Exhibit 2.1
TRANSWITCH CORPORATION
Sea Level Acquisition Corporation
HORIZON SEMICONDUCTORS, INC.
AGREEMENT AND PLAN OF REORGANIZATION
Dated as of February 6, 2001
TABLE OF CONTENTS
ARTICLE I. THE MERGER........................................................................... 2
1.1 The Merger............................................................................... 2
1.2 Effects of the Merger.................................................................... 2
1.3 Closing.................................................................................. 2
1.4 Approval by the Stockholders of Horizon.................................................. 3
ARTICLE II. CONVERSION AND EXCHANGE OF SHARES; DISSENTING SHARES................................ 3
2.1 Conversion of Horizon Securities......................................................... 3
2.2 No Fractional TranSwitch Common.......................................................... 4
2.3 Delivery of Evidence of Ownership........................................................ 4
2.4 No Further Ownership Rights in Horizon Common Stock...................................... 5
2.5 Closing of Stock Transfer Books.......................................................... 5
2.6 Escrow Shares............................................................................ 5
2.7 Withholding Rights....................................................................... 6
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF HORIZON AND THE FOUNDER.......................... 6
3.1 Organization, Standing and Power; Subsidiaries........................................... 6
3.2 Capital Structure........................................................................ 7
3.3 Authority................................................................................ 8
3.4 Compliance with Laws and Other Instruments; Non-Contravention............................ 8
3.5 Technology and Intellectual Property Rights.............................................. 9
3.6 Financial Statements; Business Information............................................... 11
3.7 Taxes.................................................................................... 12
3.8 Absence of Certain Changes and Events.................................................... 14
3.9 Leases in Effect......................................................................... 16
3.10 Personal Property; Real Estate........................................................... 16
3.11 Certain Transactions..................................................................... 17
3.12 Litigation and Other Proceedings......................................................... 17
3.13 No Defaults.............................................................................. 17
3.14 Major Contracts.......................................................................... 17
3.15 Material Reductions...................................................................... 19
3.16 Insurance and Banking Facilities......................................................... 19
3.17 Employees................................................................................ 19
3.18 ERISA.................................................................................... 20
3.19 Certain Agreements....................................................................... 21
3.20 Guarantees and Suretyships............................................................... 21
3.21 Brokers and Finders...................................................................... 21
3.22 Certain Payments......................................................................... 21
3.23 Environmental Matters.................................................................... 21
3.24 Enforceability of Contracts, etc......................................................... 22
3.25 Information Statement.................................................................... 22
3.27 Disclosure............................................................................... 23
3.28 Reliance................................................................................. 23
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF THE FOUNDER....................................... 23
ARTICLE V. REPRESENTATIONS AND WARRANTIES OF TRANSWITCH AND MERGER SUB.......................... 24
5.1 Organization and Qualification........................................................... 24
5.2 Capitalization........................................................................... 24
5.3 Authority Relative to this Agreement..................................................... 24
5.4 Non-Contravention........................................................................ 24
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5.5 Reports and Financial Statements......................................................... 25
5.6 Validity of Total TranSwitch Common Shares............................................... 25
5.7 Consents and Approvals of Governmental Authorities....................................... 25
5.8 Absence of Certain Changes or Events..................................................... 26
5.9 Information Statement.................................................................... 26
5.10 Disclosure............................................................................... 26
5.11 Reliance................................................................................. 26
ARTICLE VI. COVENANTS OF HORIZON................................................................ 27
6.1 Conduct of Business in Ordinary Course................................................... 27
6.2 Dividends, Issuance of, or Changes in Securities......................................... 28
6.3 Governing Documents...................................................................... 28
6.4 No Acquisitions.......................................................................... 28
6.5 No Dispositions.......................................................................... 28
6.6 Indebtedness............................................................................. 28
6.7 Compensation............................................................................. 29
6.8 Claims................................................................................... 29
6.9 Access to Properties and Records......................................................... 29
6.10 Breach of Representations and Warranties................................................. 29
6.11 Consents................................................................................. 29
6.12 Tax Returns.............................................................................. 29
6.13 Stockholder Approval..................................................................... 29
6.14 Preparation of Disclosure and Solicitation Materials..................................... 29
6.15 Exclusivity; Acquisition Proposals....................................................... 30
6.16 Notice of Events......................................................................... 30
6.17 Reasonable Best Efforts.................................................................. 30
6.18 Insurance................................................................................ 30
ARTICLE VII. COVENANTS OF TRANSWITCH............................................................ 31
7.1 Breach of Representations and Warranties................................................. 31
7.2 Additional Information; Access........................................................... 31
7.3 Consents................................................................................. 31
7.4 Reasonable Best Efforts.................................................................. 31
7.5 Officers and Directors................................................................... 31
7.6 Nasdaq National Market Listing........................................................... 32
7.7 Notice of Events......................................................................... 32
7.8 Third-Party Beneficiaries................................................................ 32
7.9 Issuance of Options...................................................................... 32
ARTICLE VIII. ADDITIONAL AGREEMENTS............................................................. 32
8.1 Investment Agreements.................................................................... 32
8.2 Legal Conditions to the Merger........................................................... 33
8.3 Employee Benefits........................................................................ 33
8.4 Expenses................................................................................. 34
8.5 Additional Agreements.................................................................... 34
8.6 Public Announcements..................................................................... 34
8.7 Confidentiality.......................................................................... 34
ARTICLE IX. CONDITIONS PRECEDENT................................................................ 34
9.1 Conditions to Each Party's Obligation to Effect the Merger.............................. 35
9.2 Conditions of Obligations of TranSwitch and Merger Sub.................................. 35
9.3 Conditions of Obligation of Horizon...................................................... 38
ARTICLE X. INDEMNIFICATION...................................................................... 39
10.1 Indemnification Relating to Agreement.................................................... 39
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10.2 Third Party Claims....................................................................... 39
10.3 Tax Contests............................................................................. 40
10.4 Limitations.............................................................................. 40
10.5 Binding Effect........................................................................... 41
10.6 Time Limit............................................................................... 41
10.7 Sole Remedy.............................................................................. 41
ARTICLE XI....................................................................................... 42
11.1 Establishment of the Goals Escrow........................................................ 42
11.2 Release of the Year 2001 Goals Escrow Shares............................................. 42
11.3 Release of the Year 2002 Goals Escrow Shares............................................. 42
11.4 Notification of Status of Goals.......................................................... 43
11.5 Inability to Perform Goals............................................................... 43
11.6 Value of Each Goal....................................................................... 43
11.7 Acceleration of Goals.................................................................... 43
ARTICLE XII. TERMINATION........................................................................ 45
12.1 Mutual Agreement......................................................................... 45
12.2 Termination by TranSwitch................................................................ 45
12.3 Termination by Horizon................................................................... 45
12.4 Outside Date............................................................................. 45
12.5 Effect of Termination.................................................................... 45
ARTICLE XIII. MISCELLANEOUS..................................................................... 46
13.1 Entire Agreement......................................................................... 46
13.2 Governing Law; Consent to Jurisdiction................................................... 46
13.3 Notices.................................................................................. 46
13.4 Severability............................................................................. 47
13.5 Survival of Representations, Warranties and Convenants................................... 47
13.6 Assignment............................................................................... 47
13.7 Counterparts............................................................................. 47
13.8 Amendment................................................................................ 48
13.9 Extension, Waiver........................................................................ 48
13.10 Interpretation........................................................................... 48
13.11 Knowledge................................................................................ 48
13.12 Transfer, Sales, Documentary, Stamp and Other Similar Taxes.............................. 48
EXHIBITS
Exhibit 1.1 -- Merger Documents
Exhibit 2.1(d) -- Shares and Cash Percentage
Exhibit 2.2 -- Escrow Agreement
Exhibit 8.1 -- Investment Agreement
Exhibit 8.2 -- Registration Rights Agreement
Exhibit 9.2(f) -- Opinion of Goulston & Storrs
Exhibit 9.3(c) -- Opinion of Xxxxx, Xxxxxxx & Xxxxxxxxx, LLP
Exhibit 11(a) -- Year 2001 Goals
Exhibit 11(b) -- Year 2002 Goals
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INDEX OF DEFINED TERMS
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8
83(b) Election............................................... 35
A
Acquisition Transaction...................................... 29
Affiliate.................................................... 44
Aggregate Consideration...................................... 4
Agreement.................................................... 1
Audited Balance Sheet Date................................... 10
Audited Balance Sheets....................................... 10
Average Price................................................ 3
B
Blue Sky..................................................... 25
Business Condition........................................... 6
C
Cash Payment................................................. 4
Cash Percentage.............................................. 4
Cause........................................................ 44
Charter Documents............................................ 6
Closing...................................................... 2
Closing Date................................................. 2
Code......................................................... 2
Commission................................................... 25
Consent...................................................... 8
D
Delaware GCL................................................. 2
E
Effective Time............................................... 2
Environmental Laws........................................... 21
Environmental Liabilities.................................... 21
Escrow Agreement............................................. 5
Excluded Shares.............................................. 3
F
Financial Statements......................................... 11
Fractional Cash.............................................. 3
G
Goals Escrow Shares.......................................... 5
Governmental Entity.......................................... 8
H
Hazardous Materials.......................................... 21
Horizon...................................................... 1
Horizon Common Stock......................................... 1
Horizon Disclosure Schedule.................................. 6
Horizon Intellectual Property................................ 8
Horizon Option............................................... 7
Horizon Participants......................................... 34
Horizon Voting Debt.......................................... 7
I
Impossibility Notice......................................... 43
Indemnifiable Amounts........................................ 39
Indemnification Escrow Shares................................ 5
Information Statement........................................ 22
Initial Filing Date.......................................... 31
Investment Agreements........................................ 33
L
Lease........................................................ 15
Leases....................................................... 15
Legal Fees................................................... 38
Liens........................................................ 7
M
Merger....................................................... 2
Merger Consideration......................................... 4
Merger Documents............................................. 2
Merger Sub................................................... 1
N
New TranSwitch Stockholders.................................. 31
O
Option Percentage............................................ 32
Option Shares................................................ 32
Options...................................................... 32
Outstanding Horizon Shares................................... 3
P
Parachute Payments........................................... 29
Person....................................................... 6
R
Registration Rights Agreement................................ 33
Reports...................................................... 25
S
Securities Act............................................... 15
Shares Percentage............................................ 4
Stockholder Representative................................... 40
Stockholders................................................. 1
Subsidiary................................................... 6
Substitute Goals............................................. 43
Surviving Corporation........................................ 2
T
Tax.......................................................... 12
Tax Return................................................... 12
Tax Returns.................................................. 12
Taxes........................................................ 11
the "Year 2001 Release Date.................................. 42
the "Year 2002 Release Date.................................. 42
Threshold Amount............................................. 41
Total TranSwitch Common Shares............................... 3
TranSwitch................................................... 1
TranSwitch Common Stock...................................... 1, 3
TranSwitch Plans............................................. 34
U
Unaudited Balance Sheet...................................... 10
Unaudited Balance Sheet Date................................. 10
V
Virginia SCA................................................. 2
Y
Year 2001 Goal Target........................................ 42
Year 2001 Goals.............................................. 42
Year 2001 Goals Escrow Shares................................ 42
Year 2002 Goal Target........................................ 42
Year 2002 Goals.............................................. 42
Year 2002 Goals Escrow Shares................................ 42
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION, dated as of February 6, 2001 (this
"Agreement"), by and among TranSwitch Corporation, a Delaware corporation
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("TranSwitch"); Sea Level Acquisition Corporation, a Delaware corporation and a
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wholly-owned subsidiary of TranSwitch ("Merger Sub"); Horizon Semiconductors,
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Inc., a Virginia corporation ("Horizon"); and Xxxx Xxxxxxxxx, the founder of
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Horizon (the "Founder").
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Intending to be legally bound, and in consideration of the mutual
representations, warranties, covenants and agreements contained herein,
TranSwitch, Merger Sub, Horizon and the Founder agree as follows:
WITNESSETH:
WHEREAS, the authorized capital stock of TranSwitch consists of 1,000,000
shares of Preferred Stock and 300,000,000 shares of Common Stock (the
"TranSwitch Common Stock");
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WHEREAS, the authorized capital stock of Merger Sub consists of 100 shares
of Common Stock;
WHEREAS, the authorized capital stock of Horizon consists of 5,000 shares
of capital stock, all of which have been designated as Common Stock, no par
value (the "Horizon Common Stock");
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WHEREAS, the respective Boards of Directors of TranSwitch, Merger Sub and
Horizon have by resolutions approved this Agreement and deem it advisable for
the mutual benefit of the constituent corporations, and of the respective
Stockholders of each, that Merger Sub merge with and into Horizon upon the terms
and subject to the conditions hereinafter set forth;
WHEREAS, the parties intend by executing and delivering this Agreement, to
adopt a plan of reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended;
NOW, THEREFORE, in consideration of these premises and the mutual
agreements, provisions and covenants contained in this Agreement, the parties
hereby agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger. Subject to the terms and conditions hereof, and in
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accordance with the Stock Corporation Act of the Commonwealth of Virginia (the
"Virginia SCA") and the Delaware General Corporation Law (the "Delaware GCL"),
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Merger Sub will be merged with and into Horizon (the "Merger"). The Articles of
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Merger and Certificate of Merger and any other required documents (collectively,
the "Merger Documents"), substantially in the form attached as Exhibit 1.1, will
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be duly prepared, executed and acknowledged by Horizon and Merger Sub and
thereafter delivered to the Secretary of the State Corporation Commission of the
Commonwealth of Virginia for filing in accordance with the Virginia SCA and to
the Secretary of State of Delaware for filing in accordance with the Delaware
GCL respectively contemporaneously with the Closing (as defined in Section 1.3).
The Merger will become effective at such time as the Merger Documents have been
filed with the Secretaries of the State Corporation Commission of the
Commonwealth of Virginia and Delaware (whichever is later) (the "Effective
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Time"). Following the Merger, Horizon will continue as the surviving corporation
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of the Merger (the "Surviving Corporation") under the laws of the State
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Corporation Commission of the Commonwealth of Virginia, and the separate
corporate existence of Merger Sub will cease.
1.2 Effects of the Merger. At and after the Effective Time, (i) the Merger
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will have all of the effects provided by the Articles of Merger and applicable
law, (ii) the Articles of Incorporation of Horizon will be amended in the form
attached as Appendix A to Exhibit 1.1 until duly further amended, (iii) the
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bylaws of Merger Sub will be the bylaws of the Surviving Corporation until duly
amended, (iv) the directors of Merger Sub will be the directors of the Surviving
Corporation, to hold office in accordance with the bylaws of the Surviving
Corporation, (v) the officers of Merger Sub will be the officers of the
Surviving Corporation, to hold office in accordance with the bylaws of the
Surviving Corporation and (vi) the issued and outstanding certificates for the
capital stock of Merger Sub will be the issued and outstanding certificates
initially representing all of the issued capital stock of the Surviving
Corporation. The Merger is intended to be a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code of 1986, as amended (the "Code"),
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and this Agreement is intended to constitute a "plan of reorganization" within
the meaning of the regulations promulgated under Section 368 of the Code.
1.3 Closing. The closing of the transactions contemplated by this Agreement
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(the "Closing") will take place as soon as practicable (but no more than three
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(3) business days) after satisfaction or waiver of the last to be fulfilled of
the conditions set forth in Article IX that by their terms are not to occur at
the Closing (the "Closing Date"), but in no event later than February 6, 2001 at
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the offices of Xxxxx, Xxxxxxx & Xxxxxxxxx LLP in Boston, Massachusetts, unless
another date or place is agreed to in writing by TranSwitch and Horizon. If all
conditions set forth in Article IX hereof are determined to be satisfied (or
duly waived) at the Closing, concurrently with the Closing the parties hereto
will cause the Merger to be consummated by the filing of the Merger Documents
with the Secretary of the State Corporation Commission of the Commonwealth of
Virginia and the Secretary of State of Delaware. The Closing will be deemed to
have concluded at the Effective Time.
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1.4 Approval by the Stockholders of Horizon. Horizon will take all action
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necessary in accordance with applicable law, its Charter Documents (as defined
below) and any agreements to which it is a party to solicit the approval of this
Agreement, the Merger and all of the transactions contemplated hereby by all
Stockholders of Horizon by means of a unanimous written consent of Stockholders
in accordance with the Virginia SCA, or if it is unable to obtain such written
consent, by a duly convened meeting of Stockholders. Horizon will use its
reasonable best efforts to obtain such stockholder approval. Horizon represents
and warrants that its Board of Directors has duly (i) adopted the Merger in
accordance with the Virginia SCA and (ii) resolved to recommend to the
Stockholders of Horizon that they approve this Agreement, the Merger and all of
the transactions contemplated hereby.
ARTICLE II
CONVERSION AND EXCHANGE OF SHARES; DISSENTING SHARES
2.1 Conversion of Horizon Securities.
--------------------------------
(a) Subject to the limitations of Section 2.3 hereof, at the
Effective Time, each share of Horizon Common Stock issued and outstanding
immediately prior to the Effective Time (other than shares of Horizon Common
Stock held by TranSwitch or any subsidiary of TranSwitch or Horizon (the
"Excluded Shares")) shall, by virtue of the Merger and without any action on the
part of the holder thereof, automatically be canceled and extinguished and
converted into the right to receive the number of shares of common stock par
value $.001 per share, of TranSwitch ("TranSwitch Common Stock") or cash
-----------------------
determined in accordance with Section 2.1(c), and cash (rounded down to the
nearest whole cent) in lieu of fractional shares, if any, pursuant to Section
2.3 below (the "Fractional Cash"). Shares of Horizon Common Stock that are
---------------
actually issued and outstanding immediately prior to the Effective Time,
excluding the Excluded Shares, are sometimes referred to herein as the
"Outstanding Horizon Shares."
--------------------------
(b) At the Effective Time, each share of Horizon Common Stock held by
TranSwitch or any subsidiary of TranSwitch or Horizon, immediately prior to the
Effective Time shall, by virtue of the Merger and without any action on the part
of the holder thereof, automatically be canceled and retired, and all rights in
respect thereof shall cease to exist.
(c) The aggregate consideration to be issued in exchange for the
acquisition of all Outstanding Horizon Shares will be equal to the Total
TranSwitch Common Shares plus the Cash Payment.
"Total TranSwitch Common Shares" means the number of shares of
------------------------------
TranSwitch Common Stock as is determined by dividing $1,907,828 (the "Shares
Price") by the average of the last reported sale price of the Common Stock of
TranSwitch on the Nasdaq National Market for the 20 trading days ending two
trading days immediately preceding the Closing Date (subject to appropriate
adjustment in the event of a stock split or reverse stock split if the Effective
Time shall occur after the record date of such stock split or reverse stock
split) (such price being referred to as the "Average Price").
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"Cash Payment" shall mean an aggregate of $454,003.27, encompassing
------------
$39,003.27 payable to the Founder and $415,000 payable to the Stockholders who
are receiving their stock pursuant to Section 9.2(s).
"Merger Consideration" shall mean the Total TranSwitch Common Shares
--------------------
plus the Cash Payment.
"Aggregate Consideration" shall mean the aggregate Shares Price plus
-----------------------
the Cash Payment.
(d) Subject to Section 2.3, at the Effective Time, those of the
Outstanding Horizon Shares held by each of the Stockholders set forth on Exhibit
-------
2.1(d) will be converted into the right to receive (i) that number (which may be
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a fraction) of shares of TranSwitch Common Stock that equals the product of (A)
such Stockholder's "Shares Percentage" as set forth on Exhibit 2.1(d) and (B)
--------------
the Total TranSwitch Common Shares, and (ii) a cash payment equal to the product
of (A) such Stockholder's "Cash Percentage" as set forth on Exhibit 2.1(d) and
--------------
(B) the Cash Payment.).
2.2 No Fractional TranSwitch Common Stock. Notwithstanding any other
-------------------------------------
provision of this Agreement, neither certificates nor scrip for fractional
shares of TranSwitch Common Stock shall be issued to any holder of Horizon
Common Stock in the Merger, and the holder thereof shall not be entitled to any
voting or other rights of a holder of shares or a fractional share interest.
Each holder of shares of Horizon Common Stock who otherwise would have been
entitled to receive a fraction of a share of TranSwitch Common Stock shall
receive in lieu thereof cash, without interest, in an amount determined by
multiplying such holder's fractional interest by the Average Price. All amounts
of cash in respect of fractional interests which have not been claimed at the
end of three years from the Effective Time by surrender of certificates for
shares of Horizon Common Stock shall be repaid to the Surviving Corporation,
subject to the provisions of applicable escheat or similar laws, for the account
of the holders entitled thereto.
2.3 Delivery of Evidence of Ownership. At the Closing, each holder of a
---------------------------------
certificate or other documentation representing Outstanding Horizon Shares,
other than Dissenting Shares, will surrender such certificates or other
documentation to TranSwitch, and, if not previously delivered, duly executed
counterparts of this Agreement, the Escrow Agreement, the Investment Agreement
(as defined below), and the Registration Rights Agreement (as defined below) and
such other duly executed documentation as may be reasonably required by
TranSwitch to effect a transfer of such shares, and upon such surrender and
after the Effective Time each such holder will be entitled to receive promptly
from TranSwitch or its transfer agent certificates registered in the name of
such holder representing the applicable number of Total TranSwitch Common
Shares, and the cash (calculated pursuant to Sections 2.1(d)(ii) and 2.2 which
will be paid by check), to which such holder is entitled pursuant to the
provisions of this Agreement, with a portion of such shares to be deposited in
escrow pursuant to the Escrow Agreement, as provided in Section 2.6.
2.4 No Further Ownership Rights in Horizon Common Stock. The Merger and
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its approval by the stockholders of Horizon and the execution of this Agreement
will be deemed, at the Effective Time, to constitute full satisfaction and
termination of all rights and agreements pertaining to Horizon Common Stock
pursuant to the Virginia SCA, by contract or otherwise. After the Effective
Time,
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there will be no transfers on the stock transfer books of Horizon of Horizon
Common Stock. Until surrendered to TranSwitch, each certificate for Horizon
Common Stock will, after the Effective Time, represent only the right to receive
shares of TranSwitch Common Stock and the right to receive cash into which the
shares of Horizon Common Stock formerly represented thereby will have been
converted pursuant to this Agreement. Any dividends or other distribution
declared after the Effective Time with respect to TranSwitch Common Stock will
be paid to the holder of any certificate for shares of Horizon Common Stock when
the holder thereof is entitled to receive a certificate for such holder's
TranSwitch Merger Shares in accordance with this Agreement.
2.5 Closing of Stock Transfer Books. Except for the issuance of 70.94014
-------------------------------
shares of Horizon Common Stock to employees of Horizon immediately prior to the
Closing or as otherwise agreed by the parties or pursuant to the exercise of
options and warrants outstanding on the date of this Agreement, the stock
transfer books of Horizon shall be closed at the close of business on the tenth
(10) business day immediately preceding the Effective Time. In the event of a
transfer of ownership of Horizon Common Stock which is not registered in the
transfer records of Horizon, the shares of TranSwitch Common Stock and cash (if
any) to be issued in the Merger as provided herein may be delivered to a
transferee, if the certificate representing such Horizon Common Stock is
presented to the Exchange Agent, accompanied by all documents required to
evidence and effect such transfer and by payment of any applicable stock
transfer taxes.
2.6 Escrow Shares.
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(a) A number of Total TranSwitch Common Shares equal to 10% of the
quotient obtained by dividing the Aggregate Consideration by the Average Price
(rounded up to the nearest whole share) (such shares are the "Indemnification
---------------
Escrow Shares") will be deposited and held in escrow in accordance with the
-------------
Escrow Agreement attached as Exhibit 2.2 (the "Escrow Agreement") as the first
----------------
source, but not the sole source, of indemnification payments that may become due
to TranSwitch pursuant to Article X. The number of Indemnification Escrow
Shares to be so withheld from the Total TranSwitch Common Shares otherwise
distributable to each of the holders of the Outstanding Horizon Shares shall be
equal to 10% of the quotient obtained by dividing the Aggregate Consideration
for such Stockholder by the Average Price. The delivery of the Indemnification
Escrow Shares will be made on behalf of the holders of the Outstanding Horizon
Shares in accordance with the provisions hereof, with the same force and effect
as if such shares had been delivered by TranSwitch directly to such holders and
subsequently delivered by such holders to the Escrow Agent.
(b) A number of the Total TranSwitch Common Shares equal to 50% of
the quotient obtained by dividing the Aggregate Consideration by the Average
Price (which number shall include the Indemnification Escrow Shares), rounded up
to the nearest whole share (the "Goals Escrow Shares") will be deposited and
-------------------
held in escrow in accordance with the Escrow Agreement as the sole source of
payments that may become due to TranSwitch pursuant to Article XI. The number of
Goals Escrow Shares (excluding the Indemnification Escrow Shares that will be
added to the Goals Escrow Shares as provided in the Escrow Agreement), to be so
withheld from the Total TranSwitch Common Shares otherwise distributable to each
Stockholder hereunder shall be equal to 40% of the quotient obtained by dividing
the Aggregate Consideration for such Stockholder by the Average Price. The
delivery of the Goals Escrow Shares will be made on behalf of the holders of the
Outstanding Horizon Shares in accordance with the provisions hereof, with the
same force and effect as if such shares has been delivered by TranSwitch
directly to such holders and subsequently delivered to the Escrow Agent.
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2.7 Withholding Rights. TranSwitch or Horizon (or any of their Affiliates)
------------------
shall be entitled to deduct and withhold (or to direct that the Escrow Agent
deduct and remit to TranSwitch, Horizon or an applicable Affiliate for purposes
of withholding) from the consideration otherwise payable to any Stockholder of
Horizon pursuant to this Agreement or as part of the transactions contemplated
herein such Taxes as may be required to be deducted and withheld. To the extent
that amounts are so withheld and paid over to the appropriate Tax authority,
TranSwitch, Horizon or an applicable Affiliate will be treated as though it paid
to the applicable Stockholder the applicable amount of consideration otherwise
payable pursuant to this Agreement or the Escrow Agreement. The parties agree to
treat the following as not subject to withholding at the Closing: (i) with
respect to a Stockholder of Horizon who advises TranSwitch pursuant to Section
9.2(v) that he or she is not making an election pursuant to Section 83(b) of the
Code, the stock of Horizon issued to the Stockholders pursuant to Section 9.2(s)
of this Agreement and the TranSwitch stock exchanged therefor in the Merger, and
(ii) the Cash Payment paid to the Founder as part of the consideration for his
Horizon stock; provided, however, that the rights of TranSwitch and its
Affiliates (including Horizon after the Closing) under this Agreement and the
Escrow Agreement to seek indemnification from the Stockholders or otherwise
ensure that the withholding Tax obligations are satisfied shall not be limited
on account of this sentence.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF HORIZON
AND THE FOUNDER
Except as set forth in the disclosure schedule of Horizon dated as of the
date hereof and delivered herewith to TranSwitch (the "Horizon Disclosure
------------------
Schedule"), each of Horizon and the Founder, in the Founder's case to the
--------
knowledge of the Founder, represents and warrants to TranSwitch and Merger Sub
as follows:
3.1 Organization, Standing and Power; Subsidiaries.
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(a) Horizon is a corporation duly organized, validly existing and in
good standing under the laws of the Commonwealth of Virginia, has all requisite
corporate power and authority to own, lease and operate its properties and to
carry on its businesses as now being conducted, and is duly qualified and in
good standing to do business in each jurisdiction in which a failure to so
qualify would have a material adverse effect on the Business Condition (as
hereinafter defined) of Horizon.
As used in this Agreement, "Business Condition" with respect to any
------------------
Person (as defined below) means the business, financial condition, results of
operations or assets (without giving effect to the consequences of the
transactions contemplated by this Agreement, and other than changes in general
economic conditions) of such Person or Persons including its Subsidiaries taken
as a whole. In this Agreement, a "Subsidiary" of any Person means a corporation,
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partnership, limited liability company, joint venture or other entity of which
such Person directly or indirectly owns or controls a majority of the equity
interests or voting securities or other interests that are sufficient to elect a
majority of the Board of Directors or other managers of such corporation,
partnership, limited liability
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company, joint venture or other entity. References to Horizon in this Agreement
shall be deemed to include all Subsidiaries of Horizon, if any, unless the
context specifically requires otherwise. In this Agreement, "Person" means any
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natural person, corporation, partnership, limited liability company, joint
venture or other entity.
All Subsidiaries of Horizon and their jurisdiction of incorporation
are completely and correctly listed in Section 3.1 of the Horizon Disclosure
Schedule. Horizon has delivered to TranSwitch complete and correct copies of the
articles or certificate of incorporation, bylaws and/or other primary charter
and organizational documents ("Charter Documents") of Horizon, in each case, as
-----------------
amended to the date hereof. The minute books and stock records of Horizon,
complete and correct copies of which have been delivered to TranSwitch, contain
correct and complete records of all material proceedings and actions taken at
all meetings of, or effected by written consent of, the Stockholders of Horizon
and its Board of Directors, and all original issuances and subsequent transfers,
repurchases and cancellations of Horizon's capital stock. Section 3.1 of the
Horizon Disclosure Schedule contains a complete and correct list of the officers
and directors of Horizon.
(b) Except for the Subsidiaries listed in Section 3.1 of the Horizon
Disclosure Schedule, Horizon has never owned, nor does it currently own,
directly or indirectly, any capital stock or other equity securities of any
corporation or have direct or indirect equity or ownership interest in any
partnership, limited liability company, joint venture or other entity. All of
the outstanding shares of capital stock of each Subsidiary of Horizon are owned
beneficially and of record by Horizon, one of its other Subsidiaries, or any
combination thereof, in each case free and clear of any security interests,
liens, charges, restrictions, claims, encumbrances or assessments of any nature
whatsoever ("Liens"); and there are no outstanding subscriptions, warrants,
-----
options, convertible securities, or other rights (contingent or other) pursuant
to which any of the Subsidiaries is or may become obligated to issue any shares
of its capital stock to any Person other than Horizon or one of the other
Subsidiaries.
3.2 Capital Structure.
-----------------
(a) The authorized capital stock of Horizon consists (i) of 5,000
shares of Horizon Common Stock, of which 170.94014 shares are, or will be,
issued and outstanding as of the Closing (after giving effect to the issuance of
70.94014 shares immediately prior to the Closing). The Horizon Disclosure
Schedule sets forth all holders of Horizon Common Stock and the number of shares
owned or to be owned immediately prior to the Closing. The Horizon Disclosure
Schedule also sets forth any options, warrants, calls, conversion rights,
commitments, agreements, contracts, understandings, restrictions, arrangements
or rights of any character (each, a "Horizon Option") to which Horizon is a
--------------
party or by which Horizon may be bound obligating Horizon to issue, deliver or
sell, or cause to be issued, delivered or sold, additional shares of the capital
stock of Horizon, or obligating Horizon to grant, extend, or enter into any such
option, warrant, call, conversion right, conversion payment, commitment,
agreement, contract, understanding, restriction, arrangement or right.
(b) All outstanding shares of Horizon Common Stock are, and any
shares of Horizon Common Stock issued upon exercise of any Outstanding Horizon
Options will be, validly issued, fully paid, nonassessable and not subject to
any preemptive rights (other than those which have been duly waived), or to any
agreement to which Horizon is a party or by which Horizon may be bound. Horizon
does not have outstanding any bonds, debentures, notes or other indebtedness the
holders of which (i) have the right to vote (or convertible or exercisable into
securities having the right to vote) with holders
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of shares of Horizon Common Stock on any matter ("Horizon Voting Debt") or (ii)
-------------------
are or will become entitled to receive any payment as a result of the execution
of this Agreement or the completion of the transactions contemplated hereby.
3.3 Authority. The execution, delivery and performance of this Agreement
---------
and all other agreements contemplated hereby by Horizon have been duly
authorized by all necessary action of the Board of Directors of Horizon, and if
the Closing shall occur, shall have been duly authorized by all necessary action
of the Stockholders of Horizon. Certified copies of the resolutions adopted by
the Board of Directors of Horizon and its Stockholders approving this Agreement,
all other agreements contemplated hereby and the Merger have been or will be
provided to TranSwitch prior to the Closing. Horizon has duly and validly
executed and delivered this Agreement and has, or prior to Closing, will have
duly and validly executed and delivered all other agreements contemplated
hereby, and each of this Agreement and such other agreements constitutes a
valid, binding and enforceable obligation of Horizon in accordance with its
terms.
3.4 Compliance with Laws and Other Instruments; Non-Contravention. Horizon
-------------------------------------------------------------
holds, and at all times has held, all licenses, permits and authorizations from
all Governmental Entities (as defined below) necessary for the lawful conduct of
its business pursuant to all applicable statutes, laws, ordinances, rules and
regulations of all such Governmental Entities having jurisdiction over it or any
part of its operations, excepting, however, when such failure to hold would not
have a material adverse effect on Horizon's Business Condition. There are no
violations or claimed violations known by Horizon of any such license, permit or
authorization or any such statute, law, ordinance, rule or regulation, which
such violation would have a material adverse effect on Horizon's Business
Condition. Assuming the receipt of all Consents (as defined below), neither the
execution, delivery or performance of this Agreement and all other agreements
contemplated hereby by Horizon and the Stockholders, nor the consummation by
Horizon of the Merger or any other transaction described herein to occur at or
immediately following the Closing, does or will, after the giving of notice, or
the lapse of time, or otherwise, conflict with, result in a breach of, or
constitute a default under, the Charter Documents of Horizon or any federal,
foreign, state or local court or administrative order or process, statute, law,
ordinance, rule or regulation, or any contract, agreement or commitment to which
Horizon is a party, or under which Horizon is obligated, or by which Horizon or
any of the rights, properties or assets of Horizon are subject or bound; result
in the creation of any Lien upon, or otherwise adversely affect, any of the
rights, properties or assets of Horizon; terminate, amend or modify, or give any
party the right to terminate, amend, modify, abandon or refuse to perform or
comply with, any contract, agreement or commitment to which Horizon is a party,
or under which Horizon is obligated, or by which Horizon or any of the rights,
properties or assets of Horizon are subject or bound; or accelerate, postpone or
modify, or give any party the right to accelerate, postpone or modify, the time
within which, or the terms and conditions under which, any liabilities, duties
or obligations are to be satisfied or performed, or any rights or benefits are
to be received, under any contract, agreement or commitment to which Horizon is
a party, or under which Horizon may be obligated, or by which Horizon or any of
the rights, properties or assets of Horizon are subject or bound; except when
such violation, breach, default, creation of a Lien or similar act would not
have a material adverse effect on Horizon's Business Condition. Section 3.4 of
the Horizon Disclosure Schedule sets forth each agreement, contract or other
instrument binding upon Horizon requiring a notice or consent (by its terms or
as a result of any conflict or other contravention required to be disclosed in
the Horizon Disclosure Schedule pursuant to the preceding provisions of this
Section 3.4) as a result of the execution, delivery or performance of this
Agreement and all other agreements contemplated hereby by
-8-
Horizon or the consummation by Horizon of the Merger or any other transaction
described herein to be consummated at or immediately following the Closing (each
such notice or consent, a "Consent"). No consent, approval, order, or
-------
authorization of or registration, declaration, or filing with or exemption (also
a "Consent") by, any court, administrative agency or commission or other
-------
governmental authority or instrumentality, whether domestic or foreign (each a
"Governmental Entity") is required by or with respect to Horizon or any of its
-------------------
Subsidiaries in connection with the execution, delivery or performance of this
Agreement and all other agreements contemplated hereby by Horizon and the
Founder or the consummation of the Merger or any other transaction described
herein, except for the filing by Horizon and Merger Sub of the appropriate
Merger Documents with the Secretaries of the State Corporations Commission of
the Commonwealth of Virginia and the Secretary of State of the State of
Delaware.
3.5 Technology and Intellectual Property Rights.
-------------------------------------------
(a) For the purposes of this Agreement, "Horizon Intellectual
--------------------
Property" consists of the following intellectual property:
--------
(i) all patents, trademarks, trade names, service marks, trade
dress, copyrights and any renewal rights therefor, mask works, schematics,
software, firmware, technology, manufacturing processes, supplier lists,
customer lists, trade secrets, know-how, moral rights and applications and
registrations for any of the foregoing;
(ii) all documents, records and files relating to design, end user
documentation, manufacturing, quality control, sales, marketing or customer
support for all intellectual property described herein;
(iii) all other tangible or intangible proprietary information and
materials; and
(iv) all license and other rights in any third party product or any
third party intellectual property described in (i) through (iii) above;
that are owned or held by or on behalf of Horizon or that are being, and/or have
been, used, or are currently under development for use, in the business of
Horizon as it has been, is currently or is currently planned to be conducted;
provided, however, that Horizon Intellectual Property will not include any
intellectual property of any third party.
(b) Section 3.5 of the Horizon Disclosure Schedule lists: (i) all
patents, copyright registrations, mask works, registered trademarks, registered
service marks, trade dress, any renewal rights for any of the foregoing, and any
applications and registrations for any of the foregoing, that are included in
Horizon Intellectual Property and owned by or on behalf of Horizon; (ii) all
material hardware products and tools, software products and tools and services
that are currently published, offered, or under development by Horizon; and
(iii) all licenses, sublicenses and other agreements to which Horizon is a party
and pursuant to which Horizon or any other person is authorized to use any
Horizon Intellectual Property or exercise any other right with regard thereto.
The disclosures described in (iii) hereof include the identities of the parties
to the relevant agreements, a description of the nature and subject matter
thereof, the term thereof and the applicable royalty or summary of any formula
or procedure for determining such royalty.
-9-
(c) Except as disclosed in Section 3.5 of the Horizon Disclosure
Schedule, Horizon Intellectual Property consists solely of items and rights that
are either: (i) owned solely by Horizon; (ii) rightfully used or authorized for
use by Horizon and its successors pursuant to a valid license, and none of such
items or rights is in the public domain or is "free-xxxx" or "shareware". All
Horizon Intellectual Property that consists of license or other rights to third
party property is separately set forth in Section 3.5 of the Horizon Disclosure
Schedule. Other than as set forth in Section 3.5 of the Horizon Disclosure
Schedule, Horizon has all rights in Horizon Intellectual Property necessary to
carry out Horizon's current and former activities, including without limitation
rights to make, use, exclude others from using, reproduce, modify, adapt, create
derivative works based on, translate, distribute (directly and indirectly),
transmit, display and perform publicly, license, rent, lease, assign and sell
Horizon Intellectual Property in all geographic locations and fields of use, and
to sublicense any or all such rights to third parties, including the right to
grant further sublicenses.
(d) Other than as disclosed in Section 3.5 of the Horizon Disclosure
Schedule, Horizon is not, nor as a result of the execution or delivery of this
Agreement and all other agreements contemplated hereby, or performance of
Horizon's obligations hereunder or the consummation of the Merger, will Horizon
be, in violation of any license, sublicense or other agreement relating to any
Horizon Intellectual Property to which Horizon is a party or otherwise bound.
Horizon is not obligated to provide any consideration (whether financial or
otherwise) to any third party, nor is any third party otherwise entitled to any
consideration, with respect to any exercise of rights by Horizon or TranSwitch,
as successor to Horizon, in Horizon Intellectual Property.
(e) The use, reproduction, modification, distribution, licensing,
sublicensing, sale, or any other exercise of rights in any product, work,
technology, service or process as used, provided, or offered at any time, or as
proposed for use, reproduction, modification, distribution, licensing,
sublicensing, sale, or any other exercise of rights, by Horizon through the
Closing Date does not infringe any copyright, patent, trade secret, trademark,
service xxxx, trade name, firm name, logo, trade dress, mask work, moral right,
other intellectual property right, right of privacy, or right in personal data
of any Person. No claims (i) challenging the validity, effectiveness, or
ownership by Horizon of any Horizon Intellectual Property, or (ii) to the effect
that the use, reproduction, modification, manufacturing, distribution,
licensing, sublicensing, sale, or any other exercise of rights in any product,
work, technology, service, or process as used, provided or offered at any time,
or as proposed for use, reproduction, modification, distribution, licensing,
sublicensing, sale, or any other exercise of rights, by Horizon infringes or
will infringe on any intellectual property or other proprietary or personal
right of any Person have been asserted to Horizon or, to the knowledge of
Horizon (as defined below), are threatened by any Person nor, to Horizon's
knowledge, are there any valid grounds for any bona fide claim of any such kind.
Neither Horizon nor the Founder has received notice of any legal or governmental
proceedings, including interference, re-examination, reissue, opposition,
nullity, or cancellation proceedings pending that relate to any Horizon
Intellectual Property, other than review of pending applications for patent, and
Horizon is not aware of any information indicating that such proceedings are
threatened or contemplated by any Governmental Entity or any other Person. All
granted or issued patents and mask works and all registered trademarks and
copyright registrations owned by Horizon are valid, enforceable and subsisting.
To the knowledge of Horizon, there is no unauthorized use, infringement, or
misappropriation of any Horizon Intellectual Property by any third party,
employee or former employee.
-10-
(f) Section 3.5 of the Horizon Disclosure Schedule separately lists
all parties (other than employees) who have created any portion of, or otherwise
have any rights in or to, such Horizon Intellectual Property other than Horizon
Intellectual Property that is licensed to Horizon. Horizon has secured from all
parties who have created any portion of, or otherwise have any rights in or to,
Horizon Intellectual Property valid and enforceable written assignments of any
such work or other rights to Horizon and has provided true and complete copies
of such assignments to TranSwitch.
(g) Horizon has obtained written agreements from all employees and
from third parties with whom Horizon, to its knowledge, has shared confidential
proprietary information (i) of Horizon or (ii) received from others that Horizon
is obligated to treat as confidential and to obtain the written agreement of
employees and others to keep confidential, which agreements require such
employees and third parties to keep such information confidential in accordance
with the terms thereof. Horizon has made available copies of such written
agreements, as executed, to TranSwitch.
3.6 Financial Statements; Business Information.
------------------------------------------
(a) Horizon has delivered to TranSwitch an unaudited balance sheet
(the "Unaudited Balance Sheet") as of December 31, 2000 (the "Unaudited Balance
----------------------- -----------------
Sheet Date") and audited balance sheets (the "Audited Balance Sheets") as of
---------- ----------------------
December 31, 1999 (the "Audited Balance Sheet Date"), December 31, 1998 and
--------------------------
1997, unaudited statements of income for the twelve-month period ended December
31, 2000 and audited statements of income for the fiscal years ended December
31, 1997, 1998 and 1999 (all of such balance sheets and statements of income and
cash flows are collectively referred to as the "Financial Statements"). The
--------------------
Financial Statements: (i) are in accordance with the books and records of
Horizon; (ii) present fairly, in all material respects, the financial position
of Horizon as of the date indicated and the results of its operations and cash
flows for such periods; and (iii) have been prepared in accordance with
generally accepted accounting principles consistently applied (subject, in the
case of unaudited statements, to the absence of footnote disclosure and in the
case of interim statements to year-end adjustments, which will not be material
either individually or in the aggregate and except as described in Section 3.6
of the Horizon Disclosure Schedule). As of the Unaudited Balance Sheet Date,
there were no material liabilities, claims or obligations of any nature, whether
accrued, absolute, contingent, anticipated or otherwise, whether due or to
become due, that are not shown or provided for either in the Unaudited Balance
Sheet or Section 3.6 of the Horizon Disclosure Schedule, and since the Unaudited
Balance Sheet Date, Horizon has incurred no liabilities, claims or obligations
of any nature, whether accrued, absolute, contingent, anticipated or otherwise
other than in the ordinary course of business and except for liabilities
incurred by Horizon in connection with the preparation and execution of this
Agreement and the consummation of the transactions contemplated herein.
(b) All of the accounts, notes and other receivables which are
reflected in the Unaudited Balance Sheet were acquired in the ordinary course of
business; and, except to the extent reserved against in the Unaudited Balance
Sheet, all of the accounts, notes and other receivables which are reflected
therein have been collected in full, or to Horizon's knowledge are good and
collectible, in the ordinary course of business; and all of the accounts, notes
and other receivables which have been acquired by Horizon since the Unaudited
Balance Sheet Date were acquired in the ordinary course of business and have
been collected in full, or to Horizon's knowledge are good and collectible,
subject to an appropriate reserve determined in a manner consistent with past
practices of Horizon, in the ordinary course of business. Other than
receivables relating to the performance of specific contracts by
-11-
Horizon as described in Section 3.6 of the Horizon Disclosure Schedule, and
receivables arising in the ordinary course of business under such contracts from
and after such date, no accounts, notes or other receivables are contingent upon
the performance by Horizon of any obligation or contract. No Person has any Lien
on any of such receivables and no agreement for deduction or discount has been
made with respect thereto.
(c) The business information previously prepared by Horizon and
delivered to TranSwitch was prepared in good faith, based on assumptions Horizon
deems reasonable, and was prepared for planning purposes, although no assurances
are given that Horizon will engage in the activities described therein or
achieve the results projected therein.
3.7 Taxes.
-----
(a) The term "Taxes" as used herein means all federal, state, local
-----
and foreign income taxes, alternative or add-on minimum taxes, estimated, gross
income, gross receipts, sales, use, property gains, ad valorem, registration,
value added, transfer, franchise, capital profits, lease, service, license,
withholding, payroll, employment, social security, Medicare, excise, severance,
stamp, occupation, premium, property, environmental (including taxes under Code
Section 59A) or windfall profit taxes, customs duties and other taxes,
governmental fees and other like assessments and charges of any kind whatsoever,
whether disputed or not, together with all interest, penalties, additions to tax
and additional amounts with respect thereto, and the term "Tax" means any one of
---
the foregoing Taxes. The term "Tax Returns" as used herein means all returns,
-----------
declarations, reports, claims for refund, information statements and other
documents relating to Taxes, including all schedules and attachments thereto,
and including all amendments thereof, and the term "Tax Return" means any one of
----------
the foregoing Tax Returns.
(b) Other than as set forth in Section 3.7 of the Horizon Disclosure
Schedule, Horizon has timely filed all Tax Returns required to be filed and has
timely paid all Taxes owed (whether or not shown or required to be shown on any
Tax Returns). Horizon has timely withheld and paid all Taxes required to have
been withheld and paid in connection with amounts paid or owing to any employee,
creditor, stockholder, independent contractor, or other third party. All Tax
Returns filed by Horizon were complete and correct in all material respects.
Other than as set forth in Section 3.7 of the Horizon Disclosure Schedule, none
of the Tax Returns filed by Horizon or Taxes payable by Horizon or Tax Returns
filed by a holder of Horizon Common Stock with respect to, or which may relate
to, items of income, gain, deduction, loss or credit of Horizon have been the
subject of an audit, action, suit, proceeding, claim, examination, deficiency or
assessment by any Governmental Entity, and other than as set forth in Section
3.7 of the Horizon Disclosure Schedule, no such audit, action, suit, proceeding,
claim, examination, deficiency or assessment is currently pending or, to the
knowledge of Horizon, threatened. Other than as set forth in Section 3.7 of the
Horizon Disclosure Schedule, Horizon is not currently the beneficiary of any
extension of time within which to file any Tax Return, and Horizon has not
waived any statute of limitation with respect to any Tax or agreed to any
extension of time with respect to a Tax assessment or deficiency, except as a
result of obtaining an extension of time to file any Tax Return. All material
elections with respect to Taxes affecting Horizon are set forth in the Financial
Statements or in Section 3.7 of the Horizon Disclosure Schedule. None of the Tax
Returns filed by Horizon contains a disclosure statement under former Section
6661 of the Code or Section 6662 of the Code (or any similar provision of state,
local or foreign Tax law). Horizon is not a party to any Tax sharing agreement
or similar arrangement. Horizon has never been a member of a group filing
-12-
a consolidated federal income Tax Return, or a consolidated, combined or other
affiliated group state, local or foreign Tax Return, and Horizon does not have
any liability for the Taxes of any Person (other than Horizon) under Treasury
Regulation Section 1.1502-6 (or any corresponding provision of state, local or
foreign Tax law), as a transferee or successor, by contract, or otherwise.
(c) Horizon is not a party to any agreement, contract, arrangement or
plan that has resulted or would result, separately or in the aggregate, in the
payment of (i) any "excess parachute payments" within the meaning of Section
280G of the Code (without regard to the exceptions set forth in Sections
280G(b)(4) and 280G(b)(5) of the Code) or (ii) any amount for which a deduction
would be disallowed or deferred under Section 162 or Section 404 of the Code.
Horizon has not made any change in accounting method or practice and has not
agreed to make any adjustment under Section 481(a) of the Code (or any
corresponding provision of state, local or foreign law) by reason of a change in
accounting method or otherwise. Horizon does not have and has not had a
permanent establishment in any foreign country, as defined in any applicable Tax
treaty or convention between the United States and such foreign country. None of
the assets of Horizon directly or indirectly secures any debt, the interest on
which is tax exempt under Section 103(a) of the Code. None of the assets of
Horizon is "tax-exempt use property" within the meaning of Section 168(h) of the
Code. No written claim has ever been made by any Governmental Entity in a
jurisdiction where Horizon does not file Tax Returns that it is or may be
subject to Tax in that jurisdiction. Horizon has not participated in an
international boycott as defined in Section 999 of the Code. None of the shares
of outstanding capital stock of Horizon is subject to a "substantial risk of
forfeiture" within the meaning of Section 83 of the Code, except as disclosed in
Section 3.7 of the Horizon Disclosure Schedule. Horizon is an accrual basis
taxpayer
(d) There are no Liens for Taxes (other than for Taxes not yet due
and payable) upon the assets of Horizon. The unpaid Taxes of Horizon
attributable to all periods (or portions thereof) ending on or before the
Closing did not, as of the Unaudited Balance Sheet Date, exceed the reserve for
actual Taxes (as opposed to any reserve for deferred Taxes established to
reflect timing differences between book and Tax income) as shown on the
Unaudited Balance Sheet, and will not exceed such reserve as adjusted for the
passage of time through the Closing Date in accordance with reasonable past
custom and practice of Horizon in filing its Tax Returns (taking into account
any Taxes incurred as a result of the transactions contemplated by this
Agreement). Horizon has not incurred and will not incur any Taxes subsequent to
the Unaudited Balance Sheet Date through the Closing except in the ordinary
course of business. Horizon is not a party to any joint venture, partnership,
limited liability company or other arrangement or contract which could be
treated as a partnership for federal income tax purposes.
(e) Horizon (and any predecessor of Horizon) has been a validly
electing S corporation within the meaning of Sections 1361 and 1362 of the Code
(or any corresponding provision of state law) at all times during its existence
and Horizon will be an S corporation up to and including the day before the
Closing Date. No Tax will be imposed under Section 1374 of the Code (or any
corresponding provision of state law) as a result of the transactions
contemplated by this Agreement.
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(f) Horizon has paid all Taxes and filed all Tax Returns in
jurisdictions where the failure to do so would have a material adverse effect on
the Business Condition of Horizon and Section 3.7(f) of the Horizon Disclosure
Schedule contains a list of all jurisdictions (whether domestic or foreign) in
which Horizon has filed any Tax Return.
(g) [intentionally omitted]
(h) Neither Horizon nor any of its current or former subsidiaries has
been either a "distributing corporation" or a "controlled corporation" (within
the meaning of Section 355(a)(1)(A) of the Code) in any distribution of stock
qualifying for tax-free treatment under Section 355 of the Code.
3.8 Absence of Certain Changes and Events. Except as set forth in Section
-------------------------------------
3.8 of the Horizon Disclosure Schedule. Since the Unaudited Balance Sheet Date,
there has not been:
(a) Any transaction involving more than $50,000 entered into by
Horizon other than in the ordinary course of business and consistent with past
practice ("Ordinary Course of Business"); any change (or any development or
---------------------------
combination of developments of which Horizon has knowledge which is reasonably
likely to result in such a change) in Horizon's Business Condition, other than
changes in the ordinary course of business which in the aggregate have not been
and are not expected to be materially adverse to Horizon's Business Condition;
or, without limiting the foregoing, any loss of or damage to any of the
properties of Horizon due to fire or other casualty or other loss, whether or
not insured, amounting to more than $50,000 in the aggregate;
(b) Any declaration, setting aside or payment of any dividend or
other distribution with respect to any shares of capital stock of Horizon, or
any repurchase, redemption, retirement or other acquisition by Horizon of any
outstanding shares of capital stock, any Horizon Option, or other securities of,
or other equity or ownership interests in, Horizon;
(c) Any discharge or satisfaction of any Lien or payment or
satisfaction of any obligation or liability (whether absolute, accrued,
contingent or otherwise and whether due or to become due) other than current
liabilities shown on the Unaudited Balance Sheet and current liabilities
incurred since the Unaudited Balance Sheet Date in the ordinary course of
business;
(d) Any change in the Charter Documents of Horizon or any amendment
of any term of any outstanding security of Horizon, other than the issuance of
70.94014 shares of Horizon Common Stock immediately prior to the Closing and
pursuant to Stock Award Agreements disclosed in Section 3.17 of the Horizon
Disclosure Schedule;
(e) Any incurrence, assumption or guarantee by Horizon of any
indebtedness for borrowed money other than in the ordinary course of business
and in an aggregate amount exceeding $50,000;
(f) Any creation or assumption by Horizon of any Lien on any asset;
(g) Any making of any loan, advance or capital contributions to, or
investment in, any Person;
-14-
(h) Any sale, lease, pledge, transfer or other disposition of any
material capital asset;
(i) Any material transaction or commitment made, or any material
contract or agreement entered into, by Horizon relating to its assets or
business (including the acquisition or disposition of any assets) or any
relinquishment by Horizon of any contract or other right;
(j) Other than in connection with the transactions contemplated by
this Agreement, any (A) grant of any severance or termination pay to any
director, officer or employee of Horizon, (B) entering into of any employment,
severance, management, consulting, deferred compensation or other similar
agreement (or any amendment to any such existing agreement) with any director,
officer or employee of Horizon, (C) change in benefits payable under existing
severance or termination pay policies or employment, severance, management,
consulting or other similar agreements, (D) change in compensation, bonus or
other benefits payable to directors, officers or employees of Horizon or (E)
change in the payment or accrual policy with respect to any of the foregoing;
(k) Any labor dispute or any activity or proceeding by a labor union
or representative thereof to organize any employees of Horizon, or any lockouts,
strikes, slowdowns, work stoppages or threats thereof by or with respect to any
employees of Horizon;
(l) Any notes or accounts receivable or portions thereof written off
by Horizon as uncollectible in an aggregate amount exceeding $50,000;
(m) Other than the issuance of 70.94014 shares of Horizon Common
Stock to Stockholders on the Closing Date immediately prior to the Closing, any
issuance or sale of any stock, bonds, phantom stock interest or other securities
of which Horizon is the issuer, or the grant, issuance or change of any stock
options, warrants, or other rights to purchase securities of Horizon or phantom
stock interest in Horizon;
(o) Any cancellation of any debts or claims or waiver of any rights
of substantial value in an aggregate amount exceeding $50,000;
(p) Any sale, assignment or transfer of any Horizon Intellectual
Property or other similar assets, including licenses therefor;
(q) Any capital expenditures, or commitment to make any capital
expenditures, for additions to property, plant or equipment in an aggregate
amount exceeding $50,000;
(r) Payment of any amounts to, or liability incurred to or in respect
of, or sale of any properties or assets (real, personal or mixed, tangible or
intangible) to, or any transaction or any agreement or arrangement with, any
corporation or business in which Horizon or any of its corporate officers or
directors, or any "affiliate" or "associate" (as such terms are defined in the
rules and regulations promulgated under the Securities Act of 1933, as amended
(the "Securities Act") of any such Person, has any direct or indirect ownership
--------------
interests;
(s) Any Tax election, change of any Tax election or change of any
method of accounting; or
-15-
(t) Any agreement, undertaking or commitment to do any of the
foregoing.
3.9 Real Property. All real property leases, subleases and occupancy
-------------
agreements as to which Horizon is a party and any amendments or modifications
thereof (i) are listed in Section 3.9 of the Horizon Disclosure Schedule (each a
"Lease" and collectively, the "Leases"), and (ii) are valid, in full force and
----- ------
effect and enforceable, and there are no existing defaults on the part of
Horizon. Horizon has not received or given notice of default or claimed default
with respect to any Lease, nor is there any event that with notice or lapse of
time, or both, would constitute a default on the part of Horizon or any landlord
thereunder. In addition, any non-disturbance agreements which relate to any of
the Leases are listed in Section 3.9 of the Horizon Disclosure Schedule. All
rent and other sums and charges payable by Horizon under each Lease have been
paid through the date hereof and shall be paid by Horizon through the Closing.
The premises demised under each of the Leases and the improvements, equipment
and fixtures therein are in good operating condition and repair. To the
knowledge of Horizon, the premises demised under each of the Leases (i) is in
compliance with all applicable laws, (ii) is not subject to any official
complaint or notice of violation of any applicable zoning ordinance or building
code, (iii) is not subject to any use or occupancy restriction, and (iv) is not
subject to any pending or threatened condemnation proceeding. The execution,
delivery and performance of this Agreement will not give others any rights of
termination, default, acceleration or cancellation of any of the Leases. Horizon
does not own, or have options to purchase, any real property.
3.10 Personal Property. Horizon has good and marketable title, free and
-----------------
clear of all title defects and Liens (including, without limitation, leases,
chattel mortgages, conditional sale contracts, purchase money security
interests, collateral security arrangements and other title or interest-
retaining agreements) to all inventory, receivables, furniture, machinery,
equipment and other personal property, tangible or otherwise, reflected on the
Unaudited Balance Sheet or used in Horizon's business, except for acquisitions
and dispositions since the Unaudited Balance Sheet Date in the ordinary course
of business. The Horizon Disclosure Schedule lists (i) all computer equipment
and (ii) all other personal property, in each case having a depreciated book
value of $10,000 or more, which are used by Horizon in the conduct of its
business, and all such equipment and property, in the aggregate, is in good
operating condition and repair, reasonable wear and tear excepted. There is no
asset used or required by Horizon in the conduct of its business as presently
operated which is not either owned by it or licensed or leased to it.
3.11 Certain Transactions. Except as set forth in Section 3.11 of the
--------------------
Horizon Disclosure Schedule and for (a) relationships with Horizon as an
officer, director, or employee thereof (and compensation by Horizon in
consideration of such services) and (b) relationships with Horizon as
Stockholders or option holders therein, none of the directors, officers, or
Stockholders of Horizon, or any member of any of their families, is presently a
party to, or was a party to during the year preceding the date of this
Agreement, any transaction, or series of similar transactions, with Horizon, in
which the amount involved exceeds $60,000, including, without limitation, any
contract, agreement, or other arrangement (i) providing for the furnishing of
services to or by, (ii) providing for rental of real or personal property to or
from, or (iii) otherwise requiring payments to or from, any such Person or any
other Person in which any such Person has or had a 5%-or-more interest (as a
stockholder, partner, beneficiary, or otherwise) or is or was a director,
officer, employee, or trustee. Except as set forth in Section 3.11 of the
Horizon Disclosure Schedule, none of Horizon's officers or directors has any
interest in any property, real or personal, tangible or intangible, including
inventions, copyrights,
-16-
trademarks, or trade names, used in or pertaining to the business of Horizon, or
any supplier, distributor, or customer of Horizon, except for (x) the normal
rights of a stockholder, (y) rights under existing employee benefit plans and
(z) rights of any Horizon employee who may have authored or invented Horizon
Intellectual Property in his or her capacity as an employee of Horizon which
Horizon Intellectual Property has been fully assigned and/or licensed to Horizon
pursuant to the terms and conditions of the agreements with employees disclosed
in the Horizon Disclosure Schedule.
3.12 Litigation and Other Proceedings. There is no action, suit, claim,
--------------------------------
investigation or proceeding (or any basis therefor known to Horizon) pending
against or, to the knowledge of Horizon, threatened against Horizon or its
properties and assets before any court or arbitrator or any Governmental Entity.
Horizon has received no notice that Horizon is subject to any order, writ,
judgment, decree, or injunction that has a material adverse effect on Horizon's
Business Condition.
3.13 No Defaults. Horizon is not, nor has Horizon received notice that it
-----------
would be with the passage of time, in default or violation of any term,
condition, or provision of (i) the Charter Documents; (ii) any judgment, decree,
or order applicable to Horizon; or (iii) any loan or credit agreement, note,
bond, mortgage, indenture, contract, agreement, lease, license, or other
instrument to which Horizon is now a party or by which it or any of its
properties or assets may be bound, except for defaults and violations which,
individually or in the aggregate, would not have a material adverse effect on
the Business Condition of Horizon.
3.14 Major Contracts. Other than as disclosed in Section 3.14 of the
---------------
Horizon Disclosure Schedule, Horizon is not a party to or subject to:
(a) Any union contract, or any employment contract or arrangement
(other than "at-will" employment arrangements) providing for future
compensation, written or oral, with any officer, consultant, director, or
employee;
(b) Other than in connection with the transactions contemplated by
this Agreement, any plan or contract or arrangement, written or oral, providing
for bonuses, pensions, deferred compensation, retirement payments, profit-
sharing or the like;
(c) Any joint venture contract or arrangement or any other agreement
which has involved or is expected to involve a sharing of profits;
(d) Any OEM agreement, reseller or distribution agreement, volume
purchase agreement, corporate end user sales or service agreement, reproduction
or replication agreement or manufacturing agreement in which the amount involved
exceeds annually, or is expected to exceed in the aggregate over the life of the
contract, $50,000 or pursuant to which Horizon has granted or received
manufacturing rights, most favored nation pricing provisions, or exclusive
marketing, production, publishing or distribution rights related to any product,
group of products or territory;
(e) Any lease for personal property in which the amount of payments
which Horizon is required to make on an annual basis exceeds $50,000;
(f) Any agreement, license, franchise, permit, indenture, or
authorization which has not been terminated or performed in its entirety and not
renewed which may be, by its terms, terminated,
-17-
impaired, or adversely affected by reason of the execution of this Agreement and
all other agreements contemplated hereby, the consummation of the Merger, or the
consummation of the transactions contemplated hereby or thereby;
(g) Except for trade indebtedness incurred in the ordinary course of
business, any instrument evidencing or related in any way to indebtedness
incurred in the acquisition of companies or other entities or indebtedness for
borrowed money by way of direct loan, sale of debt securities, purchase money
obligation, conditional sale, guarantee, or otherwise which individually is in
the amount of $50,000 or more;
(h) Any license agreement, either as licensor or licensee (excluding
nonexclusive hardware and software licenses granted to distributors or end-users
and commercially available in-licensed software applications);
(i) Any contract or agreement containing covenants purporting to
limit Horizon's freedom to compete in any line of business in any geographic
area; or
(j) Any contract or agreement, not elsewhere specifically disclosed
pursuant to this Agreement, involving the payment or receipt by Horizon of more
than $50,000 in the aggregate.
All contracts, arrangements, plans, agreements, leases, licenses,
franchises, permits, indentures, authorizations, instruments and other
commitments which are listed in the Horizon Disclosure Schedule pursuant to this
Section 3.14 are valid and in full force and effect and Horizon has not, nor, to
the knowledge of Horizon, has any other party thereto, breached any material
provisions of, or entered into default in any material respect under the terms
thereof. Since the Unaudited Balance Sheet Date, Horizon has not amended,
modified or terminated the terms of the contracts or agreements referred to in
this Section 3.14 unless such amendment, modification or termination was in the
ordinary course of business, and Horizon has provided TranSwitch with written
notification of such. Horizon is not party to any contract, arrangement, plan,
agreement, lease, franchise, permit, indenture, authorization, instrument or
other commitment which, upon or as a result of the occurrence of the Closing and
other than in the ordinary course of business, (i) requires or will require in
the future the payment of any amount or the incurrence of any obligation by
Horizon or its successor(s) in interest or (ii) increases the amount otherwise
payable or the amount or nature of any obligation otherwise owing currently or
in the future.
3.15 Material Reductions. Except as disclosed in Section 3.15 of the
-------------------
Horizon Disclosure Schedule, to Horizon's knowledge, none of the parties to any
of the contracts identified in the Horizon Disclosure Schedule pursuant to
Section 3.14 has terminated, or, to the knowledge of Horizon, in any way
expressed to Horizon an intent to reduce or terminate the amount of its business
with Horizon in the future.
3.16 Insurance and Banking Facilities. Section 3.16 of the Horizon
--------------------------------
Disclosure Schedule contains a complete and correct list of (i) all contracts of
insurance or indemnity of Horizon in force at the date of this Agreement
(including name of insurer or indemnitor, agent, annual premium, coverage,
deductible amounts and expiration date) and (ii) the names and locations of all
banks in which Horizon has accounts or safe deposit boxes, the designation of
each such account and safe deposit box, and the names of all persons authorized
to draw on or have access to each such account and safe deposit box.
-18-
All premiums and other payments due from Horizon with respect to any such
contracts of insurance or indemnity have been paid, and Horizon does not know of
any fact, act, or failure to act which has or might cause any such contract to
be canceled or terminated. All known claims for insurance or indemnity have been
presented.
3.17 Employees. Section 3.17 of the Horizon Disclosure Schedule sets forth
---------
a list of (a) the names, titles, salaries and all other compensation of all
salaried Horizon employees (such term meaning permanent and temporary, full-time
and part-time employees) and (b) the wage rates for non-salaried Horizon
employees (by classification). Any persons engaged by Horizon as independent
contractors, rather than employees, have been properly classified as such and
have been so engaged in accordance with all applicable federal, foreign, state
or local laws. No employee has stated to Horizon that such employee intends to
resign or retire as a result of the transactions contemplated by this Agreement
or otherwise within six months after the Closing Date. Hours worked by and
payments made to employees of Horizon have not been in violation of the Fair
Labor Standards Act or any other applicable federal, foreign, state or local
laws dealing with such matters. Horizon is not and, except as disclosed in
Section 3.17 of the Horizon Disclosure Schedule, never has been engaged in any
dispute or litigation with an employee or former employee regarding matters
pertaining to intellectual property or assignment of inventions. Horizon has
never been and, to the knowledge of Horizon, is not now subject to a union
organizing effort. To Horizon's knowledge, each of Horizon's employees has
complied with all applicable and material immigration and naturalization laws,
regulations and other directives or guidelines applicable to such employee.
Other than as set forth in Section 3.17 of the Horizon Disclosure Schedule,
Horizon does not have any written contract of employment or other employment,
severance or similar agreement with any of its employees or any established
policy or practice relating thereto, and all of its employees are employees-at-
will. Horizon is not a party to any pending, or to Horizon's knowledge,
threatened, labor dispute. Horizon has complied in all material respects with
all applicable federal, state and local laws, ordinances, rules and regulations
and requirements relating to the employment of labor, including but not limited
to the provisions thereof relating to wages, hours, collective bargaining and
ensuring equality of opportunity for employment and advancement of minorities
and women. There are no claims pending, or, to the knowledge of Horizon,
threatened to be brought, in any court or administrative agency by any former or
current Horizon employees for compensation, pending severance benefits, vacation
time, vacation pay or pension benefits, or any other claim threatened or pending
in any court or administrative agency from any current or former employee or any
other Person arising out of Horizon's status as employer, whether in the form of
claims for employment discrimination, harassment, unfair labor practices,
grievances, wrongful discharge, or otherwise.
3.18 ERISA.
-----
(a) Section 3.18 of the Horizon Disclosure Schedule lists each Employee
Benefit Plan (within the meaning of Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")) and each Benefit Arrangement
including any plan, contract, arrangement or policy (written or oral) providing
for severance benefits, insurance coverage (including any self-insured
arrangements), workers' compensation, disability benefits, supplemental
unemployment benefits, vacation benefits, retirement benefits or for deferred
compensation, profit-sharing, bonuses, stock options, stock appreciation rights
or other forms of incentive compensation or post-retirement insurance,
compensation or benefits that is maintained or contributed to by Horizon, or any
entity that would be considered to be under common control with Horizon under
Section 414 of the Code (each
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an "ERISA Affiliate"). Copies or descriptions of all Employee Benefit Plans and
Benefit Arrangements, the most recently filed Forms 5500 and accurate summary
plan descriptions have been made available or furnished to TranSwitch.
(b) Each Employee Benefit Plan which is intended to be qualified under
Section 401(a) of the Code is so qualified and has been so qualified during the
period from its adoption to date, and each trust forming a part thereof is
exempt from tax pursuant to Section 501(a) of the Code. Each Employee Benefit
Plan and Benefit Arrangement has been maintained in material compliance with its
terms and with the applicable requirements prescribed by any and all statutes,
orders, rules and regulations, including but not limited to ERISA and the Code.
(c) Neither Horizon nor any ERISA Affiliate maintains or has ever
maintained or contributed to any "multiemployer plan" as defined in Section
3(37) of ERISA, a "multiple employer plan" within the meaning of Section 413 of
the Code, or any Employee Benefit Plan subject to Title IV of ERISA. With
respect to the employees and former employees of Horizon, there are no employee
post-retirement health plans or life insurance in effect, except as required by
Section 4980B of the Code or applicable state law.
(d) No employee of Horizon will become entitled to any material bonus,
retirement, severance or similar benefit or enhanced benefit solely as a result
of the transactions contemplated hereby.
(e) Except as disclosed in Section 3.18 of the Horizon Disclosure
Schedule, all contributions and payments accrued under each Employee Benefit
Plan and Benefit Arrangement, determined in accordance with prior funding and
accrual practices, as adjusted to include proportional accruals for the period
ending on the Closing Date, will be discharged and paid on or prior to the
Closing Date. No Employee Benefit Plan has an "accumulated funding deficiency"
(within the meaning of Section 412 of the Code), whether or not waived. There
has been no amendment to, written interpretation of or announcement (whether or
not written) by Horizon or any of its ERISA Affiliates relating to, or change in
employee participation or coverage under, any Employee Benefit Plan or Benefit
Arrangement that would increase materially the expense of maintaining such
Employee Benefit Plan or Benefit Arrangement above the level of the expense
incurred in respect thereof for the fiscal year ended prior to the date hereof.
3.19 Certain Agreements. Except as set forth in Section 3.19 of the Horizon
------------------
Disclosure Schedule and as contemplated by this Agreement, neither the execution
and delivery by Horizon of this Agreement and all other agreements contemplated
hereby, nor the consummation of the transactions contemplated hereby will: (i)
result in any payment by Horizon (including, without limitation, severance,
unemployment compensation, parachute payment, bonus or otherwise) becoming due
to any director, employee, or independent contractor of Horizon under any Plan,
agreement, or otherwise, (ii) increase any benefits otherwise payable under any
Plan or agreement or (iii) result in the acceleration of the time of payment or
vesting of any such benefits.
3.20 Guarantees and Suretyships. Horizon has no powers of attorney
--------------------------
outstanding (other than those issued in the ordinary course of business with
respect to Tax matters), and Horizon has no material obligations or liabilities
(absolute or contingent) as guarantor, surety, cosigner, endorser, co-
-20-
maker, indemnitor, or, to Horizon' knowledge, otherwise respecting the
obligations or liabilities of any Person.
3.21 Brokers and Finders. Other than the Purchaser's Representative,
-------------------
Horizon has not retained any broker, finder, or investment banker in connection
with this Agreement or any of the transactions contemplated by this Agreement,
nor does or will Horizon owe any fee or other amount to any broker, finder, or
investment banker in connection with this Agreement or the transactions
contemplated by this Agreement.
3.22 Certain Payments. Neither Horizon, nor to the knowledge of Horizon,
----------------
any Person acting on behalf of Horizon has, directly or indirectly, on behalf of
or with respect to Horizon: (i) made an unreported political contribution, (ii)
made or received any payment which was not legal to make or receive, (iii)
engaged in any material transaction or made or received any material payment
which was not properly recorded on the books of Horizon, (iv) created or used
any "off-book" bank or cash account or "slush fund," or (v) engaged in any
conduct constituting a violation of the Foreign Corrupt Practices Act of 1977.
3.23 Environmental Matters. To the knowledge of Horizon, (i) Horizon has
---------------------
complied with all federal, state and local laws (including, without limitation,
case law, rules, regulations, orders, judgments, decrees, permits, licenses and
governmental approvals) which are intended to protect the environment and/or
human health or safety (collectively, "Environmental Laws"); (ii) Horizon has
------------------
not handled, generated, used, stored, transported or disposed of any material,
substance or waste which is regulated by Environmental Laws ("Hazardous
---------
Materials"), except for reasonable amounts of ordinary office and/or office-
---------
cleaning supplies which have been used in material compliance with Environmental
Laws; (iii) there is not now, nor has there ever been, any underground storage
tank or asbestos on any real property owned, operated or leased by Horizon; (iv)
Horizon has not conducted, nor is it aware of, any environmental investigations,
studies, audits, tests, reviews or analyses, the purpose of which was to
discover, identify, or otherwise characterize the condition of the soil,
groundwater, air or the presence of Hazardous Materials at any real property
owned, operated or leased by Horizon; and (v) there are no "Environmental
Liabilities". For purposes of this Agreement, "Environmental Liabilities" are
-------------------------
any claims, demands, or liabilities under Environmental Laws which (i) arise out
of or in any way relate to Horizon's operations or activities, or any real
property at any time owned, operated or leased by Horizon, whether vested or
unvested, contingent or fixed, actual or potential, and (ii) arise from or
relate to actions occurring (including any failure to act) or conditions
existing on or before the Closing Date.
3.24 Enforceability of Contracts, etc.
---------------------------------
(a) To the knowledge of Horizon, no Person that is a party to any
contract, agreement, commitment or plan to which Horizon is a party has a valid
defense, on account of non-performance or malfeasance by Horizon, which would
make any such contracts, agreement, commitment or plan not valid and binding
upon or enforceable against such parties in accordance with their terms, except
to the extent such enforceability may be subject to or limited by bankruptcy,
insolvency, reorganization, arrangement or similar laws affecting the rights of
creditors generally and usual equity principles.
(b) Neither Horizon, nor, to the knowledge of Horizon, any other
Person, is in breach or violation of, or default under, any material contract,
agreement, arrangement, commitment or plan to
-21-
which Horizon is a party, and no event or action has occurred, is pending, or,
to the knowledge of Horizon, is threatened, which, after the giving of notice,
or the lapse of time, or otherwise, would constitute a breach or a default by
Horizon or, to the knowledge of Horizon, any other Person, under any material
contract, agreement, arrangement, commitment or plan to which Horizon is a
party.
3.25 Information Statement. The information regarding Horizon (including,
---------------------
for purposes of this Section 3.25, information regarding Horizon's officers,
directors and Stockholders) included in the information to be sent to the
Stockholders of Horizon in connection with the consideration and approval of the
Merger and the other transactions contemplated by this Agreement (such
information statement as amended or supplemented is referred to herein as the
"Information Statement") will not, on the date the Information Statement (or any
----------------------
amendment thereof or supplement thereto) is first mailed or otherwise provided
to the Stockholders of Horizon, at the time of the execution and delivery of any
written consent of the Stockholders of Horizon or the time of any Stockholders
meeting of Horizon to approve the Merger, and at the Effective Time, contain any
statement regarding Horizon that, at such time and in light of the circumstances
under which it will be made, is false or misleading in any material respect, or
will omit to state any material fact regarding Horizon necessary in order to
make the statements made therein regarding Horizon not false or misleading in
any material respect; or omit to state any material fact regarding Horizon
necessary to correct any statement regarding Horizon in any earlier
communication with respect to the solicitation of the Stockholders of Horizon
that has become false or misleading in any material respect. If at any time
prior to the Effective Time any event relating to Horizon should be discovered
by Horizon which should be set forth in an amendment or a supplement to the
Information Statement, Horizon will promptly inform TranSwitch. Notwithstanding
the foregoing, Horizon makes no representation or warranty with respect to any
information regarding TranSwitch or Merger Sub which is contained in any of the
foregoing documents.
3.26 Disclosure. Neither the representations or warranties made by Horizon
----------
or the Founder in this Agreement, nor the Horizon Disclosure Schedule or any
other certificate executed and delivered by Horizon or the Founder pursuant to
this Agreement, when taken together, contains any untrue statement of a material
fact, or omits to state a material fact necessary to make the statements or
facts contained herein or therein not misleading in light of the circumstances
under which they were furnished.
3.27 Reliance. The foregoing representations and warranties are made by
--------
Horizon and the Founder with the knowledge and expectation that TranSwitch and
Merger Sub are placing reliance thereon.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF THE FOUNDER
The Founder represents and warrants to TranSwitch and Merger Sub as
follows:
-22-
(a) Subject to applicable community property laws, the Founder is the
lawful owner of the shares of Horizon Common Stock to be exchanged for the Total
TranSwitch Common Shares pursuant to this Agreement and has, and on the Closing
Date will have, good and clear title to such shares of Horizon Common Stock,
free of all Liens.
(b) The Founder has, and on the Closing Date will have, full legal
right, power and authority to enter into this Agreement and to sell and deliver
the shares of Horizon Common Stock owned by him in the manner provided herein.
The Founder has duly and validly executed this Agreement and has, or prior to
the Closing, will have duly and validly executed and delivered all other
agreements contemplated hereby, and each of this Agreement and such other
agreements constitutes a valid, binding and enforceable obligation of the
Founder in accordance with its terms.
(c) The execution, delivery and performance of this Agreement and the
other agreements contemplated hereby by the Founder, and the consummation of the
transactions contemplated hereby or thereby, will not require, on the part of
the Founder, any consent, approval, authorization or other order of, or any
filing with, any Governmental Entity, or under any contract, agreement or
commitment to which the Founder is a party or by which the Founder or property
of the Founder is bound, and will not constitute a violation on the part of the
Founder of any law, administrative regulation or ruling or court decree, or any
contract, agreement or commitment, applicable to the Founder or property of the
Founder.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF TRANSWITCH AND MERGER SUB
TranSwitch and Merger Sub jointly and severally represent and warrant to
Horizon as follows:
5.1 Organization and Qualification. TranSwitch is a corporation duly
------------------------------
organized, validly existing and in good standing under the laws of the State of
Delaware, has all requisite corporate power and authority to own, lease and
operate its properties and to carry on its businesses as now being conducted,
and is duly qualified and in good standing to do business in each jurisdiction
in which a failure to so qualify would have a material adverse effect on the
Business Condition of TranSwitch. Merger Sub is a corporation duly organized,
validly existing and in good standing under the laws of Delaware, is recently
organized and has conducted no business activities, other than as contemplated
by this Agreement.
5.2 Capitalization. The authorized capital stock of TranSwitch consists of
--------------
1,000,000 shares of preferred stock, $.001 par value per share, of which no
shares are issued or outstanding or held in TranSwitch's treasury, and
300,000,000 shares of TranSwitch Common Stock, of which, as of December 31,
2000: (a) 83,502,986 shares were validly issued and outstanding, fully paid and
nonassessable and (b) 15,238,849 shares were reserved for issuance pursuant to
TranSwitch's stock option and stock purchase plans for its employees and
directors. Except for options and rights relating to shares described in clause
(b) of the preceding sentence, and except as set forth in Section 5.2 of the
TranSwitch Disclosure Schedule or the Reports (as defined in Section 5.5), there
are no options,
-23-
warrants or other rights, agreements or commitments (contingent or otherwise)
obligating TranSwitch to issue shares of its capital stock or any other
securities convertible into or evidencing the right to subscribe to shares of
its capital stock.
5.3 Authority Relative to this Agreement. The execution, delivery and
------------------------------------
performance of this Agreement and all other agreements contemplated hereby by
TranSwitch and Merger Sub have been duly authorized by all necessary action of
the Boards of Directors of TranSwitch and Merger Sub and Stockholders of Merger
Sub. Certified copies of the resolutions adopted by the Boards of Directors of
TranSwitch and Merger Sub and TranSwitch as sole stockholder of Merger Sub
approving this Agreement, all other agreements contemplated hereby and the
Merger have been or will be provided to Horizon prior to Closing. Each of
TranSwitch and Merger Sub has duly and validly executed and delivered this
Agreement and has, or prior to Closing, will have duly and validly executed and
delivered all other agreements contemplated hereby to be executed by it, and
each of this Agreement and such other agreements constitutes a valid, binding
and enforceable obligation of each of TranSwitch and Merger Sub in accordance
with its terms.
5.4 Non-Contravention. Assuming the accuracy of the representations and
-----------------
warranties of Horizon and the Founder contained in the Agreement and the other
agreements contemplated hereby, neither the execution, delivery or performance
of this Agreement and all other agreements contemplated hereby by TranSwitch and
Merger Sub, nor the consummation of the Merger or any other transaction
described herein, does or will, after the giving of notice, or the lapse of
time, or otherwise, conflict with, result in a breach of, or constitute a
default under, the Charter Documents of TranSwitch or Merger Sub or any federal,
foreign, state or local court or administrative order or process, statute, law,
ordinance, rule or regulation, or any contract, agreement or commitment to which
TranSwitch is a party, or under which TranSwitch is obligated, or by which
TranSwitch or any of the rights, properties or assets of TranSwitch are subject
or bound; result in the creation of any Lien upon, or otherwise adversely
affect, any of the rights, properties or assets of TranSwitch; terminate, amend
or modify, or give any party the right to terminate, amend, modify, abandon or
refuse to perform or comply with, any contract, agreement or commitment to which
TranSwitch is a party, or under which TranSwitch is obligated, or by which
TranSwitch or any of the rights, properties or assets of TranSwitch are subject
or bound; or accelerate, postpone or modify, or give any party the right to
accelerate, postpone or modify, the time within which, or the terms and
conditions under which, any liabilities, duties or obligations are to be
satisfied or performed, or any rights or benefits are to be received, under any
contract, agreement or commitment to which TranSwitch is a party, or under which
TranSwitch may be obligated, or by which TranSwitch or any of the rights,
properties or assets of TranSwitch are subject or bound, other than any of the
foregoing which would not have, individually or in the aggregate, a material
adverse effect on Business Condition of TranSwitch.
5.5 Reports and Financial Statements. TranSwitch has previously furnished
--------------------------------
to Horizon true and correct copies of its (i) Form 10-K for the period ended
December 31, 1999, (ii) all other reports filed by it with the Securities and
Exchange Commission (the "Commission") under the Securities Exchange Act of
----------
1934, as amended (the "Exchange Act") since January 1, 2000 and (iii) TranSwitch
hereby agrees to furnish to Horizon true and correct copies of all reports filed
by it with the Commission after the date hereof prior to the Closing all in the
form (including exhibits) so filed (collectively, the "Reports"). As of their
-------
respective dates, the Reports complied or will comply in all material respects
with the then applicable published rules and regulations of the Commission with
respect thereto at the date of their issuance and did not or will not contain
any untrue statement of a
-24-
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. As of the date hereof, no additional
filings or amendments to previously filed Reports are required pursuant to such
rules and regulations. Each of the audited consolidated financial statements and
unaudited interim financial statements included in TranSwitch's Reports has been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis (except as may be indicated therein or in the notes thereto)
and fairly presents the financial position of the entity or entities to which it
relates as at its date or the results of operations, Stockholders' equity or
cash flows of such entity or entities (subject, in the case of unaudited
statements, to the absence of footnote disclosure and in the case of unaudited
interim statements to year-end adjustments, which will not be material either
individually or in the aggregate, and except as described in Section 5.5 of the
TranSwitch Disclosure Schedule).
5.6 Validity of Total TranSwitch Common Shares. The Total TranSwitch
------------------------------------------
Common Shares to be issued in the Merger will, when issued, be, validly issued,
fully paid and nonassessable.
5.7 Consents and Approvals of Governmental Authorities. Assuming the
--------------------------------------------------
accuracy of the representations and warranties of Horizon and the Founder
contained in the Agreement and the other agreements contemplated hereby, except
for (a) the requirements of state securities (or "Blue Sky") laws, (b) the
--------
filing and recording of the Merger Documents as provided by the Virginia SCA and
the Delaware GCL, (c) the filing of appropriate documents with the Nasdaq Stock
Market and (d) the filing of a Form D and a Form 8-K with the Commission, if
applicable, no consent, approval or authorization of, or declaration, filing or
registration with, any Governmental Entity is required to be made or obtained by
TranSwitch or Merger Sub in connection with the execution, delivery and
performance of this Agreement or the consummation of the transactions
contemplated hereby.
5.8 Absence of Certain Changes or Events. Since September 30, 2000, there
------------------------------------
has not been any material adverse change in the Business Condition of
TranSwitch.
5.9 Information Statement. The information regarding TranSwitch
---------------------
(including, for purposes of this Section 5.9, information regarding TranSwitch's
officers, directors and Stockholders) included in the Information Statement will
not, on the date of the Information Statement (or any amendment thereof or
supplement thereto) is first mailed to the Stockholders of Horizon, at the time
of the execution and delivery of any written consent of the Stockholders of
Horizon or the time of any Stockholders meeting of Horizon to approve the
Merger, and at the Effective Time, contain any statement regarding TranSwitch
that, at such time and in light of the circumstances under which it will be
made, is false or misleading in any material respect, or will omit to state any
material fact regarding TranSwitch necessary in order to make the statements
made therein regarding TranSwitch not false or misleading in any material
respect; or omit to state any material fact regarding TranSwitch necessary to
correct any statement regarding TranSwitch in any earlier communication with
respect to the solicitation of the Stockholders of TranSwitch that has become
false or misleading in any material respect. If at any time prior to the
Effective Time any event relating to TranSwitch should be discovered by
TranSwitch which should be set forth in an amendment or a supplement to the
Information Statement, TranSwitch will promptly inform Horizon. Notwithstanding
the foregoing, TranSwitch makes no representation or warranty with respect to
any information regarding Horizon which is contained in any of the foregoing
documents.
-25-
5.10 Disclosure. Neither the representations or warranties made by
----------
TranSwitch in this Agreement, nor the TranSwitch Disclosure Schedule or any
other certificate executed and delivered by TranSwitch pursuant to this
Agreement, when taken together and with knowledge of the contents of the
Reports, contains any untrue statement of a material fact, or omits to state a
material fact necessary to make the statements or facts contained herein or
therein not misleading in light of the circumstances under which they were
furnished.
5.11 Reliance. The foregoing representations and warranties are made by
--------
TranSwitch with the knowledge and expectation that Horizon and the Stockholders
are placing reliance thereon.
ARTICLE VI
COVENANTS OF HORIZON
During the period from the date of this Agreement (except as
otherwise indicated) and continuing until the earlier of the termination of this
Agreement or the Effective Time, each of Horizon and the Founder agree (except
as expressly contemplated by this Agreement or otherwise permitted with
TranSwitch's prior written consent):
6.1 Conduct of Business in Ordinary Course. Horizon will carry on its
--------------------------------------
business in the ordinary course in substantially the same manner as heretofore
conducted and, to the extent consistent with such business, use all reasonable
best efforts consistent with past practice and policies to preserve intact its
present business organization, keep available the services of its present
officers, consultants and employees and preserve its relationships with
customers, suppliers and distributors and others having business dealings with
it. Horizon will confer on a regular and frequent basis with representatives of
TranSwitch to report operational matters of a material nature and to report the
general status of the ongoing operations of the business of Horizon. The
foregoing notwithstanding and other than in connection with the fulfillment of
the terms and conditions of this Agreement, including without limitation the
issuance of 70.94014 shares of Horizon Common Stock to the Stockholders on the
Closing Date immediately prior to the Closing, Horizon will not:
(a) other than in the ordinary course of business consistent with
prior practice, enter into any material commitment or transaction, including but
not limited to any purchase of assets (other than raw materials, supplies or
cash equivalents) for a purchase price in excess of $25,000;
(b) grant or pay any bonus, severance or termination pay to any
officer, director, independent contractor or employee of Horizon;
(c) enter into or amend any agreements pursuant to which any other
party is granted support, service, marketing or publishing rights, other than in
the ordinary course of business consistent with prior practice, or is granted
distribution rights of any type or scope with respect to any products of
Horizon;
(d) other than in the ordinary course of business consistent with
prior practice, enter into or terminate any contracts, arrangements, plans,
agreements, leases, licenses, franchises, permits,
-26-
indentures, authorizations, instruments, or commitments, or amend or otherwise
change in any material respect the terms thereof in a manner adverse to Horizon;
(e) commence a lawsuit other than: (i) for the routine collection of
bills, (ii) in such cases where Horizon in good faith determines that failure to
commence suit would result in a material impairment of a valuable aspect of
Horizon's business; provided, that Horizon consults with TranSwitch prior to
filing such suit, or (iii) for a breach of this Agreement or any agreement
related hereto;
(f) modify in any material respect existing discounts or other terms
and conditions with dealers, distributors and other resellers of Horizon's
products or services in a manner adverse to Horizon;
(g) accelerate the vesting or otherwise modify any Horizon Option,
restricted stock or other outstanding rights or other securities;
(h) take any action which would make any representation or warranty
in this Agreement untrue or incorrect, as if made as of such time;
(i) make or change any Tax election or change any method of
accounting, except with the written approval of TranSwitch, which approval shall
not be unreasonably withheld; or
(j) agree in writing or otherwise to take any of the foregoing
actions.
6.2 Dividends, Issuance of, or Changes in Securities. Horizon will not:
------------------------------------------------
(i) declare or pay any dividends on or make other distributions to its
Stockholders (whether in cash, shares or property), (ii) issue, deliver, sell,
or authorize, propose, or agree to, or commit to the issuance, delivery, or sale
of any shares of its capital stock of any class, any Horizon Voting Debt or any
securities convertible into its capital stock, any options, warrants, calls,
conversion rights, commitments, agreements, contracts, understandings,
restrictions, arrangements or rights of any character obligating Horizon to
issue any such shares, Horizon Voting Debt or other convertible securities
except as any of the foregoing is required by Outstanding Horizon Options; (iii)
split, combine or reclassify any of its capital stock or issue or authorize the
issuance of any other securities in respect of, in lieu of or in substitution
for shares of capital stock of Horizon, (iv) repurchase or otherwise acquire,
directly or indirectly, any shares of its capital stock or options or warrants
related thereto, or (v) propose any of the foregoing.
6.3 Governing Documents. Other than as contemplated by this Agreement,
-------------------
Horizon will not amend its Charter Documents.
6.4 No Acquisitions. Horizon will not authorize, recommend, propose or
---------------
announce an intention to authorize, recommend or propose, or enter into a letter
of intent (whether or not binding), an agreement in principle or an agreement
with respect to any merger, consolidation or business combination (other than
the Merger), or any acquisition of assets or securities.
6.5 No Dispositions. Other than as expressly provided in this Agreement,
---------------
including without limitation payment of the first $40,000 of Legal Fees (defined
below), Horizon will not sell, lease,
-27-
license, transfer, mortgage, encumber or otherwise dispose of any of its
material assets or cancel, release, or assign any material indebtedness or
claim, except in the ordinary course of business.
6.6 Indebtedness. Horizon will not incur any indebtedness for borrowed
------------
money by way of direct loan, sale of debt securities, purchase money obligation,
conditional sale, guarantee or otherwise.
6.7 Compensation. Except as provided in Section 9.2(l), Horizon will not
------------
adopt or amend, or modify in any material respect, any Plan or pay any pension
or retirement allowance not required by any existing Plan. Horizon will not
enter into or modify any employment or severance contracts, increase the
salaries, wage rates or fringe benefits of its officers, directors or employees
or pay bonuses or other remuneration except for current salaries, severance and
other remuneration for which Horizon is obligated under arrangements existing
prior to the Unaudited Balance Sheet Date to which Horizon is a party and which
have been disclosed in the Horizon Disclosure Schedule.
6.8 Claims. Horizon will not settle any claim, action or proceeding,
------
except in the ordinary course of business consistent with prior practice.
6.9 Access to Properties and Records. Subject to contractual and other
--------------------------------
obligations, Horizon will give TranSwitch and its representatives full access,
at a place reasonably acceptable to Horizon, during reasonable business hours
and following reasonable notice but in such a manner as not unduly to disrupt
the business of Horizon, to its senior management, senior technical personnel,
premises, properties, contracts, commitments, books, records and affairs, and
will provide TranSwitch with such financial, technical and operating data and
other information pertaining to its business as TranSwitch may request. With
Horizon's prior consent, which will not be unreasonably withheld, TranSwitch
will be entitled in conjunction with Horizon personnel to make appropriate
inquiries of third parties in the course of its investigation.
6.10 Breach of Representations and Warranties. Horizon will not take any
----------------------------------------
action that would cause or constitute a breach of any of the representations and
warranties set forth in Article III or that would cause any of such
representations and warranties to be inaccurate in any material respect or that
would constitute a breach of any of its other obligations under this Agreement.
In the event of, and promptly after becoming aware of, the occurrence of or the
pending or threatened occurrence of any event that would cause or constitute
such a breach or inaccuracy, Horizon will give detailed notice thereof to
TranSwitch and will use its reasonable best efforts to prevent or remedy
promptly such breach or inaccuracy.
6.11 Consents. Horizon will promptly apply for or otherwise seek and use
--------
reasonable best efforts to obtain, all Consents, and make all filings with
Governmental Entities, required with respect to the consummation of the Merger.
6.12 Tax Returns. Horizon will promptly provide or make available to
-----------
TranSwitch copies of all Tax Returns that have been filed or are filed prior to
the Closing.
6.13 Stockholder Approval. The Founder agrees to vote all of such Founder's
--------------------
shares of Horizon Common Stock for the approval of this Agreement and the
appropriate Merger Documents as required by the Virginia SCA.
-28-
6.14 Preparation of Disclosure and Solicitation Materials. As promptly as
----------------------------------------------------
practicable after the execution of this Agreement or, if earlier, as far in
advance as possible prior to the Closing, Horizon will promptly submit to its
Stockholders or the employees of Horizon who are scheduled to become
Stockholders immediately prior to the Closing, information and documents
relating to Horizon, its business or operations, TranSwitch, its business or
operations, the terms of the Merger and this Agreement as reasonably agreed by
counsel to TranSwitch and Horizon and intended to comply in all material
respects with Regulation D under the Securities Act to satisfy all requirements
applicable to Horizon of applicable state and federal securities laws, the
Virginia SCA and the regulations thereunder. Horizon will promptly set a record
date, give notice of a special meeting, solicit consents and/or give notices to
holders of Dissenting Shares so as to facilitate the Closing of the Merger as of
the earliest practicable date.
6.15 Exclusivity; Acquisition Proposals. Unless and until this Agreement
----------------------------------
will have been terminated by either party pursuant to Article XII hereof and
thereafter subject to Section 12.5, neither Horizon nor the Founder will (and
each will use its reasonable best efforts to ensure that none of its officers,
directors, agents, representatives, Stockholders or affiliates) take or cause or
permit any Person to take, directly or indirectly, any of the following actions
with any party other than TranSwitch and its designees: (i) solicit, encourage,
initiate or participate in any negotiations, inquiries, or discussions with
respect to any offer or proposal to acquire all or any significant part of
Horizon's business, assets or capital stock, whether by merger, consolidation,
other business combination, purchase of assets, tender or exchange offer or
otherwise (each of the foregoing, an "Acquisition Transaction"), (ii) disclose,
-----------------------
in connection with an Acquisition Transaction, any information not customarily
disclosed to any Person other than TranSwitch or its representatives concerning
Horizon's business or properties or afford to any Person other than TranSwitch
or its representatives access to its properties, books, or records, except in
the ordinary course of business and as required by law or pursuant to a
governmental request for information, (iii) enter into or execute any agreement
relating to an Acquisition Transaction, or (iv) make or authorize any public
statement, recommendation or solicitation in support of any Acquisition
Transaction or any offer or proposal relating to an Acquisition Transaction
other than with respect to the Merger. In the event that Horizon is contacted
by any third party expressing an interest in discussing an Acquisition
Transaction, Horizon will promptly notify TranSwitch of such contact and the
identity of the party so contacting Horizon.
6.16 Notice of Events. Throughout the period between the date of this
----------------
Agreement and the Closing, Horizon will promptly advise and consult with
TranSwitch regarding any and all material events and developments concerning its
financial position, results of operations, assets, liabilities or business or
any of the items or matters concerning Horizon covered by the representations,
warranties and covenants of Horizon and the Stockholders contained in this
Agreement.
6.17 Reasonable Best Efforts. Horizon and the Founder will use their
-----------------------
reasonable best efforts to effectuate the transactions contemplated hereby and
to fulfill and cause to be fulfilled the conditions to Closing under this
Agreement.
6.18 Insurance. Horizon will use its reasonable best efforts to maintain
---------
in force at the Effective Time policies of insurance of the same character and
coverage as those described in the Horizon Disclosure Schedule, and Horizon will
promptly notify TranSwitch in writing of any changes in such insurance coverage
occurring prior to the Effective Time.
-29-
ARTICLE VII
COVENANTS OF TRANSWITCH
During the period from the date of this Agreement and continuing until the
earlier of the termination of this Agreement or the Effective Time (or later
where so indicated), TranSwitch and Merger Sub agree (except as expressly
contemplated by this Agreement or with Horizon's prior written consent):
7.1 Breach of Representations and Warranties. Neither TranSwitch nor
----------------------------------------
Merger Sub will take any action which would cause or constitute a breach of any
of the representations and warranties set forth in Article V or which would
cause any of such representations and warranties to be inaccurate in any
material respect. In the event of, and promptly after becoming aware of, the
occurrence of or the pending or threatened occurrence of any event which would
cause or constitute such a breach or inaccuracy, TranSwitch will give detailed
notice thereof to Horizon and will use its reasonable best efforts to prevent or
remedy promptly such breach or inaccuracy.
7.2 Additional Information; Access. TranSwitch will provide Horizon, the
------------------------------
Founder and those employees of Horizon scheduled to become Stockholders prior to
the Closing with the information relating to TranSwitch referred to in Section
5.5 and the information relating to TranSwitch to be included in the Information
Statement. In addition, TranSwitch will afford to Horizon and to its counsel and
to the persons expected to become Stockholders of TranSwitch pursuant to the
Merger access throughout the period prior to the Effective Time to its senior
management and all other information concerning TranSwitch as Horizon or such
stockholder may reasonably request.
7.3 Consents. TranSwitch will promptly apply for or otherwise seek, and
--------
use its reasonable best efforts to obtain, all consents and approvals, and make
filings, required with respect to the consummation of the Merger.
7.4 Reasonable Best Efforts. Each of TranSwitch and Merger Sub will use
-----------------------
its reasonable best efforts to effectuate the transactions contemplated hereby
and to fulfill and cause to be fulfilled the conditions to Closing under this
Agreement.
7.5 Officers and Directors. TranSwitch agrees that all rights to
----------------------
indemnification existing on the date hereof in favor of the present or former
officers and directors of Horizon with respect to actions taken in their
capacities as directors or officers of Horizon prior to the Effective Time as
provided in the Charter Documents of Horizon (copies of which have been provided
to TranSwitch) will survive the Merger and continue in full force and effect
following the Effective Time and the obligations related thereto will be assumed
by TranSwitch. Notwithstanding the foregoing the provisions of such Charter
Documents will have no effect on the obligations of any Stockholders of Horizon
pursuant to Article X of this Agreement or the Escrow Agreement.
7.6 Nasdaq National Market Listing. TranSwitch will use its commercially
------------------------------
reasonable best efforts to cause a registration statement on Form S-3
registering the Total TranSwitch Common Shares
-30-
filed no later than thirty (30) days after the Effective Time (the "Initial
-------
Filing Date") and to be declared effective no later than six (6) weeks after the
-----------
Initial Filing Date.
7.7 Notice of Events. Throughout the period between the date of this
----------------
Agreement and the Closing, TranSwitch will promptly advise and consult with
Horizon regarding any and all material adverse changes to the representations,
warranties and covenants of TranSwitch and Merger Sub contained in this
Agreement.
7.8 Third-Party Beneficiaries. Sections 7.5 and 7.6 will survive the
-------------------------
consummation of the Merger, are intended to benefit the Stockholders of Horizon
that receive Total TranSwitch Common Shares (the "New TranSwitch Stockholders"),
---------------------------
will be binding on TranSwitch and its successors and assigns, and will be
enforceable by the officers and directors of Horizon and the New TranSwitch
Stockholders.
7.9 Issuance of Options. On the day following the Closing TranSwitch
-------------------
shall grant to the Stockholders who become employees of TranSwitch non-qualified
stock options ("Options") exercisable for an aggregate of 100,000 shares of
-------
TranSwitch Common Stock (the "Option Shares"), at an exercise price equal to the
-------------
market price thereof as determined by the Board of Directors of TranSwitch in
accordance with applicable law. Such Options are not intended to qualify as
incentive stock options under Section 422 of the Internal Revenue Code of 1986,
as amended (the "Code"). Each Stockholder shall be entitled to receive Options
for that number of Option Shares equal to the product of (A) such Stockholder's
"Option Percentage" set forth on Exhibit 2.1(d) and (B) the aggregate Option
--------------
Shares. The Options shall be governed by TranSwitch's then applicable employee
equity incentive plan and form of stock option agreement.
7.10 Health and Related Benefits. Until such time as standard
---------------------------------------------------------
health, disability, life insurance and similar benefits coverage commences for
------------------------------------------------------------------------------
the Stockholders as TranSwitch employees, TranSwitch shall not cancel, limit or
-------------------------------------------------------------------------------
otherwise curtail coverage available to such Stockholders from Horizon on the
-----------------------------------------------------------------------------
Closing Date.
-------------
ARTICLE VIII
ADDITIONAL AGREEMENTS
In addition to the foregoing, TranSwitch, Merger Sub, Horizon and the
Founder each agree to take the following actions after the execution of this
Agreement.
8.1 Investment Agreements. All resales of TranSwitch Common Shares by the
---------------------
New TranSwitch Stockholders will be subject to the restrictions imposed by the
investment agreements (the "Investment Agreements") in the form attached as
---------------------
Exhibit 8.1 and the registration rights agreement (the "Registration Rights
-------------------
Agreement") in the form attached as Exhibit 8.2, each of which will be entered
--------- -----------
into by each New TranSwitch Stockholder and TranSwitch. TranSwitch will be
entitled to place the legends as referred to in the form of Investment Agreement
on each certificate evidencing any TranSwitch Common Shares to be received by
New TranSwitch Stockholders pursuant to the terms of this Agreement and to issue
appropriate stop transfer instructions to the transfer agent for TranSwitch
Common Shares consistent with the terms of the Investment Agreements.
-31-
8.2 Legal Conditions to the Merger. Each of TranSwitch, Merger Sub,
------------------------------
Horizon and the Founder will use all reasonable best efforts to take actions
necessary to comply promptly with all legal requirements which may be imposed on
it with respect to the Merger. Each of TranSwitch, Merger Sub, Horizon and the
Founder will use all reasonable best efforts to take all actions to obtain (and
to cooperate with the other parties in obtaining) any consent required to be
obtained or made by Horizon, Merger Sub, or TranSwitch in connection with the
Merger, or the taking of any action contemplated thereby or by this Agreement.
8.3 Employee Benefits. (a) Nothing contained herein will be considered
-----------------
as requiring Horizon or TranSwitch to continue any specific plan or benefit, or
to confer upon any employee, beneficiary, dependent, legal representative or
collective bargaining agent of such employee any right or remedy of any nature
or kind whatsoever under or by reason of this Agreement, including without
limitation any right to employment or to continued employment for any specified
period, at any specified location or under any specified job category, except as
specifically provided for in an offer letter or other agreement of employment.
It is specifically understood that continued employment with Horizon or
employment with TranSwitch is not offered or implied for any other employees of
Horizon and any continuation of employment with Horizon after the Closing will
be at will except as specifically provided otherwise in an offer letter or other
agreement of employment.
(b) Following the Effective Time, TranSwitch, in its discretion, shall
either: (i) continue (or cause Horizon to continue) to maintain the Horizon
Employee Plans as in effect immediately prior to the Effective Time, or (ii)
arrange for each participant in Horizon Employee Plans ("Horizon Participants")
--------------------
to participate in any similar plans of TranSwitch ("TranSwitch Plans") in which
----------------
similarly situated employees of TranSwitch participate, or (iii) a combination
of clauses (i) and (ii). Each Horizon Participant who continues to be employed
by TranSwitch or any of its subsidiaries immediately following the Effective
Time shall, to the extent permitted by law and applicable tax qualification
requirements, and subject to any generally applicable break in service or
similar rule, receive credit for purposes of eligibility to participate and
vesting under TranSwitch Plans for years of service with Horizon or its
subsidiaries prior to the Effective Time. To the extent permitted by insurers
of TranSwitch Plans, TranSwitch shall cause any and all pre-existing condition
limitation eligibility waiting periods and evidence of insurability requirements
under any group health plans to be waived with respect to so such Horizon
Participants and their eligible dependents and shall provide them with credit
for any co-payments and deductibles prior to the Effective Time for purposes of
satisfying any applicable deductible, out-of-pocket, or similar requirements
under any TranSwitch Plans in which they are eligible to participate immediately
after the Effective Time. Notwithstanding any of the foregoing to the contrary,
none of the provisions contained herein shall operate to duplicate any benefit
provided to any employee of Horizon or the funding of any such benefit.
8.4 Expenses. Unless otherwise agreed by the parties, whether or not the
--------
Merger is consummated, all costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby and thereby, including
investment banking, legal and accounting expenses, will be paid by the party
incurring such expense. Without limitation of the foregoing, the parties hereto
agree that the Founder shall at the Closing pay for all legal fees of Goulston &
Storrs over and above $40,000 arising in connection with the negotiation of this
Agreement and the Closing and the Stockholders shall pay the Purchaser
Representative fees incurred in connection with this Agreement.
-32-
8.5 Additional Agreements. In case at any time after the Effective Time
---------------------
any further action is reasonably necessary or desirable to carry out the
purposes of this Agreement or to vest the Surviving Corporation with full title
to all properties, assets, rights, approvals, immunities and franchises of
Horizon, the proper officers and directors of each corporation which is a party
to this Agreement will take all such necessary action. Without limiting the
foregoing, on or prior to the Closing Date, Horizon will cause each of the
Stockholders to deliver to TranSwitch a properly executed statement satisfying
the requirements of Treas. Reg. 1.1445-2(b) in a form reasonably acceptable to
TranSwitch.
8.6 Public Announcements. Neither TranSwitch, Horizon nor the Founder
--------------------
will disseminate any press release or other announcement concerning this
Agreement or the transactions contemplated herein to any third party (except to
the directors, officers and employees of the parties to this Agreement whose
direct involvement is necessary for the consummation of the transactions
contemplated under this Agreement, to the attorneys, advisors and accountants of
the parties hereto, or except as TranSwitch determines in good faith to be
required by applicable law) without the prior written agreement of TranSwitch
and Horizon.
8.7 Confidentiality. Horizon and TranSwitch have entered into a Mutual
---------------
Non-Disclosure and Confidentiality Agreement dated as of October 23, 2000
concerning each party's obligations to protect the confidential information of
the other party. Horizon and TranSwitch each hereby affirm each of their
obligations under such agreement. If this Agreement is terminated in accordance
with Article XII hereof, TranSwitch will, and will cause its accountants,
counsel and other representatives to deliver to Horizon all documents and other
material, and all copies thereof, obtained by TranSwitch or on its behalf from
Horizon in connection with this Agreement, whether so obtained before or after
the execution hereof, and will not disclose any such information or documents to
any third parties or make any use of such. If this Agreement is terminated in
accordance with Article XII hereof, Horizon will, and will cause its
accountants, counsel and other representatives to, deliver to TranSwitch all
documents and other material, and all copies thereof, obtained by Horizon or on
its behalf or by a Stockholder from TranSwitch in connection with this
Agreement, whether so obtained before or after the execution hereof, and will
not disclose any such information or documents to any third parties or make any
use thereof.
ARTICLE IX
CONDITIONS PRECEDENT
9.1 Conditions to Each Party's Obligation to Effect the Merger'. The
----------------------------------------------------------
respective obligations of each party to effect the Merger will be subject to the
satisfaction prior to the Closing Date of the following conditions:
(a) Governmental Approvals. Other than the filing of the Merger
----------------------
Documents with the Secretaries of the Corporation Commission of the Commonwealth
of Virginia and the Secretary of State of the State of Delaware, all statutory
requirements and all Consents of Governmental Entities legally required for the
consummation of the Merger and the transactions contemplated by this
-33-
Agreement will have been filed, occurred, or been obtained, other than such
Consents for which the failure to obtain would not have a material adverse
effect on the consummation of the Merger or the other transactions contemplated
hereby or on the Business Condition of TranSwitch or Horizon.
(b) No Restraints. No statute, rule or regulation, and no final and
-------------
nonappealable order, decree or injunction will have been enacted, entered,
promulgated or enforced by any court or Governmental Entity of competent
jurisdiction which enjoins or prohibits the consummation of the Merger.
9.2 Conditions of Obligations of TranSwitch and Merger Sub. Unless waived
------------------------------------------------------
by TranSwitch and Merger Sub, the obligations of TranSwitch and Merger Sub to
effect the Merger are subject to the satisfaction of the following conditions:
(a) Representations and Warranties of Horizon and the Founder. The
---------------------------------------------------------
representations and warranties of Horizon and the Founder set forth in this
Agreement will be true and correct in all material respects as of the date of
this Agreement and as of the Closing Date as though made on and as of the
Closing Date, except (i) as otherwise contemplated by this Agreement, (ii) as a
result of actions taken or not taken at the direction of or after consultation
with and written concurrence of TranSwitch and (iii) for representations and
warranties specifically limited to an earlier date(s). TranSwitch will have
received a certificate signed by or on behalf of the Founder and by the
President of Horizon to such effect on the Closing Date.
(b) Performance of Obligations of Horizon and the Founder. Horizon
-----------------------------------------------------
and the Founder will have performed in all material respects all agreements and
covenants required to be performed by them under this Agreement prior to the
Closing Date except (i) as otherwise contemplated or permitted by this Agreement
and (ii) as a result of actions taken or not taken at the direction of or after
consultation with and written concurrence of TranSwitch, and TranSwitch will
have received a certificate signed by each director of Horizon, and each officer
of Horizon to such effect on the Closing Date.
(c) Investment and Escrow Agreements. TranSwitch will have received
--------------------------------
from Stockholders of Horizon certificates constituting one hundred percent
(100%) of the Outstanding Horizon Shares and 100% of the duly executed
Investment Agreements and Escrow Agreements.
(d) Employment and Assignment of Inventions, Nondisclosure and
----------------------------------------------------------
Restrictive Covenants Agreements. All employees of Horizon will have executed
--------------------------------
employment and/or assignment of inventions, nondisclosure and restrictive
covenants agreements in the form previously provided by TranSwitch to Horizon.
(e) Legal Action. There will not be overtly threatened or pending
------------
any action, proceeding or other application before any court or Governmental
Entity brought by any Person or Governmental Entity: (i) challenging or seeking
to restrain or prohibit the consummation of the transactions contemplated by
this Agreement, or seeking to obtain any material damages from TranSwitch,
Merger Sub or Horizon as a result of such transactions; or (ii) seeking to
prohibit or impose any limitations on TranSwitch's ownership or operation of all
or any portion of Horizon's business or assets, or to compel TranSwitch to
dispose of or hold separate all or any portion of its or Horizon's business or
assets as a result of the transactions contemplated by the Agreement which if
-34-
successful would have a material adverse effect on TranSwitch's ability to
receive the anticipated benefits of the Merger and the employment of the
individuals referenced in Section 9.2(d).
(f) Opinion of Counsel. TranSwitch will have received an opinion
------------------
dated as of the Closing Date of Goulston & Storrs, counsel to Horizon,
substantially in the form attached as Exhibit 9.2(f).
--------------
(g) Consents. TranSwitch will have received duly executed copies of
--------
all Consents specified in the Horizon Disclosure Schedule, and there will not be
any Consents which have not been received and are required to be disclosed in
the Horizon Disclosure Schedule which have not been so disclosed, in each case
except for such thereof as TranSwitch and Horizon will have agreed in writing
will not be obtained.
(h) Termination of Rights and Certain Securities. Any registration
--------------------------------------------
rights, rights of refusal, voting rights, rights to any liquidation preference
or redemption rights relating to any security of Horizon will have been
terminated or waived or satisfied as of the Closing.
(i) Stockholder Approvals. This Agreement and the Merger will have
---------------------
been approved by Stockholders of Horizon holding one hundred percent (100%) of
the voting power of the Outstanding Horizon Shares. Any Parachute Payments will
have been approved by the percentage of holders of the Outstanding Horizon
Shares as required by law (as reasonably interpreted by counsel for TranSwitch).
(j) Corporate Proceedings Satisfactory. All corporate and other
----------------------------------
proceedings to be taken by Horizon in connection with the transactions
contemplated hereby and all documents incident thereto will be satisfactory in
form and substance to TranSwitch and its counsel, and TranSwitch and its counsel
will have received all such counterpart originals or certified or other copies
of such documents as they reasonably may request.
(k) Securities Law Compliance. TranSwitch will be satisfied, in its
-------------------------
reasonable discretion, that the approval of the Merger, this Agreement and all
associated transactions by the Stockholders of Horizon and the issuance of Total
TranSwitch Common Shares hereunder will have been conducted in compliance with
Regulation D under the Securities Act.
(l) Termination of Profit-Sharing Plan. Horizon shall have terminated
----------------------------------
its profit-sharing plan prior to Closing, TranSwitch shall have received from
Horizon evidence that Horizon's profit-sharing plan has been terminated pursuant
to resolutions of Horizon's Board of Directors (effective prior to the Closing)
satisfactory to TranSwitch.
(m) Repayment of Related Indebtedness. All indebtedness of any
---------------------------------
officer, director, employee or stockholder of Horizon to Horizon, whether due or
to become due in the future shall have been repaid or otherwise discharged in a
manner satisfactory to TranSwitch, and TranSwitch shall have received evidence
of such repayment or discharge in a form reasonably satisfactory to it.
(n) Resignation of Horizon Officers and Directors. The officers and
---------------------------------------------
directors of Horizon shall have resigned as of the Effective Time, and
TranSwitch shall have received evidence of such resignation in a form
satisfactory to it.
-35-
(o) Payment of Purchaser Representative. The Stockholders shall have
-----------------------------------
paid the Purchaser Representative fees of $2,500 per day up to a maximum of
$10,000 for services rendered to certain of the Stockholders as purchaser
representative.
(p) Payment of Legal Fees. Goulston & Storrs shall have received
payment for all legal fees, costs and disbursements incurred by Goulston &
Storrs in connection with the negotiation, execution and delivery of this
Agreement and all documents, instruments and agreements in connection herewith
(the "Legal Fees"). The Legal Fees shall be paid as follows:
----------
(i) the first $40,000 to be paid by Horizon prior to the Closing
from its available cash
(ii) any amounts over $40,000 to be paid by the Founder at the
Closing
(q) Money Purchase Pension Plan. Prior to the Closing Horizon shall
---------------------------
have (i) delivered a termination notice to the appropriate persons regarding
termination of its Money Purchase Pension Plan and (ii) provided to TranSwitch
such documentation as TranSwitch may require confirming that the Money Purchase
Pension Plan has been terminated and that no more than $16,500 is due under the
Money Purchase Pension Plan.
(r) Termination of Sun Microsystems Contract. Horizon and the Founder
----------------------------------------
shall have terminated any and all Horizon contracts with Sun Microsystems and
shall have provided evidence of such termination in a form acceptable to
TranSwitch.
(s) Issuance of Stock to Stockholders (other than the Founder). On
----------------------------------------------------------
(but not before) the Closing Date, Horizon shall have issued stock to the
Stockholders (other than the Founder) in consideration for past services
rendered to Horizon.
(t) Horizon shall have distributed $39,003.37 to the Founder, which is
the amount placed in the Horizon profit-sharing plan for the fiscal year 1999.
(u) Horizon shall have terminated its line of credit with Fleet Bank
and shall have terminated the guaranty of Xxxx Xxxxxxxxx of such line of credit
and shall have provided evidence of such terminations in a form acceptable to
TranSwitch.
(v) each of the Stockholders shall have notified TranSwitch in
writing whether such Stockholder will be making an election under Section 83(b)
of the Code of the Internal Revenue Code of 1986, as amended, with respect to
the transactions contemplated by this Agreement.
9.3 Conditions of Obligation of Horizon. The obligation of Horizon and
-----------------------------------
the Founder to effect the Merger is subject to the satisfaction of the following
conditions unless waived by Horizon and the Founder:
(a) Representations and Warranties of TranSwitch and Merger Sub. The
-----------------------------------------------------------
representations and warranties of TranSwitch and Merger Sub set forth in this
Agreement will be true and correct in all material respects as of the date of
this Agreement and as of the Closing Date as though made on and as of the
Closing Date, except as otherwise contemplated by this Agreement, and
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Horizon will have received a certificate signed on behalf of TranSwitch by a
duly authorized officer of TranSwitch to such effect.
(b) Performance of Obligations of TranSwitch and Merger Sub.
-------------------------------------------------------
TranSwitch and Merger Sub will have performed in all material respects all
agreements and covenants required to be performed by them under this Agreement
at or prior to the Closing Date (including without limitation the ), and Horizon
will have received a certificate signed on behalf of TranSwitch by officers of
TranSwitch to such effect.
(c) Opinion of TranSwitch's Counsel. Horizon and the Stockholders
-------------------------------
will have received an opinion, dated the Closing Date, of Xxxxx, Xxxxxxx &
Xxxxxxxxx, LLP, substantially in the form attached as Exhibit 9.3(c).
--------------
(d) Stockholder Approval. This Agreement and the Merger will have
--------------------
been approved and adopted by the requisite vote of the Stockholders of Horizon,
as required by the Virginia SCA and Horizon's Charter Documents; provided,
however, that the inclusion of this condition will not be construed in any way
as excusing the Founder from fulfilling his covenant in Section 6.13.
(e) Escrow and Registration Rights Agreements. TranSwitch shall have
-----------------------------------------
duly executed and delivered the Escrow Agreement and the Registration Rights
Agreement.
(f) Legal Action. There will not be overtly threatened or pending any
------------
action, proceeding or other application before any court or Governmental Entity
brought by any Person or Governmental Entity: (i) challenging or seeking to
restrain or prohibit the consummation of the transactions contemplated by this
Agreement, or seeking to obtain any material damages from Horizon or the
Stockholders as a result of the transactions contemplated by this Agreement or
(ii) restricting in any way the receipt, ownership, or ability to dispose of the
consideration to be received by any stockholder of Horizon in the transactions
contemplated by this Agreement; provided, however, that Horizon and the
Stockholders will automatically be deemed to waive this condition if TranSwitch
agrees to indemnify, defend and hold any such named party harmless against any
such action.
ARTICLE X
INDEMNIFICATION
10.1 Indemnification Relating to Agreement. Subject to Sections 10.4 and
-------------------------------------
10.6, the Founder and, as an integral term of the Merger, all other Stockholders
of Horizon who accept Merger Consideration and execute the Escrow Agreement
(which is a condition to receiving such consideration), severally (but not
jointly) and in proportion to their original contributions of Indemnification
Escrow Shares, hereby agree to defend, indemnify and hold TranSwitch harmless
from and against, and to reimburse TranSwitch with respect to, any and all
losses, damages, liabilities, claims, judgments, settlements, fines, costs and
expenses (including reasonable attorneys' fees), determined as provided in
Section 10.4 ("Indemnifiable Amounts"), of every nature whatsoever incurred by
---------------------
TranSwitch (which will be deemed to include any of the foregoing incurred by the
Surviving Corporation) by reason of or arising out of or in connection with (i)
any breach, or any claim (including claims by parties other than TranSwitch)
that constitutes a breach, by Horizon or the Founder of any representation or
warranty of Horizon or the Founder contained in this Agreement or in
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any certificate or other document delivered to TranSwitch pursuant to this
Agreement, other than any breach or related claim taken or not taken at the
written direction of or after consultation with and written concurrence of
TranSwitch, (ii) the failure, partial or total, of Horizon or the Founder to
perform any agreement or covenant required by this Agreement to be performed by
it or them other than any breach or related claim taken or not taken at the
written direction of or after consultation with and written concurrence of
TranSwitch, (iii) any Tax liability, or asserted liability, of Horizon
attributable to periods (or any portion thereof) ending on or prior to the
Closing but only to the extent such liabilities were not accrued for on the
Unaudited Balance Sheet, and any Tax liability, or asserted liability, of
Horizon or the Stockholders attributable to the transactions contemplated by
this Agreement, and (iv) any Tax Liability, or asserted Tax Liability, of the
Stockholders in connection with receiving any shares of Horizon Capital Stock or
any shares of TranSwitch Common Stock or the Cash Payment or any cash in lieu of
fractional shares (or any withholding Tax liability of Horizon or TranSwitch in
connection with any such receipt of shares or cash). The foregoing obligations
to indemnify TranSwitch will be determined without regard to any right to
indemnification to which any Person may have in his or her capacity as an
officer, director, employee, agent or any other capacity of Horizon, and no
Stockholder will be entitled to any indemnification from Horizon or the
Surviving Corporation for amounts paid hereunder. There will be no right of
contribution or subrogation from TranSwitch or the Surviving Corporation for
indemnification payments made by or for the account of the Stockholders.
10.2 Third Party Claims. With respect to any claims or demands by third
------------------
parties as to which TranSwitch may seek indemnification hereunder, other than
claims or demands covered by Section 10.3, whenever TranSwitch will have
received a written notice that such a claim or demand has been asserted or
threatened, TranSwitch will promptly notify the "Stockholder Representative" (as
--------------------------
designated in the Escrow Agreement) of such claim or demand and of the facts
within TranSwitch's knowledge that relate thereto within a reasonable time after
receiving such written notice. The Stockholder Representative will then have
the right to defend, contest, negotiate or settle any such claim or demand
through counsel of his own selection, satisfactory to TranSwitch, and solely at
the Stockholders' own cost and expense, which costs and expenses will be payable
out of the Indemnification Escrow Shares being held pursuant to the Escrow
Agreement. Notwithstanding the preceding sentence, the Stockholder
Representative will not settle, compromise, or offer to settle or compromise any
such claim or demand without the prior written consent of TranSwitch, which
consent will not be unreasonably withheld. Without limiting TranSwitch's
rights to object for other reasons, TranSwitch may object to a settlement or
compromise which includes any provision which in its reasonable judgment may
have an adverse impact on or establish an adverse precedent for the Business
Condition of TranSwitch or any of its Subsidiaries. If the Stockholder
Representative gives notice to TranSwitch within twenty (20) calendar days after
TranSwitch has notified the Stockholder Representative that any such claim or
demand has been made in writing, that the Stockholder Representative elects to
have TranSwitch defend, contest, negotiate, or settle any such claim or demand,
then TranSwitch will have the right to contest and/or settle any such claim or
demand and seek indemnification pursuant to this Article X as to any
Indemnifiable Amounts; provided, however, that TranSwitch will not settle,
compromise, or offer to settle or compromise any such claim or demand without
the prior written consent (which may include a general or limited consent) of
the Stockholder Representative, which consent will not be unreasonably withheld.
If the Stockholder Representative fails to give written notice to TranSwitch of
his intention to contest or settle any such claim or demand within twenty (20)
calendar days after TranSwitch has notified the Stockholder Representative that
any such claim or demand has been made in writing, or if any such notice is
given
-38-
but any such claim or demand is not contested by the Stockholder Representative
within a reasonable time thereafter, TranSwitch will have the right to contest
and/or settle any such claim or demand in its sole discretion and seek
indemnification pursuant to this Article X as to any Indemnifiable Amounts.
10.3 Tax Contests. Notwithstanding any of the foregoing, TranSwitch will
------------
have the right to conduct any Tax audit or other Tax contest relating to the
Surviving Corporation. TranSwitch will conduct any such Tax audit or other Tax
contest in good faith. With respect to any matters relating to such Tax audits
or other Tax contests as to which TranSwitch may seek indemnification hereunder,
TranSwitch shall consult with the Indemnification Representative and allow him
to comment before taking any position or making any written submission with any
Governmental Entity with regard to any Indemnifiable matter.
10.4 Limitations. Notwithstanding any other provision in this Article X,
-----------
TranSwitch will be entitled to indemnification only to the extent that the
aggregate Indemnifiable Amounts (which shall be determined for all purposes of
this Article X disregarding any qualification in any representation or warranty
as to "materially" or "material") exceed Twenty Thousand Dollars ($20,000.00)
(the "Threshold Amount"), provided that at such time as the amount to which
----------------
TranSwitch is entitled to be indemnified exceeds the Threshold Amount,
TranSwitch shall be entitled to be indemnified up to the full Indemnifiable
Amounts including the Threshold Amount. Any claim for Indemnifiable Amounts
hereunder shall be offset or reduced by the amount of any insurance proceeds
actually received by TranSwitch and/or the Surviving Corporation in respect of
such losses; provided, however, that nothing herein shall require TranSwitch or
-------- -------
the Surviving Corporation to obtain or maintain any such insurance, nor to
proceed against any policies so obtained, in lieu of or prior to obtaining the
indemnification provided for in this Article X. The liability of any single
Stockholder (except the Founder) for indemnification obligations after the
termination of the Escrow Agreement (whether such termination is due to the
depletion of amounts held in escrow pursuant to the Escrow Agreement or to the
passage of time) shall be further limited to such Stockholder's pro rata share
of any Indemnifiable Amounts based on the number of shares of TranSwitch Common
Stock received by such Stockholder relative to the aggregate number of shares of
TranSwitch Common Stock distributed in respect of shares of Horizon Common Stock
and each Stockholder's aggregate liability for Indemnifiable Amounts shall not
exceed such Stockholder's portion of the Indemnification Escrow Shares;
provided, however, that each Stockholder shall be solely responsible for any
indemnification related to the payment or non-payment of such Stockholder's
withholding or other taxes in connection with the receipt of shares of Horizon
Capital Stock or shares of TranSwitch Common Stock or the Cash Payment or any
cash in lieu of fractional shares and that TranSwitch shall be indemnified up to
a maximum of the aggregate number of shares of TranSwitch Common Stock and cash
received by such Stockholder; further provided, however, that the aggregate
liability of the Founder for Indemnifiable Amounts arising out of Taxes (except
withholding Taxes payable by the Stockholders), ERISA matters, criminal activity
or intentional fraud or willful misstatements or willful omissions by Horizon or
the Founder come out of the Founder's portion of the Aggregate Consideration.
Any Indemnifiable Amounts payable by the Founder pursuant to the preceding
sentence will be net of, and in addition to, the Founder's portion of any
portion of the property held pursuant to the Escrow Agreement that is payable to
TranSwitch; provided, however, that TranSwitch will first seek reimbursement
from the Founder of any Indemnifiable Amounts pursuant to the provisions of the
Escrow Agreement, but may seek indemnification hereunder with respect to any
deficiency in any Indemnifiable Amounts not satisfied by the property held
pursuant to the Escrow Agreement after the termination of the Escrow Agreement.
-39-
10.5 Binding Effect. The indemnification obligations contained in this
--------------
Article X are an integral part of this Agreement and the Merger in the absence
of which TranSwitch would not have entered into this Agreement.
10.6 Time Limit. The representations, warranties, covenants and agreements
----------
of Horizon and the Founder set forth in this Agreement will survive the Closing
and the consummation of the transactions contemplated by this Agreement, but any
claims with respect thereto may be made only on or before the first anniversary
of the date of this Agreement; provided, however, that claims alleging fraud or
willful misstatements or willful omissions of Horizon or the Founder may be made
only on or before the third anniversary of the Closing Date, claims relating to
Tax matters may be made only on or before the expiration of the applicable Tax
statute of limitations and claims relating to ERISA matters may be made only on
or before the expiration of the applicable ERISA statute of limitations.
10.7 Sole Remedy. Notwithstanding any other provision in this Agreement to
-----------
the contrary, the provisions of this Article X and the provisions of the Escrow
Agreement will be the sole and exclusive remedy of (and corresponding liability
of any Stockholder of Horizon, in such stockholder's capacity as such, to)
TranSwitch, Merger Sub and the Surviving Corporation for any damage, claim,
cause of action or right of any nature arising out of or relating to this
Agreement, the certificates or other documents executed or delivered herewith,
or the transactions contemplated hereby; provided, however, that nothing in this
Agreement or the Escrow Agreement will be deemed to limit any right or remedy
for criminal activity or fraud, Taxes or ERISA matters, or willful misstatements
or willful omissions, or breaches of covenants or inaccuracies in any
representations or warranties set forth in any other agreement contemplated by
this Agreement, including any Investment Agreement, employment agreement or non-
competition agreement or the Registration Rights Agreement.
ARTICLE XI
GOALS ESCROW
11.1 Establishment of the Goals Escrow. The Goals Escrow Shares shall be
---------------------------------
placed in the Goals Escrow subject to the successful completion of the Year 2001
goals on Exhibit 11.1(a) (the "Year 2001 Goals") and the Year 2002 goals on
---------------
Exhibit 11.1(b) (the "Year 2002 Goals"). Fifty percent (50%) of the Goals
---------------
Escrow Shares (including without limitation in the Goals Escrow Shares the
Indemnification Escrow Shares to be combined therewith in accordance with the
terms and conditions of the Escrow Agreement) shall be placed in escrow for
payment to the Stockholders upon successful completion of the Year 2001 Goals
("Year 2001 Goals Escrow Shares") and fifty percent (50%) of the Goals Escrow
-------------------------------
Shares(including without limitation in the Goals Escrow Shares the
Indemnification Escrow Shares to be combined therewith in accordance with the
terms and conditions of the Escrow Agreement), shall be placed in escrow for
release to the Stockholders upon successful completion of the Year 2002 Goals
("Year 2002 Goals Escrow Shares").
-------------------------------
11.2 Release of the Year 2001 Goals Escrow Shares. One year following the
--------------------------------------------
date of this Agreement the "Year 2001 Release Date"), the Stockholders shall
----------------------
receive a pro rata payment of the Year 2001 Goals Escrow Shares if the Horizon
Team (as defined in Section 11.8) shall have successfully completed at least
five (5) of the eight (8) Year 2001 Goals (the "Year 2001 Goal
--------------
-40-
Target"). Upon completion of the Year 2001 Goal Target and passage of the Year
------
2001 Release Date, TranSwitch will release to the Stockholders one-eighth
(1/8/th/) of the Year 2001 Goals Escrow Shares for each Year 2001 Goal
successfully completed by the Horizon Team, up to a maximum of all the Year 2001
Goals Escrow Shares. Each Stockholder shall receive its pro rata percentage of
the Year 2001 Goals Escrow Shares released to the Stockholders based on the
relative proportion of shares of Total TranSwitch Common Stock initially
deposited with the Escrow Agent as Indemnification Escrow Shares and Goals
Escrow Shares for the benefit of such Stockholder. No Year 2001 Goals Escrow
Shares shall be released to the Stockholder if the Horizon Team has not met the
Year 2001 Goal Target.
11.3 Release of the Year 2002 Goals Escrow Shares. Two years following the
--------------------------------------------
date of this Agreement (the "Year 2002 Release Date") the Stockholders shall
----------------------
receive a pro rata payment of the Year 2002 Goals Escrow Shares if the Horizon
Team shall have successfully completed at least three (3) of the four (4) Year
2002 Goals (the "Year 2002 Goal Target"). Upon completion of the Year 2002 Goal
---------------------
Target, and passage of the Year 2002 Release Date TranSwitch will release to the
Stockholders one-fourth (1/4/th/) of the Year 2002 Goals Escrow Shares for each
Year 2002 Goal successfully completed by the Horizon Team, up to a maximum of
all the Year 2002 Goals Escrow Shares. Each Stockholder shall receive its pro
rata percentage of the Year 2002 Goals Escrow Shares released to the
Stockholders based on the relative proportion of shares of Total TranSwitch
Common Stock initially deposited with the Escrow Agent as Indemnification Escrow
Shares and Goals Escrow Shares for the benefit of such Stockholder. No Year
2002 Goals Escrow Shares shall be released to the Stockholder if the Horizon
Team has not met the Year 2002 Goal Target.
11.4 Notification of Status of Goals; Disputes. On the applicable date for
-----------------------------------------
the completion of each Goal, TranSwitch shall notify the Stockholders in writing
regarding whether each applicable Goal was successfully completed and if no such
notice is received within ten (10) business days following the due date
therefor, such goal shall be deemed for all purposes to have been satisfied.
Any dispute with respect to whether any on or more Goals has been achieved shall
be submitted to arbitration pursuant to Section 2.3(c) of the Escrow Agreement
before a single arbitrator.
11.5 Inability to Perform Goals. If TranSwitch, in its sole discretion,
--------------------------
shall take any unilateral action that will make it not commercially reasonable
for the Horizon Team to achieve one or more of the Goals, including without
limitation in light of the time and resources made available to the Stockholders
by TranSwitch for the achievement thereof, the Stockholder Representative (as
defined in the Escrow Agreement), on behalf of the Stockholders, shall so notify
TranSwitch in writing (the "Impossibility Notice"). TranSwitch and the
Stockholder Representative shall each use good faith efforts to agree to a
mutually acceptable substitute goal or goals (the "Substitute Goals"). The
----------------
parties shall have sixty (60) days from mailing of the Impossibility Notice to
agree to any such Substitute Goals and the terms of any such Substitute Goals
shall be in writing signed by both parties. If the parties are unable to come
to a resolution within such sixty (60) day period, the parties will submit the
dispute to arbitration pursuant to Section 2.3(e) of the Escrow Agreement.
11.6 Value of Each Goal. For purposes of this Agreement and the Escrow
------------------
Agreement, each Year 2001 Goal shall be of an equal value in Year 2001 Goal
Escrow Shares as each other Year 2001 Goal and each Year 2002 Goal shall be of
an equal value in Year 2002 Goal Escrow Shares as each other Year 2002 Goal.
-41-
11.7 Acceleration of Goals. Notwithstanding anything herein to the
---------------------
contrary, if TranSwitch breaches any of the following obligations prior to the
Year 2002 Release Date, the Stockholder Representative on behalf of the
Stockholders shall give notice of such breach to TranSwitch containing a
reasonably adequate description of the nature of the breach, and, should
TranSwitch not have cured the breach within thirty (30) days following receipt
thereof, that portion of the Goals Escrow that would otherwise be payable to
the Stockholders in the future upon the achievement of any and all Goals shall
thereupon immediately be paid and distributed to the Stockholders without
further liability or obligation of the Stockholders to TranSwitch or any
Affiliate (defined below) pursuant to this Agreement, subject to the provisions
of this Agreement and the Escrow Agreement.
(a) Neither TranSwitch nor any Affiliate will terminate the employment of
Xxxx Xxxxxxxxx without Cause (defined below).
(b) from and after the Closing, TranSwitch shall (i) permit the Founder to
manage the Horizon Team and any additions thereto through the Year 2002 Release
Date, subject to audit and reasonable supervision by TranSwitch, and (ii) not
lower the Founder's salary as agreed to in connection with this transaction
unless other engineers on the Founder's level with similar responsibility are
subject to a similar or greater salary cut-back.
(c) TranSwitch will offer such commercially reasonable and prudent support
to the Stockholders as is necessary and proper under the economic and
competitive conditions then prevailing in order to give the Stockholders a fair
opportunity to accomplish the Goals, subject to such financial, equipment and
resource restrictions as other engineering departments of TranSwitch will be
subject to from time to time, provided, however that Section 11.5 hereof shall
apply to any unilateral action of TranSwitch that triggers the criteria in
Section 11.5.
(d) If substantially all of the assets of TranSwitch or the applicable
Affiliate are sold or otherwise conveyed to another entity, TranSwitch or the
applicable Affiliate shall assign the obligations in this Article XI to such
entity and such entity shall assume all obligations of TranSwitch or the
applicable Affiliate hereunder.
The sole purpose of the obligations of TranSwitch in the foregoing (a), (b), (c)
and (d) is to give the Stockholders a fair opportunity to meet the Goals in
accordance with the Year 2001 Goals Target and Year 2002 Goals Target. From and
after the Year 2002 Release Date, all of the above obligations shall terminate.
11.8 For purposes of this Article XI, the following terms shall have the
following meanings:
(a) "Affiliate" means with respect to any person or entity means any
other person or entity controlled by, controlling or under common control with
such person or entity, and any director, officer, agent or employee of such
person or such entity. For the purposes hereof, "control" means direct or
indirect ownership of 50% or more of the voting stock or other class of equity
interest in any entity, or the power to elect or appoint a majority of the board
of directors or other governing body of such entity, or the power to otherwise
manage or direct the business affairs of such entity.
-42-
(b) "Cause" means (1) substantial or continuing gross negligence or
willful misconduct by the Stockholder in connection with the performance of the
Stockholder's material duties to TranSwitch or an applicable Affiliate, (2) the
Stockholder's conviction of, or entry of a plea of guilty or nolo contendere
with respect to allegations of, an act of fraud, theft or embezzlement of funds,
properties or assets of TranSwitch or the applicable Affiliate, (3) an
adjudication by a court of competent jurisdiction that the Stockholder committed
an intentional tort relating to the Stockholder's office or employment with
TranSwitch or the applicable Affiliate or of a crime involving moral turpitude
or constituting a felony, which commission has a material adverse effect on the
interests or reputation or condition of TranSwitch or the applicable Affiliate,
(4) material breach by the Stockholder of any written agreement with TranSwitch
or the applicable Affiliate of this Agreement, or (5) willful or continuing
material breach by the Stockholder of any applicable TranSwitch policy of which
such Stockholder had reasonable advance written notice, provided further however
in the case of (1), (4) and (5) above, only if such alleged conduct remains
uncured for thirty (30) days following receipt of written notice thereof by the
Stockholder from TranSwitch or the applicable Affiliate.
(c) "Horizon Team" means the TranSwitch employees under the supervision of
Xxxx Xxxxxxxxx.
ARTICLE XII
TERMINATION
12.1 Mutual Agreement. This Agreement may be terminated at any time prior
----------------
to the Effective Time by the written consent of TranSwitch and Horizon.
12.2 Termination by TranSwitch. This Agreement may be terminated by
-------------------------
TranSwitch (provided that it is not then in material breach of any
representation, warranty, covenant or agreement contained in this Agreement)
alone, by means of written notice to Horizon, if there has been a material
breach by Horizon or the Founder of any representation, warranty, covenant or
agreement set forth in this Agreement or other ancillary agreements, which
breach would result in a failure to satisfy the closing conditions contained in
Section 9.2 and has not been cured within five (5) business days following
receipt by Horizon of notice of such breach.
12.3 Termination by Horizon. This Agreement may be terminated by Horizon
----------------------
(provided that it is not then in material breach of any representation,
warranty, covenant or agreement contained in this Agreement) alone, by means of
written notice to TranSwitch, if there has been a material breach by TranSwitch
of any representation, warranty, covenant or agreement set forth in the
Agreement or other ancillary agreements, which breach would result in a failure
to satisfy the closing conditions contained in Section 9.3 and has not been
cured within five (5) business days following receipt by TranSwitch of notice of
such breach,
12.4 Outside Date. This Agreement may be terminated by TranSwitch alone or
------------
by Horizon alone by means of written notice if the Effective Time does not occur
on or prior to January 31, 2000;
-43-
provided, however, that the right to terminate this Agreement pursuant to the
preceding clause will not be available to any party whose failure to fulfill any
obligation under this Agreement has been a significant cause of, or resulted in,
the failure of the Effective Time to occur on or before such date.
12.5 Effect of Termination. In the event of termination of this Agreement
---------------------
by either Horizon or TranSwitch as provided in this Article, this Agreement will
forthwith become void and have no effect, and there will be no liability or
obligation on the part of TranSwitch, Horizon, Merger Sub, the Stockholders or
their respective officers or directors, except that (i) the provisions of
Sections 8.4, 8.6, 8.7, 12.5 and 13.2 will survive any such termination and
abandonment, and (ii) no party will be released or relieved from any liability
arising from the willful breach by such party prior to termination of any of its
representations, warranties, covenants or agreements as set forth in this
Agreement.
ARTICLE XIII
MISCELLANEOUS
13.1 Entire Agreement. This Agreement, including the exhibits, schedules
----------------
and other agreements incorporated herein by reference or delivered pursuant to
this Agreement contain all of the terms and conditions agreed upon by the
parties relating to the subject matter of this Agreement and supersede all prior
agreements, negotiations, correspondence, undertakings and communications of the
parties, whether oral or written, respecting that subject matter.
13.2 Governing Law; Consent to Jurisdiction. The Merger will be governed
--------------------------------------
by the Virginia SCA to the extent applicable, and all other aspects of this
Agreement will be governed by the internal laws of the State of Connecticut.
Legal proceedings relating to this Agreement, the agreements executed in
connection with this Agreement or the transactions contemplated hereby or
thereby that are commenced against TranSwitch, Merger Sub or the Surviving
Corporation may be commenced only in the state or federal courts in or for
Shelton, Connecticut. Any such legal proceedings that are commenced against
Horizon or against the Founder may be commenced only in the state or federal
courts in or for Shelton, Connecticut. Each of the parties hereby consents to
the exclusive jurisdiction of such courts (and of the appropriate appellate
courts) in any such action or proceeding and waives any objection to venue laid
therein. The foregoing provisions will not be construed to preclude any party
from bringing a counter-claim in any action or proceeding properly commenced in
accordance with the foregoing provisions. Process in any such action or
proceeding may be served on any party anywhere in the world. Notwithstanding
the foregoing, any dispute relating to a claim under the Escrow Agreement will
be resolved in accordance with the arbitration provisions of the Escrow
Agreement.
13.3 Notices. All notices, requests, demands or other communications
-------
which are required or may be given pursuant to the terms of this Agreement will
be in writing and will be deemed to have been duly given: (i) on the date of
delivery if personally delivered by hand, (ii) upon the third day after such
notice is deposited in the United States mail, if mailed by registered or
certified mail, postage prepaid, return receipt requested, (iii) upon the date
scheduled for delivery after such notice is timely sent by a nationally
recognized overnight express courier or (iv) by fax upon written confirmation
-44-
(including the automatic confirmation that is received from the recipient's fax
machine) of receipt by the recipient of such notice:
If to TranSwitch or Merger Sub TranSwitch Corporation
------------------------------
Three Enterprise Drive
Shelton, Connecticut
Attention: Xxxxxxx X. Xxxxxx
Telephone No.: (000) 000-0000
Fax No.: (000) 000-0000
With copies to:
---------------
Xxxxx, Xxxxxxx & Xxxxxxxxx, LLP
000 Xxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxx, Esq.
Telephone No.: (000) 000-0000
Fax No.: (000) 000-0000
If to Horizon: Horizon Semiconductors, Inc.
-------------- 00 Xxxxxxx Xxxx
Xxxxx 0 Xxxx
Xxxxxx Xxxxxx, XX 00000
Attention: Xxxx Xxxxxxxxx
Telephone No.: (000) 000-0000, ext. 201
Fax No.: (000) 000-0000
With a copy to:
---------------
Goulston & Storrs
000 Xxxxxxxx Xxxxxx
Xxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxx, Esq.
Telephone No.: (000) 000-0000
Fax No.: (000) 000-0000
Such addresses may be changed, from time to time, by means of a notice
given in the manner provided in this Section 13.3.
13.4 Severability. If any provision of this Agreement is held to be
------------
unenforceable for any reason, it will be modified rather than voided, if
possible, in order to achieve the intent of the parties to this Agreement to the
extent possible. In any event, all other provisions of this Agreement will be
deemed valid and enforceable to the full extent.
13.5 Survival of Representations, Warranties and Convenants. All
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representations, warranties and covenants contained in this Agreement, including
the exhibits and schedules delivered pursuant to this Agreement, will survive
the Effective Time but shall not survive the termination of this Agreement, but
any claims for breach thereof may only be made within any applicable time limits
specified herein or in the Escrow Agreement.
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13.6 Assignment. No party to this Agreement may assign, by operation of
----------
law or otherwise, all or any portion of its rights, obligations, or liabilities
under this Agreement without the prior written consent of Horizon, Merger Sub
and TranSwitch, which consent may be withheld in the absolute discretion of the
party asked to grant such consent; provided however, that no such assignment
which materially adversely reflects the rights of a Stockholder will be made
without the written consent of such Stockholder. Any attempted assignment by
Merger Sub or TranSwitch, on the one hand, or by Horizon, on the other hand, in
violation of this Section 13.6 will be voidable and will entitle Horizon or
TranSwitch, respectively, to terminate this Agreement at its option.
13.7 Counterparts. This Agreement may be executed in two or more partially
------------
or fully executed counterparts each of which will be deemed an original and will
bind the signatory, but all of which together will constitute but one and the
same instrument. The execution and delivery of a Signature Page to Agreement and
Plan of Reorganization in the form annexed to this Agreement, including a
facsimile copy of the actual signature, by any party hereto who will have been
furnished the final form of this Agreement will constitute the execution and
delivery of this Agreement by such party.
13.8 Amendment. This Agreement may not be amended except by an instrument
---------
in writing executed by Horizon, Merger Sub and TranSwitch; provided however,
that no such amendment which materially adversely affects the rights or
obligations of any Stockholder will be made without the written consent of such
Stockholder.
13.9 Extension, Waiver. At any time prior to the Effective Time, any party
-----------------
hereto may, to the extent legally allowed: (i) extend the time for the
performance of any of the obligations or other acts of any other party hereto to
the party extending such time, (ii) waive any inaccuracies in the
representations and warranties made to such party contained herein or in any
document delivered pursuant hereto, and (iii) waive compliance with any of the
agreements, covenants or conditions for the benefit of such party contained
herein. Any agreement on the part of a party hereto to any such extension or
waiver will be valid only if set forth in an instrument in writing signed on
behalf of such party.
13.10 Interpretation. When a reference is made in this Agreement to
--------------
Sections, Exhibits or Schedules, such reference will be to a Section, Exhibit or
Schedule to this Agreement unless otherwise indicated. The words "include,"
"includes," and "including" when used therein will be deemed in each case to be
followed by the words "without limitation." The table of contents, index to
defined terms, and headings contained in this Agreement are for reference
purposes only and will not affect in any way the meaning or interpretation of
this Agreement.
13.11 Knowledge. For purposes of this Agreement, the term "knowledge"
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(including any derivation thereof such as "know" or "knowing" and regardless of
whether such word starts with an initial capital) in reference to Horizon will
mean the knowledge of the directors and executive officers of Horizon and the
Founder.
13.12 Transfer, Sales, Documentary, Stamp and Other Similar Taxes. Any
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and all transfer, sales, documentary, stamp and other similar Taxes imposed in
connection with the transactions contemplated by this Agreement will be borne by
the Stockholders of Horizon with respect to which
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such Tax relates (or if any such Tax does not relate to particular Stockholders,
then it shall be borne by all of the Stockholders). At TranSwitch's discretion,
the amount paid to any Person pursuant to this Agreement will be reduced by the
amount of Taxes payable by such Person pursuant to this Section 13.12. Any
amounts so withheld will be promptly remitted to the appropriate Governmental
Authority.
(The remainder of this page has been left blank intentionally.)
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Signature Page to
Agreement and Plan of Reorganization
IN WITNESS WHEREOF, TranSwitch, Merger Sub, Horizon and the Stockholders
have executed this Agreement as of the date first written above.
TRANSWITCH HORIZON SEMICONDUCTORS, INC.
By: /s/ Xxxxxx Xxxx By: /s/ Xxxx Xxxxxxxxx
-------------------- ------------------
Title: Vice President Title: President
SEA LEVEL ACQUISITION CORPORATION
By: /s/ Xxxxxx Xxxx
--------------------
Title: Vice President
FOUNDER:
/s/ Xxxx Xxxxxxxxx
-------------------------
Xxxx Xxxxxxxxx
The undersigned Stockholders join this agreement solely with respect to their
rights and obligations under and pursuant to Articles X and XI hereof:
/s/ Xxxxxxx X. Xxxxxxx
-------------------------
Xxxxxxx X. Xxxxxxx
/s/ Xxxxxxx X. Xxxxx
-------------------------
Xxxxxxx X. Xxxxx
/s/ Xxxxxxx X'Xxxxxxxxxx
-------------------------
Xxxxxxx X'Xxxxxxxxxx
/s/ Xxxxxxxx Xxxx
-------------------------
Xxxxxxxx Xxxx
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