Securityholder's Pro Rata Share of the amount of such
Damages and with each such share of Initial Stock Consideration valued at 140%
of the Closing Stock Price; or (C) by any combination of cash, and, only in the
event that the Put Termination Date (as such term is defined in the Put
Agreement) has not occurred prior to the date such indemnification payment is
due pursuant to this Article 12, shares of OmniVision Common Stock that were
initially issued to such Effective Time Securityholders either as Initial Stock
Consideration or upon the release of Contingent Shares under Section 12.3(g)
(including any shares issued for any stock dividends, combinations, forward or
reverse stock splits, recapitalizations and the like with
73
respect to such shares occurring after the Effective Time) pursuant and subject
to the payment methods set forth in preceding clauses 12.3(b)(A) and 12.3(b)(B).
Any transfer and assignment of shares of OmniVision Common Stock from an
Effective Time Securityholder to OmniVision Indemnified Persons pursuant to and
in compliance with preceding clauses 12.3(b)(B) or 12.3(b)(C) must be
accompanied by one or more original stock certificates representing such shares,
duly executed by such transferring Effective Time Securityholder for transfer to
the recipient OmniVision Indemnified Person and accompanied by a medallion
signature guarantee and a statement of representations and warranties, duly
executed by such transferring Effective Time Securityholder for the benefit of
the recipient OmniVision Indemnified Person, stating that: (xx) the shares of
OmniVision Common Stock which are being transferred and assigned to the
recipient OmniVision Indemnified Person are owned by such Effective Time
Securityholder; (yy) such shares were originally issued to such Effective Time
Securityholder either as Initial Stock Consideration or upon the release of
Contingent Shares under Section 12.3(g) (including any shares issued for any
stock dividends, combinations, forward or reverse stock splits,
recapitalizations and the like with respect to such shares occurring after the
Effective Time) and have not been previously pledged, sold, assigned,
transferred or otherwise encumbered (including any transfer by operation of law,
any transfer by will or by the laws of intestacy, or otherwise (except that if
an Effective Time Securityholder is then deceased, his or her heirs may satisfy
any Damages for which such Effective Time Securityholder is responsible with
shares of OmniVision Common Stock meeting all the requirements set forth in this
Section 12.3(b) that were transferred to such heirs from the Effective Time
Securityholder by will or the laws of intestacy)) by such Effective Time
Securityholder; and (zz) such Effective Time Securityholder has all necessary
legal authority and capacity to individually transfer and assign such shares to
the recipient OmniVision Indemnified Person and no additional consents or
authorizations are necessary on the part of such Effective Time Securityholder
to duly and validly transfer and assign such shares to the recipient OmniVision
Indemnified Person.
(c) Inapplicability of Total Cap. Notwithstanding anything in this
Agreement, nothing in this Agreement shall limit the liability of (i) CDM or the
CDM Officers for any breach of any representation, warranty, covenant or
agreement if the Merger is not consummated, except as otherwise set forth in
Section 11.3 of this Agreement; (ii) any CDM Securityholder in connection with
any breach by such CDM Securityholder of the Voting Agreement, Employment
Agreement, Non-Competition Agreement, Put Agreement, Registration Rights
Agreement, CDM Securityholder Documents or other agreement to which he, she or
it is a party (other than pursuant to the terms of this Agreement); or (iii) any
Effective Time Securityholder for any Damages arising out of any fraud, willful
breach or intentional misrepresentation by CDM, any of the CDM Officers or any
CDM Representative (as to any certificate executed by such CDM Representative
pursuant to this Agreement).
(d) Basket. Notwithstanding anything contained herein to the
contrary, no OmniVision Indemnified Person may receive any recovery in respect
of any claim for indemnification that is made pursuant to clauses (i)-(iii) or
(vii)(a) of Section 12.2 (other than claims relating to a breach of the
representations and warranties contained in Section 4.4 (Capitalization of CDM)
(and contained in each of the related disclosures set forth in (A)
Section/Schedule 4.4 of the CDM Disclosure Letter and (B) any other
section/schedule of the CDM Disclosure Letter where the relevance of the
disclosed exception set forth in the CDM
74
Disclosure Letter is reasonably apparent to relate to Section 4.4 of this
Agreement from the face of such disclosed exception), Section 4.13(r) (and
contained in the related disclosures set forth in Section/Schedule 4.13(r) of
the CDM Disclosure Letter) and Section 4.7 (Taxes) (and contained in each of the
related disclosures set forth in (A) Section/Schedule 4.7 of the CDM Disclosure
Letter and (B) any other section/schedule of the CDM Disclosure Letter where the
relevance of the disclosed exception set forth in the CDM Disclosure Letter is
reasonably apparent to relate to Section 4.7 of this Agreement from the face of
such disclosed exception), for which the Basket (as defined below) will not
apply), unless and until Damages in an aggregate amount greater than $200,000
(the "BASKET") have been incurred, paid or properly accrued, in which case the
OmniVision Indemnified Persons may make claims for indemnification for any and
all Damages other than the first $200,000 in aggregate Damages. In determining
the amount of any Damages in respect of the failure of any representation or
warranty to be true and correct as of any particular date, any materiality
standard contained in such representation or warranty shall be disregarded.
(e) Dissenting Shares Excess Payment Adjustments and Credits. In the
event OmniVision receives or is owed recovery for indemnification claims for
Damages for Dissenting Shares Excess Payments, and either prior or subsequent to
OmniVision's recovery of such Damages for Dissenting Shares Excess Payments the
Contingent Consideration Payment has been paid or earned and is uncontested,
then OmniVision shall either (i) if the Damages for Dissenting Shares Excess
Payments have not yet been received by OmniVision, deduct from the aggregate
amount of Damages owed to OmniVision pursuant to such Dissenting Shares Excess
Payments the aggregate amount of cash that would have been paid pursuant to the
Contingent Consideration Payment in respect of Dissenting Shares or (ii) if and
to the extent the Damages for Dissenting Shares Excess Payments have been
actually received (or recovered from the Contingent Shares) by OmniVision,
refund in cash to the Effective Time Securityholders who paid such Damages for
Dissenting Shares Excess Payments (or against whom a deduction against their Pro
Rata Share of Contingent Shares was made) an aggregate amount equal to the
aggregate amount of cash that would have been paid pursuant to the Contingent
Consideration Payment in respect of Dissenting Shares in a pro rata amount to
each such Effective Time Securityholder proportionate to the percentage of total
Damages for Dissenting Shares Excess Payments paid by such Effective Time
Securityholder, with appropriate deduction if OmniVision has not received the
full amount of Damages for Dissenting Shares Excess Payments which it is
otherwise due.
(f) Exclusive Remedy. Except as expressly provided otherwise in this
Agreement (including Section 13.5), the indemnification provisions set forth in
this Agreement shall be the sole and exclusive remedy of the OmniVision
Indemnified Persons from and after the Closing for claims of breach, default,
inaccuracy, non-fulfillment and the like of any representation, agreement,
warranty or covenant in this Agreement; provided, however, that the foregoing
clause of this sentence shall not be deemed a waiver by any party of any right
to specific performance or injunctive relief, or any right or remedy arising by
reason of any claim of fraud, willful breach or intentional misrepresentation
with respect to this Agreement or any of the other agreements referred to
herein.
(g) Early Contingent Share Release. In the event that prior to the
eighteen-month anniversary of the Closing Date, the Surviving Corporation shall
have received an
75
agreement which includes a full general release and a covenant not to xxx in
form and substance reasonably satisfactory to the Surviving Corporation from the
purported licensee and its Affiliates related to all claims as a result of,
arising under or relating to or from, directly or indirectly, the Section
4.13(r) Documents, OmniVision shall, without limiting its rights and remedies
under this Article 12, issue and release to the Effective Time Securityholders
$850,000 in combined value of the Contingent Shares (valuing each such share at
140% of the Closing Stock Price), less the number of Contingent Shares (valuing
each such share at 140% of the Closing Stock Price) retained by the OmniVision
Indemnified Persons with a combined value equal to the amount of Damages being
claimed by the OmniVision Indemnified Persons and less the number of Contingent
Shares of a combined value necessary to satisfy all then remaining unresolved,
unsatisfied or disputed Claims as a result of, arising under or relating to or
from, directly or indirectly, the Section 4.13(r) Documents.
12.4 Appointment of Representative.
(a) By voting in favor of the Merger, or participating in the
conversion of CDM Common Stock pursuant to Section 2.3(b)(iii) and/or receiving
consideration in exchange for (i) the cancellation of CDM Options that remain
outstanding as of immediately before the Effective Time pursuant to Section
2.3(b)(i) or (ii) the purchase by OmniVision of CDM Warrants that remain
outstanding as of immediately prior to the Effective Time pursuant to Section
2.3(b)(ii), each Effective Time Securityholder approves the designation of and
designates the Representative as the representative of the Effective Time
Securityholders and as the attorney-in-fact and agent for and on behalf of each
Effective Time Securityholder with respect to elections made by the
Representative pursuant to Section 2.5(g), claims for indemnification under this
Article 12 and the taking by the Representative of any and all actions and the
making of any decisions required or permitted to be taken by the Representative
under this Agreement, including the exercise of the power to: (a) elect to
substitute Escrow Consideration in replacement of Contingent Shares pursuant to
Section 2.5(g); (b) give and receive notices and communications to or from
OmniVision (on behalf of itself or any other OmniVision Indemnified Person)
relating to this Agreement or any of the transactions and other matters
contemplated hereby or thereby (except to the extent, if any, that this
Agreement expressly contemplates that any such notice or communication shall be
given or received by such holders individually); (c) authorize the release or
delivery to, or retention by, OmniVision of Contingent Shares or the Contingent
Consideration Payment in satisfaction of indemnification claims by OmniVision or
any other OmniVision Indemnified Person pursuant to this Article 12 (including
by not objecting to such claims); (d) agree to, object to, negotiate, resolve,
enter into settlements and compromises of, demand litigation of, and comply with
orders of courts with respect to, (i) indemnification Claims by OmniVision or
any other OmniVision Indemnified Person pursuant to this Article 12 or (ii) any
other claim by any OmniVision Indemnified Person, against any such holder or by
any such holder against any OmniVision Indemnified Person or any dispute between
any OmniVision Indemnified Person and any such holder, in each case relating to
this Agreement or any of the transactions and other matters contemplated hereby
or thereby; and (e) take all actions necessary or appropriate in the judgment of
the Representative for the accomplishment of the foregoing. The Representative
shall have authority and power to act on behalf of each Effective Time
Securityholder with respect to the disposition, settlement or other handling of
all claims under this Article 12 and all rights or obligations arising under
this Article 12. The Effective Time Securityholders shall be bound by all
actions taken and
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documents executed by the Representative in connection with this Article 12
and/or Section 2.5, and OmniVision and other OmniVision Indemnified Persons
shall be entitled to rely on any action or decision of the Representative. The
individual serving as the Representative may be replaced from time to time by
the holders of a majority in interest of the Fully-Diluted CDM Common Stock
(other than Dissenting Shares) outstanding as of immediately prior to the
Effective Time upon not less than 10 days' prior written notice to OmniVision.
No bond shall be required of the Representative, and the Representative shall
receive no compensation for his or her services. Notices or communications to or
from the Representative shall constitute notice to or from each of the Effective
Time Securityholders (except to the extent, if any, that this Agreement
expressly contemplates that any such notice or communication shall be given or
received by such holders individually).
(b) In performing the functions specified in this Agreement, the
Representative shall not be liable to any Effective Time Securityholder in the
absence of gross negligence or willful misconduct on the part of the
Representative. Each Effective Time Securityholder shall severally (based on
each such holder's Pro Rata Share), and not jointly, indemnify and hold harmless
the Representative from and against any loss, liability or expense incurred
without gross negligence or willful misconduct on the part of the Representative
and arising out of or in connection with the acceptance or administration of his
duties hereunder, including any out-of-pocket costs and expenses and legal fees
and other legal costs reasonably incurred by the Representative. If not paid
directly to the Representative by the Effective Time Securityholders, such
losses, liabilities or expenses may be recovered by the Representative from
Contingent Shares or the Contingent Consideration Payment (with shares valued in
the manner set forth in Section 12.3(b)) otherwise distributable to the
Effective Time Securityholders (and not distributed or distributable to any
OmniVision Indemnified Person or subject to a pending indemnification claim of
any OmniVision Indemnified Person) pursuant to the terms hereof, at the time of
distribution, and such recovery will be made from the Effective Time
Securityholders according to their respective Pro Rata Share.
12.5 Notice of Claim. OmniVision may give notice of a Claim under this
Agreement, whether for its own Damages or for Damages incurred by any other
OmniVision Indemnified Person, and OmniVision shall give written notice of a
Claim executed by an officer of OmniVision (a "NOTICE OF CLAIM") to the
Representative promptly after OmniVision becomes aware of the existence of any
potential claim by an OmniVision Indemnified Person for indemnification from the
Effective Time Securityholders under this Article 12, arising from or relating
to:
(a) Any matter specified in Section 12.2; or
(b) the assertion, whether orally or in writing, against OmniVision
or any other OmniVision Indemnified Person of a Third-Party Claim that is based
on, arises out of or relates to any matter specified in Section 12.2.
The period during which Claims may be initiated (the "CLAIMS PERIOD") for
indemnification from the Contingent Shares shall commence at the Effective Time
and terminate eighteen months following the Effective Time, except as otherwise
provided herein. The Claims Period for the covenant of indemnification from and
against Damages arising out of, resulting
77
from or in connection with (i) any failure of any of the representations and
warranties contained in Section 4.4 (Capitalization of CDM) (and contained in
each of the related disclosures set forth in (A) Section/Schedule 4.4 of the CDM
Disclosure Letter and (B) any other section/schedule of the CDM Disclosure
Letter where the relevance of the disclosed exception set forth in the CDM
Disclosure Letter is reasonably apparent to relate to Section 4.4 of this
Agreement from the face of such disclosed exception), Section 4.7 (Taxes) (and
contained in each of the related disclosures set forth in (A) Section/Schedule
4.7 of the CDM Disclosure Letter and (B) any other section/schedule of the CDM
Disclosure Letter where the relevance of the disclosed exception set forth in
the CDM Disclosure Letter is reasonably apparent to relate to Section 4.7 of
this Agreement from the face of such disclosed exception) and Section 4.13
(Intellectual Property) (and contained in each of the related disclosures set
forth in (A) Section/Schedule 4.13 of the CDM Disclosure Letter and (B) any
other section/schedule of the CDM Disclosure Letter where the relevance of the
disclosed exception set forth in the CDM Disclosure Letter is reasonably
apparent to relate to Section 4.13 of this Agreement from the face of such
disclosed exception) to be true and correct as aforesaid or any breach thereof;
(ii) any inaccuracies in the Spreadsheet; (iii) any Indemnifiable Merger
Expenses; (iv) any Dissenting Shares Excess Payments; and (v) any Damages as a
result of or arising under or from, directly or indirectly, (a) any government
audit of CDM invoices pursuant to Contracts (for audits relating to all fiscal
years of CDM from incorporation of the predecessor entity through September 30,
2004 and fifty percent of the amount of such Damages for audit adjustments
relating to fiscal year 2005 (beginning October 1, 2004 and ending September 30,
2005)) and (b) the Section 4.13(r) Documents, shall commence at the Effective
Time and terminate on the earlier to occur of (A) the fifth anniversary of the
Effective Time and (B) the second anniversary of the occurrence date of the
Milestone Event, except for Claims arising under or related to (1) Section 4.7
(Taxes) (and contained in each of the related disclosures set forth in (A)
Section/Schedule 4.7 of the CDM Disclosure Letter and (B) any other
section/schedule of the CDM Disclosure Letter where the relevance of the
disclosed exception set forth in the CDM Disclosure Letter is reasonably
apparent to relate to Section 4.7 of this Agreement from the face of such
disclosed exception), which shall survive until the expiration of the applicable
statute of limitations period with respect to any Tax matter hereunder and (2)
Section 12.2(vii)(a), which shall survive until September 30, 2007, and except
as otherwise provided herein. The Claims Period for indemnification from and
against Damages arising out of, resulting from or in connection with fraud,
willful breach or intentional misrepresentation by CDM, any of the CDM Officers
or any CDM Representative (as to any certificate executed by such CDM
Representative pursuant to this Agreement) shall commence at the Effective Time
and terminate upon the expiration of the applicable statute of limitations. The
Claims Period for indemnification from a breach of any other covenant or
agreement by CDM, any CDM Officer or any CDM Representative shall commence on
the Effective Time and terminate in accordance with the express terms of this
Agreement. Notwithstanding anything contained herein to the contrary, any Claims
for Damages specified in any Notice of Claim delivered to the Representative
prior to expiration of the applicable Claims Period with respect to facts and
circumstances existing prior to expiration of the applicable Claims Period and
the rights of OmniVision Indemnified Persons to indemnification under this
Article 12 shall remain outstanding until such Claims for Damages have been
resolved or satisfied, notwithstanding the expiration of such Claims Period.
Until the expiration of the applicable Claims Period, no delay on the part of
OmniVision in giving the Representative a Notice of Claim shall relieve the
Representative or any Effective Time Securityholder from any of its obligations
under this
78
Article 12 unless (and then only to the extent that) the Representative or the
Effective Time Securityholders are prejudiced thereby.
12.6 Defense of Third-Party Claims.
(a) OmniVision shall determine and conduct the defense or settlement
of any Third-Party Claim, and the costs and expenses incurred by OmniVision in
connection with such defense or settlement (including reasonable attorneys'
fees, other professionals' and experts' fees and court or arbitration costs)
shall be included in the Damages for which OmniVision may seek indemnification
pursuant to a Claim made by any OmniVision Indemnified Person hereunder to the
extent provided in this Article 12.
(b) The Representative shall have the right to receive copies of all
pleadings, notices and communications with respect to the Third-Party Claim to
the extent that receipt of such documents by the Representative does not affect
any privilege relating to the OmniVision Indemnified Person and may at the sole
expense of the Effective Time Securityholders participate in, but not determine
or conduct, any defense of the Third-Party Claim or settlement negotiations with
respect to the Third-Party Claim.
(c) No settlement of any such Third-Party Claim with any third party
claimant shall be determinative of the existence of or amount of Damages
relating to such matter, except with the written consent of the Representative,
which consent shall not be unreasonably withheld, conditioned or delayed and
which shall be deemed to have been given unless the Representative shall have
objected within 15 calendar days after a written request for such consent by
OmniVision. In the event that the Representative has consented in writing to any
such settlement, neither the Representative nor any Effective Time
Securityholder shall have any power or authority to object under any provision
hereof to the amount of any Claim by or on behalf of any OmniVision Indemnified
Person against the Contingent Shares or earned but unpaid Contingent
Consideration Payment, or Effective Time Securityholders for indemnity with
respect to such settlement.
12.7 Contents of Notice of Claim. Each Notice of Claim by OmniVision
given pursuant to Section 12.5 shall contain the following information:
(a) That OmniVision or another OmniVision Indemnified Person has
directly or indirectly incurred, paid or properly accrued (in accordance with
GAAP) or, in good faith, believes it shall have to directly or indirectly incur,
pay or accrue (in accordance with GAAP), Damages in an aggregate stated amount
arising from such Claim (which amount may be the amount of damages claimed by a
third party in an action brought against any OmniVision Indemnified Person based
on alleged facts, which if true, would give rise to liability for Damages to
such OmniVision Indemnified Person under this Article 12); and
(b) A brief description, in reasonable detail (to the extent
reasonably available to OmniVision), of the facts, circumstances or events
giving rise to the alleged Damages based on OmniVision's good faith belief
thereof, including the identity and address of any third-party claimant (to the
extent reasonably available to OmniVision) and copies of any formal demand or
complaint, the amount of Damages, the date each such item was incurred, paid or
properly
79
accrued, or the basis for such anticipated liability, and the specific nature of
the breach to which such item is related.
12.8 Resolution of Notice of Claim. Each Notice of Claim given by
OmniVision shall be resolved as follows:
(a) Uncontested Claims. If the Representative consents to a Notice
of Claim in writing, in whole or in part, the Representative shall be
conclusively deemed to have consented, on behalf of all Effective Time
Securityholders, to the recovery by the OmniVision Indemnified Person of the
amount of Damages specified in the written consent to the Notice of Claim in
accordance with this Article 12, including the forfeiture of Contingent Shares
or the Contingent Consideration Payment, as specified in the written consent,
and, without further notice, to have stipulated to the entry of a final judgment
for damages against the Effective Time Securityholders for such amount in any
court having jurisdiction over the matter where venue is proper.
(b) Contested Claims. If the Representative gives OmniVision written
notice contesting all or any portion of a Notice of Claim (a "CONTESTED CLAIM")
or does not respond to a Notice of Claim within 15 business days of his receipt
thereof, then such Contested Claim shall be resolved by either (i) a written
settlement agreement executed by OmniVision and the Representative or (ii) in
the absence of such a written settlement agreement within the earlier of 30
business days following receipt by OmniVision of the written notice from the
Representative or 45 business days of the Representative's receipt of the Notice
of Claim, by binding litigation between OmniVision and the Representative in
accordance with the terms and provisions of Section 12.8(c).
(c) Litigation of Contested Claims. Any case with respect to a
Contested Claim will be tried to the court sitting without a jury. Regardless of
which party brings suit to resolve a matter, OmniVision shall bear the burden of
proof by a preponderance of the evidence that OmniVision or other OmniVision
Indemnified Persons are entitled to indemnification pursuant to this Article 12.
The decision of the trial court as to the validity and amount of any claim in
such Notice of Claim shall be nonappealable, binding and conclusive upon the
parties to this Agreement and OmniVision shall be entitled to act in accordance
with such decision and make or withhold payments of Contingent Shares or the
Contingent Consideration Payment in accordance with this Article 12. Judgment
upon any award rendered by the trial court may be entered in any court having
jurisdiction. For purposes of this Section 12.8(c), in any suit hereunder in
which any claim or the amount thereof stated in the Notice of Claim is at issue,
OmniVision shall be deemed to be the non-prevailing party unless the trial court
awards OmniVision more than one-half of the amount in dispute; otherwise, the
Representative and Effective Time Securityholders shall be deemed to be the
non-prevailing party. The non-prevailing party to a suit shall pay its own
expenses and the expenses, including attorneys' fees and costs, reasonably
incurred by the other party to the suit.
12.9 Tax Consequences of Indemnification Payments. All payments (if any)
made to an OmniVision Indemnified Person pursuant to any indemnification
obligations under this Article 12 will be treated as adjustments to the purchase
price for tax purposes and such agreed
80
treatment will govern for purposes of this Agreement, unless otherwise required
by Applicable Law.
ARTICLE 13
MISCELLANEOUS
13.1 Governing Law. The internal laws of the State of California,
irrespective of its conflicts of law principles, shall govern the validity of
this Agreement, the construction of its terms, and the interpretation and
enforcement of the rights and duties of the parties hereto; provided, however,
that issues involving the consummation and effects of the Merger shall be
governed by the laws of the State of Delaware.
13.2 Assignment; Binding Upon Successors and Assigns. This Agreement
shall inure to the benefit of the successors and assigns of all or substantially
all of the business and assets of OmniVision (which successor or assignee shall
agree in writing to be bound by OmniVision's obligations hereunder). Except as
set forth in the preceding sentence, no party hereto may assign any of its
rights or obligations hereunder without the prior written consent of the other
parties hereto. This Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and permitted assigns. Any
assignment in violation of this provision shall be void.
13.3 Severability. If any provision of this Agreement, or the application
thereof, shall for any reason and to any extent be invalid or unenforceable,
then the remainder of this Agreement and the application of such provision to
other Persons or circumstances shall be interpreted so as reasonably to effect
the intent of the parties hereto. The parties further agree to replace such void
or unenforceable provision of this Agreement with a valid and enforceable
provision that shall achieve, to the maximum extent possible, the economic,
business and other purposes of the void or unenforceable provision.
13.4 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original as regards any party whose
signature appears thereon and all of which together shall constitute one and the
same instrument. This Agreement shall become binding when one or more
counterparts hereof, individually or taken together, shall bear the signatures
of all parties reflected hereon as signatories.
13.5 Specific Performance. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to seek an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof in any court of the United States
or any State having jurisdiction.
13.6 Amendments and Waivers. Except as set forth herein, any term or
provision of this Agreement may be amended, and the observance of any term of
this Agreement may be waived (either generally or in a particular instance and
either retroactively or prospectively), only by a writing signed by the party to
be bound thereby. The waiver by a party of any breach hereof or default in the
performance hereof shall not be deemed to constitute a waiver of any other
81
default or any succeeding breach or default. Except as set forth herein, this
Agreement may be amended by the parties hereto as provided in this Section 13.6
at any time before or after adoption of this Agreement by the CDM Stockholders,
but, after such adoption, no amendment shall be made which by Applicable Law
requires the further approval of the CDM Stockholders without obtaining such
further approval. The failure of any party to enforce any of the provisions
hereof shall not be construed to be a waiver of the right of such party
thereafter to enforce such provisions.
13.7 Expenses. Subject to the provisions of this Agreement regarding
Merger Expenses (which shall be paid by the Effective Time Securityholders or
deducted from the Initial Cash Consideration or otherwise will constitute
Indemnifiable Merger Expenses) and the provisions of Section 11.3, each party
shall bear its respective legal, auditors', investment bankers' and financial
advisors' fees and other expenses incurred with respect to this Agreement, the
Merger and the transactions contemplated hereby.
13.8 Attorneys' Fees. Except as specifically provided in Section 12.8(c),
should suit be brought to enforce or interpret any part of this Agreement, the
prevailing party shall be entitled to recover, as an element of the costs of
suit and not as damages, reasonable attorneys' fees to be fixed by the court
(including costs, expenses and fees on any appeal). The prevailing party shall
be entitled to recover its costs of suit, regardless of whether such suit
proceeds to final judgment.
13.9 Notices. All notices and other communications required or permitted
under this Agreement shall be in writing and shall be either hand delivered in
person, sent by facsimile, sent by certified or registered first-class mail,
postage pre-paid, or sent by nationally recognized express courier service. Such
notices and other communications shall be effective upon receipt if hand
delivered or sent by facsimile, three days after mailing if sent by mail, and
one business day after dispatch if sent by express courier, to the following
addresses, or such other addresses as any party may notify the other parties in
accordance with this Section 13.9:
If to OmniVision or Merger Sub:
OmniVision Technologies, Inc.
0000 Xxxxxxx Xxxxx
Xxxxxxxxx, XX 00000
Attention: General Counsel
Facsimile No.: (000) 000-0000
Telephone No.: (000) 000-0000
with a copy (which shall not constitute notice) to:
O'Melveny & Xxxxx LLP
0000 Xxxx Xxxx Xxxx
Xxxxx Xxxx, XX 00000-0000
Attention: Xxxxxx Xxxxxxx, Esq.
Facsimile No.: (000) 000-0000
Telephone No.: (000) 000-0000
82
If to CDM:
CDM Optics, Inc.
0000 Xxxxxxxxx Xxxxx, Xxxxx 000
Xxxxxxx, XX 00000-0000
Attention: Chief Executive Officer
Facsimile No.: (000) 000-0000
Telephone No.: (000) 000-0000
with a copy (which shall not constitute notice) to:
Xxxxx & Xxxxxxx L.L.P.
0000 Xxxxxx, Xxxxx 000
Xxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxx, Esq.
Facsimile No.: (000) 000-0000
Telephone No.: (000) 000-0000
If to the any of the CDM Officers:
[Such CDM Officer's name]
c/o CDM Optics, Inc.
0000 Xxxxxxxxx Xxxxx, Xxxxx 000
Xxxxxxx, XX 00000-0000
Facsimile No.: (000) 000-0000
Telephone No.: (000) 000-0000
with a copy (which shall not constitute notice) to:
Xxxxx & Xxxxxxx L.L.P.
0000 Xxxxxx, Xxxxx 000
Xxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxx, Esq.
Facsimile No.: (000) 000-0000
Telephone No.: (000) 000-0000
If to the Representative:
X.X. Xxxxxxx, Xx.
c/o CDM Optics, Inc.
0000 Xxxxxxxxx Xxxxx, Xxxxx 000
Xxxxxxx, XX 00000-0000
Facsimile No.: (000) 000-0000
Telephone No.: (000) 000-0000
83
with a copy (which shall not constitute notice) to:
Xxxxx & Xxxxxxx L.L.P.
0000 Xxxxxx, Xxxxx 000
Xxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxx, Esq.
Facsimile No.: (000) 000-0000
Telephone No.: (000) 000-0000
13.10 Rules of Construction. The parties hereto agree that they have been
represented by legal counsel during the negotiation and execution of this
Agreement and, therefore, waive the application of any law, regulation, holding
or rule of construction providing that ambiguities in an agreement or other
document shall be construed against the party drafting such agreement or
document.
13.11 No Joint Venture. Nothing contained in this Agreement shall be
deemed or construed as creating a joint venture or partnership between any of
the parties hereto. No party is by virtue of this Agreement authorized as an
agent, employee or legal representative of any other party. No party shall have
the power to control the activities and operations of any other and their status
is, and at all times shall continue to be, that of independent contractors with
respect to each other. No party shall have any power or authority to bind or
commit any other party. No party shall hold itself out as having any authority
or relationship in contravention of this Section 13.11.
13.12 Third Party Beneficiary Rights. No provisions of this Agreement are
intended, nor shall be interpreted, to provide or create any third party
beneficiary rights or any other rights of any kind in any client, customer,
employee, Affiliate, stockholder, partner or any party hereto or any other
Person unless specifically provided otherwise herein and, except as so provided,
all provisions hereof shall be personal solely between the parties to this
Agreement; except that Article 12 is intended to benefit the OmniVision
Indemnified Persons and, from and after the Closing Date, the Merger payment
obligations set forth in Sections 2.3, 2.5 and 2.6 and Article 3 are intended to
benefit the Effective Time Securityholders.
13.13 Public Announcement. Upon execution of this Agreement, OmniVision
and CDM shall issue a press release approved by both parties announcing the
Merger. Thereafter, OmniVision may issue such press releases, and make such
other disclosures and filings regarding the Merger, as it determines are
required under applicable securities laws or regulatory rules. Prior to the
publication of such initial and mutually agreed press release, neither party
shall make any general public announcement relating to this Agreement or the
transactions contemplated hereby (except as may be required by law) and CDM
shall use its reasonable efforts to prevent any trading in shares of OmniVision
Common Stock by its officers, directors, employees, stockholders and agents
prior to the Effective Time.
13.14 Confidentiality. CDM and OmniVision each confirm that they have
entered into the NDAs and that they are each bound by, and shall abide by, the
provisions of such NDAs; provided, however, that OmniVision shall not be bound
by such NDAs after the Closing. If this Agreement is terminated, the NDAs shall
remain in full force and effect, and all copies of
84
documents containing confidential information of a disclosing party shall be
returned by the receiving party to the disclosing party or be destroyed, as
provided in the NDAs.
13.15 Entire Agreement. This Agreement, the exhibits and schedules
hereto, the CDM Ancillary Agreements, the OmniVision Ancillary Agreements and
the Merger Sub Ancillary Agreements constitute the entire understanding and
agreement of the parties hereto with respect to the subject matter hereof and
supersede all prior and contemporaneous agreements or understandings,
inducements or conditions, express or implied, written or oral, between the
parties with respect hereto other than the NDAs. The express terms hereof
control and supersede any course of performance or usage of the trade
inconsistent with any of the terms hereof.
[SIGNATURE PAGE NEXT]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
OMNIVISION TECHNOLOGIES, INC., a Delaware corporation
By: /s/ Xxxx Hong
----------------
Name: Xxxx Hong
Title: President and Chief Executive Officer
SKI-JUMP ACQUISITION CORP., a Delaware corporation
By: /s/ Xxxxx X. Xxxxx
--------------------
Name: Xxxxx X. Xxxxx
Title: Chief Financial Officer
CDM OPTICS, INC., a Delaware corporation
By: /s/ X.X. Xxxxxxx, Xx.
----------------------
Name: X.X. Xxxxxxx, Xx.
Title: Chairperson and Chief Executive Officer
X.X. XXXXXXX, XX., as a CDM OFFICER
/s/ X.X. Xxxxxxx, Xx.
------------------------
Name: X.X. Xxxxxxx, Xx.
[SIGNATURE PAGE TO AGREEMENT AND PLAN OF MERGER]
W. XXXXXX XXXXXX, XX., as a CDM OFFICER
/s/ W. Xxxxxx Xxxxxx, Xx.
--------------------------
Name: W. Xxxxxx Xxxxxx, Xx.
XXXXXX XXXXXX, XX., as a CDM OFFICER
/s/ Xxxxxx Xxxxxx, Xx.
-------------------------
Name: Xxxxxx Xxxxxx, Xx.
X.X. XXXXXXX, XX., as REPRESENTATIVE
/s/ X.X. Xxxxxxx, Xx.
------------------------
Name: X.X. Xxxxxxx, Xx.
[SIGNATURE PAGE TO AGREEMENT AND PLAN OF MERGER]
