SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 or 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) - June 3, 2002
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STANDARD MICROSYSTEMS CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 11-2234952
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
80 Arkay Drive, Hauppauge, New York 11788
(Address of principal executive offices) (Zip Code)
(631) 435-6000
(Registrant's telephone number, including area code)
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Item 5. Other Events
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On June 4, 2002, Standard Microsystems Corporation (SMSC) announced
the June 3, 2002 completion of its acquisition of Gain Technology Corporation
(Gain). Based in Tucson, Arizona, Gain is engaged in the development and supply
of high-speed, high-performance analog and mixed-signal communications
integrated circuits and proprietary intellectual property cores.
SMSC acquired all of Gain's outstanding capital stock by merger in
exchange for approximately 749,000 shares of SMSC common stock, valued at $17.9
million, and $17.0 million of cash, the source of which was SMSC's cash
balances. Under the terms of the Merger Agreement, approximately 224,000 of the
shares will be held in an escrow account as security for certain indemnity
obligations of Gain's former shareholders. Up to $17.5 million of additional
consideration, payable in SMSC common stock and cash, may be issued to Gain's
former shareholders during SMSC's fiscal 2004 upon satisfaction of certain
future performance goals. The amount of consideration was determined by arms
length bargaining.
The Agreement and Plan of Merger dated April 29, 2002 by and among
SMSC, SMSC Sub, Inc., a wholly-owned subsidiary of SMSC, and Gain, and the press
release dated June 4, 2002, are attached as Exhibit 2.1 and Exhibit 99.1,
respectively, to this Form 8-K, and are incorporated herein by reference.
Item 7. Financial Statements and Exhibits
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(c) Exhibits.
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Exhibit No. Description of Exhibit
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2.1 Agreement and Plan of Merger dated as of April 29, 2002, by and
among Standard Microsystems Corporation, SMSC Sub, Inc., and Gain
Technology Corporation.
99.1 Press release, dated June 4, 2002, announcing the completion of
the acquisition of Gain Technology Corporation.
SIGNATURES
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Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
STANDARD MICROSYSTEMS CORPORATION
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(Registrant)
Date: June 19, 2002 By: /s/ ANDREW M. CAGGIA
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Andrew M. Caggia
Senior Vice President and
Chief Financial Officer,
and Director
(Principal Financial Officer)
INDEX TO EXHIBITS
Exhibit No. Description
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2.1 Agreement and Plan of Merger dated as of April 29, 2002, by and
among Standard Microsystems Corporation, SMSC Sub, Inc., and Gain
Technology Corporation.
99.1 Press release, dated June 5, 2002, announcing the completion of
the acquisition of Gain Technology Corporation.
Exhibit 2.1
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AGREEMENT AND PLAN OF MERGER, dated as of April 29, 2002, made among
STANDARD MICROSYSTEMS CORPORATION, a Delaware corporation ("Parent"); SMSC SUB
INC., an Arizona corporation ("Merger Sub") and a wholly owned subsidiary of
Parent; and GAIN TECHNOLOGY CORPORATION, an Arizona corporation ("Company").
W I T N E S S E T H:
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WHEREAS, the board of directors and stockholders of Merger Sub and the
board of directors of Company have determined that it is the best interests of
each such company and its respective stockholders for Merger Sub to merge with
and into Company, with Company being the surviving corporation, upon the terms
and subject to the conditions set forth herein;
WHEREAS, it is intended by the parties hereto that the merger
contemplated herein shall not constitute a tax-free reorganization with the
meaning of Section 368(a) of the Code.
NOW, THEREFORE, the parties agree as follows:
ARTICLE I
THE CLOSING
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1.1. Effective Time of the Merger. Subject to the provisions of this
Agreement, as early as practical on the Closing Date, assuming that all
conditions precedent to the obligations of each of the parties to consummate the
Merger have been met, Company shall cause duly executed Articles of Merger in
the form of Exhibit 1.1A (the "Articles of Merger") to be submitted to the
Arizona Corporation Commission in accordance with the provisions of Sections
10-1101 through 10-1108 of the Arizona Revised Statutes (the "ARS"), and, upon
the filing thereof by the Commission, the Merger shall become effective (the
"Effective Time").
1.2. Closing. Except as otherwise agreed by Parent and Company, the
closing (the "Closing") shall occur on June 3, 2002. At the Effective Time,
Parent shall deliver to Bryan Cave LLP, counsel to Company, share certificates
registered in the name of each of the Shareholders, respectively, representing,
in the aggregate, the total number of shares of Parent Common Stock required by
Sections 1.5(a) and (b), and checks representing immediately available funds
payable to each of the Shareholders, respectively, representing, in the
aggregate the total amount of cash consideration payable pursuant to those
Sections (such cash, the "Initial Cash Consideration" and such shares of Parent
Common Stock and the Initial Cash Consideration, the "Initial Consideration")
which such counsel shall deliver to the Shareholders entitled to receive the
same. Company will cause such counsel promptly to mail the Initial Consideration
to the Shareholders.
1.3. Effects of the Merger.
(a) At the Effective Time, (i) the separate existence of Merger
Sub shall cease, and Merger Sub shall be merged with and into Company (Merger
Sub and Company are sometimes referred to herein as the "Constituent
Corporations"; with respect to periods after the Effective Time, Company is
sometimes referred to herein as the "Surviving Corporation"; and such merger is
referred to herein as the "Merger"); (ii) the articles of incorporation of
Company (the "Articles of Incorporation") shall be the articles of incorporation
of Surviving Corporation; (iii) the by-laws of Merger Sub as in effect
immediately prior to the Effective Time shall be the by-laws of Surviving
Corporation; and (iv) except as set forth on Exhibit 1.3, those persons who
immediately prior to the Effective Time are (A) directors of Merger Sub, shall
be the directors of Surviving Corporation and (B) officers of Merger Sub, shall
be the officers of Surviving Corporation, in each case until their respective
successors are duly elected and qualified.
(b) At and after the Effective Time, title to all real estate
and other property owned by each of Constituent Corporations shall vest in the
Surviving Corporation without reversion or impairment, and Surviving Corporation
shall automatically have all of the Liabilities of each Constituent Corporation,
and any proceeding pending against any Constituent Corporation may be continued
as if the Merger did not occur or Surviving Corporation may be substituted in
the proceeding for the corporation whose existence ceased.
1.4. Effect on Capital Stock. As of the Effective Time, by virtue of
the Merger and without any action on the part of any Shareholder or the holder
of any capital stock of Merger Sub:
(a) Capital Stock of Company. Except as provided in Sections
1.4(c), 1.4(d), or 1.5(e), each issued and outstanding share of Company Common
Stock shall, by virtue of the Merger and without any action on the part of the
holder thereof, be converted into the right to receive (i) the Initial
Consideration, (ii) any amount payable pursuant to Section 1.7, and (iii) the
Contingent Payments, if applicable, as shall be determined pursuant to Section
1.5 (the "Merger Consideration"). Each certificate representing any such Company
Common Stock shall thereafter represent only the right to receive the Merger
Consideration pursuant to the terms hereof or otherwise under Sections 10-1301
through 10-1331 of the ARS.
(b) Capital Stock of Merger Sub. Each issued and outstanding
share of the capital stock of Merger Sub shall, by virtue of the Merger and
without any action on the part of the holder thereof, be converted into a share
of common stock of Surviving Corporation, and each certificate representing any
such Merger Sub capital stock shall thereafter represent instead only the right
to receive an equal number of shares of common stock of Surviving Corporation.
(c) Treasury Stock and Parent-Owned Company Stock. All shares of
Company Common Stock that are owned by Company as treasury stock and any shares
of Company Common Stock owned by Parent, Merger Sub, or any other wholly owned
subsidiary of Parent or Company shall be canceled, and no Merger Consideration
or other consideration shall be paid, delivered, or received in respect thereof.
(d) Dissenting Shareholders. Notwithstanding anything in this
Agreement to the contrary, shares of Company Common Stock that are issued and
outstanding immediately prior to the Effective Time and that are held by a
Shareholder who shall not have voted in favor of the Merger and who shall have
complied with all of the relevant provisions of Sections 10-1301 through 10-1331
of the ARS with respect to a demand for payment for his shares of Company Common
Stock ("Dissenting Shares") shall not be converted into the right to receive the
Merger Consideration, but instead, such Shareholder shall be entitled to receive
such consideration as shall be determined pursuant to Sections 10-1301 through
10-1331 of the ARS; provided, however, that if such Shareholder shall have
failed to perfect or shall have effectively withdrawn or lost his rights to
dissent under Sections 10-1301 through 10-1331 of the ARS, each of such
Shareholder's shares of Company Common Stock shall thereupon be deemed to have
been converted into the right to receive, as of the Effective Time, the Merger
Consideration, without any interest thereon, in accordance with Section 1.4(a),
and such Shareholder shall forfeit his dissenter's rights as provided by
Sections 10-1301 through 10-1331 of the ARS. The Company shall give Parent
notice of all such dissenting Shareholders, and Parent shall have the right to
participate in all negotiations and proceedings with respect to any demands for
payment by any dissenting Shareholders. The Company shall not, except with the
prior written consent of Parent, voluntarily make or agree to make any payment
with respect to, or settle or offer to settle, any such demands for payment.
1.5. Computation of Merger Consideration.
(a) Election Shares. At the Effective Time, each share
("Election Share") of Company common stock, no par value (the "Company Common
Stock"), outstanding immediately before the Effective Time as to which the
holder thereof in accordance with the terms hereof shall have elected (a
"Section 1.5A Election") that this Section 1.5(a) shall apply, shall be
converted into the right to receive:
(i) An amount of cash equal to the excess of (X) the
product obtained by multiplying the Per Share Value by .45 over (Y) the Election
Share Cash Amount;
(ii) An amount of Parent Common Stock equal to the product
obtained by multiplying (X) the quotient obtained by dividing the Per Share
Value by the Average Stock Price by (Y) .55; and
(iii) Any amount to be distributed pursuant to Section 1.7.
(b) Nonelection Shares. At the Effective Time, each share of
Company Common Stock outstanding immediately before the Effective Time as to
which the holder thereof shall not have made a Section 1.5A Election, other than
Dissenting Shares and shares described in Section 1.4(c), (a "Nonelection
Share") shall be converted into the right to receive
(i) An amount of cash equal to the excess of (X) the
product obtained by multiplying the Per Share Value by .5 over (Y) the
Nonelection Share Cash Amount;
(ii) An amount of Parent Common Stock equal to the product
obtained by multiplying (X) the quotient obtained by dividing the Per Share
Value by the Average Stock Price by (Y) .5; and
(iii) Any amount to be distributed pursuant to Section 1.7.
(c) Contingent Payments. At each Contingent Payment Date, (X)
for each Election Share beneficially owned other than by the beneficial owner of
any Disqualified Share, Parent shall distribute to such beneficial owner (A) an
amount of cash equal to the product obtained by multiplying the Per Share
Contingent Amount by .45 and (B) an amount of Parent Common Stock equal to the
quotient obtained by dividing (I) the product obtained by multiplying the
applicable Per Share Contingent Amount by .55 by (II) the Average Stock Price,
and (Y) for each Election Share, other than a Disqualified Share, beneficially
owned by the beneficial owner of any Disqualified Share, Parent shall distribute
the amounts of cash and stock respectively referred to in clauses (X)(A) and
(X)(B), in each case multiplied by a fraction, (I) the numerator of which shall
be the sum of the number of Election Shares beneficially owned other than by the
beneficial owner of any Disqualified Share and the number of Nonelection Shares,
and (II) the denominator of which shall be such sum plus the number of
Disqualified Shares. At each Contingent Payment Date, for each Nonelection
Share, excluding any Disqualified Share, outstanding immediately before the
Effective Time, Parent shall distribute to the holder thereof (X) an amount of
cash equal to the product obtained by multiplying (A) the applicable Per Share
Contingent Amount by (B) .5 and (Y) an amount of Parent Common Stock equal to
the quotient obtained by dividing the amount computed pursuant to the
immediately preceding clause (X) by the Average Stock Price.
(i) USB GT3200 Contingent Payment. Parent shall distribute
any Contingent Payment respecting revenue during Parent's 2003 fiscal year, from
the GT3200 USB 2.0 Discrete IC PHY chip product (the "USB GT3200"), as
determined pursuant to Schedule 1.5(c)(i), within 15 days after Parent shall
have filed its Annual Report on Form 10-K for Parent's 2003 fiscal year.
(ii) 1Q04 Contingent Payment. Parent shall distribute any
Contingent Payment respecting Company's 2004 fiscal first quarter, as determined
pursuant to Schedule 1.5(c)(ii), within 15 days after Parent shall have filed
its Form 10-Q for the quarter ending May 31, 2003.
(iii) Enabled Revenue Contingent Payment. Parent shall
distribute any Contingent Payment respecting Enabled Revenue, as determined
pursuant to Schedule 1.5(c)(iii), within 15 days after Parent shall have filed
its Annual Report on Form 10-K for Parent's 2003 fiscal year.
(d) Definitions. For purposes of this Section 1.5,
(i) "Average Stock Price" shall mean $22.64, which is the
sum of the closing prices of a share of Parent Common Stock as reported by the
NASDAQ Stock Market for the period of 20 consecutive trading days ending April
10, 2002 divided by 20.
(ii) "Contingent Payment" means each of the distributions
specified in Sections 1.5(c)(i), 1.5(c)(ii), and 1.5(c)(iii).
(iii) "Contingent Payment Date" means the date on which a
Contingent Payment is distributed pursuant to Sections 1.5(c)(i), 1.5(c)(ii), or
1.5(c)(iii).
(iv) "Disqualified Share" shall mean, for any holder of
Company Common Stock who is the beneficial owner of more than 50% of the issued
and outstanding Company Common Stock (the "Disqualified Holder") at the Closing
(on a fully diluted basis, after giving effect to the exercise or conversion of
all options, warrants, or other convertible securities issued by the Company as
of the Closing, whether or not currently exercisable or convertible, other than
any options, warrants or other convertible securities held by Parent, as if such
exercise or conversion had occurred immediately prior to the Closing), any share
of Company Common Stock that at the Closing would entitle such Disqualified
Holder to receive more than the Disqualified Holder's Eligible Percentage of any
Contingent Payment, if such share were not a Disqualified Share, provided that
the aggregate amount of distributions not made in respect of Disqualified Shares
to such Disqualified Holder with respect to the maximum amount of aggregate
Contingent Payments under Section 1.5(c) shall not exceed $2,500,000. For the
purposes of this definition, the term "Eligible Percentage" shall mean the
quotient of (A) the excess of (i) the product of (a) the quotient of the total
amount of Election Shares beneficially held by the Disqualified Holder (on a
fully diluted basis as determined in the immediately preceding sentence) divided
by the total amount of outstanding Election Shares and Nonelection Shares (on a
fully diluted basis as determined in the immediately preceding sentence),
multiplied by (b) 17,500,000, over (ii) 2,500,000, divided by (B) 17,500,000,
with such quotient expressed as a percentage.
(v) "Election Share Cash Amount" means the quotient
obtained by dividing the Election Share Holdback by the number of Election
Shares.
(vi)"Election Share Holdback" means the product obtained by
multiplying the Initial Holdback by the Holdback Ratio.
(vii) "Holdback Ratio" means the quotient obtained by
dividing (X) the product obtained by multiplying the number of Election Shares
by .45 by (Y) the sum of (A) the product obtained by multiplying the number of
Election Shares by .45 and (B) the product obtained by multiplying the number of
Nonelection Shares by .5.
(viii) "Nonelection Share Cash Amount" means the quotient
obtained by dividing (X) the excess of the Initial Holdback over the Election
Share Holdback by (Y) the number of Nonelection Shares.
(ix) "Per Share Contingent Amount" means the product
obtained by multiplying (X) the quotient obtained by dividing the Contingent
Payment computed pursuant to Sections 1.5(c)(i), 1.5(c)(ii), or 1.5(c)(iii), as
the case may be, by the sum of the number of Election Shares and Nonelection
Shares by (Y) the quotient obtained by dividing (A) the sum of the number of
Election Shares beneficially owned other than by the beneficial owner of any
Disqualified Share plus the number of Nonelection Shares plus the number of
Disqualified Shares, by (B) the sum of such number of Election Shares
beneficially owned other than by the beneficial owner of any Disqualified Share
plus the number of Nonelection Shares.
(x) "Per Share Value" means the quotient obtained by
dividing $31,500,000 by the sum of the Election Shares and Nonelection Shares.
(e) No Fractional Shares. No certificates or scrip representing
fractional shares of Parent Common Stock shall be issued, and such fractional
share interests will not entitle the owner thereof to vote or to any rights of a
stockholder of Parent. Insofar as practical, fractional shares that each
Shareholder would otherwise receive shall be aggregated into whole shares of
Parent Common Stock.
(f) Parent Common Stock Transfer Restrictions; Registration. Any
Parent Common Stock distributed as Merger Consideration, shall be subject to
restrictions on transfer, as set forth in the agreement to be signed by each
Shareholder as a condition to Parent's obligation to consummate the transactions
contemplated hereby (the "Agreement with Shareholder"), and Parent will register
such shares for resale on the terms set forth in such Agreement with
Shareholder.
(g) Model Computations. Exhibit 1.5 sets forth model
computations under Sections 1.5(a) and 1.5(c).
1.6. Adjustments For Changes in Parent Common Stock. All amounts
referred to in Sections 1.5(a), (b) and (c) shall be adjusted appropriately for
any stock split, stock dividend, reverse stock split or like changes in the
outstanding Parent Common Stock. For purposes of Section 1.5(c) and (f)
references to Parent Common Stock, Election Share, Non-Election Share,
Disqualified Share, or any other term referring to Parent Common Stock shall
include any capital stock or other security distributed in respect thereof by
Parent or any other Person or that otherwise might constitute a Restricted
Security as defined in the Agreement Key-Officer Shareholder. For the purposes
of determining the Contingent Payment payable under Section 1.5(c)(ii), and the
calculation of the Parent's consolidated net income per share, all amounts
referred to in such Section and Schedule 1.5(c)(ii) shall be adjusted
appropriately for any stock split, stock dividend, reverse stock split, or like
change in the number of outstanding shares of Parent Common Stock, so that the
effect of such changes in the number of outstanding shares of Parent Common
Stock shall not adversely affect the amount of the Contingent Payment otherwise
payable pursuant to such Section and Schedule.
1.7. Initial Consideration Holdback. Within 30 days after the
Effective Time, Arthur Andersen LLP shall deliver to Parent and Millaway (as
representative of the Key Officers) a reasonably detailed statement setting
forth any amount (the "Final Holdback") by which $750,000 (the "Initial
Holdback") exceeds any amount by which (X) the sum of Company Debt and
Transaction Expenses, immediately prior to the Effective Time, exceeds (Y)
$3,000,000. Absent manifest error, such statement shall bind all parties hereto
and the Shareholders. Within 10 days after delivery of such statement, for each
Election Share outstanding immediately before the Effective Time, Parent shall
distribute to the holder thereof an amount equal to the quotient obtained by
dividing (X) the product obtained by multiplying the Final Holdback by the
Holdback Ratio by (Y) the number of Election Shares, and for each Nonelection
Share outstanding immediately before the Effective Time, Parent shall distribute
to the holder thereof an amount equal to the quotient obtained by dividing (A)
the product obtained by multiplying (i) the Final Holdback by (ii) the excess of
one over the Holdback Ratio by (Y) the number of Nonelection Shares.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
OF COMPANY
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Company represents and warrants to Parent and Merger Sub as follows:
2.1. Organization; Authority; Due Authorization. Except as otherwise
set forth in Schedule 2.1 attached hereto:
2.1.1. Organization and Good Standing. Company is a corporation
duly organized, validly existing and in good standing under the Laws of the
State of Arizona and has all requisite corporate power to own, lease, and
operate the Assets and to carry on the Business as presently conducted. Company
is duly qualified to do business as a foreign corporation and is in good
standing in each jurisdiction in which the current nature of the Business or the
location of the Assets requires such qualification except where the failure to
be so qualified, licensed or in good standing will not result in an Adverse
Change. Schedule 2.1, except for premises owned or leased by consultants to
Company at which Company stores product samples, sets forth each address at
which Company holds any Assets or any Company office is located and each
jurisdiction in which Company is so qualified.
2.1.2. Authority to Execute and Perform Agreements. Company has
all requisite corporate power and authority to enter into, execute, and deliver
this Agreement and each Additional Agreement to which it shall be a party and to
perform fully Company's obligations hereunder and thereunder.
2.1.3. Due Authorization. Subject only to obtaining shareholder
approval of the Plan of Merger embodied by this Agreement ("Plan of Merger"), as
required by Sections 10-1301 through 10-1331 of the ARS ("Shareholder
Approval"), all corporate action required to be taken by Company's Board of
Directors and Shareholders to authorize Company to execute, deliver, and perform
each obligation of Company under this Agreement and each Additional Agreement to
which Company shall be a party has been taken and remains in full force and
effect.
2.1.4. Specific Board Action. Without limiting any other
representation or warranty hereunder, the Board of Directors of Company has
unanimously (a) adopted the Plan of Merger; (b) authorized the execution and
delivery of this Agreement and each Additional Agreement to which it shall be a
party and performance by Company of each of its obligations thereunder and
consummation of the transactions contemplated hereby and thereby, including the
Merger; (c) determined that each of this Agreement and the Plan of Merger is
fair to and in the best interests of the Shareholders; to recommend that the
Shareholders vote their Company Common Stock to approve the Agreement; and that
such recommendation shall be included in the Solicitation Documents; and (d)
resolved to call a Shareholders' meeting to approve the Plan of Merger.
2.1.5. Vote Required. The affirmative vote of not less than a
majority of the votes that the holders of record of the outstanding Company
Common Stock are entitled to cast at a special meeting of Shareholders duly
called, noticed and convened and at which the requisite quorum is present (in
person or by proxy), is the only vote necessary to constitute Shareholder
Approval.
2.2. Charter Documents; Legality. Company has previously delivered to
Parent true and complete copies of its Articles of Incorporation and by-laws,
minute books, and stock books, as in effect or constituted on the date hereof.
Subject to obtaining Shareholder Approval and making the filings and giving the
notices necessary to effectuate the Merger under Law, the execution, delivery,
and performance by Company of this Agreement or any Additional Agreement to
which Company is to be a party has not violated and will not violate, and
consummation by Company or the Key Officers of the transactions contemplated
hereby or thereby will not violate, any of the foregoing charter documents or
any Law or Order to which Company or its property is subject.
2.3. Capitalization and Ownership of Company Common Stock. The
authorized capital stock of Company consists solely of 12,000,000 shares of
Company Common Stock, of which 11,792,300 shares (and no more) are outstanding
and owned by the Shareholders as set forth in Schedule 2.3. To the Company's
knowledge, each Shareholder owns the shares set forth beside such Person's name
on Schedule 2.3, free and clear of any Encumbrance, except as set forth on
Schedule 2.3. The name of each Option Holder and the number of shares of Company
Common Stock subject to such Option Holder's Company Stock Option (a complete
and accurate copy of which previously has been delivered to Parent) are set
forth on Schedule 2.3, and no other security or instrument exercisable or
exchangeable for or convertible into Company capital stock is outstanding.
Except as set forth on Schedule 2.3, there is no Contract (other than this
Agreement) that requires or under any circumstance would require (a) Company to
issue, or grant any right to acquire, any Company capital stock, or security or
instrument exercisable or exchangeable for or convertible into, any Company
capital stock or to merge, consolidate, dissolve, liquidate, restructure, or
recapitalize or (b) any holder of Company capital stock to transfer any Company
capital stock or interest therein. The issuance of all outstanding Company
capital stock has been duly authorized, and all such capital stock is or has
been validly issued, fully paid, and nonassessable.
2.4. Subsidiaries. Company has no subsidiaries and does not or
otherwise control any Person, is not a partner of or joint venturer with any
other Person, and owns no debt, equity, or other kind of investment in any other
Person, except as included as current assets on the Balance Sheet.
2.5. Affiliates. Other than the Key Officers, Company is not
controlled by any Person, and Company is not in common control of a Person with
any other Person. Except as set forth in Schedule 2.5, to the Company's
knowledge, none of the Key Officers (x) engages in any business, except through
Company, or is an employee of or provides any Real Property, material service
for compensation to any other business concern or (y) beneficially owns any
equity security of any business concern, except for publicly traded securities
constituting less than 1% of the class thereof. Schedule 2.5 lists each
Contract, arrangement, or understanding to which Company and any Key Officer,
any family member of a Key Officer, or any business concern identified on
Schedule 2.5 are parties (excluding any participation by any such individual in
a Company group insurance or like benefit plan available to Company employees
generally). Except as disclosed in Schedule 2.5, none of the Key Officers or any
Affiliate of them (excluding Company) (i) owns, directly or indirectly, in whole
or in part, any Real Property, material tangible property, or Intellectual
Property that Company uses or the use of which is necessary for Company's
conduct of the Business, or (ii) has engaged in any transaction with Company
other than on arms'-length terms.
2.6. No Consents Required. Except as set forth on Schedule 2.6,
neither the execution or delivery of this Agreement or any Additional Agreement
nor the consummation of the transactions contemplated herein or therein by
Company or any Key Officer (a) does or will violate, conflict with, or
constitute a default under, cause, permit, or result in any termination,
acceleration, or loss or creation of any right or obligation under any Contract
or the creation or imposition of any Encumbrance other than Permitted
Encumbrances upon any of the Assets or any Company Common Stock beneficially
owned by any Key Officer or (b) require any approval authorization, consent,
license, or permit of or designation, declaration, filing, registration, or
notice with or to any Authority ("Government Approval") or of any other party to
any Contract ("Third Party Consent").
2.7. Enforceability. This Agreement and each Additional Agreement to
which Company or any Key Officer is a party is, and as of the Closing Date, will
be the legal, valid, and binding Agreement of such Person, and each other
Additional Agreement to which Company or any Key Officer is to be a party, upon
execution thereof by such Person, will be, the legal, valid, and binding
obligation of such Person, enforceable in accordance with its terms, except as
the same may be limited by bankruptcy, insolvency, reorganization, moratorium or
other similar Laws affecting the rights of creditors generally and available
equitable remedies, and except as the enforcement of the indemnification
provisions may be limited by securities Laws or held to be against public
policy.
2.8. Financial Condition.
2.8.1. Financial Statements. Schedule 2.8.1 sets forth (a) (i)
the audited balance sheets of Company as of December 31, 2001 and the related
audited statements of operations, shareholders' equity and cash flows for the
year ended December 31, 2001; (ii) the audited balance sheets of Company as of
December 31, 2000 and the related audited statements of operations,
shareholders' equity, and cash flows for the year ended December 31, 2000; and
(iii) the reviewed balance sheets of Company as of December 31, 1999, and the
reviewed statements of operations and cash flows of Company for the fiscal years
ended December 31, 1999. Except as otherwise disclosed in Schedule 2.8.1 or with
respect to matters in such unaudited or reviewed financial statements that would
be disclosed in notes thereto, said financial statements (a) were prepared from
and in accordance with Company's Books and Records in accordance with GAAP; (b)
fairly present Company's financial condition and the results of its operations
as of the relevant dates thereof and for the periods covered thereby; and (c)
contain and reflect all necessary adjustments and accruals for a fair
presentation of Company's financial condition and the results of its operations
for the periods covered by said financial statements.
2.8.2. No Undisclosed Liabilities. Schedule 2.8.2 is a complete
and accurate list of all of Company's Liabilities as of April 19, 2002. Since
April 19, 2002, Company has incurred no Liabilities, except for trade or
business obligations incurred in connection with the operation of the Business
in the ordinary course and consistent with past practices (none of which
Liabilities is individually or are in the aggregate material or is for breach of
contract, breach of warranty, tort (including product liability) or
infringement) or arising under any Disclosed Contract in the ordinary course of
performance thereof (and not from breach thereof).
2.8.3. Inventories. Schedule 2.8.3 lists all Company's
Inventories as of its date, which is a date within ten days of the date hereof,
in accordance with GAAP. Except as set forth in Schedule 2.8.3 or Schedule
2.12.2A, Company owns all such Inventory free and clear of any Encumbrance other
than Permitted Encumbrances, and no items included in such Inventories are held
by Company on consignment from others.
2.8.4. Accounts Receivable. Schedule 2.8.4 lists all of
Company's Accounts Receivable as of its date, which is a date within five days
of the date hereof, in accordance with GAAP. Except as set forth in Schedule
2.8.4, all Accounts Receivable represent bona fide sales of inventory or
services of Company in the ordinary course of the Business and are fully
collectible, net of any reserves shown on the Balance Sheet or identified in
Schedule 2.8.4, and Company owns all such Inventory free and clear of any
Encumbrance other than Permitted Encumbrances.
2.8.5. Absence of Certain Changes. Except as disclosed in
Schedule 2.8.5, or expressly contemplated by this Agreement or any Additional
Agreement, since the Balance Sheet Date, Company has conducted the Business only
in the ordinary course consistent with past practices and has not:
(a) suffered any change, event, or condition that, in any case
or in the aggregate, has had or could reasonably be expected to cause a material
adverse change in the financial condition or operating results of Company, the
Business, or the Assets (before or after the Closing) (an "Adverse Change"), it
being agreed, however, that XXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX after Parent
publicly announces the execution of this Agreement shall not constitute an
Adverse Change;
(b) incurred any Liability, except as contemplated in Section
2.8.2;
(c) subjected any Assets or permitted or suffered any Assets to
be subjected to any Encumbrance other than Permitted Encumbrances;
(d) sold,transferred, leased to others or otherwise disposed of
any of the Assets, except for Inventory or otherwise in the ordinary course of
the Business;
(e) breached, amended, or terminated any Disclosed Contract or
Government Approval or received any notice of breach or termination of any of
the same;
(f) declared or made any payment of dividend or other
distribution to any Shareholder or upon or in respect of any Company capital
stock, or issued, purchased, retired or redeemed, or obligated itself to issue
any capital stock except for Company Stock Options listed on Schedule 2.3 or
shares of Company Common Stock issuable upon exercise of Company Stock Options
listed on Schedule 2.3, or to purchase, retire or redeem, any Company capital
stock or capital stock;
(g) been subject to any labor union organizing activity,
suffered any actual or threatened employee strike, work stoppage, slow-down or
lock-out, or any material change in its relations with its employees or
consultants, or suffered any actual or threatened claim of wrongful discharge,
or other unlawful labor practice or proceeding;
(h) paid or promised (absolutely or conditionally) to pay any
bonus or other special compensation to or changed or agreed to change the rate
of salary, bonus, commission, or other compensation, fee, or remuneration, of
any employee, officer, director, salesman, distributor, or consultant or adopted
or amended any employee benefit plan or policy;
(i) terminated the employment of any employee or received any
notice that any employee intends to terminate his employment;
(j) changed its accounting methods or practices (including,
without limitation, any change in depreciation or amortization policies or
rates) or revalued any of the Assets, for financial or Tax reporting purposes;
(k) entered into any transaction, contract or commitment other
than in the ordinary course of the Business and consistent with its prior
practices; or
(l) entered into any agreement or made any commitment to take
any of the types of action described in subparagraphs (a) through (k) above.
2.8.6. Company Liabilities. Schedule 2.8.6 sets forth a good
faith estimate of each item of Company Debt or Transaction Expense that will be
used in computing the Final Holdback.
2.9. Tax Matters. Except as disclosed on Schedule 2.9, within the
times and in the manner prescribed by Law, Company has filed all required Tax
Returns, which accurately and completely reflected Company's Tax Liability for
the respective periods covered thereby, has paid or provided for all Taxes shown
thereon to be due and owing by it and has paid or provided for all deficiencies
or other assessments of Taxes, interest or penalties owed by it; no Tax
Authority has asserted any claim for the assessment of any additional Taxes of
any nature with respect to any periods covered by any such Tax Returns; all
Taxes required to be withheld or collected by Company have been duly withheld or
collected and, to the extent required, have been paid to the proper taxing
Authority or properly segregated or deposited as required by Law. Each Tax
Return filed by Company fully and accurately reflects its liability for Taxes
for such year or period and accurately sets forth all items (to the extent
required to be included or reflected in such returns) relevant to its future
liabilities for Taxes, including the Tax basis of its properties and assets. No
audit of any Company Tax Return is in progress or, to the knowledge of Company,
threatened. Company has not waived or extended any applicable statute of
limitations relating to the assessment of any Taxes. No issue has been raised
with Company by any Tax Authority that is currently pending in connection with
any Tax Return. No material issue has been raised in any examination by any Tax
Authority with respect to Company which, by application of similar principles,
reasonably could be expected to result in a proposed deficiency for any other
period not so examined. There are no unresolved issues or unpaid deficiencies
relating to any such examination. All copies of Tax Returns furnished by Company
to Parent were accurate and complete copies of the Tax Returns filed with the
relevant Tax Authorities.
2.10. Compliance with Laws; Governmental Matters. Except as otherwise
disclosed on Schedule 2.10 or as disclosed pursuant to Section 2.9 (Tax
Matters), 2.11 (Litigation), 2.12 (Property of Company), 2.15 (Employee Plans)
or 2.19 (Environmental Matters), Company has in all material respects complied
with, and is now in all material respects in compliance with, all Laws, and no
material capital expenditure will be required to insure continued compliance
therewith; Company possesses each Government Approval material to or necessary
for the conduct of the Business as currently conducted, and Company now is and
has at all relevant times in the past been in compliance with each thereof; each
such Government Approval is identified on Schedule 2.10; and Company neither has
received notice nor knows of any proceeding or other action, pending or
threatened, to revoke, amend, or limit any Government Approval and has no basis
to believe that any such proceeding or action would result from the consummation
of the transactions contemplated hereby or that any such Government Approval
would not be renewed in the ordinary course.
2.11. Litigation. Except as otherwise disclosed in Schedule 2.11 or as
disclosed pursuant to Sections 2.9 (Tax Matters), 2.10 (Compliance with Laws;
Governmental Matters), 2.12 (Property of Company), 2.15 (Employee Plans) or 2.19
(Environmental Matters), Company neither has received notice nor knows of any
pending or threatened adverse claim, dispute, governmental investigation, suit,
action, arbitration, legal, administrative or other proceeding by or against or
otherwise affecting Company, any of the Assets, any Key Officer, St. Pierre or
any employee identified on Schedule 5.5; there exists no Order enjoining or
requiring Company to take any action of any kind with respect to the Business or
the Assets; and none of Company, or, to the knowledge of Company, any Key
Officer, St. Pierre or other employee identified on Schedule 5.5 has been
permanently or temporarily enjoined from engaging in or continuing any conduct
or practice.
2.12. Property of Company.
2.12.1. Real Property.
(a) Company owns no Real Property. Company has delivered to
Parent true, correct, and complete copies of each lease for Real Property to
which Company is a party, and all amendments thereto. Each such lease, together
with all amendments, is listed in Schedule 2.12.1 and, to the knowledge of
Company, is valid, and enforceable by Company, with respect to the other party
thereto, except as the same may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar Laws affecting the rights of
creditors generally and available equitable remedies, and except as the
enforcement of the indemnification provisions may be limited by securities Laws
or held to be against public policy.
(b) Since January 1, 2000, Company has not experienced any
material interruption in the delivery of adequate quantities of any utilities
(including, without limitation, electricity, natural gas, potable water, water
for cooling or similar purposes and fuel oil) or other public services
(including, without limitation, sanitary and industrial sewer service) required
by Company in the operation of the Business.
2.12.2. Tangible Personal Property. Schedule 2.12.2A identifies
each item of Tangible Personal Property owned by Company, excluding office
supplies, listed in the order in which they were acquired within subclass codes,
and including the date of acquisition, cost of acquisition, and, for each
subclass code, the subtotal of the acquisition costs, and any contract relating
to the possession or use of such item of Tangible Personal Property. (The
information in such schedule relating to acquisition cost or date or subclass is
for Parent's convenience and shall not constitute a representation or warranty
by Company.) Schedule 2.12.2B identifies each item of Tangible Personal Property
used in the Business or otherwise held by Company, but not owned by Company and
the owner of, and any Contract relating to the possession or use of, such item
of Tangible Personal Property. Company does not own or lease any motor vehicle.
Except as disclosed in Schedule 2.12.2A or 2.12.2B:
(a) Company has good and marketable title to each item of the
Tangible Personal Property owned, used, or otherwise held by it, free and clear
of any Encumbrance other than Permitted Encumbrances; and
(b) each item of Tangible Personal Property owned, used, or
otherwise held by Company (other than items of Tangible Personal Property that
are not material to the Business) is in good operating condition and repair,
usable in the ordinary course of the Business.
2.12.3. Intellectual Property.
(a) Schedule 2.12.3A sets forth an accurate and complete
categorized list of each registered Mark, registered mask work right, Patent,
registered copyright, or Internet domain name registration or extant application
for any Mark, mask work right, patent, registered copyright, or Internet domain
name (collectively, "Registered IP"), including title, serial number, expiration
date, and relevant jurisdiction, owned by Company, alone or jointly, or that
Company is entitled to be assigned, alone or jointly; the identity of any joint
owner (or joint assignee); and the Contract or other circumstance pursuant to
which any such joint ownership or right of assignment arose. Company previously
has delivered to Parent complete and accurate copies of all material
correspondence or any memorandum of oral communication between Company and
examining authorities or any other third party regarding any such Registered IP
in Company's possession. Schedule 2.12.3A also describes each invention or
unregistered mask work right or copyright owned by Company alone or jointly
respecting which, as evidenced in writing, Company is contemplating filing an
application for a patent or registration that has not been filed and identifies
any joint owner (or joint assignee) and Contract or other circumstance pursuant
to which joint ownership of such invention or mask work right or copyright
arose. Company previously has delivered to Parent complete and accurate copies
of all material written correspondence or any memorandum of oral communication
between Company and or any other third party regarding any such invention in
Company's possession.
(b) Schedule 2.12.3B (i) lists each Contract to which Company is
a party relating to any item of Intellectual Property owned by Company, alone or
jointly, used by Company in the Business, or to which Company has any right,
including a right to use ("Company Intellectual Property"), excluding any
generally commercially available software costing less than $1,000 per end user;
(ii) specifies which of such Contracts requires payment of any royalty, license
fee, or other compensation not fully paid as of the date hereof and whether such
payment is payable to or by Company; and (iii) identifies (A) each Company
Registered IP development of which (x) was funded by a third Person (including
any officer, director, employee, or shareholder of Company), (y) was conducted
by or as a joint venture, in partnership, or otherwise in collaboration, with
any other Person (except an employee solely in his or her capacity as such), or
(z) to Company's knowledge used any Intellectual Property of a third Person
(including any officer, director, employee, or shareholder of Company) and (B)
any Contract pursuant to which same occurred. Except as disclosed in Schedule
2.13A, none of the Intellectual Property owned or used by Company and identified
in Contracts specified on Schedule 2.16 is subject to (a) any material
contractual restriction on the manner in, purpose for, or location at which same
may be used (including any restrictions on disclosure to or use by Parent or any
subsidiary of Parent that would be in effect following the Closing), or (b)
other restriction on any use of same that would result from consummation of the
transactions contemplated by this Agreement. Schedule 2.12.3B includes any SIG,
adopters, contributors, or other industry initiative or standards-body agreement
to which Company is a party or by which Company otherwise is bound. Except as
otherwise disclosed on Schedule 2.12.3B, Company has never sold or designed any
product using an Inter-Integrated Circuit bus or adapted for use with an
Inter-Integrated Circuit bus. The term "Inter-Integrated Circuit bus" (commonly
known as "I2C") shall mean that particular bus developed in the early 1980's by
Koninklijke Philips Electronics N.V. and all subsequent versions, a recent
version of which is specified at the following website:
www.semiconductors.com/buses/i2c/facts.
(c) Except as set forth in Schedule 2.12.3A or Schedule 2.12.3B,
(i) Company is, and after consummation of the transactions contemplated hereby
will be, the owner of all right, title, and interest in and to all and each item
of Company Intellectual Property owned by it, free and clear of any Encumbrance,
and has, and after consummation of the transactions contemplated hereby will
continue to have, the right to use any Intellectual Property that it has
previously used in the conduct of the Business or that will be necessary
lawfully to complete development of products currently under development, or to
fulfill its obligations under contracts to which it is a party; (ii)
consummation of the transactions contemplated hereby will not result in the
imposition of any Encumbrance on any of the Company Intellectual Property; and
(iii) consummation of the transactions contemplated hereby will not in any
manner adverse to Company or Parent affect any Contract, understanding, or
arrangement identified in Schedule 2.12.3A or Schedule 2.12.3B.
(d) To Company's knowledge, all registrations of Company
Registered IP are valid and in full force and effect and applications therefor
have been properly filed and are in proper form, and none of the foregoing is
subject to any past due Taxes or other governmental charges, maintenance fees or
actions.
(e) To Company's knowledge, there are no Orders, claims,
actions, judicial, or other adversary proceedings, disputes, or disagreements
concerning any item of the Company Intellectual Property.
(f) Except as set forth in Schedule 2.12.3F, Company has not
violated, infringed, or misappropriated and is not now violating, infringing, or
misappropriating any copyright, Patent, Mark, mask work right, Trade Secret, or
other proprietary right belonging to any other Person, and no Person has made
any assertion inconsistent with the foregoing. To the knowledge of Company, no
Person has (i) violated, infringed, or misappropriated or is now violating,
infringing or misappropriating any copyright, Patent, Mark, mask work right,
Trade Secret, or other proprietary right belonging to Company; (ii) made any
unauthorized disclosure of any Company Intellectual Property; or (iii) to
threatened to do so.
(g) None of Company's confidential information has been used,
divulged or appropriated for the benefit of any Person, other than Company, or
to the detriment of Company. Company has taken reasonable security measures to
protect the secrecy, confidentiality, and value of its confidential information.
(h) Except as set forth in Schedule 2.12.3H, upon commencement
of employment with Company, and prior to disclosure to any Company employee of
any Trade Secret or other confidential information, each Company employee
(whether now or at any time previously employed) executed an agreement with
Company in one of the forms set forth in Schedule 2.12.3H; subject to any
exception stated therein, each such agreement has vested fully, exclusively, and
irrevocably in Company all Intellectual Property developed, created, or invented
in whole or in part, or alone or together with others, by each Company employee
during the term of his or her employment with Company and is otherwise
reasonably believed by Company to be enforceable by Company in accordance with
its terms; and to the knowledge of Company, no employee has breached or
threatened to breach any term thereof. Prior to hiring any employee or engaging
any consultant, Company uses and has always used reasonable measures to ensure
that any work performed by such employee or consultant on Company's behalf will
not violate any confidentiality or Intellectual Property assignment agreement
binding such employee or consultant or otherwise violate any Intellectual
Property or other proprietary right of any third party.
2.12.4. Use Restrictions. Except as disclosed in Schedule
2.12.2B, Schedule 2.12.3A, or Schedule 2.12.3B, none of the Tangible Personal
Property or Intellectual Property owned or used by Company is subject to (a) any
material contractual restriction on the manner in, purpose for, or location at,
which same may be used (including any restriction on disclosure to or use by
Parent or any subsidiary of Parent that would be in effect following the
Closing), or (b) other restriction on any use of same that would result from the
consummation of the transactions contemplated hereby.
2.12.5. Necessary Properties. (a) Except as set forth in
Schedule 2.12.5, as of the date hereof, the Assets include all of the Real
Property, tangible personal property, and Intellectual Property used for the
lawful conduct of the Business as conducted to the date hereof.
2.12.6. Products.
(a) Schedule 2.12.6A lists every model or version of every
product currently or heretofore sold by Company and every product currently
under development, as evidenced in writing, by Company, together with any
certification by any Authority (e.g., FCC) or private or quasi-public standards
body or other third party as to safety (e.g., UL, CSA) or compatibility (e.g.,
IEEE, ITF, MPEG, USB, Microsoft Windows), or like certification applicable to
such product. Except as disclosed on Schedule 2.12.6A, (i) Company is not a
party to any Contract prohibiting or giving any third party the right to
prohibit Company from selling any such product, in any geographical area or
otherwise; and (ii) Company is not a party to any Contract permitting any other
Person to make any such product, except for sale solely to Company. Each
distribution, sales representative, or like Contract covering any such product
is listed on Schedule 2.12.6A. Company has not exported any product in violation
of any United States Law requiring an export license respecting export of such
product. Company has no basis to believe that it will not receive from its
foundry, TSMC, and Company's packager, multiproject wafer packaged devices for
Revision F1 and Revision G0 of the GT3100/GT3200 by the end of April 2002.
(b) Schedule 2.12.6B lists every product designed and completed
for a Company design services client insofar as such products have been tracked
in a Company project routing sheet. To the Company's knowledge
XXXXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXXX the products listed on
Schedules 2.12.6A and 2.12.6B perform materially free of bugs, viruses or other
malicious code, programming errors, or manufacturing or design defects and
otherwise in accordance with the specification utilized for development of such
product (unless waived by the Company customer or Company, as applicable),
end-user documentation (if prepared by Company) or other information of which
Company is aware and on which Company customers could reasonably be expected to
rely.
(c) Schedule 2.12.6C sets forth all express warranties
applicable to Company's products and services and a warranty claims history
since January 1, 1997. The manufacturing standards applied to, and testing
procedures used by Company for, the products listed on Schedule 2.12.6A comply
in all material respects with the specification utilized for such manufacturing
or testing (unless waived) and with all applicable Laws promulgated,
administered or enforced by any Authority.
2.13. Contracts.
(a) Schedule 2.13A sets forth an accurate and complete list of
each Contract (including each amendment) binding Company or to which any of the
Assets is subject, except (i) any Contract specifically listed on a schedule
pursuant to Sections 2.3, 2.5, 2.12, 2.14, 2.15.1, 2.17, 2.18 or 2.19; (ii) any
Contract, all obligations, rights and liabilities of which may be terminated by
Company on not more than 30 days notice without payment of any damages or
penalties or (iii) any Contract not so listed and not involving total payments
exceeding $3,000 (each Contract required to be listed in Schedule 2.13A or
pursuant to any such Section, a "Disclosed Contract"). Company has previously
delivered to Parent an accurate and complete copy (including all amendments) of
each Disclosed Contract and any other confidentiality agreement to which Company
is a party or, binding or benefiting Company that by its terms does not prohibit
the disclosure thereof.
(b) Except as disclosed in Schedule 2.13A:
(i) each Disclosed Contract is the valid, legal and binding
obligation of Company and, to the knowledge of Company, of the other contracting
party, enforceable in all material respects in accordance with its terms against
the other contracting party and is in full force and effect, except as the same
may be limited to bankruptcy, insolvency, reorganization, moratorium or other
similar Laws affecting the rights of creditors generally and available equitable
remedies, and except as the enforcement of the indemnification provisions may be
limited by securities Laws or held to be against public policy;
(ii) to the knowledge of Company XXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX (x) no other contracting party to any
Disclosed Contract is now in material breach thereof or has breached the same in
any material respect prior to the date hereof; (y) there is no anticipated
material breach thereof by any such party; and (z) there is not now, nor has
there been prior to the date hereof, any disagreement or dispute arising under
any Disclosed Contract that has not been resolved to Company's satisfaction;
(iii) Company is not in material breach of and has
fulfilled all material obligations required pursuant to each Disclosed Contract
to have been performed by it prior to the date hereof; Company has no knowledge
of any anticipated material breach thereof by Company
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX;
(iv) Company has fully complied with all Laws applicable to
its performance of any Contract with or for the benefit of any Authority,
including without limitation Laws relating to pricing, cost accounting or
allocation, or reporting thereof.
(v) Company is not a party to, nor bound by, any Contract
that restricts the conduct of the Business anywhere in the world.
(c) Schedule 2.13C sets forth a complete and accurate list of
each proposed amendment to any Disclosed Contract or proposed agreement,
arrangement, commitment, or other understanding under current discussion between
Company and any third party that would be required to be disclosed as a
Disclosed Contract, if same had been executed as of the date hereof. Copies of
the most recent draft of such proposed agreement, arrangement, commitment, or
other understanding and all other documents, if any, evidencing the current
status of such discussion have previously been delivered to Parent, or, in
absence of such documents, a summary of such status is set forth in Schedule
2.13C. Except as otherwise disclosed on Schedule 2.13C, (i) neither Company nor
any of the Key Officers has offered, given, promised to give, or authorized
giving, directly or indirectly, any money or anything else of value to any
official of an Authority, political party, political official, or candidate for
political office in connection with the Business in violation of any applicable
Law; and (ii) Company is not a party to any non-binding business arrangement
with any Affiliate of Company or any other Person, including, without
limitation, with respect to the purchase, sale, lease or exchange of property by
or to the Company or the rendering of any services by or to the Company, except
to the extent the same are in the ordinary course of and pursuant to the
reasonable requirements of the Business and upon fair and reasonable terms (x)
no less favorable to Company than Company would obtain in a comparable
arm's-length transaction with an unaffiliated Person, or (y) not materially more
favorable to Company than Company could obtain in a comparable arm's-length
transaction with an unaffiliated Person, in either case which, if such
non-binding business arrangement terminated, would cause an Adverse Change.
2.14. Compensation; Employment Agreements. Company has delivered to
Parent an accurate payroll list as of February 28, 2002 identifying all
officers, directors and key employees of Company. Company has provided to Parent
true, complete and correct copies of any employment Contract for persons listed
on such payroll list and all directors.
2.15. Employee Plans.
2.15.1. Copies of Plans. Schedule 2.15.1 lists all employee
benefit plans, all Company employee welfare benefit plans, all employee pension
benefit plans, including Company's Profit Sharing Plan and Section 401(k) Plan
(the "Section 401(k) Plan"), all multi-employer plans and all multi-employer
welfare arrangements (as defined in Sections 3(3), (1), (2), (37) and (40),
respectively, of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")), which are currently maintained and/or sponsored by Company, or any
benefit plans or arrangements, formal or informal, that are not subject to
ERISA, including, without limitation, employment agreements and any other
agreements containing "golden parachute" provisions and deferred compensation
agreements, or to which Company and any member of Company's "Controlled Group",
as defined below, currently contributes, or has an obligation to contribute in
the future, together with copies of any trusts related thereto and a
classification of employees covered thereby (collectively, the "Plans").
Schedule 2.15.1 also sets forth all of the Plans that have been terminated
within the past 5 years. Company has previously provided to Parent complete and
accurate copies of all of the Plans.
2.15.2. Compliance with ERISA and Tax Code.
(a) Except for the Plans, Company does not maintain or sponsor,
and is not a contributing employer to, any pension, profit-sharing, deferred
compensation, stock option, employee stock purchase or other employee benefit
plan, employee welfare benefit plan, or any other compensation or benefit
arrangement, formal or informal, with its employees, whether or not subject to
ERISA. Except as set forth in Schedule 2.15.2A: (i) all Plans are in compliance
with all applicable provisions of ERISA and the regulations issued thereunder,
as well as with all other applicable laws, and, in all material respects, have
been administered, operated and managed in substantial accordance with the
governing documents; (ii) all Plans that are intended to qualify (the "Qualified
Plans") under Section 401(a) of the Code are so qualified and have been
determined by the Internal Revenue Service to be so qualified, and copies of the
current plan determination letters, most recent actuarial valuation reports, if
any, most recent Form 5500, or, as applicable, Form 5500-C/R filed with respect
to each such Qualified Plan or employee welfare benefit plan and most recent
trustee or custodian report, are included as part of Schedule 2.15.2A; (iii) all
reports and other documents required to be filed with any governmental agency or
distributed to plan participants or beneficiaries (including, but not limited
to, annual reports, summary annual reports, actuarial reports, PBGC-1 Reports,
audits or tax returns) have been timely filed or distributed, or failure to
timely file or deliver will not result in an Adverse Change to Company; (iv)
none of the Shareholders or Company, any Plan, or Company have engaged in any
transaction prohibited under the provisions of Section 4975 of the Code or
Section 406 of ERISA; (v) no Plan has incurred an accumulated funding
deficiency, as defined in Section 412(a) of the Code and Section 502(1) of
ERISA; (vi) no circumstances exist pursuant to which Company could have any
direct or indirect liability whatsoever (including being subject to any
statutory lien to secure payment of any such liability), to the Pension Benefit
Guaranty Corporation ("PBGC") under Title IV of ERISA or to the Internal Revenue
Service for any excise tax or penalty with respect to any plan now or hereafter
maintained or contributed to by Company or any member of a "Controlled Group"
(as defined in Section 4001(a)(14) of ERISA) that includes Company; (vii)
Company nor any member of a Controlled Group that includes Company currently has
(or at the Closing Date will have) any obligation whatsoever to contribute to
any "multi-employer pension plan" (as defined in ERISA Section 4001(a)(14)), nor
has any withdrawal liability whatsoever (whether or not yet assessed) arising
under or capable of assertion under Title IV of ERISA (including, but not
limited to, Sections 4201, 4202, 4203, 4204, or 4205 thereof) been incurred by
any Plan; (viii) there have been no terminations, partial terminations or
discontinuance of contributions to any Qualified Plan without notice to and
approval by the Internal Revenue Service; (ix) no Plan which is subject to the
provisions of Title IV of ERISA, has been terminated; (x) there have been no
"reportable events" (as that phrase is defined in Section 4043 of ERISA) with
respect to any Plan which were not properly reported; (xi) the valuation of
assets of any Qualified Plan, as of the Closing Date, shall exceed the actuarial
present value of all accrued pension benefits under any such Qualified Plan in
accordance with the assumptions contained in the regulations of the PBGC
governing the funding of terminated defined benefit plans; (xii) Company is not
now nor has it been within the past 5 years a member of a Controlled Group which
has not been disclosed to Parent; (xiii) there is no pending litigation,
arbitration, or disputed claim; and (xiv) Company has no liability under Section
4062 of ERISA.
(b) With respect to Plans which qualify as "group health plans"
under Section 4980B of the Code and Section 607(1) of ERISA and related
regulations (relating to the benefit continuation rights imposed by "COBRA"),
Company has complied (and on the Closing Date will have complied) in all
material respects with all reporting, disclosure, notice, election and other
benefit continuation requirements imposed thereunder as and when applicable to
such Plans, and Company has not incurred (and will not incur) any material
direct or indirect liability and is not (and will not be) subject to any
material loss, assessment, excise tax penalty, loss of Federal income tax
deduction or other sanction, arising on account of or in respect of any direct
or indirect failure by Company, at any time prior to the Closing Date, to comply
with any such Federal or state benefit continuation requirement, which is
capable of being assessed or asserted before or after the Closing Date directly
or indirectly against Company with respect to such group health plans.
(c) With respect to Plans which qualify as "group health plans"
under Section 4980B of the Code and Section 607(1) of ERISA and related
regulations, Company has also complied (and on the Closing Date will have
complied) in all material respects with all reporting, disclosure, notice,
election and other requirements under the Health Insurance Portability and
Accountability Act of 1996 ("HIPAA") regarding the issuance of notices regarding
entitlement to information regarding periods of "creditable coverage" for
purposes of healthcare portability, as and when applicable to such Plans, and
Company has not incurred (and will not incur) any material direct or indirect
liability and is not (and will not be) subject to any material loss, assessment,
excise tax penalty, or other sanction, arising on account of or in respect of
any direct or indirect failure by Company, at any time prior to the Closing
Date, to comply with any requirements under HIPAA, which is capable of being
assessed or asserted before or after the Closing Date directly or indirectly
against Company with respect to such group health plans.
2.16. Suppliers and Business Relationships.
(a) Schedule 2.16 is an accurate and complete, and current list
of Company's customers, distributors, sales representatives, and suppliers
(including contractors, consultants, licensors, fabricators, packagers,
assemblers, and testers) excluding suppliers of office supplies or routine
services, to which Company has paid less than $10,000. Except as disclosed in
Schedule 2.16, (i) no single customer, distributor, sales representative, or
supplier is material to Company; (ii) the relationships of Company with its
customers, distributors, sales representatives, and suppliers are good
commercial working relationships, and no customer, distributor, sales
representative, or supplier listed on Schedule 2.16 has terminated or to the
knowledge of Company threatened to terminate, its relationship with Company;
(iii) no customer, distributor or sales representative, has decreased or to the
knowledge of Company threatened to decrease materially the level of its
purchases from Company; (iv) to the knowledge of Company, no supplier of Company
has decreased or threatened to decrease materially, services or products it
supplies to Company; and (v) to the knowledge of Company the execution,
delivery, or performance of this Agreement, or the consummation of the
transactions contemplated hereby will not adversely affect the relationship of
Company with any person listed on Schedule 2.16. No expenses associated with the
development of products for Company's account or any particular customer has
been charged to any other Company customer in breach of any Contract between
Company and any Person. Except as set forth in Schedule 2.16, Company previously
has delivered to Parent copies of each standard form of purchase order,
quotation, acknowledgement, invoice, terms and conditions, non-disclosure or
similar business form pursuant to which Company buys or sells goods or services;
Company is unaware of any impending material adverse change in the rates at
which materials or services are charged to it by any person identified on
Schedule 2.16 or that Company charges to any such Person.
(b) Company is not bound by any Contract or Law obligating
Company, for the benefit of any Authority, to maintain a supply of any Company
product or requiring Company to deliver or sell any Company product at a date
later than six months after the date hereof. Each Disclosed Contract to which an
Authority is a party has been so indicated on the Schedule listing such
Disclosed Contract.
2.17. Powers of Attorney and Suretyships. Except as set forth in
Schedule 2.17, Company has no general or special powers of attorney outstanding
(whether as grantor or grantee thereof) or any obligation or liability (whether
actual, accrued, accruing, contingent, or otherwise) as guarantor, surety,
co-signer, endorser, co-maker, indemnitor or otherwise in respect of the
obligation of any Person except for endorsements of checks in the ordinary
course of business.
2.18. Insurance. Schedule 2.18 hereto contains an accurate and
complete list of all insurance policies and bonds currently in force with
respect to the officers and directors, and the Assets and Business. Copies of
all such policies have been heretofore delivered to Parent. All premiums which
have become due with respect thereto covering all periods up to the Closing have
been paid or will be paid when due. Except as set forth in Schedule 2.18,
Company has insurance against risks of a character usually insured by
corporations engaged in the same or similar business as Company similarly
situated. Company has received no notification of cancellation, modification or
denial of renewal of any such policy or bond.
2.19. Environmental Matters. Except as set forth in Schedule 2.19
(a) Company has complied with, and is now in compliance with,
all Environmental Laws. Company has not Released any Hazardous Materials, and,
to the knowledge of Company there has been no Release of Hazardous Materials by
any other Person, into the Environment on, in, under or above any Real Property
leased or used by Company, and neither Company nor, to the knowledge of Company,
any third party has generated, Released, or disposed of on, in, under or above
any Real Property leased or used by Company, or transported to or from any Real
Property leased or used by Company, any Hazardous Material, except in each case
in compliance with Environmental Laws. Company has never been subject to any
reporting requirements with respect to any Hazardous Material under any
Environmental Laws. To Company's knowledge, the buildings and other parts of any
Real Property leased or used by Company have never contained any Hazardous
Materials, except in each case in compliance with Environmental Laws.
(b) To Company's knowledge, there are no substances or
conditions in, on, under or above any portion of any Real Property leased or
used by Company which violate any Environmental Laws. Company has not used any
substances or permitted any conditions in, on, under or above any portion of any
Real Property leased or used by Company which violate any Environmental Laws. To
Company's knowledge, there are no underground or above-ground storage tanks,
containers, drums, cylinders, cans or underground deposits of or containing
Hazardous Materials in violation of any Environmental Laws located in, on,
under, or above any portion of Real Property leased or used by Company during or
preceding Company's operation, ownership, lease or use of such Real Property.
(c) Company has not received any service of process or written
notice (i) from any Authority, including, without limitation, the United States
Environmental Protection Agency, proposing, suggesting or threatening
investigation or remedial action or alleging a violation of any Environmental
Law, including without limitation, any Environmental Law relating, directly or
indirectly, to, on, under, or above any portion of Real Property leased or used
by Company, (ii) from any former owner, lienholder or former or present tenant
or other user of any of the Real Property leased or used by Company seeking
indemnification for any cost associated with, or making any other claim in
connection with, the presence of Hazardous Materials on, beneath or adjoining
such Real Property, and/or (iii) from any other person or entity with respect to
any asserted violation of any Environmental Law by Company or relating to such
Real Property, or any asserted violation by Company of any Environmental Law
with respect to Hazardous Materials, or any threatened remedial action with
respect to any asserted violation by Company or with respect to such Real
Property of any Environmental Law.
(d) Schedule 2.19 identifies all Approvals or Permits issued
pursuant to any Environmental Law that are material to the Business. Company is
in material compliance with all Approvals and Permits identified on Schedule
2.19.
(e) Company is not and has not been involved in, and there is
not pending or, to the knowledge of Company, threatened, any action, suit,
proceeding or claim, or any Order, writ, judgment, award, injunction or decree,
or, to the knowledge of Company, any pending or threatened investigation, of
whatsoever nature, involving any portion of Real Property leased or used by
Company which arises under any Environmental Law or which relates to personal
injuries from exposure to Hazardous Materials resulting from the operation of
the Business.
(f) Notwithstanding the foregoing in this Section 2.19, any
representation and warranty contained in this Section 2.19 made with respect to
periods prior to the time when Company was in possession of any Real Property
shall be made to the knowledge of Company.
2.20. Books and Records; Full Disclosure.
(a) Except as set forth on Schedule 2.20, Company's Books and
Records, in reasonable detail, accurately and fairly reflect Company's
transactions and dispositions of Assets. Company maintains a system of internal
accounting controls sufficient to provide reasonable assurance that:
(i) transactions are executed in accordance with
management's authorization;
(ii) access to assets is permitted only in accordance with
management's authorization; and
(iii) recorded assets are compared with existing assets at
reasonable intervals, and appropriate action is taken with respect to any
differences.
(b) Proper allocations have been made among Company,
Communications, and Travel, so that their respective Books and Records reflect
their respective transactions, financial conditions, and results of operations
accurately and otherwise in accordance with GAAP. Company, Communications, and
Travel have done all things necessary or desirable to maintain their separate
corporate identities, including maintaining separate bank accounts, payrolls,
assets and Liabilities, Books and Records, officers and directors, and
Government Approvals, and filing separate Tax Returns. None of Company,
Communications, and Travel has or have (i) commingled any cash or other assets;
(ii) acted or purported to act for any of the others or represented that any of
them has authority to act on behalf of any of the others; (iii) paid or agreed
to pay any Liability of another of them or represented that any of them is
liable for the Liabilities of another of them; or (iv) made any other statement
or done any other thing as a result of which any of them might be liable for any
act, obligation under a Contract, or any other Liability of another of them.
(c) Company has heretofore made all of Company's Books and
Records available to Parent for its inspection and has heretofore delivered to
Parent complete and accurate copies of documents referred to in the Schedules or
that Parent otherwise has requested, except that Company has not disclosed
employee or medical records that by Law cannot be disclosed. All Disclosed
Contracts, documents, and other papers or copies thereof delivered to Parent by
or on behalf of Company in connection with this Agreement and the transactions
contemplated herein are accurate, complete, and authentic. Except for matters of
general application relating to companies similarly situated to Company, there
is no fact that Company has not disclosed to Parent in writing that, to the
knowledge of Company, could reasonably be expected to cause an Adverse Change.
2.21. Disclaimer of Other Representations and Warranties; Knowledge;
Disclosure.
(a) Company does not make, and has not made, any representations
or warranties relating to Company, the Shareholders, Company Common Stock or
otherwise in connection with the transactions provided for by this Agreement
other than those expressly set out in this Article II, including but not limited
to, any cost estimates, projections or other predictions, data or other
statements contained in any due diligence materials provided to Parent and/or
Merger Sub. Without limiting the generality of the foregoing, Company has not
made, and shall not be deemed to have made, any representations or warranties in
any oral or written correspondence or communications, and no statement contained
in any such correspondence or communications shall be deemed a representation or
warranty hereunder or otherwise, other than those expressly set out in this
Article II. No Person has been authorized by Company or any Affiliate of Company
to make any representation or warranty relating to Company, the Shareholders,
Company Common Stock or otherwise in connection with the transactions provided
for by this Agreement other than those expressly set out in this Article II and,
if made, such representation or warranty must not be relied upon as having been
authorized by Company or any Affiliate of Company.
(b) Whenever a representation or warranty made by Company herein
refers to the knowledge of Company, such knowledge shall be deemed to consist
only of the actual knowledge of any of the following individuals: Steven D.
Millaway, Roy Scott Kaller, Douglas Smith, and Ronald L. Weinreb (the "Key
Officers").
2.22. Updating of Information. Prior to the Closing, Company shall
notify Parent promptly in writing upon its discovery of any information that
constitutes or would indicate a breach by Company of any representation or
warranty of Company contained in this Article II and/or any item that should
have been included in any Schedule prepared by Company relating to this Article
II but that was not set forth in such Schedule. Should any information require
any change in any Schedule prepared by Company relating to this Article II and
attached hereto if such Schedule were dated the date of the occurrence or
discovery of any such fact or condition following the date of this Agreement,
Company shall promptly deliver to Parent a supplement to such Schedule
incorporating such change. Unless Parent properly and timely exercises its right
to terminate this Agreement pursuant to Section 9.2.1 prior to the earlier to
occur of (a) 10 days of Company's delivery of such supplement to such Schedule
to Parent or (b) the Closing, Company's supplement pursuant to this Section
2.21.2 shall be deemed to amend this Agreement and any related Schedules and, if
applicable, to have cured any breach of a representation or warranty that
otherwise might have existed by reason of such fact or condition.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT
----------------------------------------
Each of Parent and Merger Sub, jointly and severally, represents and
warrants to Company as follows:
3.1. Organization and Good Standing. Each of Parent and Merger Sub is a
corporation duly organized, validly existing and in good standing under the Laws
of the State of Delaware and Arizona, respectively. Each of Parent and Merger
Sub has all requisite corporate power and authority to own, lease, and operate
its assets and business and to carry on its business as presently conducted.
Each of Parent and Merger Sub is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction in which the current
nature of its business or the location of its assets requires such qualification
except where the failure to be so qualified, licensed or in good standing will
not result in Adverse Change. Merger Sub is a newly formed corporation that has
no assets or Liabilities and has conducted no business, except in respect of the
transaction contemplated hereby.
3.1.1. Authority to Execute and Perform Agreements. Each of Parent and
Merger Sub has all requisite corporate power and authority to enter into,
execute, and deliver this Agreement and each Additional Agreement to which it
shall be a party and to perform fully its obligations hereunder and thereunder.
3.1.2. Due Authorization; Enforceability. All corporate action
required to be taken by each of Parent's Board of Directors and Merger Sub's
Board of Directors and by Merger Sub's stockholders to authorize such
corporation to execute, deliver, and perform each of its obligations under this
Agreement and each Additional Agreement to which it shall be a party has been
taken and remains in full force and effect. This Agreement is and each
Additional Agreement to which each of Parent or Merger Sub shall be a party will
be, the legal, valid, and binding agreements of such corporation, enforceable in
accordance with their respective terms. The issuance of the Parent Common Stock
to be issued to the Shareholders in accordance herewith has been duly
authorized, and, when so issued, will be validly issued, fully paid, and
nonassessable.
3.2. No Violation. Neither the execution and delivery of this Agreement or
any Additional Agreement to be executed by Parent or Merger Sub hereunder nor
the consummation of the transactions contemplated herein and therein will (a)
violate any provision of Parent's or Merger Sub's articles or certificate of
incorporation or by-laws or other charter documents; (b) violate, conflict with,
or constitute a default under any Contract to which either Parent or Merger Sub
is a party or by which it or its property is bound; (c) require any Government
Approval or Third Party Consent; or (d) violate any Laws or Order to which
either Parent or Merger Sub or its property is subject.
3.3. Litigation. Parent neither has received notice nor knows of any
pending or threatened adverse claim, dispute, governmental investigation, suit,
action, arbitration, legal, administrative or other proceeding by or against or
otherwise affecting the ability of Parent or Merger Sub to consummate the
transactions contemplated hereby or any Order enjoining or requiring Parent or
Merger Sub to take or refrain from taking any action of any kind with respect
thereto.
3.4. Representations and Warranties of Parent Contained in Solicitation
Documents. Attached as Schedule 3.4 are representations and warranties to be
made by Parent in the Solicitation Documents, each of which is deemed to be made
herein as if fully stated herein and shall be incorporated herein by this
Section 3.4. Parent will provide no information contained in the Information
Memorandum concerning Company. Parent will provide no information concerning
Parent other than the representations and warranties set forth on Schedule 3.4
and Parent's Proxy Statement and Annual Report for Parent's 2001 fiscal year,
Form 10-K for the year ended February 28, 2001, and Forms 10-Q dated July 13,
2001, October 12, 2001 and January 14, 2001.
3.5. Certain Confidentiality Obligations. Parent is prohibited by binding
contractual confidentiality obligations from disclosing to Company the terms and
conditions of the 1999 Technology Exchange Agreement between Intel Corporation
and Parent.
3.6. Full Disclosure. As of their respective dates, each of Parent's
reports, proxy statements, or other documents filed with the Securities and
Exchange Commission since March 1, 2001 complied in all material respects with
the Laws applicable to such filing and did not contain any untrue statement of a
material fact or omitted any material fact necessary to make the statements
contained therein, in light of the circumstances in which they were made, untrue
or not misleading. Since the date of filing of its Quarterly Report on Form 10-Q
for the quarter ended November 30, 2001, Parent has not suffered any change,
event, or condition that, in any case or in the aggregate, has had or could
reasonably be expected to cause a material adverse change in the financial
condition or operating results of Parent or its business or assets. Except for
matters of general application relating to companies similarly situated to
Parent, there is no fact that Parent has not disclosed to Company in writing
that could reasonably be expected to cause a material adverse change in the
financial condition or operating results of Parent or its business, or assets.
ARTICLE IV
CERTAIN COVENANTS
-----------------
The parties hereto covenant and agree as follows:
4.1. Business Examinations and Physical Investigations of Assets. Prior to
the Closing Date, the Parent shall be entitled, through its employees and
representatives, to make such investigations and examinations of Company, its
Books and Records (except employee and medical records that by Law cannot be
disclosed), the Business, and the Assets as Parent may reasonably request. In
order that Parent may have the full opportunity to do so, Company shall furnish
Parent and its representatives during such period with all information
concerning the Business and the Assets as Parent or such representatives may
reasonably request and cause Company's officers, employees, consultants, agents,
accountants, and attorneys to cooperate fully with Parent and such
representatives and to make full disclosure of all information and documents
requested by Parent and/or such representatives. Any such investigations and
examinations shall be conducted at reasonable times and under reasonable
circumstances and with reasonable prior notice to Company. No investigation by
Parent before or after execution of this Agreement shall, however, diminish or
obviate in any way, the effectiveness of any of the representations, warranties,
covenants, or agreements of Company contained in this Agreement. Parent shall
keep all Company confidential information confidential pursuant to Section 11.2.
4.2. Conduct of Business.
4.2.1. From the date hereof through the Closing Date, Company shall
use its commercially reasonable best efforts to conduct the Business in such a
manner that the representations and warranties contained in Article II shall
continue to be true and correct in all material respects as of the Closing Date,
as if made at and as of the Closing Date, provided that Company shall have no
Liability under this Section 4.2.1 as a result of events occurring after date of
this Agreement beyond Company's control.
4.2.2. From the date hereof through the Closing Date, Company shall
conduct the Business only in the ordinary course and consistent with its prior
practices, shall not make or institute any unusual or novel method of
manufacture, purchase, sale, lease, management, accounting or operation or that
varies materially from same in use as of the date hereof and shall maintain,
keep, and preserve the Assets in good condition and repair, normal wear and tear
and obsolete or unusable Assets excluded. In addition, Company shall use its
commercially reasonable best efforts (a) to preserve its Business and
organization of Company intact, (b) to keep available to Parent the services of
Company's present officers, employees, agents and independent contractors, (c)
to preserve for the benefit of Parent the goodwill of Company's suppliers,
licensors, landlords and others having business relations with it, and (d) to
cooperate with Parent and assist Parent in obtaining the consent of any
landlord, licensor, or other party to any lease or other Contract with Company,
where the consent of such landlord or other party may be required by reason of
the transactions contemplated herein, provided, however, that with respect to
clause (b), Company shall not be obligated to expend any money other than as
required to satisfy its obligations on the date hereof to compensate such
Persons for their continued services through the Closing Date. Without limiting
the generality of the foregoing, prior to the Closing, Company shall not without
obtaining Parent's prior written approval, which approval shall not be
unreasonably withheld (except as otherwise provided in subsection (y) below):
(x) enter into any Contract which would constitute a Disclosed
Contract if it had been entered into by Company on or prior to the
date of this Agreement;
(y) XXXXXXXXXXXXXXXXXXXXX without Parent's prior written
approval, which may be withheld in Parent's sole discretion; or
(z) amend or propose to amend its Articles of Incorporation or
by-laws.
4.3. Changes in Business. From the date hereof through the Closing
Date, Company shall in good faith consult with Parent with respect to (a) the
cancellation of Contracts, commitments or other understandings or arrangements
to which Company is a party, including, without limitation, purchase orders, and
commitments for capital expenditures or improvements; (b) discontinuance of
particular items or operations; (c) other business policies of Company; and (d)
the settlement or disposition of any litigation or claim.
4.4. No Defaults. From the date hereof through the Closing Date,
Company shall not commit a material default under any term or provision of, or
suffer or permit to exist any condition or event that, with notice or lapse of
time or both, would constitute a material default by Company under, or cause,
permit, or result in any termination, acceleration, loss, or creation of any
right or obligation under, any Disclosed Contract or any Government Approval, or
result in the creation or imposition of any Encumbrance, except Permitted
Encumbrances, upon any Asset.
4.5. Reporting and Compliance With Law. From the date hereof through
the Closing Date, Company shall duly and timely file all Tax Returns required to
be filed with Authorities and duly observe and conform, in all material
respects, to all Laws and Orders.
4.6. Litigation. From the date hereof through the Closing Date,
Company shall promptly notify Parent of any lawsuit, claim, proceeding, or
investigation that after the date hereof is commenced or, to the knowledge of
Company or St. Pierre, is threatened against Company, or to the knowledge of
Company or St. Pierre or any employee listed on Schedule 5.5 that, if decided
adversely, could reasonably be expected to cause an Adverse Change.
4.7. Arrangements with Employees. From the date hereof until the
Closing Date, Company, after prior reasonable notice from Parent, shall permit
Parent to approach and negotiate with any or all employees of Company,
including, but not limited to, managerial staff, as necessary to persuade them
to continue in the employ of Company pending the Closing and thereafter. Company
shall cooperate with Parent in such negotiations.
4.8. Exclusive Dealing. Company will not (nor will it permit any of
its directors, officers, employees or representatives to), directly or
indirectly, take any of the following actions with any party other than Parent
and its directors, officers, employees and representatives: (a) solicit or
encourage inquiries or proposals with respect to, furnish any information
relating to, participate in any negotiations or discussions concerning, or
cooperate in any manner relating to any possible acquisition of Company or
investments into Company (whether by way of merger, purchase of capital stock, a
loan to Company, purchase of assets or otherwise), any material portion of the
Business, Assets, or any equity interest in Company (an "Investment"); (b)
provide information with respect to Company, to any Person relating to, or
otherwise cooperate with, facilitate or encourage any effort or attempt by any
Person or entity with regard to, any possible Investment; or (c) enter into any
agreement with any Person or entity providing for an Investment or possible
Investment. In the event Company receives any communication from a third party
expressing an interest in an Investment, Company will immediately notify Parent
in writing of the occurrence of such contact, provide Parent with a written
summary of such communication, and respond to any such communication in
accordance with Parent's reasonable instructions.
4.9. Undertakings.
(a) Promptly following the execution hereof, Company, Parent,
and Merger Sub shall prepare a Notice of Meeting, Information Memorandum,
Agreement with Shareholder, Agreement with Key Officer-Shareholder, Purchaser
Representative Questionnaire, Voting Agreement, Irrevocable Proxy, and Escrow
Agreement and such other documents as shall be determined by counsel to the
respective parties to be necessary or appropriate lawfully to obtain Shareholder
Approval, issue and distribute the Merger Consideration, and otherwise
effectuate the Merger (collectively, the "Solicitation Documents"). Promptly
following completion thereof, Company and Parent shall distribute the
Solicitation Documents to the Shareholders and Option Holders and, in accordance
with the Solicitation Documents, convene on or before May 29, 2002, pursuant to
notice duly given, conduct (or adjourn, reconvene, and conduct) a Shareholders'
meeting to obtain Shareholder Approval.
(b) Company shall make available to each Shareholder a
"Purchaser Representative" as defined in Regulation D under the Securities Act
of 1933, amended, in accordance with the Request for Purchaser Representative
form provided in the Agreements with Shareholder.
(c) Company will prepare and include in the Solicitation
Documents information concerning the Company and the transactions contemplated
by this Agreement necessary under applicable securities Laws and the ARS and in
form and substance adequate for a reasonable investor to make an informed
investment decision with respect to Shareholder Approval.
(d) Each party agrees that the representations and warranties
made by it in the Solicitation Documents do not and will not contain any untrue
statement of a material fact or omit to state any material fact necessary to
make the statements made, in the context in which they are made, untrue or not
misleading.
(e) Parent shall be responsible for the continuation of health
plan coverage, in accordance with the requirements of COBRA, for any employee or
qualified beneficiary under a Company health plan who is already receiving COBRA
benefits or who loses health coverage in connection with the transactions
contemplated in this Agreement.
(f) In addition to any specific obligations imposed under this
Agreement, Parent and Merger Sub, on the one hand, and Company, on the other
hand, agree to use their respective commercially reasonable best efforts to, and
to cooperate with each other to, cause the effectuation of all of the
transactions contemplated by this Agreement, the satisfaction of any condition
to the obligations of any other party, and the effectuation of the Merger, so as
to permit such transactions to take place on the Closing Date. Without limiting
the foregoing, each party shall use commercially reasonable best efforts, and
shall cooperate with each other party, to obtain any necessary Government
Approval or Third Party Consent.
(g) If a change of control of Surviving Corporation occurs
during Parent's 2003 fiscal year, then the maximum amount of the Contingent
Payments payable pursuant to Sections 1.5(c)(i), (ii) and (iii) shall become
payable within 30 days after such change of control is consummated whether or
not the conditions to such payments set forth in Sections 1.5(c)(i), (ii) or
(iii) have been satisfied; provided, however, that this Section 4.2(g) shall not
apply, if a principal reason that Parent shall have caused or allowed such
change in control to occur shall have been due to Surviving Corporation's
failure to conduct its business and operations materially in accordance with the
direction of Surviving Corporation's board of directors or chief executive
officer.
(h) During Parent's 2003 fiscal year, subject to the terms of
the Employment Agreements (including without limitation the duties and reporting
assignments provided therein) and any nondisclosure or noncompetition agreements
entered into between Parent or Surviving Corporation, on the one hand and each
Key Officer on the other hand, the administrative and operational
responsibilities of each Key Officer with respect to his employment with
Surviving Corporation shall remain substantially the same as such Person's
administrative and operational responsibilities with respect to Company
immediately prior to the Effective Time; provided, however, that it is
acknowledged that, as a result of the Merger, Company will become a subsidiary
of Parent, and its business and policies shall be controlled by Parent to the
same extent as other subsidiaries of Parent.
(i) Parent will use commercially reasonably efforts to achieve
at least $4,000,000 revenues in Parent's 2003 fiscal year from sales of the USB
GT3200, determined in accordance with Schedule 1.5(c)(i) ("Target Revenues").
Parent, Merger Sub and Company acknowledge that Target Revenues are unlikely to
achieve amounts that would result in payment of the maximum Contingent Payment
under Section 1.5(c)(i).
(j) Parent shall comply with the covenants made by it in the
last two bullet point items of subsection (e) of Schedule 1.5(c)(ii).
(k) [INTENTIONALLY LEFT BLANK]
(l) If Parent shall decline to consummate the Closing, other
than because of the failure of any of the conditions set forth in Sections 5.1,
5.3, 5.5, 5.6, 5.7, 5.14 or 5.17 to have been satisfied, excluding with respect
to Section 5.1, an Adverse Change over which Company shall have had no control,
Parent and Company shall enter into Amendment 1 to Loan Agreement and Security
Agreement in the form of Exhibit 4.9L.
(m) If Parent shall decline to consummate the Closing, other
than for reasons set forth in Section 4.9(l), and, XXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX Parent and Company
shall enter into Amendment 1 to Loan Agreement and Security Agreement in the
form of Exhibit 4.9M.
ARTICLE V
CONDITIONS PRECEDENT TO THE OBLIGATION
OF PARENT AND MERGER SUB TO CLOSE
--------------------------------------
The obligation of Parent to consummate the transactions contemplated herein
shall be subject to the fulfillment, at or before the Closing Date, of all of
the conditions set forth below in this Article V. Parent may waive in writing
any or all of such conditions in whole or in part without prior notice
5.1. Representations and Warranties; Performance of Covenants. The
representations and warranties of Company and the Key Officers contained in this
Agreement and any Additional Agreement shall have been true in all material
respects on the date hereof and shall be true in all material respects on and as
of the Closing Date with the same force and effect as though made on and as of
the Closing Date, and each obligation of Company or the Key Officers to be
performed by him or it on or before the Closing Date pursuant to the terms of
this Agreement or such Additional Agreement shall have been duly performed in
all material respects on or before the Closing Date; there shall not have
occurred between the date hereof and the Closing Date any Adverse Change;
Company shall not have breached either Sections 2(c) or 5 of the Letter of
Intent, dated January 7, 2002, or either Sections 1(c) or 4 of the Letter of
Intent, dated March 4, 2002, or the Loan Agreement (the "Loan Agreement"),
Promissory Note, or Security Agreement, each dated January 23, 2002, between
Company and Parent; and Company shall have delivered to Parent a certificate to
such effect dated the Closing Date signed by the President and Chief Financial
Officer of Company.
5.2. No Amendments to Resolutions; Corporate Status. Neither the Board
of Directors of Company nor any committee thereof shall have amended, modified,
rescinded or repealed the resolutions adopted by the Board of Directors referred
to in Section 2.1.4 (certified copies of which, dated the Closing Date, shall
have been provided to Parent) and shall not have adopted any other resolutions
in connection with this Agreement or the transactions contemplated hereby
inconsistent with such resolutions. Company shall have delivered to Parent and
Merger Sub (a) a certified copy of its Articles of Incorporation, (b) a true and
complete correct copy of its by-laws certified by Company's Secretary, and (c) a
long form good standing certificate from the Arizona Corporation Commission and
good standing certificates from the Secretary of State of each jurisdiction in
which Company is qualified to do business, each dated as of a date not more than
seven days prior to the Closing Date.
5.3. Tapeout of H0 Version of USB GT3200. Company shall have
completed, no later than May 31, 2002, a production tapeout (which shall mean
the Company has sent the appropriate database to TSMC), currently referred to as
the H0 Version, of the USB GT3200, including, without limitation, resolution of
all known issues in prior versions of the USB GT3200, and including, without
limitation, resolution of any material issues discovered upon testing and
characterization of the G0 samples received on April 23, 2002. For purposes of
this Section 5.3, "material" shall mean issues which affect compliance with the
USB 2.0 or UTMI Specifications or limit the USB GT3200's marketability to third
parties.
5.4. Employee Sideletter. Concurrently with execution hereof, Company
and Parent shall have signed and delivered the Employee Sideletter, in the form
of Exhibit 5.4.
5.5. Employee Offer Letters. Concurrently with execution hereof,
Company and each of Company's employees listed in Schedule 5.5 shall have signed
and delivered to Parent an offer letter in the form of Exhibit 5.5, and, subject
to the next sentence, not more than two of such employees
XXXXXXXXXXXXXXXXXXXXXXXXXXX, but not more than one of whom XXXXXXXXXXXXXXX shall
work on the USB GT3200, shall have evidenced any intention to terminate
employment with Company or the Surviving Corporation prior to one year after the
Closing Date. If either Company or Parent shall become aware of the intention of
an employee listed in Schedule 5.5 to terminate his employment, it shall notify
the other party in writing within 24 hours, and Company shall have a cure period
commencing upon its becoming aware of such intention and ending on the earlier
of three days later or the Closing Date.
5.6. Certain Agreements with Key Officers. Concurrently with execution
hereof, each Key Officer and St. Pierre shall have (a) signed and delivered to
Parent the Voting Agreement ("Voting Agreement"), Irrevocable Proxy
("Irrevocable Proxy"), Agreement with Key Officer-Shareholder ("Agreement with
Key Officer-Shareholder") (except that St. Pierre shall have signed the
Agreement with Shareholder (St. Pierre) instead of an Agreement with Key
Officer-Shareholder), his respective Employment Agreement in the form set forth
in Exhibit 5.6 (the "Employment Agreements") and Escrow Agreement ("Escrow
Agreement") in the respective forms set forth in Exhibit 5.6, (b) delivered all
of their Company Common Stock into escrow pursuant to the Escrow Agreement, (c)
irrevocably made the Section 1.5A Election, and (d) delivered to Parent such
spousal consents required to be delivered respecting such Additional Agreement.
Concurrently herewith Company shall have signed and delivered to Parent the
Voting Agreement and Employment Agreements. In addition, neither any such Key
Officer-Shareholder nor St. Pierre shall have evidenced any intention to
terminate employment with Company or the Surviving Corporation prior to one year
following the Closing Date. All employment agreements (including without
limitation rights to continued employment), other than the Employment
Agreements, between Company on the one hand and any Key Officer or XXXXXXXXXXXX
on the other hand, shall have been terminated in a writing reasonably
satisfactory to Parent.
5.7. Indemnity Escrow Agreement. The Key Officers shall have signed
and delivered the Indemnity Escrow Agreement in the form of Exhibit 5.7 (the
"Indemnity Escrow Agreement"), and shall have deposited shares of Parent Common
Stock into escrow pursuant to their Agreements with Key Officer-Shareholder and
the Escrow Indemnity Agreement.
5.8. Third Party Consents. The Third Party Consents listed in Schedule
5.8 shall have been obtained.
5.9. No Outstanding Stock Options. No Company Stock Option or other
security or instrument exercisable or exchangeable for or convertible into
Company capital stock shall remain outstanding.
5.10. Lease; Gain Communications Inc. Telecommunications Agreements.
Company and Steve D. Millaway, d/b/a Desert West Resources ("Desert West"),
shall have signed and delivered a lease for Company's premises at 2700 W.
Broadway Boulevard, Tucson Arizona ("2700 W. Broadway") on terms reasonably
satisfactory to Parent. Any lease (written, oral or otherwise) respecting the
premises at 2880 West Broadway Boulevard, Tucson, Arizona to which Company is a
party shall have been terminated on terms reasonably satisfactory to Parent.
Company and Gain Communications Inc. ("Communications") shall have signed and
delivered agreements for continuation of telecommunications services on
substantially the same terms as heretofore provided and otherwise on terms
reasonably satisfactory to Parent. Company and Millaway shall have signed and
delivered leases for premises at 2700 W. Broadway (which leases exclude any
portion of such premises utilized by Communications and ITI Travel, Inc.
("Travel")) on terms reasonably satisfactory to Parent. Arrangements
satisfactory to Company in its sole discretion shall have been made to preclude
access by third parties, including Communications, Travel, XXXXXXX, to Company's
local area network, computers, databases, or other information systems.
5.11. Solicitation Documents. The Company shall have delivered to
Parent, promptly on receipt, and in any event prior to the Closing Date,
original copies of all Solicitation Documents executed by the Shareholders and
Option Holders. Certificates (or duly executed affidavits of loss in lieu
thereof with respect to any lost certificates) representing at least 95% of the
outstanding Company Common Stock shall have been delivered into escrow pursuant
to the Escrow Agreement; Shareholders owning at least 95% of the outstanding
Company Common Stock shall have signed and delivered to Parent the applicable
form of Agreement with Shareholder, the Voting Agreement, and the Irrevocable
Proxies authorizing Parent to vote their Company Common Stock for, the approval
or adoption of the Plan of Merger; all representations and warranties of the
Shareholders contained in the Solicitation Documents shall have been true when
made and in all material respects be true as of the Closing Date; all
Shareholders' obligations under the Solicitation Documents to have been
performed as of the Closing Date shall have been performed; and Shareholders
owning in the aggregate not more than 10,000 Company Common Stock shall have
exercised any dissenter's right under Sections 10-1301 through 10-1331 of the
ARS. Company shall have delivered to Parent a certificate duly executed by its
President and Chief Financial Officer certifying that all Option Holders have
exercised all Company Stock Options owned by them, and no Options are
outstanding.
5.12. Articles of Merger Filed. The Articles of Merger shall have been
submitted to the Arizona Corporation Commission in accordance with the
provisions of Sections 10-1101 through 10-1108 of the ARS.
5.13. Resignations. The officers and directors of Company listed on
Schedule 5.13 shall have delivered to Parent duly executed resignations, dated
as of the Closing.
5.14. Information Memorandum. The Company shall supply evidence
satisfactory to Parent that it has delivered the Information Memorandum to each
of the Shareholders at their respective last known addresses not less than 10
days prior to the date of the Closing.
5.15. No Action or Proceeding. No action, suit or proceeding shall
have been instituted or threatened by any Person other than Parent, Merger Sub
or any Affiliate of Parent or Merger Sub, before any Authority seeking to
challenge or restrain the transactions contemplated herein that in Parent's
opinion presents a substantial risk that such transactions will be restrained or
that either party hereto may suffer material damages or other relief as a result
of consummating such transactions.
5.16. Government Approvals. All Government Approvals required for (a)
the lawful consummation of the transactions contemplated herein and (b) the
Surviving Corporation's ownership of the Assets and operation of the Business
shall have been obtained.
5.17. Merger Consideration. Company shall have delivered to Parent and
Merger Sub a certificate dated the Closing Date signed by the President and
Chief Financial Officer of Company setting forth the amount of Initial
Consideration to which each Shareholder shall be entitled and in detail the
computation of same.
5.18. Company Option Amendments. Company's board of directors, subject
to its fiduciary duties, and the Shareholders owning at least 75% of the Company
Common Stock shall have approved immediate vesting of all outstanding unvested
stock options.
5.19. Non-disclosure Agreements. Each of Company's current employees
listed in Schedule 2.12.3H shall have signed and delivered to Parent a
non-disclosure agreement in the form of Exhibit 5.19.
ARTICLE VI
CONDITIONS PRECEDENT TO THE OBLIGATION
OF THE COMPANY TO CLOSE
--------------------------------------
The obligation of Company to consummate the transactions contemplated
herein shall be subject to the fulfillment, at or before the Closing Date, of
all the conditions set forth below in this Article VI. Company may waive any or
all of such conditions in whole or in part without prior notice; provided,
however, that no such waiver shall constitute a waiver by Company of any right
or remedy otherwise available to it if Parent or Merger Sub shall be in default
of any of its representations, warranties or covenants contained in this
Agreement.
6.1. Representations and Warranties. The representations and
warranties of Parent and Merger Sub contained in this Agreement shall have been
true in all material respects on the date hereof and shall be true in all
material respect on and as of the Closing Date with the same force and effect as
though made on and as of the Closing Date; each of the obligations of Parent and
Merger Sub to be performed by it on or before the Closing Date pursuant to the
terms of this Agreement shall have been duly performed in all material respects
on or before the Closing Date; there shall not have occurred between the date
hereof and the Closing Date any material adverse change in Parent's or Merger
Sub's ability to consummate the transactions contemplated hereby; and at the
Closing Parent shall have delivered to Company a certificate dated the Closing
Date to such effect.
6.2. Good Standing. Each of Parent and Merger Sub shall be in good
standing under the laws of their respective states of incorporation and shall
each have delivered to Company (a) a certified copy of its Certificate of
Incorporation or Articles of Incorporation, as appropriate, (b) a true and
correct copy of its by-laws certified by its secretary, and (c) a long form good
standing certificate from the Secretary of State of the state of its
incorporation as of a date which is not more than seven days prior to the
Closing Date.
6.3. No Action or Proceeding. No action, suit or proceeding shall have
been instituted or threatened by any Person other than Company or any Affiliate
of Company before any Authority seeking to challenge or restrain the
transactions contemplated herein that in Company's reasonable opinion presents a
substantial risk that such transactions will be restrained or that either party
hereto may suffer material damages or other relief as a result of consummating
such transactions.
6.4. Governmental Approvals. All Government Approvals required for (a)
the lawful consummation of the transactions contemplated herein and (b) the
Surviving Corporation's ownership of the Assets and operation of the Business
shall have been obtained.
6.5. Shareholder Approval. Shareholder Approval shall have been
obtained.
6.6. Articles of Merger. Merger Sub shall have signed and delivered to
Company the Articles of Merger.
6.7. Additional Agreements. Each of Parent and Merger Sub shall have
entered into and deliver to Company, each Additional Agreement to which either
of them is a party.
6.8. Other Contracts Delivered. Concurrently with the execution
hereof, Parent and Merger Sub shall each have signed and delivered to Company or
the Key Officer, as the case may be, this Agreement, each Agreement with Key
Officer-Shareholder, the Indemnity Escrow Agreement and the Escrow Agreement.
Concurrently with the execution hereof, Parent shall have signed and delivered
to St. Pierre the Agreement with Shareholder between St. Pierre and Parent.
ARTICLE VII
RELIANCE ON REPRESENTATIONS AND WARRANTIES
------------------------------------------
7.1. Reliance on Representations and Warranties of Company.
Notwithstanding any right of Parent to fully investigate the affairs of Company
and notwithstanding any knowledge of facts determined or determinable by Parent
pursuant to such investigation or right of investigation, Parent shall have the
right to rely fully upon the representations, warranties, covenants and
agreements of Company contained in this Agreement.
7.2. Reliance on Representations and Warranties of Parent and Merger
Sub. Company shall have the right to rely fully on each of Parent's and Merger
Sub's representations, warranties, covenants and agreements herein,
notwithstanding any investigation by Company.
ARTICLE VIII
INDEMNIFICATION
---------------
8.1. Indemnification of Parent and Merger Sub. If Parent shall
terminate this Agreement pursuant to Section 9.2.1, Company shall indemnify,
defend and hold harmless Parent, Merger Sub, and each of their respective
shareholders, directors, officers, employees, agents, attorneys and
representatives (the "Purchaser Indemnitees") from and against any and all
Losses that may be incurred or suffered by any such Person and arising out of or
resulting from (a) any breach of any representation, warranty, covenant, or
agreement of Company contained in this Agreement, including damages for breach
of contract, and (b) enforcing this indemnity as to which Company shall receive
notice prior to eighteen months and 7 days after the Closing Date.
8.2. Indemnification of Company and Shareholders. Prior to the Closing
each of Parent and Merger Sub shall indemnify, defend and hold harmless Company,
and, after the Closing, each of Parent and the Surviving Corporation shall
indemnify, defend, and hold harmless the Shareholders (the "Seller
Indemnitees"), from and against any and all Losses that may be incurred or
suffered by them arising out of or resulting from any breach of any
representation, warranty, covenant, or agreement of Parent or Merger Sub
contained in this Agreement and (b) enforcing this indemnity as to which Parent
shall receive notice prior to eighteen months and 7 days after the Closing Date.
The total payments made by Parent and Merger Sub to the Seller Indemnitees with
respect to Losses (other than Losses relating to the termination of this
Agreement by Company pursuant to Section 9.2.2) shall not exceed the Merger
Consideration. No Seller Indemnitee shall be entitled to indemnification
pursuant to this Section 8.2 unless and until the aggregate amount of all Losses
(other than Losses relating to the termination of this Agreement by Company
pursuant to Section 9.2.2) to all Seller Indemnitees equals at least $100,000,
at which time, subject to the immediately preceding sentence, the Seller
Indemnitees shall be entitled to indemnification for the total amount of such
Losses in excess of $100,000. Parent, Merger Sub and Company each agree and
stipulate that the Shareholders shall be third party beneficiaries of this
Section 8.2 and that, subject to the terms and conditions of this Agreement
(including, but not limited to, Section 11.10), following the Closing, the
Shareholders individually and collectively may assert and enforce their rights
under this Agreement (including, but not limited to, rights arising under this
Section 8.2), and shall be subrogated for Company and may individually and
collectively assert and enforce the rights and interests of Company set forth
herein or in any Additional Agreement to which Company is a party in the place
and stead of Company.
8.3. Notice of Indemnification. Any Person entitled to indemnification
hereunder will (a) give prompt written notice to the indemnifying party of any
claim with respect to which it seeks indemnification and (b) unless in such
indemnified party's reasonable judgment a conflict of interest may exist between
such indemnified and indemnifying parties with respect to such claim, permit
such indemnifying party to assume the defense of such claim with counsel
reasonably satisfactory to the indemnified party. Whether or not such defense is
assumed by the indemnifying party, the indemnifying party will not be subject to
any liability for any settlement made without its consent (but such consent will
not be unreasonably withheld). The failure of an indemnified party to give
notice pursuant to clause (a) above shall not relieve any indemnifying party of
its obligations hereunder, except to the extent such indemnifying party shall
have been prejudiced thereby. No indemnifying party shall consent to entry of
judgment or enter into any settlement that does not include as an unconditional
term the giving by the claimant or plaintiff to such indemnified party of a
release from liability in respect to such claim. An indemnifying party who is
not entitled to, or elects not to, assume the defense of a claim will not be
obligated to pay the fees and expenses of more than one counsel for all parties
indemnified by such indemnifying party with respect to such claim, unless, in
the reasonable judgment of any indemnified party, a conflict of interest may
exist between such indemnified party and any other of such indemnified parties
with respect to such claim, in which event the indemnifying party shall be
obligated to pay the fees and expenses of such additional counsel or counsels.
The indemnified party shall cooperate in any defense assumed by the indemnifying
party and may participate in the defense of any claim.
ARTICLE IX
TERMINATION; REMEDIES
---------------------
9.1. Termination Without Default. In the event that, as of the Closing
Date, any event or state of facts not constituting a default by a party shall
exist, which event or state of facts constitutes a failure of the conditions
precedent for the benefit of Parent and Merger Sub on the one hand, or Company
on the other, the side for whose benefit such condition precedent is imposed
hereby shall have the right, at its sole option, to terminate this Agreement
prior to the Closing without Liability to the other side. If the Closing shall
not have occurred within sixty (60) days after the date hereof, Parent, on the
one hand, or Company on the other, shall have the right to terminate this
Agreement without Liability to either party provided that such failure of the
Closing to occur is not the result of a breach of this Agreement by the party
(or its Affiliates) seeking to terminate this Agreement. Such right may be
exercised by Parent, on the one hand, or Company on the other, as the case may
be, by giving written notice to the other, specifying the event or state of
facts giving rise to such right of termination.
9.2. Termination Upon Default.
9.2.1. Termination by Parent. Notwithstanding anything to the
contrary in Section 9.1, Parent may terminate this Agreement by giving notice to
Company on or prior to the Closing Date, without prejudice to any rights or
obligations Parent or Merger Sub may have, if Company shall have materially
breached any agreement, covenant, representation, or warranty made by it herein
or any Additional Agreement to which it is a party, unless such breach shall be
curable and shall have been cured by the Closing Date.
9.2.2. Termination by Company. Notwithstanding anything to the
contrary in Section 9.1, Company, by vote of its board of directors, may
terminate this Agreement by giving notice to Parent on or prior to the Closing
Date, without prejudice to any rights or obligations Company may have, if Parent
or Merger Sub shall have materially breached any covenant, agreement,
representation, or warranty made by either of them herein or any Additional
Agreement to which it is a party, unless such breach shall be curable and shall
have been cured by the Closing Date.
9.2.3. Rights Reserved. Subject to Section 9.3; in event of
termination pursuant to Section 9.2.1 or 9.2.2, the non-breaching side may
pursue such remedies as are available to it at Law or equity, or as are provided
hereunder.
9.3. WAIVER OF JURY TRIAL; EXEMPLARY DAMAGES. ALL PARTIES HEREBY WAIVE
THEIR RIGHTS TO TRIAL BY JURY WITH RESPECT TO ANY DISPUTE ARISING UNDER THIS
AGREEMENT. No party shall be awarded punitive, treble, RICO, or other exemplary
damages respecting any dispute arising under this Agreement.
9.4. Interest On Amounts Due. Any amount payable by one party to
another under any provision of this Article IX shall bear interest at the lower
of the annual rate of 12% or the highest rate permitted by Law from the date due
until paid.
ARTICLE X
DEFINITIONS
-----------
When used in this Agreement, the following terms shall have the respective
meanings set forth below:
"Accounts Receivable" shall mean all of the accounts, notes, accounts
receivable, contract rights to payment of money, drafts, and other instruments,
receivables, and rights relating to the payment of money or other forms of
consideration, for goods sold or leased or services performed.
"Additional Agreements" shall mean each Contract execution and delivery of
which shall be a condition to any obligation of any party hereunder, including
any Contract included in the Solicitation Documents and in Sections 1(c) and 4
of the Letters of Intent, Loan Agreement, Promissory Note, and Security
Agreement referred to in Section 5.1.
"Adverse Change" is defined in Section 2.8.5(a).
"Affiliate" shall mean, with respect to any Person, a Person directly or
indirectly controlling, controlled by or under common control with, such Person.
For purposes of this Agreement, "control" means the possession, direct or
indirect, of the power to direct or cause the direction of the management and
policies of a Person, whether through the ownership of voting securities, by
contract or otherwise.
"Agreement" shall mean this Agreement and Plan of Merger, including all
exhibits and schedules hereto, as the same may hereafter be amended, modified or
supplemented from time to time.
"Agreement with Key Officer-Shareholder" is defined in Section 5.6.
"Agreement with Shareholder" is defined in Section 1.5(f).
"Articles of Incorporation" is defined in Section 1.3(a).
"Articles of Merger" is defined in Section 1.1.
"ARS" is defined in Section 1.1
"Assets" shall mean all of the Business, goodwill, assets, property,
Intellectual Property and rights of every nature, kind and description, whether
tangible or intangible, real, personal or mixed, wherever located and whether or
not carried or reflected on the Books and Records of Company, owned or used by
Company or in which Company has any interest (including the right to use),
including any of the foregoing listed on the Schedules hereto or pursuant to the
terms hereof not required to be so listed
"Authority" shall mean any governmental, regulatory or administrative
body, agency or authority, any court or judicial authority, any arbitrator, or
any public, private or industry regulatory authority, whether international,
national, Federal, state, or local.
"Authorized Disclosures" shall mean:
(a) Disclosures of confidential information to the extent that
such disclosures were previously authorized by the party which owns such
confidential information or to whom such confidential information relates (the
"Disclosing Party"); or
(b) Disclosures of confidential information which are, or had
previously become, generally known to the public through Legitimate Origins (the
term "Legitimate Origins" means that the source or channel of communications
and/or documentation was entitled to permit the transmission of the relevant
information without breach of this Agreement, any other applicable agreement or
duty, or any Law); or
(c) Disclosures of confidential information to the extent
necessary to the enforcement or defense of any claims or causes of action (i)
between Parent, Merger Sub or Surviving Corporation, on the one hand, and
Company or Shareholders, on the other hand, or (ii) asserted by a third party
against Parent, Merger Sub, Surviving Corporation, Company or Shareholders and
then only to the extent of disclosure made to governmental authorities or to
officials or officers of any court, administrative court or arbitrators before
whom such claims or causes of action are asserted, and in any event after five
(5) business days prior written notice to the Disclosing Party describing the
confidential information so to be disclosed, to whom it is to be disclosed, and
the reasons for disclosure; or
(d) Disclosures of confidential information to any Authority, or
to officials or officers of any court, administrative court or arbitrators, with
valid and competent jurisdiction thereof, if directed to disclose such
confidential information to and by any of the foregoing, and in any event after
five (5) business days prior written notice to the Disclosing Party describing
the confidential information so to be disclosed, to who it is to be disclosed,
and the reasons for disclosure; or
(e) Disclosures of confidential information to the officers,
directors, employees agents and/or representatives of Parent, Merger Sub,
Surviving Corporation, Company or Shareholders who reasonably need to know such
information and who have been informed of and have agreed to be bound by the
terms and conditions of this Agreement regarding the disclosure and protection
of such confidential information.
"Balance Sheet" shall mean the Company's balance sheet as of December
31, 2001.
"Balance Sheet Date" shall mean December 31, 2001.
"Books and Records" shall mean all books and records, ledgers,
employee records, customer lists, files, correspondence, and other records of
every kind (whether written, electronic, or otherwise embodied) or in which a
Person's assets, business, or transactions are reflected.
"Business" shall mean the business of Company as conducted now by
Company anywhere in the world and as would.
"CERCLA" shall mean the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, 42 U.S.C. Section 9601, et. seq., as the
same may be amended from time to time.
"Closing" is defined in Section 1.2.
"Closing Date" shall mean the date upon which the Closing occurs.
"Code" shall mean the Internal Revenue Code of 1986, as the same may
hereafter be amended from time to time. Any reference to a specific section of
the Code shall refer to the cited provision as the same may be subsequently
amended from time to time, as well as to any successor provision(s).
"Communications" is defined in Section 5.10.
"Company Common Stock" is defined in Section 1.5(a).
"Company Debt" means loans from Commercial Federal Bank, loans on
Cadence Design Systems, Inc. contracts, amounts of the First Loan utilized to
pay off a loan from Power Equities, Inc. (approximately $1,065,000), and any
other Liability for borrowed money repaid after funding of the First Loan, but
excluding, without limitation, any XXXXXX XXXXXXXXX, or with respect to the
First Loan to the extent that proceeds from the First Loan were not used to pay
down Liabilities owed by Company to Power Equities, Inc. prior to the advance of
the First Loan.
"Company Intellectual Property" is defined in Section 2.12.3(b).
"Company Stock Option" shall mean each outstanding option to buy
Company Common Stock, whether or not vested or exercisable in accordance with
its terms.
"Contingent Payment" is defined in Section 1.5(d)(ii).
"Contingent Payment Date" is defined in Section 1.5(d)(iii).
"Contract" shall mean any contract, agreement, warranty, guaranty,
indenture, bond, option, lease, sublease, easement, mortgage, employee benefit
plan, collective bargaining agreement, license, purchase order, sales order,
commitment, proxy, irrevocable proxy, grant of authority, power, or right or
other binding arrangement of any nature whatsoever, express or implied, written
or unwritten, and any amendment thereto.
"Controlled Group" is defined in Section 2.15.2(a).
"Disclosed Contract" is defined in Section 2.13(a).
"Dissenting Shares" is defined in Section 1.4(d).
"Effective Time" is defined in Section 1.1.
"Employment Agreements" is defined in Section 5.6.
"Encumbrance" shall mean any security interest; adverse claim; charge;
conditional sale contract; easement; lien; mortgage; option; pledge; preemptive
right; restriction on transfer, use, right to possess, power to exercise or
grant to another any right, or other restriction; reversionary interest; right
of first refusal; or similar right; proxy, irrevocable proxy, voting agreement;
voting trust arrangement; or any other encumbrance on or limitation or
impairment of any right with respect to any kind of property or right
whatsoever, whether currently in effect or that may come into effect upon the
passage of time or occurrence of a specified circumstance.
"Environment" shall mean all components of the earth and any elements
thereof, including land, soil and subsoil, air, water, any layer of the
atmosphere, any organic or inorganic matter, and any living organism including
humans.
"Environmental Laws" shall mean collectively, all applicable Laws and
Orders that relate to the protection of the Environment, including public health
and safety, including without limitation those that relate to the existence,
handling, manufacture, treatment, storage, disposal, use, generation, Release,
threatened Release, refining or recycling of Hazardous Materials, including but
not limited to the Hazardous Materials Transportation Act (49 U.S.C.ss.ss. 1801
et seq.); the Resource Conservation and Recovery Act of 1976 (42 U.S.C.ss.ss.
6901 et seq.); the Clean Air Act (42 U.S.C.ss.ss. 7401 et seq.); the Federal
Water Pollution Control Act (33 U.S.C.ss.ss. 1251 et seq.); the Safe Drinking
Water Act (42 U.S.C.ss.ss. 300f et seq.); the Comprehensive Environmental
Response; Compensation and Liability Act of 1980 (42 U.S.C.ss.ss. 9601 et seq.);
the Superfund Amendments and Reauthorization Act of 1986 (Pub. L. 99-499); the
Oil Pollution Act of 1990 (33 U.S.C.A.ss.ss. 2701-2761); the Toxic Substances
Control Act (15 U.S.C.ss.ss. 2601 et seq.); the Emergency Planning and Community
Right to Know Act (42 U.S.C.ss.ss. 11011, et seq.); the Occupational Safety and
Health Act (26 U.S.C.ss.ss. 651 et seq.); the Pollution Prevention Act of 1990
(42 U.S.C.ss.ss. 13101 et seq.) the Atomic Energy Act of 1954 (68 Stat. 919);
the Arizona Environmental Quality Act (49 A.R.S.ss.ss. 49-101, et seq.); and all
similar or additional federal, state, local or foreign statutes relating to the
protection of the Environment, all as amended, and all regulations promulgated
thereunder.
"ERISA" is defined in Section 2.15.1.
"Escrow Agreement" is defined in Section 5.6.
"Final Holdback" is defined in Section 1.7.
"First Loan" shall mean bear the meaning ascribed to such capitalized
term set forth in the First Loan Documents, For purposes of clarity, the First
Loan is the first $1,250,000 advanced by Parent to Company pursuant to the First
Loan Documents.
"First Loan Documents" shall mean the Loan Agreement, Secured
Promissory Note, or Security Agreement, each dated January 23, 2002, between
Company and Parent or issued by Company to parent.
"GAAP" shall mean the opinions and pronouncements of the Accounting
Principles Board of the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards Board from
time to time applied on a consistent basis.
"Government Approval" is defined in Section 2.6.
"Hazardous Materials" means any material or substance (a) the presence
and amount of which require reporting, investigation, removal or remediation
under any Environmental Laws; (b) that is defined as a "hazardous waste,"
"hazardous substance," "toxic pollutant" or "contaminant," or any variation of
such terms, under any Environmental Laws; (c) that is toxic, explosive,
corrosive, flammable, ignitable, infectious, radioactive, reactive,
carcinogenic, mutagenic, or otherwise hazardous and is regulated under any
Environmental Laws; (d) that contains gasoline, diesel fuel or other petroleum
hydrocarbons; or (e) that contains PCBs, asbestos or urea formaldehyde foam
insulation.
"HIPAA" is defined in Section 2.15(c).
"Holdback Ratio" is defined in Section 1.5(d)(vii).
"Indemnity Escrow Agreement" is defined in Section 5.7.
"Information Memorandum" shall mean an information statement to be
distributed by Company to the Shareholders, which is in form and substance
reasonably satisfactory to Parent.
"Initial Cash Consideration" is defined in Section 1.2.
"Initial Consideration" is defined in Section 1.2.
"Initial Holdback" is defined in Section 1.7.
"Intellectual Property" shall mean all intangible property, including,
without limitation, (i) all Marks; (ii) all unregistered trademarks, service
marks, trade names and slogans; (iii) all statutory, common law and registered
copyrights and mask work rights, and all applications for the registration
thereof; (iv) all Patents; (v) all Software; (vi) all other inventions,
discoveries, improvements, processes, formulas (secret or otherwise),
algorithms, Trade Secrets, information, know-how and ideas (including those
owned but in the possession of third parties); (vii) all Technical Documentation
and information and data contained therein; and (viii) rights under Contracts or
otherwise to acquire in the future any of the foregoing, or to acquire any of
the foregoing which may be created, invented, completed, perfected, reduced to
practice, or come into being in the future.
"Inventories" shall mean all inventories, including, without
limitation, inventories of raw materials, work in progress, storehouse stocks,
materials, supplies, finished goods and consigned goods, owned by Company or in
which Company has any interest (including the right to use), whether located on
the premises of the Business, in transit to or from such premises, in storage
facilities or otherwise.
"Irrevocable Proxy" is defined in Section 5.6.
"Investment" is defined in Section 4.8.
"Key Officers" is defined in Section 2.21(b) ---------------
"Knowledge of Company" or "Company's knowledge" or similar terms means
the actual knowledge of the Key Officers.
"Law" shall mean any provision of any constitution, statute, or law,
ordinance, regulation, rule, or binding action, order, or pronouncement of an
Authority.
"Letters of Intent" shall mean the Letter of Intent dated January 7,
2002, and Letter of Intent dated March 4, 2002, in each case between Parent and
Company.
"Liability" shall mean any direct or indirect indebtedness, liability,
claim, loss, damage, deficiency, obligation, or responsibility, known or
unknown, liquidated or unliquidated, accrued, absolute, contingent or otherwise,
and whether or not of a kind required by GAAP to be set forth on a financial
statement
"Loan Agreement" is defined in Section 5.1.
"Losses" shall mean all damages, awards, judgments, payments,
diminutions in value and other losses, however suffered or characterized, all
interest thereon, all costs and expenses of investigating any claim, lawsuit or
arbitration and any appeal therefrom, all attorneys' fees and expenses actually
incurred in connection therewith, whether or not such claim, lawsuit or
arbitration is ultimately defeated, and all amounts paid incident to any
compromise or settlement of any such claim, lawsuit, or arbitration.
"Marks" shall mean all registered and unregistered trademarks, service
marks, trade names, and slogans, all applications therefor.
XXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
"Merger" is defined in Section 1.3(a).
"Merger Consideration" is defined in Section 1.4(a).
"Millaway" means Steve D. Millaway.
"Notice of Meeting" shall mean the notice of Shareholders meeting
referred to in Section 2.1.4 (d).
"Option Holder" shall mean the holder of a Company Stock Option.
"Order" shall mean any decree, order, judgment, writ, award,
injunction, rule or consent of or by an Authority.
"Parent Common Stock" shall mean the common stock of the Parent, par
value $.10 per share.
"Patents" shall mean all patents, including, without limitation, all
reissues, divisions, continuations, continuations in part, utility models and
design patents, all patent applications (including without limitation,
provisional applications), and all associated claims, inventions, industrial
models, processes, designs, technical information, shop rights, know-how, Trade
Secrets, processes, operating, maintenance and other manuals, drawings and
specifications, process flow diagrams and related data.
"Permitted Encumbrances" means Encumbrances consisting of (a)
Encumbrances for Taxes, assessments, governmental charges or levies which are
not yet due and payable, (b) Encumbrances for the non-material claims of
landlords, carriers, contractors, materialmen, repairmen, mechanics and similar
persons, (c) any existing applicable building and zoning ordinances, and (d)
those items set forth in Schedule X.
"Person" shall mean any entity, corporation, company, association,
joint venture, joint stock company, partnership, trust, organization, individual
(including personal representatives, executors and heirs of a deceased
individual), nation, state, government (including agencies, departments,
bureaus, boards, divisions and instrumentalities thereof), trustee, receiver or
liquidator or any two or more persons deemed a person by Section 13(d) of the
Exchange Act.
"Plan" is defined in Section 2.15.1.
"Plan of Merger" is defined in Section 2.1.3.
"Purchaser Indemnitee" is defined in Section 8.1.
"Purchaser Representative Questionnaire" shall mean the purchaser
representative questionnaire to be included in the Solicitation Documents.
"Qualified Plans" is defined in Section 2.15.2(a).
"Real Property" shall mean, collectively, all real properties and
interests therein (including the right to use or occupy), together with all
buildings, fixtures, trade fixtures, plant and other improvements located
thereon or attached thereto; all rights arising out of use thereof (including
air, water, oil and mineral rights); and all subleases, franchises, licenses,
permits, easements and rights-of-way which are appurtenant thereto.
"Registered IP" is defined in Section 2.12.3(a).
"Release" shall mean any spilling, leaking, seepage, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, migrating, leaching,
dumping, or disposing into the Environment.
"Request for Purchaser Representative" shall mean the request for
purchaser representative to be included in the Solicitation Documents.
"Section 1.5A Election" is defined in Section 1.5(a).
"Seller Indemnitee" is defined in Section 8.2.
"Shareholder" shall mean the Persons identified in Schedule 2.3 as an
owner of Company Common Stock as of the Effective Time.
"Shareholder Approval" is defined in Section 2.1.3.
"Shareholder Questionnaire" shall mean the shareholder questionnaire
to be included in the Solicitation Documents.
"Software" shall mean all partial or whole "software" and "firmware"
and documentation thereof (including, without limitation, all electronic data
processing systems and program specifications, source codes, object codes,
routines, microcodes, input data and report layouts and formats, record file
layouts, outlines, documentation, diagrams, specifications and narrative
descriptions and flow charts).
"Solicitation Documents" is defined in Section 4.9.
"St. Pierre" is defined in Section 2.12.6(b).
"Surviving Corporation" is defined in Section 1.3(a).
"Tangible Personal Property" shall mean all machinery, equipment,
vehicles, trucks, automobiles, furniture, supplies, spare parts, computers,
hardware, tools, stores and other tangible personal property or interest therein
(including the right to use or possess), other than the Books and Records.
"Tax Returns" shall mean, collectively all Federal, state, foreign,
and local Tax reports, returns, information returns and other related documents
required by any relevant Taxing Authority to be filed with such Authority.
"Taxes" shall mean, collectively all taxes, including without
limitation, income, gross receipts, net proceeds, alternative, add-on, minimum,
ad valorem, value added, turnover, sales, use, property, personal property
(tangible and intangible), stamp, leasing, excise, duty, franchise, transfer,
license, withholding, payroll, employment, fuel, excess profits, environmental,
occupational, interest equalization, windfall profits and severance taxes, and
all other like governmental charges.
"Technical Documentation" shall mean all technical information and
documentation, including, without limitation, all partial or whole designs,
drawings, schematics, board layouts, bills of material, chip tooling, pattern
generation tapes, test tapes, logic diagrams, circuit diagrams, partial or whole
mask, board, chip or cell designs, outlines, or other specifications,
descriptions used in the Business, or documentation, writings, drawings, papers,
records, books, tapes, disks, or other tangible medium embodying any of the
Intellectual Property.
"Third Party Consent" is defined in Section 2.6.
"Trade Secrets" shall mean without limitation any information,
including a formula, pattern, compilation, program, device, method, technique,
or process, that derives independent economic value, actual or potential, from
not being generally known to the public or to other persons who can obtain
economic value from its disclosure or use, whether or not used in the Business,
and is the subject of efforts that are reasonable under the circumstances to
maintain its secrecy. Without limiting the foregoing definition in any way,
Trade Secrets include inventions, technical and business information, such as
information set out in or relating to computer programs, engineering or
technical data, drawings, designs, design techniques and methodologies,
manufacturing techniques, research and development plans and practices, cost
data, pricing practices and policies, marketing practices and policies,
licensing practices and policies, and the identity and location of past,
present, or prospective suppliers, licensors, licensees, or customers.
"Transaction Expenses" means expenses incurred by Company in
connection with the Merger, including fees and expenses of its outside
financial, legal and accounting advisors.
"Transfer Agent" means American Stock Transfer & Trust Company, or if
such Person is no longer Parent's Transfer Agent, any other transfer agent
retained by Parent in lieu thereof.
"Travel" is defined in Section 5.10.
"USB GT3200" is defined in Section 1.5(c)(i).
"Voting Agreement" is defined in Section 5.6.
ARTICLE XI
MISCELLANEOUS
-------------
11.1. Expenses of Transaction. Company on the one hand, and Parent and
Merger Sub, on the other, shall each bear their own direct and indirect expenses
incurred in connection with the negotiation and preparation of this Agreement
and the Additional Agreements and the consummation and performance of the
transactions contemplated herein or therein (it being understood that such
expenses of Company, to the extent unpaid as of the Closing, shall be paid from
Company cash on hand as of the Closing).
11.2. Confidentiality. Subject to any Authorized Disclosures, whether
or not the transactions contemplated herein shall be concluded, all information
obtained by any party about any other party and all of the terms and conditions
of this Agreement and the Additional Agreements shall be kept in confidence by
each party, and shall be deemed to be confidential information; and provided
that from and after the Closing, Parent shall not be obligated hereunder to keep
any such confidential information concerning Company confidential.
11.3. Publicity. No publicity release or announcement concerning this
Agreement or the transactions contemplated herein shall be issued without
advance written approval of the form and substance thereof by Parent and
Company; provided, however, that such restrictions shall not apply to any
disclosure required by any Authority, applicable Law or the applicable rules of
any securities market.
11.4. Notices. All notices, requests and other communications
hereunder shall be in writing and shall be delivered by courier or other means
of personal service (including by means of a nationally recognized courier
service or a professional messenger service), or sent by telecopy or mailed
first class, postage prepaid, by certified mail, return receipt requested, in
all cases, addressed to:
Parent:
Standard Microsystems Corporation
80 Arkay Drive
P.O. Box 18047
Hauppauge, New York 11788-8847
Telecopy: (631) 434-1348
Attention: Steven J. Bilodeau,
President and Chief Executive Officer
With copies to:
Standard Microsystems Corporation
80 Arkay Drive
P.O. Box 18047
Hauppauge, New York 11788-8847
Telecopy: (631) 434-1348
Attention: George W. Houseweart,
Senior Vice President and General Counsel
Loeb & Loeb LLP
345 Park Avenue
New York, New York 10154-0037
Telecopy: (212) 407-4990
Attention: David C. Fischer, Esq.
Company:
Gain Technology Corporation
2700 W. Broadway Blvd.
Tucson, Arizona 85745
Telecopy: (520) 545-9214
Attention: Margaret Koppen, Esq.
With copies to:
Steve Millaway
3815 W. Anklam
Tucson, Arizona 85745
Telecopier: (520) 545-9214
Doug Smith
2738 W. Avenida Azahar
Tucson, Arizona 85745
Telecopier: (520) 545-9214
Ron Weinreb
7741 E. Calle Del Minique
Tucson, Arizona 85750
Telecopier: (520) 545-9214
Roy Scott Kaller
762 E. Desert Flower Lane
Phoenix, Arizona 85048
Telecopier: (520) 545-9214
Bryan Cave LLP
1 Renaissance Square
Two North Central Ave., Suite 2200
Phoenix, Arizona 85004-4406
Telecopy: (602) 364-7070
Attention: Christopher A. Lause
All notices, requests and other communications shall be deemed given on the date
of actual receipt or delivery as evidenced by written receipt, acknowledgement
or other evidence of actual receipt or delivery to the addressee. In case of
service by telecopy, a confirmation copy of such notice shall be sent, on the
date notice is given, by certified mail as set forth above. Either party hereto
may from time to time by notice in writing served as set forth above designate a
different address or a different or additional person to which all such notices
or communications thereafter are to be sent or given.
11.5. Further Assurances. Parent, on the one hand, and Company on the
other hand, shall use their respective commercially reasonable best efforts to
proceed promptly with the transactions contemplated herein, to fulfill or to
cause to be fulfilled the covenants made by it or the conditions precedent to
the obligations of the other side to consummate the transactions contemplated
hereby, and to execute (before or after the Closing) such further documents and
other papers and perform such further acts as may be reasonably required or
desirable to carry out the provisions hereof and the transactions contemplated
herein.
11.6. Modifications and Amendments; Waivers and Consents. At any time
prior to the Closing Date or termination of this Agreement, Parent, on the one
hand, and Company, on the other hand, may, by written agreement:
(a) extend the time for the performance of any of the
obligations or other acts of the other side;
(b) waive any inaccuracies in the representations and warranties
made by the other side contained in this Agreement or any other agreement or
document delivered pursuant to this Agreement; and
(c) waive compliance with any of the covenants or agreements of
the other side contained in this Agreement. However, no such waiver shall
operate as a waiver of, or estoppel with respect to, any subsequent or other
failure. Whenever this Agreement requires or permits a waiver or consent by or
on behalf of any party hereto, such waiver or consent shall and may only be
given in writing.
11.7. Entire Agreement. This Agreement (including the Schedules and
Exhibits hereto), the Additional Agreements, and the documents and instruments
to be executed and delivered pursuant hereto or thereto are the final, complete,
and exclusive agreement among the parties with respect to the transactions
contemplated hereby; supersede all prior agreements, understandings and
representations written or oral, with respect thereto; and may not be
contradicted by evidence of any such prior or contemporaneous agreement,
understanding or representation, whether written or oral.
11.8. Governing Law. This Agreement (including without limitation, the
interpretation of the representation and warranties) is to be governed by and
construed in accordance with the internal Laws of the State of New York
applicable to a contract wholly negotiated, signed, and to be performed within
such state. The parties to this Agreement hereby irrevocably and unconditionally
(i) agree that any suit, action or proceeding against it arising out of this
Agreement or any of the transactions contemplated hereby shall be brought in any
New York State or Federal court sitting in New York, (ii) waive, to fullest
extent it may effectively do so, any objection which it may have to the laying
of venue of any such suit, action or proceeding and (iii) submit to the
exclusive jurisdiction of such courts in any suit, action or proceeding and
agrees that any process or notice of motion or other application to any court
may be served on it within or outside such court's territorial jurisdiction by
registered or certified mail or by personal service at such party's address set
forth herein.
11.9. Binding Effect. This Agreement and the rights, covenants,
conditions and obligations of the respective parties hereto and any instrument
or agreement executed pursuant hereto shall be binding upon the parties and
their respective successors, assigns, and legal representatives. Neither this
Agreement, nor any rights or obligations of any party hereunder, may be
delegated or assigned by a party without the prior written consent of the other
parties.
11.10. Counterparts. This Agreement may be executed simultaneously in
any number of counterparts, each of which shall be deemed an original but all of
which together shall constitute one and the same instrument. In making proof of
this Agreement it shall not be necessary to produce or account for more than one
counterpart.
11.11. Section Headings. The section headings of this Agreement are
for convenience of reference only and shall not be deemed to alter or affect any
provision hereof.
11.12. Gender; Tense, Etc. Where the context or construction requires,
all words applied in the plural shall be deemed to have been used in the
singular, and vice versa; the masculine shall include the feminine and neuter,
and vice versa; and the present tense shall include the past and future tense,
and vice versa.
11.13. No Third Party Rights. Except as otherwise expressly set forth
in Articles VIII, IX and XI nothing in this Agreement, whether express or
implied, shall confer any rights or remedies under or by reason of this
Agreement on any Person other than the parties hereto, and their respective
successors and assigns, nor shall anything in this Agreement to relieve or
discharge the obligation or Liability of any third Person to any party to this
Agreement, nor shall any provision give any third Person any right of
subrogation or action over against any party to this Agreement.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first above written.
STANDARD MICROSYSTEMS CORPORATION
By:
-------------------------------------
Steven J. Bilodeau,
President and Chief Executive Officer
SMSC SUB INC.
By:
-------------------------------------
Steven J. Bilodeau,
President and Chief Executive Officer
GAIN TECHNOLOGY CORPORATION
By:
-------------------------------------
Name:
Title:
SCHEDULES
1.5(c)(i) Calculation of Section 1.5(c)(i) Contingent Payment
-----------------
1.5(c)(ii) Calculation of Section 1.5(c)(ii) Contingent Payment
------------------
1.5(c)(iii) Calculation of Section 1.5(c)(iii) Contingent Payment
-------------------
2.1 Location of Assets; Addresses of Company Offices
2.3 Ownership of Company Common Stock and Options
2.5 Company Contracts with Key Officers and Affiliates
2.6 Consents
2.8.1 Financial Statements
2.8.2 Undisclosed Liabilities
2.8.3 Company Inventory
2.8.4 Accounts Receivable
2.8.5 Post Balance Sheet Date Changes
2.8.6 Liabilities
2.9 Tax Matters
2.10 Government Approvals
2.11 Litigation
2.12.1 Leases for Real Property
2.12.2A Tangible Personal Property Owned by Company
2.12.2B Tangible Personal Property Not Owned by Company
2.12.3A Registered IP
2.12.3B Company Intellectual Property Violations
2.12.3F Third Party Intellectual Property Rights
2.12.3H Employee Confidentiality Agreements and Former
Employees in Possession of Trade Secrets
2.12.6A Products
2.12.6B Designs
2.12.6C Warranties
2.12.5 Necessary Properties
2.13A Enforceability of Contracts
2.13C Agreements Under Current Discussion
2.15.1 Employee Benefit Plans
2.15.2 ERISA Exceptions
2.16 Suppliers & Business Relationships
2.17 Powers of Attorney and Suretyships
2.18 Insurance
2.19 Environmental Matters
2.20 Books and Records
3.4 Representation and Warranties of Parent
5.5 Employees Executing Offer Letters
5.8 Third Party Consents
5.13 Resignations
X Permitted Encumbrances
Schedule 1.5(c)(i)
If Parent's 2003 fiscal year consolidated net revenue from USB GT3200 chip
product sales, shall equal or exceed $4,000,000, Parent shall distribute a
Contingent Payment pursuant to Section 1.5(c)(i) totaling the sum of $3,500,000
plus 9.375% of the amount by which such revenue shall exceed $4,000,000, except
that in no case shall such Contingent Payment exceed $5,000,000. Consolidated
net revenues shall include revenues from the sale of the USB GT3200 chip product
derived by Parent and/or Surviving Corporation and recorded on a consolidated
basis in accordance with GAAP, adjusted for sales returns and allowances and
sales discounts.
Schedule 1.5(c)(ii)
(a) Parent shall distribute a Contingent Payment totaling $2,500,000, pursuant
to Section 1.5(c)(ii), if (1) Parent's consolidated net income per share from
continuing operations for the quarter ending May 31, 2003, shall exceed Parent's
pro-forma net income per share from continuing operations for such period,
determined as if the Merger had not occurred, and (2) Company's net income for
such period shall equal or exceed zero.
(b) In computing Parent's pro-forma net income per share from continuing
operations, net income from continuing operations shall mean Parent's after tax
consolidated net income from continuing operations after removing the effects
of:
> All components of net income recorded on the local books of Company
> incremental expenses, including interest, incurred by Parent as a
result of owning Company
> incremental revenue and other income earned by Parent as a result of
owning Company
> amortization of intangible assets arising from the acquisition, in
accordance with generally accepted accounting principles.
(c) Shares used in the calculation of Parent's pro-forma net income per share
from continuing operations shall be the same number of shares as used in
computing Parent's net income per share from continuing operations, excluding
only the effect of:
> Shares issued or issuable pursuant to Section 1.5
> Parent stock options and restricted stock awards granted to employees
of Company.
(d) All financial or accounting items shall be determined in accordance with
GAAP, as applied by Parent, subject to the following:
> Amortization of intangible assets may not exceed $500,000 in either
the calculation of net income per share from continuing operations or
the calculation of pro-forma net income per share from continuing
operations
> Parent net income from continuing operations may not exceed $2,545,000
in either the calculation of net income per share from continuing
operations or the calculation of pro-forma net income per share from
continuing operations
(e) Company's net income, for purposes of (a)(2) above, shall equal the
after-tax value of the sum of:
> All components of net income recorded on the local books of Company
(such books being separate from Company's books)
> incremental expenses, including interest, incurred by Parent as a
result of owning Company
> incremental revenue and other income earned by Parent as a result of
owning Company amortization of intangible assets arising from the
acquisition, in accordance with GAAP, up to a maximum of $500,000.
> Amortization of intangible assets arising from the acquisition, in
accordance with GAAP, up to a maximum of $500,000.
> Subject to the changes listed below, Parent shall not permit Surviving
Corporation to change its accounting practices and/or procedures in a
manner inconsistent with: (a) GAAP, or (b) Company practices and/or
procedures immediately prior to Closing; in a manner that will
negatively affect such calculation. Effective March 1, 2002, Surviving
Corporation shall make the following changes to its accounting
practices and/or procedures:
(1) Accounting for vacation to conform to changed vacation policy.
(2) Accounting for mask costs to conform to Parent's policy.
Schedule 1.5(c)(iii)
If Enabled Revenue shall equal or exceed $10,000,000 but be less than
$15,000,000, Parent shall distribute a Contingent Payment pursuant to Section
1.5(c)(iii) in the amount of $3,500,000. If Enabled Revenue shall equal or
exceed $15,000,000, the preceding sentence shall not apply, and Parent shall
distribute a Contingent Payment pursuant to Section 1.5(c)(iii) totaling the sum
of $7,000,000 plus 20% of the amount by which Enabled Revenue shall exceed
$15,000,000, except that in no case shall such Contingent Payment exceed
$10,000,000.
Enabled Revenue shall mean the amount of projected Parent 2004 fiscal year
consolidated revenue in Parent's 2004 business plan approved by Parent's board
of directors ("Board") attributable to the Contribution Percentages of sales of
Qualifying Products.
Qualifying Products shall be those products designed in whole or part by Company
and approved in writing by Parent's CEO through Parent's Marketing Requirements
Document (MRD), Product Development Plan (PDP), or Small Business Case (SBC)
approval process.
A Contribution Percentage of a Qualifying Product shall be the percentage of
projected Parent 2004 fiscal year sales of such Qualifying Product that the CEO
shall determine shall constitute Enabled Revenue.
The Justice Program has already been approved via the PDP process, and its
Contribution Percentage is 33.33%.
Raytheon business, IP licensing revenue, design revenue, and USB GT3200 (and
derivatives thereof) or GT3100 (and derivatives thereof) revenue shall not
constitute Enabled Revenue.
EXHIBITS
Exhibit 1.1A Form of Articles of Merger
Exhibit 1.3 Officers and Directors of Surviving Corporation
Exhibit 1.5 Model Computation under Section 1.5
Exhibit 4.9L Amendment to Bridge Loan
Exhibit 4.9M Amendment to Bridge Loan
Exhibit 5.4 Employee Sideletter
Exhibit 5.5 Form of Employee Offer Letter
Exhibit 5.6 Certain Agreements with Key Officers
Exhibit 5.7 Indemnity Escrow Agreement
Exhibit 5.19 Form of Nondisclosure Agreement
Exhibit 99.1
------------
SMSC Completes Acquisition of Gain Technology Corporation
Acquisition Adds Prolific Analog and Mixed-Signal Design Team and
Broadens SMSC's Connectivity Solutions Capabilities
HAUPPAUGE, N.Y - June 4, 2002 - Standard Microsystems Corporation (Nasdaq:
SMSC), a leading provider of Real World Connectivity solutions for a broad range
of high-speed communication and computing applications, announced today that it
has completed its acquisition of Gain Technology Corporation (Gain), a designer,
developer and supplier of high-performance analog and mixed-signal integrated
circuits (IC's) and proprietary intellectual property cores.
The acquisition brings to SMSC a veteran analog and mixed-signal development
team of 35 engineers and designers with an average of more than ten years
experience.
"With our acquisition of Gain now complete, we have significantly enhanced our
analog and mixed-signal capabilities," said Steven J. Bilodeau, Chairman,
President and Chief Executive Officer of SMSC. "This acquisition will enable
SMSC to further expand its breadth of state-of-the-art products serving both the
PC and Embedded markets, accelerating penetration into a wide range of new
market applications and enhancing opportunities for revenue growth."
Gain recently announced the GT3200, the first in a family of high-performance
analog physical layer (PHY) and high-speed serial data communication IC's
specifically designed for the new USB 2.0 standard. This stand-alone PHY is USB
2.0 Transceiver Macrocell Interface (UTMI) compliant and is the lowest-power
solution available in the market today, enabling OEM's to provide the most
efficient bus powered USB 2.0 product solutions. It is fully certified by the
USB-IF consortium and complements SMSC's new line of Hi-Speed USB 2.0 products,
which include the USB97C201 True Speed ATA/ATAPI/CF Bridge Controller for
external disk drives and the USB97C210 Memory Card Controller for USB memory
card readers.
Other products leveraging Gain's expertise will include RF Wireless and
additional high-performance serial transceiver IC's, providing transport speeds
exceeding multi-gigabits per second. These products will target the needs of
system manufacturers designing next generation desktop and mobile PCs, servers,
storage and media intensive peripheral applications including printers, scanners
and digital cameras.
Under terms of the acquisition, SMSC's initial payment was approximately $34
million, about half in cash and the balance in shares of SMSC common stock.
Additional payments of cash and SMSC common stock may be made to Gain
stockholders in fiscal 2004 upon achievement of certain performance goals. The
acquisition is expected to be accretive in the fourth quarter of ownership
(first quarter of fiscal 2004) and is projected to contribute more than $20
million of revenue to SMSC's fiscal year 2004, which begins March 1, 2003.
About SMSC:
SMSC provides Real World Connectivity(TM) solutions for high-speed communication
and computing applications. Leveraging a broad intellectual property portfolio
and an extensive history in the design of the world's most preferred Advanced
Input/Output products, SMSC delivers integrated hardware and software solutions
to manage systems and connect peripherals in today's rapidly evolving computing
architectures. SMSC works with industry leading OEMs to combine advanced
digital, mixed-signal and analog functionality into Application Specific
Standard Products.
The Company's Embedded Products connect people, machines and information. SMSC
delivers integrated Ethernet and USB 2.0 solutions, along with a diverse range
of other products, for network printers, set-top boxes, home gateway products,
car navigation systems, cellular base stations, USB peripherals and more.
SMSC is based in Hauppauge, New York and maintains offices worldwide, including
locations in North America, Asia, Europe and Japan. SMSC operates engineering
design centers in San Jose, CA, Hauppauge, NY, Austin, TX, Tucson, AZ and
Phoenix, AZ. More information about the Company is available on the World Wide
Web at http://www.smsc.com.
Safe Harbor Statement under the Private Securities Litigation Reform Act of
1995:
This news release contains forward-looking statements regarding the impact of
the acquisition on SMSC's operating results, future market demand and acceptance
of SMSC's and Gain's products, and development of new business and products of
the combined company which involve risks and uncertainties. These statements can
be identified by use of the words "will," "plan," "expect," "estimate" and
similar phrases. The forward-looking statements are not guarantees, and actual
future results may vary materially from those discussed herein. Factors that may
cause such differences include, but are not limited to, risks involving SMSC's
ability to successfully combine the operations of the two companies; to manage
the development, production, and marketing of new products intended to be
introduced by the combined companies; or generally to succeed in markets new to
SMSC, against competitors with greater resources and market experience than the
combined companies; and the other risks detailed from time to time in SMSC's
periodic reports filed with the Securities and Exchange Commission, including
but not limited to its annual report on Form 10-K for the fiscal year ended
February 28, 2002.
Standard Microsystems is a registered trademark, and SMSC and Real World
Connectivity are trademarks of Standard Microsystems Corporation. Product names
and company names are trademarks of their respective holders.
Contact:
Standard Microsystems Corporation
Carolynne Borders, Voice: 631/435-6626, Fax: 631/273-5550
carolynne.borders@smsc.com