CONTRIBUTION AGREEMENT
dated as of November 30, 1999
between
PHOENIX TECHNOLOGIES LTD.
and
INSILICON CORPORATION
TABLE OF CONTENTS
PAGE
ARTICLE I DEFINITIONS................................................................................1
Section 1.1. Definitions...........................................................................1
Section 1.2. Internal References...................................................................5
ARTICLE II CONTRIBUTION OF ASSETS AND ASSUMPTION OF LIABILITIES; ISSUANCE OF INSILICON SHARES.........5
Section 2.1. Contribution of Assets................................................................5
Section 2.2. Assignment and Assumption of Liabilities..............................................6
Section 2.3. Transfers Not Effected On or Prior to the Separation Date.............................7
Section 2.4. No Representations or Warranties; Consents............................................7
Section 2.5. Documents Relating to Transfer of Assets and Assignment and Assumption of
Liabilities.........................................................................8
Section 2.6. Issuance of inSilicon Shares..........................................................8
ARTICLE III REPRESENTATIONS AND WARRANTIES.............................................................9
Section 3.1. Representations and Warranties of inSilicon...........................................9
Section 3.2. Representations and Warranties of Phoenix; Legends....................................9
ARTICLE IV RIGHT OF FIRST OFFER......................................................................10
Section 4.1. Grant of Right of First Offer........................................................10
Section 4.2. Terms of Offer and Purchase..........................................................10
ARTICLE V BRIDGE LOAN...............................................................................11
Section 5.1. Request for Advance..................................................................11
Section 5.2. Advances by inSilicon................................................................11
Section 5.3. Interest.............................................................................11
Section 5.4. Repayment............................................................................11
ARTICLE VI MISCELLANEOUS.............................................................................11
Section 6.1. Expenses.............................................................................11
Section 6.2. Notices..............................................................................12
Section 6.3. Amendment and Waiver.................................................................12
Section 6.4. Counterparts.........................................................................12
Section 6.5. Governing Law........................................................................12
Section 6.6. Entire Agreement.....................................................................12
Section 6.7. Parties in Interest..................................................................12
Section 6.8. Exhibits and Schedules...............................................................13
TABLE OF CONTENTS
(CONTINUED)
PAGE
Section 6.9. Legal Enforceability.................................................................13
Section 6.10. Covenants of inSilicon...............................................................13
Section 6.11. Titles and Headings..................................................................14
Section 6.12. Conflicting Agreements...............................................................14
Section 6.13. Disputes.............................................................................14
Section 6.14. Adjustments for Stock Splits and Recapitalizations...................................14
SCHEDULE 1.1(a) INSILICON CONTRACTS..............................................................................1
SCHEDULE 2.1(f) EQUIPMENT AND OTHER ASSETS.......................................................................1
SCHEDULE 2.1(g) INTELLECTUAL PROPERTY............................................................................1
SCHEDULE 2.1(j) INDUSTRY ASSOCIATIONS............................................................................1
SCHEDULE 2.4(a) SPECIFIED INTELLECTUAL PROPERTY..................................................................1
CONTRIBUTION AGREEMENT
This Contribution Agreement (this "Agreement") is entered into
effective as of November 30, 1999 by and between Phoenix Technologies Ltd., a
Delaware corporation ("Phoenix"), and inSilicon Corporation, a Delaware
corporation and a wholly owned subsidiary of Phoenix ("inSilicon").
RECITALS
WHEREAS, the Board of Directors of Phoenix has determined that it is
in the best interests of Phoenix and inSilicon to separate the Business from
Phoenix's other operations; and
WHEREAS, in furtherance of the foregoing, it is appropriate and
desirable to transfer the Semiconductor Intellectual Property Assets to
inSilicon and to cause inSilicon to assume the Semiconductor Intellectual
Property Liabilities, all as more fully described in this Agreement (such
transfer of assets and assumption of liabilities are hereinafter referred to
as the "Separation");
WHEREAS, it is appropriate and desirable to set forth the principal
corporate transactions required to effect the Separation.
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual agreements, provisions and covenants contained in this Agreement, the
parties hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1. DEFINITIONS. As used in this Agreement, the following
terms have the following meanings:
"ACTION" means any claim, suit, arbitration, inquiry, proceeding or
investigation by or before any court, governmental or regulatory or
administrative agency or commission or any other tribunal or other
Governmental Authority.
"AFFILIATE" of any specified Person means any other Person that,
directly or indirectly, controls, is controlled by or is under common control
with such specified Person.
"AGREEMENT" has the meaning set forth in the preamble hereof, as
such agreement may be amended and supplemented from time to time in
accordance with its terms.
"ANCILLARY AGREEMENTS" means the IPO Agreement and the Services and
Cost-Sharing Agreement and each of the following agreements between Phoenix
and inSilicon dated as of November 30, 1999, as the same may be amended from
time to time: the Tax-Sharing Agreement, the Employee Matters Agreement and
the Registration Rights Agreement and Technology Distributor Agreement.
"BUSINESS" means the business and operations of Phoenix engaged in
the development and licensing of semiconductor intellectual property cores,
silicon subsystems, firmware stacks and drivers and test environments,
simulation models and verification systems related thereto, as well as
service, maintenance and customizations of same.
"COMMON STOCK" means the common stock, par value $0.001 per share,
of inSilicon.
"CONSENTS" means any consents, waivers or approvals from, or
notification requirements to, any third parties.
"CONTRACTS" means any contract, agreement, lease, license, sales
order, purchase order, instrument or other commitment that is binding on any
Person or any part of its property under applicable law.
"GAAP" shall have the meaning set forth in Section 6.10(a).
"GOVERNMENTAL AUTHORITY" means any federal, state, local, foreign
or international court, government, department, commission, board, bureau,
agency, official or other regulatory, administrative or governmental
authority.
"INSILICON" has the meaning set forth in the preamble of this
Agreement.
"INSILICON BALANCE SHEET" means the audited balance sheet of
inSilicon, including the notes thereto, as of September 30, 1999.
"INSILICON CAPITAL STOCK" means any shares of or securities
convertible into or exercisable for any shares of any class of capital stock
of inSilicon.
"INSILICON CONTRACTS" means the following Contracts related to the
Business to which Phoenix or any of its Affiliates is a party or by which it
or any of its Affiliates or their respective assets is bound, whether or not
in writing, including but not limited to:
(a) all Contracts listed or described on Schedule 1.1(a);
(b) any Contracts entered into in the name of, or expressly on
behalf of, inSilicon (including its former names, RaviCad, Virtual Chips,
Sand, Award (as related to the IFG group of Award), and semiconductor IP
Group); and
(c) any guarantee, indemnity, representation, warranty or other
Liability of inSilicon or Phoenix in respect of any other inSilicon Contract,
any Semiconductor Intellectual Property Liability or the Business.
"INTELLECTUAL PROPERTY" means (a) inventions, whether or not
patentable, whether or not reduced to practice or whether or not yet made the
subject of a pending patent application or applications or draft applications
(b) ideas and conceptions of potentially patentable subject matter,
including, without limitation, any patent disclosures invention disclosures,
whether or not reduced to practice and whether or not yet made the subject of
a pending patent application or applications, (c) national (including the
United States) and multinational statutory invention
2
registrations, patents, patent registrations and patent applications
(including all reissues, divisions, continuations, continuations-in-part,
extensions and reexaminations and all patents issuing thereon) and all rights
therein provided by multinational treaties or conventions and all
improvements to the inventions disclosed in each such registration, patent or
application, (d) trademarks, service marks, trade dress, logos, trade names
domain names, web addresses and corporate names, whether or not registered,
including all common law rights, and registrations and applications for
registration thereof, including, but not limited to, all marks registered in
the United States Patent and Trademark Office, the Trademark Offices of the
States and Territories of the United States of America, and the Trademark
offices of other nations throughout the world, and all rights therein
provided by multinational treaties or conventions, (e) copyrights (registered
existing commerce or otherwise) and registrations and applications for
registration thereof, and all rights therein provided by multinational
treaties or conventions, (f) moral rights (including, without limitation,
rights of paternity and integrity), and waivers of such rights by others, (g)
computer software, including, without limitation, source code, object code,
programming notes, operating systems and specifications, data, data bases,
files, documentation and other materials related thereto, data and
documentation, (h) trade secrets and confidential, technical or business
information (including ideas, formulas, systems, methodologies, compositions,
inventions, and conceptions of inventions whether patentable or unpatentable
and whether or not reduced to practice), (i) whether or not confidential,
technology (including know-how and show-how), manufacturing, production,
design and verification processes and techniques, research and development
information, drawings, specifications, designs, plans, proposals, technical
data, copyrightable works, financial, marketing and business data, pricing
and cost information, business and marketing plans and customer and supplier
lists and information, (j) copies and tangible embodiments of all the
foregoing, in whatever form or medium, (k) all rights to obtain and rights to
apply for patents, and to register trademarks and copyrights, and all other
intelectual property rights anywhere in the world, and (l) all rights to xxx
and recover and retain damages and costs and attorneys' fees for present and
past infringement of any of the Intellectual Property rights hereinabove set
out.
"IPO AGREEMENT" means that certain Initial Public Offering Agreement
between inSilicon and Phoenix dated as of November 30, 1999, as the same may
be amended from time to time.
"IPO DATE" means the date of the closing of the first qualified IPO.
"LIABILITIES" means any and all claims, charges, debts, demands,
Actions, causes of Action, suits, damages, obligations, payments, costs and
expenses, accounts, bonds, indemnities and similar obligations, covenants,
Contracts, agreements, promises, guarantees and other liabilities, including
all contractual obligations, whether absolute or contingent, matured or not
matured, liquidated or unliquidated, accrued or not accrued, known or
unknown, whenever arising, and including those arising under any law, rule,
regulation, Action, threatened or contemplated Action (including the costs
and expenses of demands, assessments, judgments, settlements and compromises
relating thereto), order or consent decree of any Governmental Authority or
any award of any arbitrator or mediator of any kind, and those arising under
any contract, commitment or undertaking, including those arising under this
Agreement, whether or not recorded or reflected or required to be recorded or
reflected on the books and records or financial statements of any Person.
3
"NOTICE" has the meaning set forth in Section 4.2.
"PERSON" means an individual, a general or limited partnership, a
corporation, a trust, a joint venture, an unincorporated organization, a
limited liability company, any other entity and any Governmental Authority.
"PHOENIX" has the meaning set forth in the preamble of this
Agreement.
"PHOENIX GROUP" means Phoenix and each Person (other than inSilicon
and its subsidiaries) that is an Affiliate of Phoenix immediately after the
Separation Date.
"QUALIFIED IPO" means a firm commitment underwritten public
offering by inSilicon of shares of its Common Stock pursuant to a
registration statement under the Securities Act, the public offering price of
which is not less than $7.50 per share (appropriately adjusted for any stock
split, dividend, combination or other recapitalization after the date hereof
and which results in aggregate cash proceeds to inSilicon of $10 million.
"SECURITIES" means the Series A Preferred Stock, the Warrant and
the Common Stock issuable upon conversion or exercise thereof.
"SECURITIES ACT" means the Securities Act of 1933, as amended, or
any successor statute.
"SEMICONDUCTOR INTELLECTUAL PROPERTY ASSETS" has the meaning set
forth in Section 2.1(a).
"SEMICONDUCTOR INTELLECTUAL PROPERTY LIABILITIES" has the meaning
set forth in Section 2.2.
"SEPARATION" has the meaning specified in the second recital of this
Agreement.
"SEPARATION DATE" means November 30, 1999.
"SERIES A PREFERRED STOCK" means the Series Preferred Stock, par
value $.001 per share, of inSilicon.
"SERVICES AND COST-SHARING AGREEMENT" means that certain Services
and Cost-Sharing Agreement between inSilicon and Phoenix dated as of November
30, 1999, as the same may be amended from time to time.
"SHORTFALL AMOUNT" has the meaning set forth in Section 5.1.
"SHORTFALL REQUEST" has the meaning set forth in Section 5.1.
"WARRANT" means the warrant to purchase shares of Common Stock in
the form set forth on Exhibit A.
Unless otherwise specified, any reference to any "subsidiary" or
"subsidiaries" of Phoenix shall not include inSilicon.
4
Section 1.2. INTERNAL REFERENCES. Unless the context indicates
otherwise, references to Articles, Sections and paragraphs shall refer to the
corresponding articles, sections and paragraphs in this Agreement and
references to the parties shall mean the parties to this Agreement.
ARTICLE II
CONTRIBUTION OF ASSETS AND
ASSUMPTION OF LIABILITIES; ISSUANCE OF INSILICON SHARES
Section 2.1. CONTRIBUTION OF ASSETS. Phoenix hereby assigns,
transfers, conveys and delivers to inSilicon as of the Separation Date, and
agrees to cause each of its subsidiaries to assign, transfer, convey and
deliver to inSilicon as of the Separation Date, and inSilicon hereby accepts
from Phoenix and such subsidiaries as of the Separation Date, all of
Phoenix's and such subsidiaries' respective right, title and interest in or
under the following assets primarily related to the Business (the
"Semiconductor Intellectual Property Assets"):
(a) all assets reflected in the inSilicon Balance Sheet as
"Assets" of inSilicon, subject to any dispositions of such assets after the
date of the inSilicon Balance Sheet;
(b) all assets that have been written off, expensed or fully
depreciated that, had they not been written off, expensed or fully
depreciated, would have been reflected in the inSilicon Balance Sheet in
accordance with the principles and accounting policies under which the
inSilicon Balance Sheet was prepared; and
(c) all assets acquired by Phoenix or its subsidiaries after
the date of the inSilicon Balance Sheet that would have been reflected in the
consolidated balance sheet of inSilicon as of the Separation Date if such
consolidated balance sheet was prepared using the same principles and
accounting policies under which the inSilicon Balance Sheet was prepared; and
(d) all assets that are used primarily by the Business at the
Separation Date but are not reflected in the inSilicon Balance Sheet due to
mistake or unintentional omission; PROVIDED, HOWEVER, that no such asset
shall be a Semiconductor Intellectual Property Asset unless inSilicon has, on
or before the first anniversary of the IPO Date, given notice that such asset
is a Semiconductor Intellectual Property Asset and thereafter cooperate for
transfer of those assets agreed to as being assets related to the Business;
(e) the inSilicon Contracts;
(f) the equipment and other assets used primarily by employees
of Phoenix that will become employees of inSilicon in connection with the
Separation, a list of which is set forth in Schedule 2.1(f).
(g) the Intellectual Property set forth on Schedule 2.1(g);
(h) the right to use all corporate documentation, license
agreements and forms necessary to conduct the Business that are owned by
Phoenix on the date hereof ;
5
(i) Services and costs to inSilicon under the Services and
Cost-Sharing Agreement for the month of December 1999 equal to the lesser of
the amount that would otherwise be due and payable thereunder and $550,000;
and
(j) Phoenix's membership's in the industry associations listed
on Schedule 2.1(j).
Section 2.2. ASSIGNMENT AND ASSUMPTION OF LIABILITIES. inSilicon
hereby assumes and agrees as of the Separation Date faithfully to pay,
perform and fulfill all obligations under the following in accordance with
their respective terms (the "SEMICONDUCTOR INTELLECTUAL PROPERTY
LIABILITIES"):
(a) all Liabilities reflected as "Liabilities" or obligations
of inSilicon in the inSilicon Balance Sheet, subject to any discharge of such
Liabilities after the date of the inSilicon Balance Sheet.
(b) all Liabilities of Phoenix or its subsidiaries that arise
after the date of the inSilicon Balance Sheet that would be reflected in the
consolidated balance sheet of inSilicon as of the Separation Date if such
consolidated balance sheet was prepared using the same principles and
accounting policies under which the inSilicon Balance Sheet was prepared;
(c) all Liabilities that are related primarily to the Business
at the Separation Date but are not reflected in the inSilicon Balance Sheet
due to mistake or unintentional omission; PROVIDED, HOWEVER, that no such
Liability shall be a Semiconductor Intellectual Property Liability unless
Phoenix, on or before the first anniversary of the IPO Date, has given
inSilicon notice that such Liability is a Semiconductor Intellectual Property
Liability;
(d) except as may be explicitly provided in an Ancillary
Agreement, all Liabilities whether arising before, on or after the Separation
Date, primarily related to, arising out of or resulting from:
(i) the operation of the Business, as conducted at any
time prior to, on or after the Separation Date (including any
Liability relating to, arising out of or resulting from any act or
failure to act by any director, officer, employee, agent or
representative (whether or not such act or failure to act is or
was within such Person's authority));
(ii) the operation of any business conducted directly or
indirectly by inSilicon at any time after the Separation Date
(including any Liability relating to, arising out of or resulting from
any act or failure to act by any director, officer, employee, agent or
representative (whether or not such act or failure to act is or was
within such Person's authority));
(iii) the Semiconductor Intellectual Property Assets; or
(iv) the acquisition of Sand Microelectronics, Inc.,
including, but not limited to those related to, arising out of or
resulting from the Agreement and Plan of Reorganization dated as of
September 17, 1998 by and among Phoenix Technologies Ltd., Phoenix
SubCorp., Sand Microelectronics Inc. and Xxxx Xxxxxxxxx, Xxxxx Xxxxx
6
and Xxxx Xxxxx, the agreements referred to therein and the retention
bonus program established in connection therewith.
Section 2.3. TRANSFERS NOT EFFECTED ON OR PRIOR TO THE SEPARATION
DATE. To the extent any transfers contemplated by this Article II shall not
have been fully effected on or before the Separation Date, Phoenix and
inSilicon shall cooperate to effect such transfers as promptly as possible
following the Separation Date. Nothing herein shall be deemed to require the
transfer of any assets or the assignment or assumption of any Liabilities
that by their terms or by operation of law cannot be so transferred, assigned
or assumed; PROVIDED, HOWEVER, that any such asset shall be deemed a
Semiconductor Intellectual Property Asset for purposes of determining whether
any Liability is a inSilicon Liability or any benefit received related to the
Business and should be held for the benefit of inSilicon; and PROVIDED,
FURTHER, that Phoenix and inSilicon and their respective Affiliates shall
cooperate in seeking to obtain any necessary Consents for the transfer of all
assets and the assignment or assumption of all Liabilities as contemplated by
this Article II. In the event that any transfer of assets or assignment or
assumption of Liabilities contemplated by this Article II has not been
consummated effective as of the Separation Date, (a) the party retaining such
assets shall thereafter hold such assets in trust for the use and benefit of
the party entitled thereto (at the expense of the party entitled thereto);
and (b) the party retaining such Liabilities shall thereafter hold such
Liabilities for the account of the party assuming such Liability or to whom
such Liability is to be assigned pursuant hereto (at the expense of the party
assuming such Liability or to whom such Liability is to be assigned), and in
each such case shall take such other actions as it may be commercially
reasonable for the Person to whom such asset is to be transferred to request
in order to place such Person, insofar as reasonably possible, in the same
position as if such asset had been transferred as contemplated hereby and so
that all the benefits and burdens relating to such Semiconductor Intellectual
Property Assets (or such Non-Semiconductor Intellectual Property Assets, as
the case may be), including possession, use, revenue, risk of loss, potential
for gain, and dominion, control and command over such assets, are to inure
from and after the Separation Date to inSilicon (or the Phoenix Group, as the
case may be). As and when any such asset or Liability becomes transferable,
assignable or assumable, as the case may be, such transfer, assignment or
assumption, as the case may be, shall be effected forthwith. Phoenix and
inSilicon agree that, as of the Separation Date, each party hereto shall be
deemed to have acquired complete and sole beneficial ownership over all of
the assets, together with all of the rights, powers and privileges incidental
thereto, that such party is entitled to acquire pursuant to the terms of this
Agreement.
Section 2.4. NO REPRESENTATIONS OR WARRANTIES; CONSENTS. (a) Each of
the parties hereto understands and agrees that no party hereto is, in this
Agreement representing or warranting in any way as to the value or freedom
from encumbrance of, or any other matter concerning, any assets of such
party, or as to the legal sufficiency to convey title to an asset transferred
pursuant to this Agreement, including, without limitation, any conveyancing
or assumption instruments. It is also agreed and understood that there are no
warranties whatsoever, express or implied, given by either party to this
Agreement, as to the condition, quality, merchantability or fitness of any of
the assets, businesses or other rights transferred or retained by the
parties, as the case may be, and all such assets, businesses and other rights
shall be "as is, where is" and "with all faults" (provided that the absence
of warranties given by the parties shall not negate the allocation of
Liabilities under this Agreement and shall have no effect on any
manufacturers, sellers, or other third party warranties that are intended to
be transferred
7
with such assets), and inSilicon shall bear the economic and legal risks that
any conveyance shall prove to be insufficient to vest in it good and
marketable title, free and clear of any security interest, pledge, lien,
charge, claim, option, right to acquire, covenant, condition, restriction on
transfer or other encumbrance of any nature whatsoever. Notwithstanding the
foregoing, Phoenix represents and warrants to inSilicon that it has good and
marketable title to the Intellectual Property listed on Schedule 2.4(a).
(b) Each party hereto understands and agrees that no party
hereto is, in this Agreement or any other agreement or document contemplated
by this Agreement or otherwise, representing or warranting in any way that
the obtaining of any Consents, the execution and delivery of any amendatory
agreements and the taking of any filings or applications contemplated by this
Agreement will satisfy the provisions of any or all applicable laws or
judgments or other instruments or agreements relating to such assets.
Notwithstanding the foregoing, the parties shall use commercially
reasonable efforts in the United States (and best efforts in jurisdictions
outside the United States) to obtain all Consents (including such Consents as
may be required by any Governmental Authority). The parties shall also use
commercially reasonable efforts to make all filings and applications
contemplated by this Agreement, and shall take all such further actions as
shall be deemed reasonably necessary to preserve for each of Phoenix and
inSilicon, to the greatest extent reasonably feasible, consistent with this
Agreement, the economic and operational benefits of the allocation of assets
and liabilities provided for in this Agreement.
Section 2.5. DOCUMENTS RELATING TO TRANSFER OF ASSETS AND ASSIGNMENT
AND ASSUMPTION OF LIABILITIES. In connection with the transfer of the
Semiconductor Intellectual Property Assets pursuant to Section 2.1 of this
Agreement and the assignment and assumption of the Semiconductor Intellectual
Property Liabilities pursuant to Section 2.2 of this Agreement,
simultaneously with the execution and delivery hereof or as promptly as
practicable thereafter, (a) Phoenix shall execute and deliver such bills of
sale, deeds, stock powers, certificates of title, assignments of Contracts
and other instruments or transfer, conveyance and assignment as and to the
extent necessary to evidence the transfer, conveyance and assignment of all
of Phoenix's right, title and interest in and to the Semiconductor
Intellectual Property Assets to inSilicon and (b) inSilicon shall execute and
deliver to Phoenix such bills of sale, certificates of title, assumptions of
Contracts and other instruments or assumption as may be necessary to evidence
the valid and effective assumption of the Semiconductor Intellectual Property
Liabilities by inSilicon.
Section 2.6. ISSUANCE OF INSILICON SHARES. As of the Separation
Date, in consideration of the transfer of the Semiconductor Intellectual
Property Assets, inSilicon shall, in addition to assuming the Semiconductor
Intellectual Property Liabilities, issue and deliver to Phoenix 10,400,000
shares of Series A Preferred Stock and the Warrant.
8
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.1. REPRESENTATIONS AND WARRANTIES OF INSILICON. inSilicon
hereby represents and warrants to Phoenix that:
(a) The Series A Preferred Stock that is being issued to
Phoenix in connection with this Agreement will be duly and validly issued,
fully paid and nonassessable and free of restrictions on transfer other than
restrictions on transfer under applicable federal and state securities laws.
(b) The Warrant will be a valid and binding obligation of
inSilicon enforceable against inSilicon in accordance with its terms and free
of restrictions on transfer other than restrictions under applicable federal
and state securities laws.
(c) The Series A Preferred Stock and the Warrant will be issued
in compliance with all applicable federal and state securities laws.
(d) The Common Stock issuable upon conversion of the Series A
Preferred Stock and exercise of the Warrant has been duly and validly
reserved for issuance, and upon issuance in accordance with the terms of the
Amended and Restated Certificate of Incorporation of inSilicon, will be duly
and validly issued, fully paid and nonassessable and free of restrictions on
transfer other than restrictions on transfer under applicable federal and
state securities laws and will be issued in compliance with all applicable
federal and state securities laws.
Section 3.2. REPRESENTATIONS AND WARRANTIES OF PHOENIX; LEGENDS. (a)
Phoenix hereby represents and warrants to inSilicon that:
(i) The Securities to be acquired by Phoenix will be
acquired for investment for Phoenix's own account, and not with a
view to the resale or distribution of any part thereof, and that
Phoenix has no present intention of selling, granting any
participation in, or otherwise distributing the same in a manner
contrary to applicable laws.
(ii) The Securities have not been registered under the
Securities Act, by reason of a specific exemption from the
registration provisions of the Securities Act which depends upon,
among other things, the bona fide nature of the investment intent
and the accuracy of Phoenix's representations as expressed herein.
Phoenix understands that the Securities are "restricted securities"
under applicable U.S. federal and state securities laws and that,
pursuant to these laws, Phoenix must hold the Securities indefinitely
unless they are registered with the Securities and Exchange
Commission and qualified by state authorities, or an exemption from
such registration and qualification requirements is available.
(b) LEGENDS. Phoenix understands that the Securities and any
securities issued in respect of or exchange for the Securities, may bear one
or all of the following legends:
9
(i) "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND HAVE
BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN
CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE
OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION
STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN A FORM
SATISFACTORY TO INSILICON THAT SUCH REGISTRATION IS NOT REQUIRED
UNDER THE SECURITIES ACT OF 1933."
(ii) Any legend required by the Blue Sky laws of any
state to the extent such laws are applicable to the shares
represented by the certificate so legended.
ARTICLE IV
RIGHT OF FIRST OFFER
Section 4.1. GRANT OF RIGHT OF FIRST OFFER. Subject to the terms and
conditions specified in this Article IV, inSilicon hereby grants to Phoenix a
right of first offer with respect to future sales by inSilicon of inSilicon
Capital Stock. As long as Phoenix owns 50,000 shares of Series A Preferred
Stock (or the Common Stock issued upon conversion thereof) Phoenix may
designate as purchasers under such right itself or its Affiliates in such
proportions as it deems appropriate.
Section 4.2. TERMS OF OFFER AND PURCHASE. Each time inSilicon
proposes to offer any shares of inSilicon Capital Stock, inSilicon shall
first make an offering of such inSilicon Capital Stock to Phoenix in
accordance with the following provisions:
(a) inSilicon shall deliver a notice (the "Notice") to Phoenix
stating (i) its bona fide intention to offer such inSilicon Capital Stock,
(ii) the number of shares of such inSilicon Capital Stock to be offered, and
(iii) the price and terms, if any, upon which it proposes to offer such
inSilicon Capital Stock.
(b) Within fifteen (15) calendar days after delivery of the
Notice, Phoenix may elect to purchase or obtain, at the price and on the
terms specified in the Notice, up to that portion of such inSilicon Capital
Stock which equals the proportion that the number of shares of Common Stock
issued and held, or issuable upon conversion and exercise of all convertible
or exercisable securities then held, by Phoenix bears to the total number of
shares of Common Stock then outstanding (assuming full conversion and
exercise of all options, warrants and convertible or exercisable securities).
Such purchase shall be completed at the same closing as that of any third
party purchasers or at an additional closing thereunder.
(c) inSilicon may, during the forty five (45)-day period
following the expiration of the period provided in Section 4.2(b) hereof,
offer the remaining unsubscribed portion of the inSilicon Capital Stock to
any Person or Persons at a price not less than, and upon terms no more
favorable to the offeree than those specified in the Notice. If inSilicon
does not enter into a Memorandum of Understanding ("MOU") for the sale of the
inSilicon Capital Stock within such period, or if such agreement is not
consummated within sixty (60) days following the execution
10
of the MOU, the right provided hereunder shall be deemed to be revived and
such Stock shall not be offered unless first reoffered to Phoenix in
accordance herewith.
(d) The right of first offer in this Article IV shall not be
applicable (i) to the issuance or sale of 2,700,000 shares of Common Stock
(or options therefor) to employees, consultants or directors pursuant to the
1999 Employee Stock Option Plan approved by the Board of Directors; (ii) to
the issuance of securities in connection with a bona fide business
acquisition of or by inSilicon, whether by merger, consolidation, sale of
assets, sale or exchange of stock or otherwise; (iii) to the issuance of
securities to financial institutions or lessors in connection with commercial
credit arrangements, equipment financings, or similar transactions; (iv) to
the shares issued upon the conversion of the Series A Preferred Stock; (v) to
the securities issued pursuant to or after consummation of a Qualified IPO;
(vi) to the issuance of securities pursuant to the Warrant; or (vii) to
securities issued pursuant to stock splits, stock dividends or similar
transactions.
ARTICLE V
BRIDGE LOAN
Section 5.1. REQUEST FOR ADVANCE. If from time to time prior to a
Qualified IPO, the Liabilities of inSilicon then due and payable shall exceed
its cash and cash equivalents (as determined under GAAP), inSilicon may
require Phoenix to provide to inSilicon up to an amount of cash equal to the
amount by which such Liabilities exceed such cash and cash equivalents (a
"Shortfall Amount") by delivering a request therefor to Phoenix (a "Shortfall
Request").
Section 5.2. ADVANCES BY INSILICON. Within two (2) business days
after delivery of a Shortfall Request, Phoenix shall deposit or cause to be
deposited into an account designated by inSilicon the Shortfall Amount set
forth in the Shortfall Request in immediately available funds.
Section 5.3. INTEREST. Amounts advanced by Phoenix under Section 5.2
shall bear interest at the rate of 8% per annum, computed from the date of
deposit in the applicable inSilicon account to the date of repayment to
Phoenix.
Section 5.4. REPAYMENT. The principal amounts advanced by Phoenix
under Section 5.2 and/or interest thereon under Section 5.3 may be paid by
inSilicon to Phoenix at any time and from time to time, in whole or in part;
PROVIDED, THAT, all principal and interest that remains outstanding as of the
date of the closing of a Qualified IPO shall become due and payable to
Phoenix concurrent with the closing of the Qualified IPO.
ARTICLE VI
MISCELLANEOUS
Section 6.1. EXPENSES. All costs and expenses of third parties
incurred by Phoenix and all costs and expenses incurred by inSilicon in
connection with the interpretation, execution,
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delivery and implementation of this Agreement and with the consummation of
the transactions contemplated by this Agreement shall be paid by inSilicon.
Section 6.2. NOTICES. All notices and communications under this
Agreement shall be in writing and any communication or delivery hereunder
shall be deemed to have been duly given when received addressed as follows:
If to Phoenix, to:
000 Xxxx Xxxxxxxx Xxxxx
Xxx Xxxx, XX 00000
Attn: General Counsel
If to inSilicon, to:
000 Xxxx Xxxxxxxx Xxxxx
Xxx Xxxx, XX 00000
Attn: General Counsel
Any party may, by written notice so delivered to the other party,
change the address to which delivery of any notice shall thereafter be made.
Section 6.3. AMENDMENT AND WAIVER. This Agreement may not be altered
or amended, nor may rights hereunder be waived, except by an instrument in
writing executed by the party or parties to be charged with such amendment or
waiver. No waiver of any terms, provision or condition of or failure to
exercise or delay in exercising any rights or remedies under this Agreement,
in any one or more instances shall be deemed to be, or construed as, a
further or continuing waiver of any such term, provision, condition, right or
remedy or as a waiver of any other term, provision or condition of this
Agreement. Notwithstanding the foregoing, this Agreement may not be altered
or amended, nor may rights hereunder be waived by inSilicon after the closing
of a Qualified IPO without the affirmative vote or written consent of a
majority of the directors of inSilicon who are not Affiliates of Phoenix.
Section 6.4. COUNTERPARTS. This Agreement may be executed in
counterparts each of which shall be deemed an original instrument, but all of
which together shall constitute but one and the same Agreement.
Section 6.5. GOVERNING LAW. This Agreement shall be construed in
accordance with, and governed by, the laws of the State of California,
without regard to the conflicts of law rules of such state.
Section 6.6. ENTIRE AGREEMENT. This Agreement including the
schedules and the other agreements referenced specifically in this Agreement
constitute the entire understanding of the parties with respect to the
subject matter of this Agreement, superseding all negotiations, prior
discussions and prior agreements and understandings relating to such subject
matter.
Section 6.7. PARTIES IN INTEREST. Neither of the parties hereto may
assign its rights or delegate any of its duties under this Agreement without
the prior written consent of each other
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party which shall not be unreasonably withheld. This Agreement shall be
binding upon, and shall inure to the benefit of, the parties hereto and their
respective successors and permitted assigns. Nothing contained in this
Agreement, express or implied, is intended to confer any benefits, rights or
remedies upon any Person other than Phoenix and inSilicon.
Section 6.8. EXHIBITS AND SCHEDULES. The Exhibits and Schedules
shall be construed with and as an integral part of this Agreement to the same
extent as if the same had been set forth verbatim herein.
Section 6.9. LEGAL ENFORCEABILITY. Any provision of this Agreement
which is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof. Any
such prohibition or unenforceability in any jurisdiction shall not invalidate
or render unenforceable such provision in any other jurisdiction. Without
prejudice to any rights or remedies otherwise available to any party hereto,
each party hereto acknowledges that damages would be an inadequate remedy for
any breach of the provisions of this Agreement and agrees that the
obligations of the parties hereunder shall be specifically enforceable.
Section 6.10. COVENANTS OF INSILICON. For as long as Phoenix owns
50,000 shares of Series A Preferred Stock (or shares of Common Stock onto
which such Series A Preferred Stock is converted) but not after the date of a
Qualified IPO, inSilicon shall deliver to Phoenix:
(a) as soon as practicable, but in any event within ninety (90)
days after the end of each fiscal year of inSilicon, an income statement for
such fiscal year, a balance sheet of inSilicon and statement of stockholder's
equity as of the end of such year, and a statement of cash flows for such
year, such year-end financial reports to be in reasonable detail, prepared in
accordance with generally accepted accounting principles ("GAAP"), and
audited and certified by an independent public accounting firm of nationally
recognized standing selected by inSilicon;
(b) within thirty (30) days of the end of each month and each
quarter, an unaudited income statement and a statement of cash flows and
balance sheet for and as of the end of such quarter or month, as the case may
be, in reasonable detail;
(c) as soon as practicable, but in any event thirty (30) days
prior to the end of each fiscal year, a budget and business plan for the next
fiscal year, prepared on a monthly basis, and, as soon as prepared, any other
budgets or revised budgets prepared by inSilicon; and
(d) with respect to the financial statements called for in
subsection (b), an instrument executed by the Chief Financial Officer or
President of the Corporation and certifying that such financials were
prepared in accordance with GAAP consistently applied with prior practice for
earlier periods (with the exception of footnotes that may be required by
GAAP) and fairly present the financial condition of inSilicon and its results
of operation for the period specified, subject to year-end audit adjustment,
provided that the foregoing shall not restrict the right of inSilicon to
change its accounting principles consistent with GAAP, if the Board of
Directors determines that it is in the best interest of inSilicon to do so.
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Section 6.11. TITLES AND HEADINGS. Titles and headings to Sections
herein are inserted for convenience of reference only and are not intended to
be a part of or to affect the meaning or interpretation of this Agreement.
Section 6.12. CONFLICTING AGREEMENTS. In the event of conflict
between this Agreement and any Ancillary Agreement executed in connection
herewith, the provisions of the Ancillary Agreement and shall prevail.
Section 6.13. DISPUTES. All disputes arising out of, related to or
resulting from this Agreement, including the interpretation hereof shall be
resolved in accordance with the procedures set forth in the IPO Agreement.
Section 6.14. ADJUSTMENTS FOR STOCK SPLITS AND RECAPITALIZATIONS.
Notwithstanding the other provisions of this Agreement, all references to
numbers of shares of the Common Stock and Series A Preferred Stock provided
in Article IV and Section 6.10 shall be deemed automatically amended to give
effect to any stock split, stock dividend recapitalization or similar
transactions that occur after the issuance of the Series A Preferred Stock
and the Warrant.
IN WITNESS WHEREOF, the parties hereto have duly executed and
delivered this Agreement as of the date first above written.
PHOENIX TECHNOLOGIES LTD.
By: /s/ Xxxxx Xxxxx
------------------------------------
Name: Xxxxx X. Xxxxx
Title: VP, General Counsel & Secretary
INSILICON CORPORATION
By: /s/ Xxxxx X. Power
------------------------------------
Name: Xxxxx X. Power
Title: Vice President, General Counsel
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