EXHIBIT 2.1
AGREEMENT
AND
PLAN OF REORGANIZATION
AMONG
VIRAGE LOGIC CORPORATION,
IN-CHIP ACQUISITION, INC.
AND
IN-CHIP SYSTEMS, INC.
May 4, 2002
THE SYMBOL "[***]" IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS
BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
TABLE OF CONTENTS
PAGE
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TABLE OF CONTENTS...........................................................................i
Index of Defined Terms......................................................................i
RECITALS....................................................................................1
ARTICLE I THE MERGER........................................................................1
Section 1.1 The Merger............................................................1
Section 1.2 Closing; Effective Time...............................................1
Section 1.3 Effect of the Merger..................................................2
Section 1.4 Articles of Incorporation; Bylaws.....................................2
Section 1.5 Directors and Officers................................................2
Section 1.6 Effect on Capital Stock...............................................2
Section 1.7 Surrender of Certificates.............................................5
Section 1.8 No Further Ownership Rights in Company Common Stock...................7
Section 1.9 Lost, Stolen or Destroyed Certificates................................7
Section 1.10 Taking of Necessary Action; Further Action............................8
Section 1.11 Withholding Rights....................................................8
ARTICLE II REPRESENTATIONS AND WARRANTIES OF COMPANY........................................8
Section 2.1 Organization of Company...............................................8
Section 2.2 Company Capital Structure.............................................8
Section 2.3 Authority............................................................10
Section 2.4 No Conflict..........................................................10
Section 2.5 Consents.............................................................11
Section 2.6 Company Financial Statements.........................................11
Section 2.7 No Undisclosed Liabilities...........................................11
Section 2.8 No Changes...........................................................12
Section 2.9 Tax Matters..........................................................14
Section 2.10 Restrictions on Business Activities..................................16
Section 2.11 Title to Properties; Absence of Liens and Encumbrances;
Condition of Equipment...............................................16
Section 2.12 Intellectual Property................................................17
Section 2.13 Agreements, Contracts and Commitments................................19
Section 2.14 Interested Party Transactions........................................20
Section 2.15 Governmental Authorization...........................................21
Section 2.16 Litigation...........................................................21
Section 2.17 Accounts Receivable..................................................21
Section 2.18 Minute Books.........................................................21
Section 2.19 Environmental Matters................................................21
Section 2.20 Brokers' and Finders' Fees; Third Party Expenses.....................22
Section 2.21 Employee Benefit Plans and Compensation..............................23
Section 2.22 Insurance............................................................26
Section 2.23 Compliance with Laws.................................................26
Section 2.24 Complete Copies of Materials.........................................26
THE SYMBOL "[***]" IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS
BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB........................26
Section 3.1 Organization, Standing and Power.....................................26
Section 3.2 Authority............................................................27
Section 3.3 SEC Documents; Financial Statements..................................27
Section 3.4 Capital Structure....................................................28
Section 3.5 Litigation...........................................................29
Section 3.6 Absence of Certain Changes...........................................29
Section 3.7 Absence of Undisclosed Liabilities...................................29
Section 3.8 Interim Operations of Merger Sub.....................................29
ARTICLE IV CONDUCT PRIOR TO THE EFFECTIVE TIME.............................................29
Section 4.1 Conduct of Business of Company.......................................29
Section 4.2 No Solicitation......................................................32
ARTICLE V ADDITIONAL AGREEMENTS............................................................33
Section 5.1 Preparation of Information Statement.................................33
Section 5.2 Approval of the Company Shareholders.................................34
Section 5.3 Sale of Shares Pursuant to Regulation D..............................34
Section 5.4 Access to Information................................................34
Section 5.5 Confidentiality......................................................34
Section 5.6 Public Disclosure....................................................35
Section 5.7 Reasonable Best Efforts..............................................35
Section 5.8 Notice of Certain Events.............................................36
Section 5.9 Blue Sky Laws........................................................37
Section 5.10 Nonaccredited Shareholders...........................................37
Section 5.11 Employees............................................................37
Section 5.12 Expenses.............................................................37
Section 5.13 Registration of Shares of Parent Common Stock Issued in the
Merger...............................................................37
Section 5.14 Employee Benefits....................................................41
Section 5.15 Incentive Bonus Pool.................................................41
Section 5.16 Option Grants........................................................42
Section 5.17 Repurchase Right.....................................................42
Section 5.18 Amendment to Articles of Incorporation...............................42
Section 5.19 Amendment to 2001 Plan...............................................42
Section 5.20 Purchase Price Adjustment............................................42
Section 5.21 Tax Matters..........................................................43
Section 5.22 Indemnification of Company Officers and Directors....................44
Section 5.23 Consents.............................................................44
ARTICLE VI CONDITIONS TO THE MERGER........................................................44
Section 6.1 Conditions to Obligations of Each Party to Effect the
Merger...............................................................44
Section 6.2 Additional Conditions to the Obligations of Parent and
Merger Sub...........................................................45
Section 6.3 Additional Conditions to Obligations of Company......................46
ARTICLE VII TERMINATION, AMENDMENT AND WAIVER..............................................48
Section 7.1 Termination..........................................................48
Section 7.2 Effect of Termination................................................48
Section 7.3 Amendment............................................................48
Section 7.4 Extension, Waiver....................................................49
ii
THE SYMBOL "[***]" IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS
BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
ARTICLE VIII INDEMNIFICATION...............................................................49
Section 8.1 Indemnification......................................................49
Section 8.2 Claims by Company or Parent Indemnitees..............................51
Section 8.3 Resolution of Conflicts and Arbitration..............................52
Section 8.4 Shareholders' Agent..................................................52
Section 8.5 Actions of the Shareholders' Agent...................................53
ARTICLE IX GENERAL PROVISIONS..............................................................54
Section 9.1 Notices..............................................................54
Section 9.2 Definitions..........................................................55
Section 9.3 Counterparts.........................................................56
Section 9.4 Entire Agreement; Nonassignability; Parties in Interest..............56
Section 9.5 Severability.........................................................56
Section 9.6 Remedies Cumulative..................................................56
Section 9.7 Governing Law........................................................56
Section 9.8 Waiver of Jury Trial.................................................56
Section 9.9 Rules of Construction................................................57
Section 9.10 No Third Party Beneficiaries.........................................57
iii
THE SYMBOL "[***]" IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS
BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
Index of Defined Terms
Defined Term Section
- ------------ -----------
2001 Plan...............................................................................2.2(b)
Acquisition Proposal....................................................................4.2(a)
Affiliate..............................................................................2.21(a)
Aggregate Exercise Price.............................................................1.6(a)(i)
Agreement.............................................................................Preamble
Agreement of Merger........................................................................1.1
Assumed Option......................................................................1.6(d)(ii)
Average Closing Price................................................................1.6(a)(v)
business day...........................................................................5.13(c)
California Law.............................................................................1.1
Cash Merger Consideration...............................................................1.6(a)
Cash Payment Funds......................................................................1.7(b)
Certificates............................................................................1.7(c)
Closing....................................................................................1.2
Closing Date...............................................................................1.2
COBRA..................................................................................2.21(a)
Code..................................................................................Recitals
Company...............................................................................Preamble
Company Authorizations....................................................................2.15
Company Common Stock..................................................................Recitals
Company Common Stock Outstanding....................................................1.6(a)(iv)
Company Disclosure Schedule.................................................................II
Company Employee.......................................................................5.14(a)
Company Employee Plan..................................................................2.21(a)
Company Indemnified Persons.............................................................8.1(c)
Company Indemnified Officer or Director...................................................5.22
Company Intellectual Property..........................................................2.12(a)
Company Options....................................................................1.6(a)(iii)
Company Products........................................................................4.1(g)
Company Shareholder.....................................................................1.6(f)
Company Registered Intellectual Property...............................................2.12(a)
Company Registered Intellectual Property Rights........................................2.12(b)
Conflict...................................................................................2.4
Confidentiality Agreement..................................................................5.5
Contracts...............................................................................2.4(a)
Copyrights.............................................................................2.12(a)
Current Balance Sheet......................................................................2.6
Damages.................................................................................8.1(b)
Dissenting Shareholder..................................................................1.6(g)
Dissenting Shares.......................................................................1.6(g)
DOL....................................................................................2.21(a)
Effective Time.............................................................................1.2
Effective Time Balance Sheet...........................................................5.20(a)
Employee...............................................................................2.21(a)
Employment Agreement...................................................................2.21(a)
Environmental Permits..................................................................2.19(d)
i
ERISA..................................................................................2.21(a)
Equipment..............................................................................2.11(c)
Exchange Act...............................................................................3.3
Exchange Agent..........................................................................1.7(a)
Exchange Fund...........................................................................1.7(b)
Founder...............................................................................Recitals
Founder Shares............................................................................5.17
Fully Diluted Common Stock Outstanding.............................................1.6(a)(iii)
GAAP.......................................................................................2.6
Governmental Entity........................................................................2.5
Hazardous Material.....................................................................2.19(a)
Hazardous Materials Activities.........................................................2.19(b)
Holder.................................................................................5.13(a)
Holder Indemnitee......................................................................5.13(e)
Incentive Bonus Pool......................................................................5.15
Indemnification Notice..................................................................8.2(a)
Indemnified Party.......................................................................8.2(a)
Indemnifying Party......................................................................8.2(a)
Information Statement...................................................................5.1(a)
Initial Cash Merger Consideration.......................................................1.6(b)
Installment ..............................................................................5.15
Installment Cash Merger Consideration...................................................1.6(b)
Intellectual Property..................................................................2.12(a)
Intellectual Property Rights...........................................................2.12(a)
Interim Financials.........................................................................2.6
Interim Period.........................................................................5.20(a)
International Employee Plan............................................................2.21(a)
Investor Representation Statement..........................................................5.3
IRS....................................................................................2.21(a)
Key Shareholders..........................................................................5.11
knowledge...............................................................................9.2(b)
Liens...................................................................................2.4(a)
Mask Works.............................................................................2.12(a)
Material................................................................................9.2(c)
Material Adverse Effect.................................................................9.2(d)
Merger................................................................................Recitals
Merger Consideration.................................................................1.6(a)(i)
Merger Sub............................................................................Preamble
Multiemployer Plan.....................................................................2.21(a)
NASD.......................................................................................3.2
Net Assets..............................................................................2.8(k)
New Company Employees.....................................................................5.15
Parent................................................................................Preamble
Parent Common Stock..................................................................1.6(a)(i)
Parent Disclosure Schedule.........................................................ARTICLE III
Parent ESPPs...............................................................................3.4
Parent Financial Statements................................................................3.3
Parent Indemnified Persons..............................................................8.1(b)
Parent Indemnitee......................................................................5.13(f)
Parent Stock Plans.........................................................................3.4
Parent SEC Documents.......................................................................3.3
ii
Patents................................................................................2.12(a)
Pension Plan...........................................................................2.21(a)
Per Share Cash Merger Consideration.....................................................1.6(a)
Per Share Merger Consideration......................................................1.6(a)(ii)
Person..................................................................................9.2(e)
Proceeding..............................................................................2.8(q)
PTO....................................................................................2.12(b)
Registered Intellectual Property.......................................................2.12(b)
Registrable Securities.................................................................5.13(a)
Registration Indemnified Person........................................................5.13(g)
Registration Indemnifying Person.......................................................5.13(g)
Registration Statement.................................................................5.13(a)
Related Agreements......................................................................2.2(b)
Repurchasable Shares......................................................................5.17
Resumption Notice......................................................................5.13(c)
Retention Agreement.......................................................................5.11
Returns..............................................................................2.9(b)(i)
SEC........................................................................................3.2
Securities Act..........................................................................1.6(i)
Shareholders' Agent.....................................................................8.4(a)
Stock Exchange Ratio................................................................1.6(a)(iv)
Stock Merger Consideration...........................................................1.6(a)(v)
Subsidiary..............................................................................9.2(f)
Surviving Corporation......................................................................1.1
Suspension Notice......................................................................5.13(c)
Suspension Right.......................................................................5.13(c)
Tax(es).................................................................................2.9(a)
Trademarks.............................................................................2.12(a)
Voting Agreement......................................................................Recitals
Year-End Financials........................................................................2.6
iii
AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made and
entered into as of May 4, 2002 by and among Virage Logic Corporation, a Delaware
corporation ("Parent"), In-Chip Acquisition, Inc., a California corporation
("Merger Sub") and wholly-owned subsidiary of Parent, and In-Chip Systems, Inc.,
a California corporation ("Company").
RECITALS
A. The Boards of Directors of each of Company, Parent and Merger Sub
believe it is in the best interests of their respective companies and the
shareholders of their respective companies that Company and Merger Sub combine
into a single company through the statutory merger of Company with and into
Merger Sub (the "Merger") and, in furtherance thereof, have approved the Merger.
B. Pursuant to the Merger, among other things, the outstanding shares of
Company Common Stock, no par value per share ("Company Common Stock"), shall be
converted into the right to receive the Merger Consideration upon the terms and
subject to the conditions set forth herein.
C. Company, Parent and Merger Sub desire to make certain representations
and warranties and other agreements in connection with the Merger.
D. The parties intend, by executing this Agreement, to adopt a plan of
reorganization within the meaning of the Internal Revenue Code of 1986, as
amended (the "Code"), and to cause the Merger to qualify as a reorganization
under the provisions of Section 368(a) of the Code.
E. Concurrent with the execution of this Agreement and as an inducement
to Parent to enter into this Agreement, Tushar Gheewala ("Founder"), a
shareholder, officer and director of the Company on the date hereof, has entered
into an agreement (the "Voting Agreement") to vote the shares of Company Common
Stock beneficially owned by him to approve the Merger.
NOW, THEREFORE, in consideration of the covenants and representations
set forth herein, and for other good and valuable, consideration, the parties
agree as follows:
ARTICLE I
THE MERGER
Section 1.1 The Merger. At the Effective Time and subject to and upon
the terms and conditions of this Agreement, the Agreement of Merger attached
hereto as Exhibit 1.1 (the "Agreement of Merger"), and the applicable provisions
of the California Corporations Code ("California Law"), Company shall be merged
with and into Merger Sub, the separate corporate existence of Company shall
cease and Merger Sub shall continue as the surviving corporation. Merger Sub as
the surviving corporation after the Merger is hereinafter sometimes referred to
as the "Surviving Corporation."
Section 1.2 Closing; Effective Time. The closing of the transactions
contemplated hereby (the "Closing") shall take place as soon as practicable, but
no later than two (2) business days, after the satisfaction or waiver (subject
to applicable law) of each of the conditions set forth in Article VI hereof
(other than those conditions that by their nature are to be satisfied at the
Closing, but subject to the satisfaction or waiver of those conditions), or at
such other time as the parties hereto agree (the "Closing Date"). The Closing
shall take place at the offices of Heller Ehrman White & McAuliffe LLP, 275
1
THE SYMBOL "[***]" IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS
BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
Middlefield Road, Menlo Park, CA 94025, or at such other location as the parties
hereto agree. In connection with the Closing, the parties hereto shall cause the
Merger to be consummated by filing the Agreement of Merger with the Secretary of
State of the State of California, in accordance with the relevant provisions of
California Law (the time of such filing being the "Effective Time").
Section 1.3 Effect of the Merger. At the Effective Time, the effect of
the Merger shall be as provided in this Agreement, the Agreement of Merger and
the applicable provisions of California Law. Without limiting the generality of
the foregoing, and subject thereto, at the Effective Time, all the property,
rights, privileges, powers and franchises of Company and Merger Sub shall vest
in the Surviving Corporation, and all debts, liabilities and duties of Company
and Merger Sub shall become the debts, liabilities and duties of the Surviving
Corporation.
Section 1.4 Articles of Incorporation; Bylaws.
(a) The articles of incorporation of Merger Sub in effect
immediately prior to the Effective Time shall be the articles of
incorporation of the Surviving Corporation until thereafter amended in
accordance with California Law and such articles of incorporation,
except that Article FIRST thereof shall read as follows: "The name of
the Corporation is In-Chip Systems, Inc."
(b) The Bylaws of Merger Sub in effect immediately prior to the
Effective Time shall be the Bylaws of the Surviving Corporation until
thereafter amended.
Section 1.5 Directors and Officers. The directors and officers of Merger
Sub immediately prior to the Effective Time shall be the directors and officers
of the Surviving Corporation, until the earlier of their resignation or removal
or their respective successors are duly elected or appointed and qualified, as
the case may be.
Section 1.6 Effect on Capital Stock. At the Effective Time, by virtue of
the Merger and without any action on the part of Merger Sub, Company or the
holders of any of Company's securities:
(a) Conversion of Capital Stock. Each share of Company Common
Stock issued and outstanding immediately prior to the Effective Time
shall be converted and exchanged into the right to receive (A) an amount
of cash determined by dividing $5,500,000 (the "Cash Merger
Consideration"), as adjusted pursuant to Section 5.20, by the Company
Common Stock Outstanding (the "Per Share Cash Merger Consideration")
(calculated to the nearest five (5) decimal places), and (B) such
portion of a share of Parent Common as is necessary so that the value of
such portion (as determined based upon the Average Closing Price), when
added to the Per Share Cash Merger Consideration in (A) above equals the
Per Share Merger Consideration, together with cash in lieu of any
fraction of a share of Parent Common Stock pursuant to Section 1.6(f),
upon surrender of Certificates pursuant to Section 1.7. For purposes of
this Agreement:
(i) The "Merger Consideration" shall be $17,000,000,
adjusted to take into account any changes to the Cash Merger
Consideration under Section 5.20, payable in cash and Parent
Common Stock, $0.001 par value per share ("Parent Common
Stock").
(ii) The "Per Share Merger Consideration" shall be
determined by dividing (A) the Fully Diluted Common Stock
Outstanding into (B) the sum of $17,000,000, as adjusted
pursuant to Section 5.20, plus the total proceeds Company would
receive if all outstanding but unexercised Company Options were
deemed to be exercised (the
2
THE SYMBOL "[***]" IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS
BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
"Aggregate Exercise Price"). The Per Share Merger Consideration
shall be calculated to the nearest five (5) decimal places.
(iii) The "Fully Diluted Common Stock Outstanding" means
the Company Common Stock Outstanding plus the total number of
shares of Company Common Stock reserved for issuance upon the
exercise of all options to purchase Company Common Stock
outstanding as of the Effective Time under the 2001 Plan
("Company Options").
(iv) "Company Common Stock Outstanding" means the total
number of shares of Company Common Stock issued and outstanding
as of the Effective Time.
(v) The total number of shares of Parent Common Stock
available for issuance as consideration in the Merger pursuant
to Section 1.6(a) ("Stock Merger Consideration") shall be
determined by dividing (A) the sum of $11,500,000 and the
Aggregate Exercise Price by (B) $17.68200 (the "Average Closing
Price"), representing the average of the closing prices of
Parent Common Stock as reported on the Nasdaq National Market
during the five (5) trading days ending two (2) days prior to
the date of this Agreement. The Average Closing Price shall be
calculated to the nearest five (5) decimal places, and the Stock
Merger Consideration shall be rounded down to the nearest whole
share.
(b) Time of Payment of Cash Consideration. Parent shall pay each
Company Shareholder such shareholder's pro rata share, in accordance
with Section 1.6(a), of $4,000,000 of the Cash Merger Consideration plus
any amount payable by Parent pursuant to Section 5.20 (the "Initial Cash
Merger Consideration") upon surrender of Certificates pursuant to
Section 1.7 or in accordance with Section 5.20, if applicable. Subject
to the surrender of Certificates pursuant to Section 1.7 and the
indemnification provisions of Section 8.1, Parent shall also pay the
remaining $1,500,000 of the Cash Merger Consideration (the "Installment
Cash Merger Consideration") in three installments of $500,000 each on
March 15, 2003, March 15, 2004 and March 15, 2005 to each Company
Shareholder based on such shareholder's pro rata share at the Effective
Time, in accordance with Section 1.6(a).
(c) Cancellation of Company Capital Stock Owned by Parent. At
the Effective Time, each share of Company Common Stock owned by Parent
or any direct or indirect wholly owned subsidiary of Parent immediately
prior to the Effective Time shall be canceled and extinguished without
any conversion thereof.
(d) Company Stock Options.
(i) At the Effective Time, the 2001 Plan and all Company
Options, whether vested or unvested, shall be assumed by Parent.
(ii) At the Effective Time, each of the Company Options
which are then outstanding and have not been terminated,
exercised or otherwise converted as of the Effective Time (the
"Assumed Options") shall cease to represent the right to acquire
Company Common Stock and shall, by virtue of the Merger and
without any further action on the part of any holder thereof, be
converted into and become the right to acquire a number of
shares of Parent Common Stock as determined herein. The shares
of Stock Merger Consideration remaining after converting and
exchanging the Company Common Stock Outstanding pursuant to
Section 1.6(a)(A) and (B) above shall be allocated pro rata
3
THE SYMBOL "[***]" IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS
BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
(calculated to the nearest five (5) decimal places) to Company
Options at an exercise price determined by multiplying (A) the
exercise price immediately prior to the Effective Time for each
Company Option by (B) a fraction determined by dividing the
Company Options by the total number of shares of Stock Merger
Consideration allocated to Company Option Holders pursuant to
this subsection (ii). The exercise price shall be rounded up to
the nearest cent.
(iii) Company shall take all actions necessary to ensure
that following the Effective Time no holder of any Company
Options or rights pursuant to, nor any participant in, the 2001
Plan, or any other plan, program or arrangement providing for
the issuance or grant of any interest in respect of the capital
stock of Company will have any right thereunder to acquire
equity securities, or any right to payment in respect of the
equity securities, of the capital stock of Company or the
Surviving Corporation, except as provided in subsection (ii)
above.
(iv) Parent shall take all corporate action necessary to
reserve for issuance a sufficient number of shares of Parent
Common Stock for delivery upon exercise of the Assumed Options
in accordance with this Section 1.6(d).
(e) Capital Stock of Merger Sub. Each share of common stock of
Merger Sub issued and outstanding immediately prior to the Effective
Time shall remain outstanding, unchanged by reason of the Merger, as one
fully paid and nonassessable share of common stock of the Surviving
Corporation. Each stock certificate of Merger Sub evidencing ownership
of any such shares shall continue to evidence ownership of such shares
of capital stock of the Surviving Corporation.
(f) Fractional Shares. No fraction of a share of Parent Common
Stock will be issued, but in lieu thereof each holder of shares of
Company Common Stock (the "Company Shareholder") who would otherwise be
entitled to a fraction of a share of Parent Common Stock (after
aggregating all fractional shares of Parent Common Stock to be received
by such holder) shall receive from Parent an amount of cash (rounded to
the nearest whole cent) equal to the product of (i) such fraction
multiplied by (ii) the Average Closing Price.
(g) Dissenters' Rights. Notwithstanding any provision of this
Agreement to the contrary, any shares of Company Common Stock held by a
holder who demands and perfects such holder's right for appraisal of
such shares after the Effective Time in accordance with California Law
("Dissenting Shares"), if any, shall not be converted into the Merger
Consideration but shall instead be converted into the right to receive
such consideration as may be determined to be due with respect to such
Dissenting Shares pursuant to California Law. Surviving Corporation
shall give Parent prompt notice of any demand received by Surviving
Corporation to require Surviving Corporation to purchase shares of
Company Common Stock, and Parent shall have the right to direct and
participate in all negotiations and proceedings with respect to such
demand. Surviving Corporation agrees that, except with the prior written
consent of Parent, or as required under the California Law, it will not
voluntarily make any payment with respect to, or settle or offer to
settle, any such purchase demand. Each holder of Dissenting Shares
("Dissenting Shareholder") who, pursuant to the provisions of California
Law, becomes entitled to payment of the fair value for shares of Company
Common Stock shall receive payment therefor (but only after the value
therefor shall have been agreed upon or finally determined pursuant to
such provisions). If any Dissenting Shares shall lose their status as
Dissenting Shares, Parent shall issue and deliver, upon surrender by
such shareholder of certificates representing shares of Company Common
Stock, the
4
THE SYMBOL "[***]" IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS
BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
portion of the Merger Consideration to which such shareholder would
otherwise be entitled under this Section 1.6.
(h) Restricted Stock. If any shares of Company Common Stock
outstanding immediately prior to the Effective Time are unvested or are
subject to a repurchase option, risk of forfeiture or other condition
under any applicable restricted stock purchase agreement or other
agreement with Company or under which Company has any rights, then the
shares of Parent Common Stock issued in exchange for such shares of
Company Common Stock will to the same extent also be unvested and
subject to the same repurchase option, risk of forfeiture or other
condition, and the certificates representing such shares of Parent
Common Stock may accordingly be marked with appropriate legends. Company
shall take all action that may be necessary to ensure that, from and
after the Effective Time, Parent is entitled to exercise any such
repurchase option or other right set forth in any such restricted stock
purchase agreement or other agreement.
(i) Certificate Legends. The issuance of the shares of Parent
Common Stock pursuant to this Article I shall not have been registered
and such shares shall be characterized as "restricted securities" under
the federal securities laws, and under such laws such shares may be
resold without registration under the Securities Act of 1933, as amended
(the "Securities Act"), only in certain limited circumstances. Each
certificate evidencing shares of Parent Common Stock to be issued
pursuant to this Article I shall bear the following legend, in addition
to any legends required by state securities laws:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED
FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933. SUCH SHARES MAY NOT BE SOLD OR OTHERWISE
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION WITHOUT AN
EXEMPTION UNDER THE SECURITIES ACT AND AN OPINION OF LEGAL
COUNSEL REASONABLY ACCEPTABLE TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED."
(j) Adjustments to Exchange Ratio. If, during the period between
the date of this Agreement and the Effective Time, any change in the
outstanding shares of capital stock of Parent shall occur, including by
reason of any reclassification, recapitalization, stock split or
combination, exchange or readjustment of shares, or any stock dividend
thereon with a record date during such period, the Stock Merger
Consideration and any shares issuable or amounts payable pursuant to the
Merger or otherwise pursuant to this Agreement shall be appropriately
adjusted.
Section 1.7 Surrender of Certificates.
(a) Exchange Agent. Mellon Investor Services LLC shall act as
exchange agent (the "Exchange Agent") in the Merger.
(b) Parent to Provide Parent Common Stock and Cash. Promptly
after the Effective Time, Parent shall supply or cause to be supplied to
the Exchange Agent for exchange in accordance with this Article I
through such reasonable procedures as Parent may adopt (i) certificates
evidencing the shares of Parent Common Stock issuable pursuant to
Section 1.6(a) in exchange for shares of Company Common Stock
outstanding immediately prior to the Effective Time and (ii) cash in an
amount sufficient to permit payment of the Initial Cash Merger
Consideration and cash in lieu of fractional shares pursuant to Section
1.6(f) (the "Cash Payment
5
THE SYMBOL "[***]" IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS
BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
Funds" and, together with the shares of Parent Common Stock deposited
pursuant to clause (i), the "Exchange Fund"). The Exchange Fund shall
not be used for any purpose except as expressly provided in this
Agreement. The Cash Payment Funds shall be invested by the Exchange
Agent as directed by Parent or the Surviving Corporation pending payment
thereof by the Exchange Agent to the holders of record of shares of
Company Common Stock. Earnings from such investment shall be the sole
and exclusive property of Parent and the Surviving Corporation, and no
part of such earnings shall accrue to the benefit of holders of record
of shares of Company Common Stock.
(c) Exchange Procedures. Promptly after the Effective Time, the
Surviving Corporation shall cause to be mailed to each holder of record
of a certificate or certificates which immediately prior to the
Effective Time represented outstanding shares of Company Common Stock
(the "Certificates"), whose shares were converted into the right to
receive the Merger Consideration pursuant to Section 1.6, (i) a letter
of transmittal (which shall specify that delivery shall be effected, and
risk of loss and title to the Certificates shall pass, only upon receipt
of the Certificates by the Exchange Agent, and which shall contain a
specific agreement on the part of the owner of such Certificates to be
bound by the provisions of Sections 8.4 and 8.5 in form and substance
acceptable to Shareholders' Agent, and which shall otherwise be in such
form and have such other provisions not inconsistent with this Agreement
as Parent may reasonably specify), (ii) instructions for use in
effecting the surrender of the Certificates in exchange for the Merger
Consideration (without interest), and (iii) such other customary
documents as may be required pursuant to such instructions. Upon
surrender of a Certificate for cancellation to the Exchange Agent or to
such other agent or agents as may be appointed by Parent, together with
such letter of transmittal and other documents, duly completed and
validly executed in accordance with the instructions thereto, the holder
of such Certificate shall be entitled to receive in exchange therefor
(A) the Cash Merger Consideration to which such holder is entitled
pursuant to Sections 1.6(a) and 1.6(b) (without interest), (B) a
certificate representing the number of whole shares of Parent Common
Stock to which such holder is entitled pursuant to Section 1.6(a), (c)
any dividends or other distributions to which such holder is entitled
pursuant to Section 1.7(d), and (d) cash (without interest) in respect
of fractional shares as provided in Section 1.6(f), and the Certificate
so surrendered shall forthwith be canceled. Until so surrendered, each
outstanding Certificate will be deemed from and after the Effective
Time, for all corporate purposes, other than the payment of dividends,
to evidence the ownership of the number of full shares of Parent Common
Stock into which such shares of Company Common Stock shall have been so
converted and the right to receive the Cash Merger Consideration to
which such holder is entitled pursuant to Section 1.6(a) and 1.6(b)
(without interest) and an amount in cash (without interest) in lieu of
the issuance of any fractional shares in accordance with Section 1.6(f).
(d) Distributions With Respect to Unexchanged Shares. No
dividends or other distributions with respect to Parent Common Stock
with a record date after the Effective Time will be paid to the holder
of any unsurrendered Certificate with respect to the shares of Parent
Common Stock represented thereby until the holder of record of such
Certificate shall surrender such Certificate. Subject to applicable law,
following surrender of any such Certificate, there shall be paid to the
record holder of the certificates representing whole shares of Parent
Common Stock issued in exchange therefor, without interest at the time
of such surrender, the amount of any such dividends or other
distributions with a record date after the Effective Time theretofore
payable (but for the provisions of this Section 1.7(d)) with respect to
such shares of Parent Common Stock.
6
THE SYMBOL "[***]" IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS
BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
(e) Transfers of Ownership. At the Effective Time, the stock
transfer books of Company shall be closed and there shall be no further
registration of transfers of Company Common Stock thereafter on the
records of Company. If any certificate for shares of Parent Common Stock
is to be issued in a name other than that in which the Certificate
surrendered in exchange therefor is registered, or any portion of the
cash portion of the Merger Consideration is to be paid to a Person other
than the Person in whose name the Certificate surrendered in exchange
therefor is registered, it will be a condition of the issuance thereof
that the Certificate so surrendered will be properly endorsed and
otherwise in proper form for transfer and that the Person requesting
such exchange will have paid to Parent or any agent designated by it any
transfer or other taxes required by reason of the issuance of a
certificate for shares of Parent Common Stock in any name other than
that of the registered holder of the Certificate surrendered or payment
of any portion of the Cash Merger Consideration to any Person other than
the registered holder of the Certificate surrendered, or established to
the satisfaction of Parent or any agent designated by it that such tax
has been paid or is not payable.
(f) Termination of Exchange Fund. Any portion of the Exchange
Fund which remains undistributed to the Company Shareholders six months
after the Effective Time shall be delivered to Parent, upon demand, and
the Company Shareholders who have not previously complied with this
Section 1.7 shall thereafter look only to Parent for payment of their
claim for the Merger Consideration and any dividends or distributions
with respect to Parent Common Stock.
(g) No Liability. Notwithstanding anything to the contrary in
this Section 1.7, none of the Exchange Agent, Parent, the Surviving
Corporation or any party hereto shall be liable to any Person for any
amount properly paid to a public official pursuant to any applicable
abandoned property, escheat or similar law.
(h) Dissenting Shares. The provisions of this Section 1.7 shall
also apply to Dissenting Shares that lose their status as such, except
that the obligations of Parent under this Section 1.7 shall commence on
the date of loss of such status and the holder of such shares shall be
entitled to receive in exchange for such shares the Merger Consideration
to which such holder is entitled pursuant to Section 1.6 hereof.
Section 1.8 No Further Ownership Rights in Company Common Stock. The
Merger Consideration delivered upon the surrender for exchange of shares of
Company Common Stock in accordance with the terms hereof (including any
dividends, distributions or cash paid in lieu of fractional shares) shall be
deemed to have been issued in full satisfaction of all rights pertaining to such
shares of Company Common Stock, and there shall be no further registration of
transfers on the records of the Surviving Corporation of shares of Company
Common Stock which were outstanding immediately prior to the Effective Time. If,
after the Effective Time, Certificates are presented to the Surviving
Corporation for any reason, they shall be canceled and exchanged as provided in
this Article I.
Section 1.9 Lost, Stolen or Destroyed Certificates. In the event any
Certificates shall have been lost, stolen or destroyed, the Exchange Agent shall
issue in exchange for such lost, stolen or destroyed Certificates, upon the
making of an affidavit of that fact by the holder thereof such Merger
Consideration (and dividends, distributions and cash in lieu of fractional
shares) as may be required pursuant to Section 1.6; provided, however, that
Parent may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed Certificates to
deliver a bond in such sum as it may reasonably direct as indemnity against any
claim that may be made against Parent, the Surviving Corporation or the Exchange
Agent with respect to the Certificates alleged to have been lost, stolen or
destroyed.
7
THE SYMBOL "[***]" IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS
BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
Section 1.10 Taking of Necessary Action; Further Action. Each of Parent,
Merger Sub and Company will take all such reasonable and lawful action as may be
necessary or desirable in order to effectuate the Merger in accordance with this
Agreement as promptly as possible. If, at any time after the Effective Time, any
further action is necessary or desirable to carry out the purposes of this
Agreement and to vest the Surviving Corporation with full right, title and
possession to all assets, property, rights, privileges, powers and franchises of
Company and Merger Sub, the officers and directors of Company and Merger Sub are
fully authorized in the name of their respective corporations or otherwise to
take, and will take, all such lawful and necessary action, so long as such
action is not inconsistent with this Agreement.
Section 1.11 Withholding Rights. Each of the Surviving Corporation and
Parent shall be entitled, or shall be entitled to cause the Exchange Agent, to
deduct and withhold from the Merger Consideration otherwise payable pursuant to
this Agreement to any holder of shares of Company Common Stock such amounts as
may be required to be deducted and withheld with respect to the making of such
payment under the Code, and the rules and regulations promulgated thereunder, or
any provision of state, local or foreign Tax law or under any other applicable
law. To the extent that amounts are so withheld by the Surviving Corporation,
Parent or the Exchange Agent, as the case may be, such amounts shall be treated
for all purposes of this Agreement as having been paid to the holder of the
shares of Company Common Stock in respect to which such deduction and
withholding was made by the Surviving Corporation, Parent or the Exchange Agent,
as the case may be.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF COMPANY
Company hereby represents and warrants to Parent and Merger Sub, subject
to such exceptions as are disclosed in the disclosure schedules dated as of the
date hereof supplied by Company to Parent (collectively, the "Company Disclosure
Schedule"), on the date hereof, and as of the Effective Time as though made at
the Effective Time except as otherwise expressly set forth herein, as follows.
Any exception or disclosure contained in the Company Disclosure Schedule with
reference to a particular section of the Agreement shall be deemed an exception
or disclosure with respect to each other section of the Company Disclosure
Schedule to which it is reasonably apparent that it may relate.
Section 2.1 Organization of Company. Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
California. Company has the corporate power to own its properties and to carry
on its business as currently conducted and as currently contemplated to be
conducted. Company is duly qualified or licensed to do business and in good
standing as a foreign corporation in each jurisdiction in which the failure to
be so qualified or licensed would have a Material Adverse Effect on Company (all
of which jurisdictions are set forth in Schedule 2.1 of the Company Disclosure
Schedule). Company has delivered a true and correct copy of its articles of
incorporation and bylaws, each as amended to date and in full force and effect,
to Parent. Company is not in violation of any of the provisions of its articles
of incorporation or bylaws. Schedule 2.1 of the Company Disclosure Schedule
lists the directors and officers of Company. Company does not have, and has
never had, any subsidiaries and does not otherwise own, and has not otherwise
owned, any share in the capital of or any interest in, or control of, directly
or indirectly, any corporation, partnership, association, joint venture or other
business entity.
Section 2.2 Company Capital Structure.
(a) The authorized capital stock of Company consists of
15,000,000 shares of Common Stock, of which 11,354,600 shares are issued
and outstanding as of the date hereof. As of the
8
THE SYMBOL "[***]" IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS
BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
date hereof, the capitalization of Company is as set forth in Schedule
2.2(a) of the Company Disclosure Schedule. All outstanding shares of
Company Common Stock are duly authorized, validly issued, fully paid and
non-assessable and are free of any Liens and not subject to preemptive
rights or rights of first refusal created by statute, the articles of
incorporation or bylaws of Company, or any agreement to which Company is
a party or by which it is bound. All of the issued and outstanding
shares of Company Common Stock are owned by the persons in the amounts
set forth in Schedule 2.2(a) of the Company Disclosure Schedule, subject
to the exercise of Company Options which were issued prior to the date
of this Agreement and the existence of which are disclosed pursuant to
Section 2.2(b) below, which exercise is disclosed to Parent promptly and
in any event before the Effective Time. All outstanding shares of
Company Common Stock and Company Options have been issued and, in the
case of shares that were outstanding and repurchased by Company or any
shareholder of Company, repurchased in compliance with all applicable
federal, state, foreign, or local statues, laws, rules, or regulations,
including federal and state securities laws except as would not either
individually or in the aggregate, have a Material Adverse Effect on
Company. Company has not, and will not have, suffered or incurred any
liability (contingent or otherwise) or loss relating to or arising out
of the issuance or repurchase of any Company Common Stock or Company
Options except as would not either individually or in the aggregate,
have a Material Adverse Effect on Company. There are no declared or
accrued but unpaid dividends with respect to any shares of Company
Common Stock that will be payable after the Closing. Company has no
other capital stock authorized, issued or outstanding.
(b) Except for Company's 2001 Incentive and Non-Statutory Stock
Option Plan (the "2001 Plan"), Company has never adopted or maintained
any stock option plan or other plan providing for equity compensation of
any person. Company has reserved 3,000,000 shares of Company Common
Stock for issuance to employees and directors of, and consultants to,
Company upon the exercise of options granted under the 2001 Plan, of
which options to purchase 2,333,000 shares have been granted as of the
date hereof, options to purchase 2,063,000 shares are outstanding as of
the date hereof, and options to purchase 667,000 shares remain available
for issuance under the 2001 Plan as of the date hereof. Schedule 2.2(b)
of the Company Disclosure Schedule sets forth (i) for each outstanding
Company Option, the name of the holder of such option, the number of
shares of Company Common Stock issuable upon the exercise of such
option, the exercise price of such option, the date on which such option
was granted, the vesting schedule for such option, including the extent
vested to date and whether and to what extent the vesting of such option
will be accelerated by the transactions contemplated by this Agreement,
the date on which such option expires, and whether and to what extent
such option qualifies as an incentive stock option as defined in Section
422 of the Code, and (ii) for each right to repurchase shares in favor
of Company, the name of Shareholder, the number of shares of Company
Common Stock subject to repurchase by Company, the price at which such
shares may be repurchased, the schedule by which such repurchase right
lapses, including the extent such repurchase right has lapsed to date
and whether and to what extent the lapsing of the repurchase right will
be accelerated by the transactions contemplated by this Agreement. No
vesting provisions applicable to any Company Options, or to any other
rights to purchase Company Common Stock will accelerate as a result of
the Merger. Except for Company Options, there are no options, warrants,
calls, rights, commitments or agreements of any character, written or
oral, to which Company is a party or by which it is bound obligating
Company to issue, deliver, sell, repurchase or redeem, or cause to be
issued, delivered, sold, repurchased or redeemed, any shares of the
capital stock of Company or obligating Company to grant, extend,
accelerate the vesting of, change the price of, otherwise amend or enter
into any such option, warrant, call, right, commitment or agreement.
There are no outstanding or authorized stock appreciation, phantom
9
THE SYMBOL "[***]" IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS
BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
stock, profit participation, or other similar rights with respect to
Company. There are no voting trusts, proxies, or other agreements or
understandings with respect to the voting stock of Company except for
the Voting Agreement. There are no bonds, debentures, notes or other
indebtedness of Company having the right to vote (or convertible into
securities having the right to vote) on any matters on which the Company
Shareholders may vote. As a result of the Merger, Parent will be the
sole owner of all issued and outstanding Company Common Stock and all
rights to acquire or receive any shares of Company Common Stock, whether
or not such shares of Company Common Stock are outstanding.
Section 2.3 Authority. Company has all requisite power and authority to
enter into this Agreement and any Related Agreements to which it is a party and
to consummate the transactions contemplated hereby and thereby. The execution
and delivery of this Agreement and any Related Agreements to which Company is a
party and the consummation of the transactions contemplated hereby and thereby
have been duly authorized by all necessary corporate action on the part of
Company, and no further action is required on the part of Company to authorize
the Agreement and any Related Agreements to which it is a party and the
transactions contemplated hereby and thereby, subject only to the approval of
this Agreement and the transactions contemplated hereby by the Company
Shareholders. This Agreement and each of the Related Agreements to which Company
is a party has been duly executed and delivered by Company, and assuming the due
authorization, execution and delivery by the other parties hereto and thereto,
constitute the valid and binding obligations of Company, enforceable against
Company in accordance with their respective terms, except as such enforceability
may be subject to the laws of general application relating to bankruptcy,
insolvency, and the relief of debtors and rules of law governing specific
performance, injunctive relief, or other equitable remedies. For all purposes of
this Agreement, the term "Related Agreements" shall mean this Merger Agreement
and any other agreements entered into to consummate the transactions
contemplated thereby.
Section 2.4 No Conflict.
(a) The execution and delivery by Company of this Agreement and
any Related Agreement to which Company is a party, and the consummation
of the transactions contemplated hereby and thereby, subject to
obtaining the consents hereto and thereto referred to in Schedule 2.5 of
the Company Disclosure Schedule, will not conflict with or result in any
violation of or default under (with or without notice or lapse of time,
or both) or give rise to a right of termination, cancellation, payment,
modification or acceleration of any obligation or loss of any benefit
under (any such event, a "Conflict"), or result in the creation of any
pledge, claim, lien, charge, encumbrance or security interest of any
kind or nature whatsoever (collectively, "Liens") in or upon any of the
properties or assets of Company under (i) any provision of the articles
of incorporation, bylaws or charter documents of Company, (ii) any
mortgage, indenture, lease, contract, covenant or other agreement,
obligation, instrument or commitment, permit, concession, franchise or
license to which the Company is a party or to which Company or any of
its properties or assets (including intangible assets) is subject or
which may affect the ability of Company to enter into this Agreement and
any Related Agreement and the consummation of the transactions
contemplated hereby and thereby (each a "Contract" and collectively, the
"Contracts"), or (iii) any judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to Company or any of its
properties (tangible and intangible) or assets, other than in the case
of clauses (ii) and (iii), any such Conflict which either individually
or in the aggregate, would not reasonably be expected to have a Material
Adverse Effect on Company.
(b) With respect to each Contract and subject to the consents
hereto and thereto referred to in Schedule 2.5 of the Company Disclosure
Schedule: (i) the agreement is legal, valid, binding
10
THE SYMBOL "[***]" IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS
BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
and enforceable and in full force and effect with respect to Company,
and to Company's knowledge is legal, valid, binding, enforceable and in
full force and effect with respect to each other party thereto, in
either case subject to the effect of bankruptcy, insolvency, moratorium
or other similar laws affecting the enforcement of creditors' rights
generally and except as the availability of equitable remedies may be
limited by general principles of equity; (ii) the agreement will
continue to be legal, valid, binding and enforceable and in full force
and effect immediately following the Closing in accordance with the
terms thereof as in effect prior to the Closing, subject to the effect
of bankruptcy, insolvency, moratorium or other similar laws affecting
the enforcement of creditors' rights generally and except as the
availability of equitable remedies may be limited by general principles
of equity; and (iii) neither Company nor, to Company's knowledge, any
other party is in breach or default, and no event has occurred which
with notice or lapse of time would constitute a breach or default by
Company or, to Company's knowledge, by any such other party, or permit
termination, modification or acceleration, under the agreement.
Section 2.5 Consents. No consent, waiver, approval, order or
authorization of, or registration, declaration or filing with any court,
administrative agency or commission or other federal or state governmental
authority, instrumentality, agency or commission (each, a "Governmental Entity")
or party to any Contract with Company (so as not to trigger any Conflict), is
required by or with respect to Company in connection with the execution and
delivery of this Agreement and any Related Agreement to which Company is a party
or the consummation of the transactions contemplated hereby and thereby, except
for (i) such consents, waivers, approvals, orders, authorizations,
registrations, declarations and filings as may be required under applicable
securities laws, (ii) the filing of the Agreement of Merger with the Secretary
of State of the State of California and (iii) any consent, waivers and approvals
of parties to any Contract as are required thereunder in connection with the
Merger, as set forth in Schedule 2.5 of the Company Disclosure Schedule, and
(iv) such consents, waivers, approvals, orders, authorizations, registration,
declarations and filings as would not either individually or in the aggregate
result in a Material Adverse Effect on Company were they not obtained.
Section 2.6 Company Financial Statements. Schedule 2.6 of the Company
Disclosure Schedule sets forth (i) Company's unaudited balance sheets and
statements of income as of December 31, 2001, December 31, 2000 and December 31,
1999 (collectively, the "Year-End Financials"), and (ii) Company's unaudited
balance sheet as of March 31, 2002, and the related unaudited statement of
income for the period then ended (the "Interim Financials"). The Year-End
Financials and the Interim Financials present fairly Company's financial
condition and operating results as of the dates and during the periods indicated
therein in accordance with, and the "Total Assets" and "Total Liabilities" line
items of such Year-End Financials and Interim Financials have been prepared in
accordance with, generally accepted accounting principles ("GAAP") applied on a
basis that is materially consistent throughout the periods indicated (except
that the Year-End Financials and Interim Financials do not contain footnotes and
certain other presentation items that may be required by GAAP, the Year-End
Financials and Interim Financials do not contain statements of cash flows and
statements of retained earnings, and subject in the case of the Interim
Financials to normal year-end adjustments, which are not material in amount or
significance in any individual case or in the aggregate). Company maintains and
will continue to maintain a standard system of accounting established and
administered in accordance with GAAP. The Company's unaudited balance sheet as
of March 31, 2002 is referred to hereinafter as the "Current Balance Sheet."
Section 2.7 No Undisclosed Liabilities. Company does not have any
obligations or liabilities other than (a) liabilities reflected or reserved
against in the Year-End Financials or Interim Financials, (b) liabilities
incurred after the date thereof in the ordinary course of business, (c)
liabilities incurred in the ordinary course of business and not required to be
reflected in the Year-End Financials or Interim
11
THE SYMBOL "[***]" IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS
BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
Financials in accordance with GAAP, (d) liabilities not yet due and payable, or
obligations to be performed or satisfied after the date hereof, under contracts
furnished to Parent on or prior to the date hereof, to which Company is a party,
(e) liabilities disclosed to Parent in Schedule 2.7 of the Company Disclosure
Schedule, (f) such other liabilities as, individually or in the aggregate, have
not had and would not reasonably be expected to have a Material Adverse Effect
on Company. There are no asserted claims for indemnification by any Person
against Company under any law or agreement or pursuant to Company's articles of
incorporation or bylaws, and to the knowledge of Company there has been no
threatened claim for such indemnification.
Section 2.8 No Changes. Since the date of the Current Balance Sheet,
there has not been any:
(a) transaction by Company outside the ordinary course of
business consistent with past practice;
(b) amendments or changes to the articles of incorporation,
bylaws, or the organizational documents of Company;
(c) capital expenditure or commitment by Company exceeding
$25,000 individually or $50,000 in the aggregate;
(d) payment, discharge or satisfaction, in any amount in excess
of $25,000 in any one case, or $50,000 in the aggregate, of any claim or
liability other than payment, discharge or satisfaction in the ordinary
course of business of (i) liabilities reflected or reserved against in
the Current Balance Sheet, (ii) liabilities incurred after the date
thereof in the ordinary course of business, (iii) liabilities incurred
in the ordinary course of business and not required to be reflected in
the Year-End Financials or Interim Financials in accordance with GAAP,
or (iv) liabilities not yet due and payable, or obligations to be
performed or satisfied after the date thereof, under any Contract
furnished to Parent on or prior to the date hereof;
(e) as of the date hereof, destruction of, damage to, or loss of
any material assets, material business or, to the knowledge of Company,
a material customer of Company (whether or not covered by insurance),
and as of the Effective Time, any such destruction, damage or loss that
would have a Material Adverse Effect on Company;
(f) as of the date hereof, any material labor trouble or claim
of wrongful discharge or other unlawful labor practice or action by
Company, in any such case to Company;
(g) change in accounting methods or practices (including any
change in depreciation or amortization policies or rates) by Company
other than as required by GAAP;
(h) except as contemplated hereby, any change in any election in
respect of Taxes (as defined in Section 2.9), any material change in or
adoption of any accounting method in respect of Taxes, any material
agreement or settlement of any claim or assessment in respect of Taxes,
or extension or waiver of the limitation period applicable to any claim
or assessment in respect of Taxes;
(i) revaluation by Company of any of its assets other than in
the ordinary course of business, except as may be required by GAAP;
12
THE SYMBOL "[***]" IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS
BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
(j) issuance or sale, or contract to issue or sell, by Company
of any shares of Company Common Stock or securities convertible into, or
exercisable or exchangeable for, shares of Company Common Stock, or any
securities, warrants, options or rights to purchase any of the
foregoing, except as contemplated hereby or upon exercise of, or
otherwise in accordance with the agreements evidencing, Company Options;
(k) declaration, setting aside or payment of a dividend or other
distribution (whether in cash, stock or property) in respect of any
Company Common Stock, or any split, combination or reclassification in
respect of any shares of Company Common Stock, or any issuance or
authorization of any issuance of any other securities in respect of, in
lieu of or in substitution for shares of Company Common Stock, or any
direct or indirect repurchase, redemption, or other acquisition by
Company of any shares of Company Common Stock (or options, warrants or
other rights convertible into, exercisable or exchangeable therefore),
except issuance of Company Common Stock upon exercise of, or
distribution of the proceeds of exercise of, or otherwise in accordance
with the agreements evidencing, Company Options, and provided that
notwithstanding the foregoing it is understood that Company may declare,
set aside or pay cash dividends in respect of any Company Common Stock
to the extent that, taking into account any such dividends, the total
assets of the Company minus the total liabilities of the Company (the
"Net Assets") as of the Closing Date are reasonably expected to equal or
exceed $1,000,000 in cash;
(l) increase in the salary or other compensation payable or to
become payable by Company to any of its officers, directors, or
employees, or the declaration, payment or commitment or obligation of
any kind for the payment by Company of a severance payment, termination
payment, bonus or other additional salary or compensation to any such
person, except in the ordinary course of business or as contemplated
hereby;
(m) except for the granting of non-exclusive licenses relating
to the Company's current technology and/or technology development
services agreements entered into in the ordinary course of business
consistent with past practice or as contemplated hereby, any material
agreement, contract, covenant, instrument, lease, license or commitment
to which Company is a party or by which it or any of its assets
(including intangible assets) are bound or any termination, extension,
amendment or modification of the terms of any material agreement,
contract, covenant, instrument, lease, license or commitment to which
Company is a party or by which it or any of its assets are bound;
(n) acquisition of or sale, lease or other disposition of any of
the assets or properties of Company, including, but not limited to, the
sale of any accounts receivable of Company, or any creation of any
security interest in such assets or properties (except as contemplated
by subsection (o) below), except as contemplated hereby, outside of the
ordinary course of business;
(o) loan, advance or capital contribution by Company to any
person or entity, incurring by Company of any material indebtedness,
guaranteeing by Company of any material indebtedness, issuance or sale
of any debt securities of Company or guaranteeing of any debt securities
of others, except in the ordinary course of business or as contemplated
hereby, provided that Founder shall loan money to Company, in the amount
necessary so that Company will have $1,000,000 in cash at the Effective
Time, in return for a promissory note secured by the assets of the
Company and otherwise with terms no less favorable to Company than that
certain promissory note, dated June 29, 2001, of Company to Founder
except that the amount owed on such promissory note shall be payable
upon the earlier of (x) receipt by Parent or Company of
13
THE SYMBOL "[***]" IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS
BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
amounts paid in respect of Company receivables outstanding as of date
hereof or as of the Effective Time (such payment to be made promptly
upon any such receipt in an amount equal to the amount received up to
the amount owed on the promissory note) or (y) three months after the
Effective Time;
(p) material waiver or release of any right or claim of Company,
including any write-off or other compromise of any account receivable of
Company;
(q) commencement, settlement, or notice of any action, lawsuit,
claim or proceeding ("Proceeding") against Company, or to the knowledge
of Company, any investigation or threat of any Proceeding against
Company;
(r) material change in the pricing or royalties set or charged
by Company to its customers or licensees, or to the knowledge of the
Company, in the pricing or royalties set or charged by persons who have
licensed Intellectual Property to Company;
(s) agreement or modification to any material agreement pursuant
to which any other party was granted marketing, distribution,
development or similar rights of any type or scope with respect to any
products or technology of Company;
(t) any event or condition of any character, relating to the
Company or to the knowledge of the Company, relating to any competitor
of the Company, that has had or is reasonably likely to have a Material
Adverse Effect on Company;
(u) amendment of any term of any outstanding security of Company
that would materially increase the obligations of Company under such
security;
(v) creation or assumption by Company of any Lien on any asset
of Company other than in the ordinary course of business consistent with
past practice (except as contemplated by subsection (o) above);
(w) any material delay or postponement in the payment of
material accounts payable or and other material liabilities outside the
ordinary course of business;
(x) agreement by Company, or any officer or employees on behalf
of Company to do any of the things described in the preceding clauses
(a) through (w) of this Section 2.8 (other than negotiations with Parent
and its representatives regarding the transactions contemplated by this
Agreement and the Related Agreements).
Section 2.9 Tax Matters.
(a) Definition of Taxes. For the purposes of this Agreement, the
term "Tax" or, collectively, "Taxes" shall mean any and all federal,
state, local and foreign taxes, assessments and other governmental
charges, duties, impositions and liabilities, including taxes based upon
or measured by gross receipts, income, profits, sales, use and
occupation, and value added, ad valorem, transfer, franchise,
withholding, payroll, recapture, employment, excise and property taxes
as well as public imposts, fees and social security charges (including
but not limited to health, unemployment and pension insurance), and any
liability imposed by law for the Taxes of another Person, including by
reason of being a successor to or transferee of any Person or a member
of an affiliated, consolidated or unitary group (including pursuant to
Treasury
14
THE SYMBOL "[***]" IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS
BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
Regulations Section 1.1502-6 and corresponding provisions of state,
local and foreign law), together with all interest, penalties and
additions imposed with respect to such amounts.
(b) Tax Returns and Audits.
(i) As of the Closing Date, Company has or will have
prepared and timely filed all material federal, state, local and
foreign returns, estimates, information statements, elections,
notices, forms and reports relating to Taxes required to be
filed by Company ("Returns"). Each such Return was, or will be
when filed, true, correct and complete in all material respects,
except as to immaterial items that were believed to be correct
or supported by substantial authority when such Return was or
will be filed.
(ii) As of the Closing Date, Company will have timely
paid all Taxes it is required to pay and will have timely
withheld with respect to its Employees all federal, state and
foreign income, employment, and other Taxes required to be
withheld.
(iii) The Company has not been delinquent in the payment
of any Tax, nor is there any Tax deficiency outstanding,
assessed or proposed against Company, nor has Company executed
any waiver of any statute of limitations on or extending the
period for the assessment or collection of any Tax.
(iv) No audit or other examination of any Return is
presently in progress, nor has Company been notified of any
request for such an audit or other examination. No adjustment
relating to any Return filed by Company has been proposed
formally or, to the knowledge of Company, informally by any
Governmental Entity to Company or any representative thereof.
(v) Company has not granted any power of attorney with
respect to Taxes, which power of attorney will be outstanding as
of the Closing Date.
(vi) The Company's liabilities for unpaid federal,
state, local or foreign Taxes do not exceed the amounts accrued
or reserved on the Current Balance Sheet, whether for Taxes that
are asserted or unasserted, contingent or otherwise, and Company
has not incurred any liability for Taxes since the date of the
Current Balance Sheet other than in the ordinary course of
business.
(vii) The Company has made available to Parent or its
legal counsel, copies of all material foreign, federal, state
and local income and all material state and local sales and use
Returns for Company filed for all periods since its inception,
all ruling requests or correspondence with Governmental Entities
concerning Taxes, and any information relating to any Tax audit
of Company.
(viii) None of Company's assets is treated as
"tax-exempt use property," within the meaning of Section 168(h)
of the Code.
(ix) The Company has not filed any consent agreement
under Section 341(f) of the Code or agreed to have Section
341(f)(4) of the Code apply to any disposition of a subsection
(f) asset (as defined in Section 341(f)(4) of the Code) owned by
Company.
15
THE SYMBOL "[***]" IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS
BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
(x) The Company is not a party to any Tax sharing, Tax
indemnification or Tax allocation agreement, nor does Company
owe any amount under any such agreement.
(xi) The Company is not, and has not been at any time, a
"United States real property holding corporation" within the
meaning of Section 897(c)(2) of the Code.
(xii) Company is now and since its formation has been an
S Corporation within the meaning of Section 1361 of the Code and
corresponding provisions of state law.
(xiii) Company has maintained its books and records on
the accrual method of accounting since its formation, and has
neither applied for any change of accounting method nor been
forced to change its accounting methods for tax purposes.
(c) Compensation. There is no contract, agreement, plan or
arrangement to which Company is a party, including, without limitation,
the provisions of this Agreement, covering any employee or former
employee of Company, which, individually or collectively, could give
rise to the payment of any amount that would not be deductible pursuant
to Sections 404 or 162(m) of the Code.
Section 2.10 Restrictions on Business Activities. There is no agreement
(non-competition or otherwise), commitment, judgment, injunction, order or
decree to which Company is a party or otherwise binding upon Company which has
or would reasonably be expected to have the effect of prohibiting or materially
impairing the conduct of business as currently conducted by Company or otherwise
limiting the freedom of Company to engage in any line of business, to acquire
any property or to compete with any Person. Without limiting the generality of
the foregoing, Company has not entered into any agreement under which Company is
restricted from selling, licensing or otherwise distributing any of its
technology or products or from providing services to customers or potential
customers or any class of customers, in any geographic area, during any period
of time, or in any segment of the market.
Section 2.11 Title to Properties; Absence of Liens and Encumbrances;
Condition of Equipment.
(a) Company does not own any real property, nor has Company ever
owned any real property. Schedule 2.11(a) of the Company Disclosure
Schedule sets forth a list of all real property currently leased by
Company, the name of the lessor, the date of the lease and each
amendment thereto and, with respect to any current lease, the aggregate
annual rental payable under any such lease. All such current leases are
in full force and effect, are valid, binding and effective in accordance
with their respective terms, and there is not, under any of such leases,
any existing material default or material event of default (or event
which with notice or lapse of time, or both, would constitute such
default).
(b) Company has good and valid title to, or, in the case of
leased properties and assets, valid leasehold interests in, all of its
tangible properties and assets, real, personal and mixed, used or held
for use in its business, free and clear of any Liens, except (i) as
reflected in the Current Balance Sheet, (ii) Liens for Taxes not yet due
and payable, and (iii) such imperfections of title and encumbrances, if
any, which, either individually or in the aggregate, have not and would
not reasonably be expected to result in a Material Adverse Effect on
Company.
16
THE SYMBOL "[***]" IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS
BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
(c) The equipment (the "Equipment") owned or leased by Company,
is (i) adequate for the conduct of the business of Company as currently
conducted and as currently contemplated to be conducted, and (ii) in
reasonable operating condition and regularly and properly maintained,
subject to normal wear and tear, except as would not either individually
or in the aggregate result in a Material Adverse Effect on Company.
Section 2.12 Intellectual Property.
(a) Definitions. For all purposes of this Agreement, the
following terms shall have the following respective meanings:
"Intellectual Property" shall mean any or all of the following:
(i) works of authorship including, without limitation, computer programs,
algorithms, routines, source code, and executable code, whether embodied in
software, firmware or otherwise, documentation, designs, files, records and
data, (ii) inventions (whether or not patentable), improvements, and technology,
(iii) proprietary and confidential information, including without limitation
technical data and customer and supplier lists, trade secrets, know how and
techniques, (iv) databases, data compilations and collections of technical data,
(v) logos, trade names, trade dress, trademarks and service marks, (vi) domain
names, web addresses and sites, and (vii) tools, methods, processes, devices,
prototypes, schematics, net lists and test methodologies.
"Intellectual Property Rights" shall mean any or all of the
following and all rights in, arising out of, or associated therewith, whether
arising from statute or common law: (i) all United States and foreign patents
and utility models and applications therefor and all reissues, divisions,
re-examinations, renewals, extensions, provisionals, continuations and
continuations-in-part thereof, and equivalent or similar rights anywhere in the
world in inventions and discoveries including without limitation invention
disclosures ("Patents"), (ii) all trade secrets and other rights in know-how and
confidential and proprietary information, (iii) all copyrights, copyright
registrations and applications therefor and all other rights corresponding
thereto throughout the world ("Copyrights"), (iv) all industrial designs and any
registrations and applications therefor throughout the world, (v) mask works,
mask work registrations and applications therefor, and all other rights
corresponding thereto throughout the world ("Mask Works"), (vi) all rights in
World Wide Web addresses and domain names and applications and registrations
therefor, all trade names, logos, common law trademarks and service marks,
trademark and service mark registrations and applications therefor and all
goodwill associated therewith throughout the world ("Trademarks"), and (vii) any
similar, corresponding or equivalent rights to any of the foregoing throughout
the world.
"Company Intellectual Property" shall mean any Intellectual
Property and Intellectual Property Rights (including Company Registered
Intellectual Property Rights, as defined below) that are owned by or exclusively
licensed to Company.
"Registered Intellectual Property" shall mean Intellectual
Property and Intellectual Property Rights that are the subject of an
application, certificate, filing, registration or other document issued by,
filed with, or recorded by any state, government or other public legal authority
at any time.
(b) Schedule 2.12(b) of the Company Disclosure Schedule (i)
lists all Registered Intellectual Property Rights owned by, filed in the
name of, or applied for by or on behalf of Company (the "Company
Registered Intellectual Property Rights") and (ii) lists any proceedings
or actions of which Company has received notice before any court,
tribunal (including the United States Patent and Trademark Office (the
"PTO") or equivalent authority anywhere in the world)
17
THE SYMBOL "[***]" IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS
BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
related to any of Company Registered Intellectual Property Rights or
Company Intellectual Property, other than ex parte proceedings and
actions of which Company has not received notice.
(c) Each item of Company Intellectual Property, including all
Company Registered Intellectual Property listed in Schedule 2.12(b) of
the Company Disclosure Schedule, but excluding all Intellectual Property
licensed to Company, is free and clear of any [***]. Company is the
exclusive owner or exclusive licensee of all Company Intellectual
Property.
(d) The Company has not transferred ownership of, or granted any
exclusive license of or exclusive right to use, or authorized the
retention of any exclusive rights to use or joint ownership of, any
Company Intellectual Property, to any other person. All Company
Intellectual Property owned by Company will be fully transferable,
alienable or licensable by Parent without restriction and without
payment of any kind to any third party.
(e) Other than "shrink-wrap" and similar publicly available
binary code and commercial end-user licenses, Company Intellectual
Property constitutes all the Intellectual Property and Intellectual
Property Rights used in and/or necessary to the conduct of the business
of Company as it currently is conducted.
(f) Other than (i) "shrink-wrap" and similar publicly available
binary code and commercial end-user licenses and (ii) other
non-exclusive licenses and related agreements with respect thereto of
Company's products to its customers pursuant to written agreements that
[***] (which is or are included in Schedule 2.12(f) of the Company
Disclosure Schedule), Schedule 2.12(f) of the Company Disclosure
Schedule lists all contracts, licenses and agreements to which Company
is a party with respect to any Intellectual Property and Intellectual
Property Rights [***]. Company is not in breach of nor has Company
failed to perform under, any of the foregoing contracts, licenses or
agreements, [***].
(g) Other than (i) "shrink-wrap" and similar publicly available
binary code and commercial end-user licenses and (ii) other
non-exclusive licenses and related agreements with respect thereto of
Company's products to end-users pursuant to written agreements that
[***] (which is or are included in Schedule 2.12(g) of the Company
Disclosure Schedule), Schedule 2.12(g) of the Company Disclosure
Schedule lists all contracts, licenses and agreements between Company
and any other person that [***].
(h) [***]
18
THE SYMBOL "[***]" IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS
BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
Within the past six years, Company has not received any written notice
from any person claiming that such operation or any act, product,
Intellectual Property or service (including products, Intellectual
Property or services currently under development) of Company infringes
or misappropriates any Intellectual Property Right of any person or
constitutes unfair competition or trade practices under the laws of any
jurisdiction.
(i) [***]
(j) [***]
(k) [***]
(l) No Company Intellectual Property is subject to any
proceeding or outstanding decree, order, judgment or settlement
agreement or stipulation that [***] the use, transfer or licensing
thereof by Company or affects the validity, use or enforceability of
such Company Intellectual Property.
Section 2.13 Agreements, Contracts and Commitments.
(a) Except as disclosed pursuant to Section 2.12 hereof or
expressly contemplated hereby, Company is not a party to nor is it bound
by:
(i) any material employment or consulting agreement,
contract or commitment with an employee or individual consultant
or salesperson, or consulting or sales agreement, contract, or
commitment with a firm or other organization;
(ii) any agreement or plan, including, without
limitation, any stock option plan, stock appreciation rights
plan or stock purchase plan, any of the benefits of which will
be increased, or the vesting of benefits of which will be
accelerated, by the occurrence of any of the transactions
contemplated by this Agreement or the value of any of the
benefits of which will be calculated on the basis of any of the
transactions contemplated by this Agreement;
(iii) any fidelity or surety bond or completion bond;
(iv) any lease of personal property having a value in
excess of $25,000 individually or $50,000 in the aggregate;
19
THE SYMBOL "[***]" IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS
BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
(v) any agreement, contract or commitment relating to
capital expenditures and involving future payments in excess of
$25,000 individually or $50,000 in the aggregate;
(vi) any agreement, contract or commitment relating to
the disposition or acquisition by Company of assets or any
interest in Company or any other business enterprise outside the
ordinary course of Company's business;
(vii) any mortgages, indentures, guarantees, loans or
credit agreements, security agreements or other agreements or
instruments relating to the borrowing of money or extension of
credit in excess of $25,000 individually or $50,000 in the
aggregate;
(viii) any no-shop agreement or other agreements
restricting Company from engaging in negotiations or entering
into an agreement for any merger or acquisition of Company or a
material part of Company's assets;
(ix) any purchase order or contract for the purchase of
materials involving in excess of $25,000 individually or $50,000
in the aggregate;
(x) any construction contracts for which future payments
by Company exceed $25,000 individually or $50,000 in the
aggregate;
(xi) any dealer, distribution, joint marketing or
development agreement;
(xii) any sales representative, original equipment
manufacturer, value added, remarketer, reseller, or independent
software vendor, or other agreement for use or distribution of
Company's products, technology or services;
(xiii) any contract, agreement or commitment containing
material obligations of Company to indemnify or hold harmless
any Person; or
(xiv) any other agreement, contract or commitment that
involves future payments by Company in excess of $25,000 and is
not cancelable without penalty within thirty (30) days.
(b) True, correct and complete copies of each agreement listed
in Section 2.13(a) of the Company Disclosure Schedule have been made
available to Parent.
Section 2.14 Interested Party Transactions. To the knowledge of Company
no officer, director or material shareholder of Company (nor any ancestor,
sibling, descendent or spouse of any of such persons, or any trust, partnership
or corporation in which any of such persons has or has had any material
interest), has or has had, directly or indirectly, (i) any material interest in
any entity which furnished or sold, or furnishes or sells, material services,
products or technology that Company furnishes or sells, or proposes to furnish
or sell, or (ii) any material interest in any entity that purchases from or
sells or furnishes to Company, any material goods or services, or (iii) any
material beneficial interest in any Contract to which Company is a party;
provided, however, that ownership of no more than two percent (2%) of the
outstanding voting stock of a publicly traded corporation shall not be deemed to
be an "interest in any entity" for purposes of this Section 2.14.
20
THE SYMBOL "[***]" IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS
BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
Section 2.15 Governmental Authorization. Each consent, license, permit,
grant or other authorization (i) pursuant to which Company currently operates or
holds any interest in any of its properties, or (ii) which is required for the
operation of Company's business as currently conducted or currently contemplated
to be conducted or the holding of any such interest has been issued or granted
to Company, except as the lack of such Company Authorization would not, either
individually or in the aggregate, result in a Material Adverse Effect on Company
(collectively, "Company Authorizations"). Company Authorizations are in full
force and effect and constitute all company authorizations that are necessary to
permit Company to operate or conduct its business or hold any interest in its
properties or assets, and no Company Authorization is subject to revocation or
forfeiture by virtue of any existing circumstance, there is no proceeding
pending or, to the knowledge of Company, threatened to modify or revoke any
Company Authorization, and no Company Authorization is subject to any
outstanding order, decree, judgment, stipulation or, to the knowledge of
Company, investigation by any Person, except as would not, either individually
or in the aggregate, result in a Material Adverse Effect on Company.
Section 2.16 Litigation. There is no action, suit, claim or proceeding
of any nature pending, or to the knowledge of Company, there is no action, suit,
claim, investigation, or proceeding of any nature threatened, against Company,
its properties (tangible or intangible) or any of its officers or directors, and
there is no proceeding pending or, to the knowledge of Company, threatened and
there is no investigation pending or threatened, against Company, any of its
properties (tangible or intangible) or any of their officers or directors by or
before any Governmental Entity, and no Governmental Entity has at any time
challenged or questioned the legal right of Company to conduct its operations as
presently or previously conducted or as presently contemplated to be conducted.
Section 2.17 Accounts Receivable.
(a) The Company has made available to Parent a list dated as of
March 31, 2002 of all of Company's accounts receivable in excess of
$25,000 individually as of that date.
(b) All of Company's accounts receivable arose in the ordinary
course of business, are carried at values determined in accordance with
GAAP consistently applied, and for receivables arising subsequent to
date of the Current Balance Sheet, are reflected on the books and
records of Company. No person has any Lien on any of Company's accounts
receivable and to the knowledge of Company no written request or
agreement for deduction or discount has been received by Company with
respect to any of Company's accounts receivable.
Section 2.18 Minute Books. The copies of the minutes of Company made
available to counsel for Parent are true and correct copies of the minutes of
Company and include all actions by written consent of the Board of Directors (or
committees thereof) of Company and its shareholders in each case since the time
of incorporation of Company.
Section 2.19 Environmental Matters.
(a) Hazardous Material. Company to its knowledge has not: (i)
operated any underground storage tanks at any property that Company has
at any time owned, operated, occupied or leased, or (ii) illegally
released any amount of any substance that has been designated by any
Governmental Entity or by applicable federal, state or local law, rules,
regulations or ordinances to be radioactive, toxic, hazardous or
otherwise a danger to health, safety or the environment, including,
without limitation, PCBs, asbestos, petroleum, and urea-formaldehyde and
all substances listed as hazardous substances pursuant to applicable
federal, state or local laws, rules, regulations or ordinances,
including without limitation, the Comprehensive
21
THE SYMBOL "[***]" IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS
BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
Environmental Response, Compensation, and Liability Act of 1980, as
amended, or defined as a hazardous waste pursuant to the United States
Resource Conservation and Recovery Act of 1976, as amended, and the
regulations promulgated pursuant to said laws (a "Hazardous Material"),
but excluding office and janitorial supplies properly and safely
maintained. Company has not been notified of any Hazardous Materials
being present in, on or under any property, including the land and the
improvements, ground water and surface water thereof, that Company has
at any time owned, operated, occupied or leased.
(b) Hazardous Materials Activities. Company has not transported,
stored, used, manufactured, disposed of, released or exposed its
employees or others to Hazardous Materials in violation of any law in
effect at the time of the transportation, storage, use, manufacture,
disposal, release or exposure, nor has Company disposed of, transported,
sold, or manufactured any product containing a Hazardous Material (any
or all of the foregoing being collectively referred to herein as
"Hazardous Materials Activities") in violation of any rule, regulation,
treaty or statute promulgated by any Governmental Entity in effect at
the time of the transportation, sale or manufacture to prohibit,
regulate or control Hazardous Materials or any Hazardous Material
Activity.
(c) Compliance. To the knowledge of the Company, none of
Company's properties or facilities is in violation of any federal,
state, or local law, ordinance, regulation, or order relating to
industrial hygiene or to the environmental conditions on, under or about
such properties or facilities, including, but not limited to, soil and
ground water condition except as would not either individually or in the
aggregate reasonably be expected to result in a Material Adverse Effect.
(d) Permits. Company currently holds all material environmental
approvals, permits, licenses, clearances and consents (the
"Environmental Permits") necessary for the conduct of Company's
Hazardous Material Activities, and other businesses of Company as such
activities and businesses are currently being conducted.
(e) Environmental Liabilities. No action, proceeding, revocation
proceeding, amendment procedure, writ, injunction or claim is pending,
or to the knowledge of Company, threatened, concerning any Environmental
Permit, Hazardous Material or any Hazardous Materials Activity of
Company. Company does not have any knowledge of any fact or circumstance
which could involve Company in any material environmental litigation or
impose upon Company any material environmental liability.
(f) No Litigation. During the time that Company has leased its
properties and facilities, there has been no litigation brought against
Company, or any settlement reached by Company with, any party or parties
alleging the presence, disposal, release or threatened release of any
Hazardous Materials on, from or under any of such properties or
facilities, except as would not either individually or in the aggregate
reasonably be expected to result in a Material Adverse Effect.
Section 2.20 Brokers' and Finders' Fees; Third Party Expenses. Company
has not incurred, nor will it incur, directly or indirectly, any liability for
brokerage or finders' fees or agents' commissions or any similar charges in
connection with the Agreement or any transaction contemplated hereby.
22
THE SYMBOL "[***]" IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS
BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
Section 2.21 Employee Benefit Plans and Compensation.
(a) Definitions. For purposes of this Agreement, the following
terms shall have the meanings set forth below:
"Affiliate" for purposes of this Section 2.21 shall mean any
other person or entity under common control with Company within the meaning of
Section 414(b), (c), (m) or (o) of the Code and the regulations issued
thereunder;
"COBRA" shall mean the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended;
"Company Employee Plan" shall mean any plan, program, policy,
practice, contract, agreement or other arrangement providing for compensation,
severance, termination pay, deferred compensation, performance awards, stock or
stock-related awards, fringe benefits or other employee benefits or remuneration
of any kind, whether written or unwritten or otherwise, funded or unfunded,
including without limitation, each "employee benefit plan," within the meaning
of Section 3(3) of ERISA which is maintained, contributed to, or required to be
contributed to, by Company or any Affiliate for the benefit of any Employee, or
with respect to which Company or any Affiliate has any liability or obligation;
"DOL" shall mean the United States Department of Labor;
"Employee" shall mean any current or former or retired employee,
consultant or director of Company or any Affiliate;
"Employment Agreement" shall mean each management, employment,
severance, consulting or other agreement, contract or understanding between
Company or any Affiliate and any Employee;
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended;
"International Employee Plan" shall mean each Company Employee
Plan that has been adopted or maintained by Company or any Affiliate, whether
informally or formally, or with respect to which Company or any Affiliate will
or may have any liability, for the benefit of Employees who perform services
outside the United States;
"IRS" shall mean the Internal Revenue Service;
"Multiemployer Plan" shall mean any "Pension Plan" (as defined
below) which is a "multiemployer plan," as defined in Section 3(37) of ERISA;
and
"Pension Plan" shall mean each Company Employee Plan which is an
"employee pension benefit plan," within the meaning of Section 3(2) of ERISA.
(b) Plans and Agreements. Schedule 2.21(b) contains an accurate
and complete list of each Company Employee Plan and each Employment
Agreement. Company does not have any plan or commitment to establish any
new Company Employee Plan or Employment Agreement, or to modify any
Company Employee Plan or Employment Agreement (except to the extent
required by law or to conform any such Company Employee Plan or
Employment Agreement to the requirements of any applicable law, in each
case as previously disclosed to Parent in writing,
23
THE SYMBOL "[***]" IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS
BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
or as contemplated by this Agreement), or to adopt or enter into any
Company Employee Plan, or Employment Agreement.
(c) Documents. Company has provided to Parent correct and
complete copies of: (i) all documents embodying each Company Employee
Plan, and each Employment Agreement including (without limitation) all
amendments thereto and, if applicable, all related trust documents,
administrative service agreements, group annuity contracts, group
insurance contracts, and policies pertaining to fiduciary liability
insurance covering the fiduciaries for each Plan; (ii) the most recent
annual actuarial valuations, if any, prepared for each Company Employee
Plan; (iii) the most recent annual report (Form Series 5500 and all
schedules and financial statements attached thereto), if any, required
under ERISA or the Code in connection with each Company Employee Plan;
(iv) if Company Employee Plan is funded, the most recent annual and
periodic accounting of Company Employee Plan assets; (v) the most recent
summary plan description together with the summary(ies) of material
modifications thereto, if any, required under ERISA with respect to each
Company Employee Plan; (vi) the most recent IRS determination, opinion,
notification and advisory letters with respect to each Company Employee
Plan intended to qualify under Section 401(a) of the Code, and all
applications and correspondence to or from the IRS or the DOL with
respect to any such application or letter; and (vii) the most recent
plan year discrimination tests for each Company Employee Plan.
(d) Employee Plan Compliance. (i) Company has performed in all
material respects all obligations required to be performed by it under,
is not in default or violation of, and has no knowledge of any default
or violation by any other party to each Company Employee Plan, and each
Company Employee Plan has been established and maintained in all
material respects in accordance with its terms and in compliance with
all applicable laws, statutes, orders, rules and regulations, including
but not limited to ERISA or the Code; (ii) each Company Employee Plan
intended to qualify under Section 401(a) of the Code and each trust
intended to qualify under Section 501(a) of the Code has either received
a favorable determination, opinion, notification or advisory letter from
the IRS with respect to each such Company Employee Plan as to its
qualified status under the Code, including all amendments to the Code
effected by the Tax Reform Act of 1986 and subsequent legislation, or
has remaining a period of time under applicable Treasury regulations or
IRS pronouncements in which to apply for such a letter and make any
amendments necessary to obtain a favorable determination as to the
qualified status of each such Company Employee Plan; (iii) no Company
Employee Plan promises or provides retiree medical or other retiree
welfare benefits to any Person; (iv) no "prohibited transaction," within
the meaning of Section 4975 of the Code or Sections 406 and 407 of
ERISA, and not otherwise exempt under Section 4975 of the Code or
Section 408 of ERISA (or any administrative class exemption issued
thereunder), has occurred with respect to any Company Employee Plan; (v)
there are no actions, suits or claims pending, or, to the knowledge of
Company, threatened (other than routine claims for benefits) against any
Company Employee Plan or against the assets of any Company Employee
Plan; (vi) each Company Employee Plan (other than any stock option plan)
can be amended, terminated or otherwise discontinued after the Effective
Time, without material liability to Parent, Company or any of its
Affiliates (other than ordinary administration expenses); (vii) there
are no audits, inquiries or proceedings pending or, to the knowledge of
Company, threatened by the IRS or DOL with respect to any Company
Employee Plan; (viii) neither Company nor any Affiliate is subject to
any penalty or tax with respect to any Company Employee Plan under
Section 502(i) of ERISA or Sections 4975 through 4980 of the Code; and
(ix) there has been no amendment to, written interpretation or
announcement by Company or any Affiliate which would materially increase
the expense of maintaining any Company Employee
24
THE SYMBOL "[***]" IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS
BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
Plan above the level of expense incurred with respect to such Company
Employee Plan for the most recent fiscal year.
(e) Pension Plan. Neither Company nor any Affiliate has ever
maintained, established, sponsored, participated in, or contributed to,
any Pension Plan which is subject to Title IV of ERISA or Section 412 of
the Code.
(f) Collectively Bargained, Multiemployer and Multiple Employer
Plans. At no time has Company or any Affiliate contributed to or been
obligated to contribute to any Multiemployer Plan. Neither Company, nor
any Affiliate has at any time ever maintained, established, sponsored,
participated in, or contributed to any multiple employer plan, or to any
plan described in Section 413 of the Code.
(g) No Post-Employment Obligations. No Company Employee Plan
provides, or reflects or represents any liability to provide retiree
health to any person for any reason, except as may be required by COBRA
or other applicable statute, and Company has never represented, promised
or contracted (whether in oral or written form) to any Employee (either
individually or to Employees as a group) or any other person that such
Employee(s) or other person would be provided with retiree health,
except to the extent required by statute.
(h) Effect of Transaction.
(i) The execution of this Agreement and the consummation
of the transactions contemplated hereby will not (either alone
or upon the occurrence of any additional or subsequent events)
constitute an event under any Company Employee Plan, Employment
Agreement, trust or loan that will or may result in any payment
(whether of severance pay or otherwise), acceleration,
forgiveness of indebtedness, vesting, distribution, increase in
benefits or obligation to fund benefits with respect to any
Employee.
(ii) No payment or benefit which will or may be made by
Company or its Affiliates with respect to any Employee or any
other "disqualified individual" (as defined in Code Section 280G
and the regulations thereunder) will be characterized as a
"parachute payment," within the meaning of Section 280G(b)(2) of
the Code.
(i) Employment Matters. Company has heretofore furnished to
Parent a list of the names of all current employees (including without
limitation, part-time, temporary and inactive employees), independent
contractors and consultants of Company, their respective salaries or
wages, other compensation and positions. Company: (i) is in compliance
in all material respects with all applicable foreign, federal, state and
local laws, rules and regulations respecting employment, employment
practices, terms and conditions of employment and wages and hours, in
each case, with respect to Employees and independent contractors; (ii)
has withheld and reported all amounts required by law or by agreement to
be withheld and reported with respect to wages, salaries and other
payments to Employees and independent contractors; (iii) is not liable
for any arrears of wages or any taxes or any penalty for failure to
comply with any of the foregoing; and (iv) is not liable for any payment
to any trust or other fund governed by or maintained by or on behalf of
any governmental authority, with respect to unemployment compensation
benefits, social security or other benefits or obligations for Employees
and independent contractors (other than routine payments to be made in
the normal course of business and consistent with past practice). There
are no pending, or to the knowledge of Company,
25
THE SYMBOL "[***]" IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS
BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
threatened claims or actions against Company under any worker's
compensation policy or long-term disability policy.
(j) Labor. No work stoppage or labor strike against Company is
pending, or to the knowledge of Company, threatened. Company has no
knowledge of any activities or proceedings of any labor union to
organize any Employees. There are no actions, suits, claims, labor
disputes or grievances pending, or, to the knowledge of Company,
threatened against Company relating to any labor, safety or
discrimination matters involving any Employee, including, without
limitation, charges of unfair labor practices or discrimination
complaints, which, if adversely determined, would, individually or in
the aggregate, result in any material liability to Company. Neither
Company nor any of its subsidiaries has engaged in any unfair labor
practices within the meaning of the National Labor Relations Act.
Company is not presently, nor has it been in the past, a party to, or
bound by, any collective bargaining agreement or union contract with
respect to Employees and no collective bargaining agreement is being
negotiated by Company.
(k) International Employee Plan. Company does not now, nor has
it ever had the obligation to, maintain, establish, sponsor, participate
in, or contribute to any International Employee Plan.
Section 2.22 Insurance. Schedule 2.22 of the Company Disclosure Schedule
lists all insurance policies and fidelity bonds covering the assets, business,
equipment, properties, operations, employees, officers and directors of Company.
There is no claim by Company, pending under any of such policies or bonds as to
which coverage has been questioned, denied or disputed by the underwriters of
such policies or bonds. All premiums due and payable under all such policies and
bonds have been paid, and Company and its Affiliates are otherwise in material
compliance with the terms of such policies and bonds (or other policies and
bonds providing substantially similar insurance coverage). Company has no
knowledge of threatened termination of, or premium increase with respect to, any
of such policies.
Section 2.23 Compliance with Laws. Company has complied in all material
respects with, is not in violation of, and has not received any notices of
violation with respect to, any foreign, federal, state or local statute, law or
regulation or any judgment, order or decree of any Governmental Entity.
Section 2.24 Complete Copies of Materials. Company has delivered or made
available true and complete copies of each document (or summaries of same) that
has been delivered or made available.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub hereby represent and warrant to Company, subject
to such exceptions as are disclosed in the disclosure schedules dated as of the
date hereof supplied by Parent to Company (collectively, the "Parent Disclosure
Schedule"), on the date hereof, and as of the Effective Time as though made at
the Effective Time, except as otherwise expressly set forth herein, as follows.
Any exception or disclosure contained in the Parent Disclosure Schedule with
reference to a particular section of the Agreement shall be deemed an exception
or disclosure with respect to each other section of the Parent Disclosure
Schedule to which it is reasonably apparent that it may relate.
Section 3.1 Organization, Standing and Power. Each of Parent and Merger
Sub is a corporation duly organized, validly existing and in good standing under
the laws of its jurisdiction of organization. Each of Parent and Merger Sub has
the corporate power to own its properties and to carry on its business as now
being conducted and as currently proposed to be conducted and is duly qualified
to
26
THE SYMBOL "[***]" IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS
BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
do business and is in good standing in each jurisdiction in which the failure to
be so qualified would have a Material Adverse Effect on Parent. Parent has made
available to Company a true and correct copy of the certificate of incorporation
and bylaws of Parent and Merger Sub, each as amended to date and in full force
and effect, to Company. Neither Parent nor Merger Sub is in violation of any of
the provisions of its certificate of incorporation or bylaws.
Section 3.2 Authority. Each of Parent and Merger Sub has all requisite
corporate power and authority to enter into this Agreement and any Related
Agreements to which it is a party and to consummate the transactions
contemplated hereby and thereby. The execution and delivery of this Agreement
and any Related Agreements to which Parent and Merger Sub is a party and the
consummation of the transactions contemplated hereby and thereby have been duly
authorized by all necessary corporate action on the part of Parent and Merger
Sub. This Agreement and any Related Agreements to which Parent and Merger Sub is
a party have been duly executed and delivered by Parent and Merger Sub and
assuming the due authorization, execution and delivery by the other parties
hereto and thereto, constitute the valid and binding obligations of Parent and
Merger Sub, enforceable against each of Parent and Merger Sub in accordance with
their terms, except that such enforceability may be limited by bankruptcy,
insolvency, moratorium or other similar laws affecting or relating to creditors'
rights generally, and is subject to general principles of equity. The execution
and delivery of this Agreement and any Related Agreements to which Parent or
Merger Sub is a party do not and the consummation of the transactions
contemplated hereby and thereby will not, assuming compliance with the matters
referred to in the next sentence, require any consent or other action by any
Person under, or Conflict with, or result in the creation of any Lien in or upon
any of the properties or assets of Parent or any of its Subsidiaries under, (i)
any provision of the certificate of incorporation or bylaws of Parent or any of
its Subsidiaries, as amended, or (ii) any material mortgage, indenture, lease,
contract or other agreement or instrument, permit, concession, franchise,
license, judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to Parent or any of its Subsidiaries or their properties or assets.
No consent, approval, order or authorization of or registration, declaration or
filing with any Governmental Entity is required by or with respect to Parent or
any of its Subsidiaries in connection with the execution and delivery of this
Agreement by Parent and Merger Sub or the consummation by Parent and Merger Sub
of the transactions contemplated hereby, except for (i) the filing of the
Agreement of Merger as provided in Section 1.2, (ii) filings required under
Regulation D of the Securities Act, (iii) the filing of a Form 8-K with the
Securities and Exchange Commission ("SEC") and National Association of
Securities Dealers ("NASD"), (iv) any filings as may be required under
applicable state securities laws, (v) filings required to perform its
obligations under Section 5.13, (vi) those that may be required solely by reason
of Company's (as opposed to any third party's) participation in the transactions
contemplated by this Agreement, and (vii) such other consents, authorizations,
filings, approvals and registrations which, if not obtained or made, would not
prevent, materially alter or delay any of the transactions contemplated by this
Agreement.
Section 3.3 SEC Documents; Financial Statements.
(a) Parent has made available to Company or its counsel through
EDGAR a true and complete copy of each statement, report, registration
statement (with the prospectus in the form filed pursuant to Rule 424(b)
of the Securities Act), definitive proxy statement and other filing
filed with the SEC by Parent since May 2, 2000, and, prior to the
Effective Time, Parent will have made available to Company or its
counsel through EDGAR true and complete copies of any additional
documents filed with the SEC by Parent prior to the Effective Time
(collectively, the "Parent SEC Documents"). All documents required to be
filed as exhibits to Company SEC Documents have been so filed. As of
their respective filing dates, the Parent SEC Documents complied in all
material respects with the requirements of the Securities Exchange Act
of 1934, as
27
THE SYMBOL "[***]" IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS
BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
amended (the "Exchange Act"), and the Securities Act and none of the
Parent SEC Documents contained any untrue statement of a material fact
or omitted to state a material fact required to be stated therein or
necessary to make the statements made therein, in light of the
circumstances in which they were made, not misleading, except to the
extent corrected by a subsequently filed Parent SEC Document prior to
the date hereof. As of the date hereof, the Parent SEC Documents,
together with supplemental disclosures, if any, set forth in Schedule
3.3(a), do not contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to
make the statements made therein, in light of the circumstances in which
they were made, not misleading. As of the Effective Time, the Parent SEC
Documents, together with supplemental disclosures, if any, set forth in
Schedule 3.3(a), do not contain any untrue statement of fact or omit to
state a fact required to be stated therein or necessary to make the
statements made therein, in light of the circumstances in which they
were made, not misleading, except as would not have a Material Adverse
Effect on Parent.
(b) The financial statements of Parent, including the notes
thereto, included in the Parent SEC Documents (the "Parent Financial
Statements"), complied as to form in all material respects with
applicable accounting requirements and with the published rules and
regulations of the SEC with respect thereto as of their respective
dates, and have been prepared in accordance with GAAP applied on a basis
consistent throughout the periods indicated and consistent with each
other (except as may be indicated in the notes thereto or, in the case
of unaudited statements included in Quarterly Reports on Form 10-Qs, as
permitted by Form 10-Q of the SEC). The Parent Financial Statements
fairly present the consolidated financial condition and operating
results of Parent and its Subsidiaries at the dates and during the
periods indicated therein (subject, in the case of unaudited statements,
to normal, recurring year-end adjustments). The Parent Financial
Statements fairly present the consolidated financial condition and
operating results of Parent and its Subsidiaries at December 31, 2001
and during the three-month period then ended (subject to normal,
recurring year-end adjustments).
Section 3.4 Capital Structure. The authorized capital stock of Parent
consists of 150,000,000 shares of common stock, $.001 par value, and 25,000,000
shares of Preferred Stock, $.001 par value. As of the date hereof, (i)
20,295,536 shares of Parent Common Stock are issued and outstanding and (ii) no
shares of Preferred Stock are issued or outstanding. There are no other
outstanding shares of capital stock or voting securities of Parent other than
(i) shares of Parent Common Stock issued after the date hereof pursuant to, or
upon the exercise of options issued under, the Parent stock plans described in
the Parent SEC Documents (the "Parent Stock Plans") and (ii) shares of Parent
Common Stock issued after the date hereof pursuant to the Parent employee stock
purchase plans described in the Parent SEC Documents (the "Parent ESPPs"). The
authorized capital stock of Merger Sub consists of 100 shares of Common Stock,
all of which are issued and outstanding and are held by Parent. All outstanding
shares of Parent and Merger Sub have been duly authorized, validly issued, fully
paid and are nonassessable. As of the date hereof, Parent has reserved 7,945,140
shares of Parent Common Stock for issuance to employees, directors and
independent contractors pursuant to the Parent Stock Plans, of which 4,019,389
shares are subject to outstanding, unexercised options. As of the date hereof,
Parent has reserved 350,458 shares of Parent Common Stock for issuance pursuant
to the Parent ESPPs, of which 143,817 shares are issued and outstanding. Other
than this Agreement, the Parent Stock Plans and the Parent ESPPs, there are no
other options, warrants, calls, rights, commitments or agreements of any
character to which Parent or Merger Sub is a party or by which either of them is
bound obligating Parent or Merger Sub to issue, deliver, sell, repurchase or
redeem, or cause to be issued, delivered, sold, repurchased or redeemed, any
shares of the capital stock of Parent or Merger Sub or obligating Parent or
Merger Sub to grant, extend or enter into any such option, warrant, call, right,
commitment or agreement. The shares of Parent Common Stock to be issued pursuant
to the Merger will be duly authorized, validly issued, fully paid and
nonassessable.
28
THE SYMBOL "[***]" IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS
BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
Section 3.5 Litigation. There is no Proceeding pending before any
Governmental Entity, foreign or domestic, or, to the knowledge of Parent,
threatened against Parent or any of its Subsidiaries or any of their respective
properties or any of their respective officers or directors (in their capacities
as such) that, individually or in the aggregate, could reasonably be expected to
have the effect of preventing, enjoining or materially altering or delaying any
of the transactions contemplated by this Agreement. There is no judgment, decree
or order against Parent or any of its Subsidiaries or, to the knowledge of
Parent, any of their respective directors or officers (in their capacities as
such) that could prevent, enjoin, or materially alter or delay any of the
transactions contemplated by this Agreement.
Section 3.6 Absence of Certain Changes. Since December 31, 2001, there
has not been: (i) any event, occurrence or development which, individually or in
the aggregate, has had or would reasonably be expected to have a Material
Adverse Effect on Parent; or (ii) any material change in accounting methods or
practices by Parent or any material revaluation by Parent of any of its assets.
Section 3.7 Absence of Undisclosed Liabilities. As of the date of this
Agreement, Parent has no material obligations or liabilities of any nature
(matured or unmatured, fixed or contingent) other than (i) those set forth or
adequately provided for in the balance sheet included in Parent's Quarterly
Report on Form 10-Q for the period ended December 31, 2001, (ii) those incurred
in the ordinary course of business and not required to be set forth in the
Parent's balance sheet under GAAP and (iii) those incurred in the ordinary
course of business since the December 31, 2001 and consistent with past
practice.
Section 3.8 Interim Operations of Merger Sub. Merger Sub was formed
solely for the purpose of engaging in the transactions contemplated by this
Agreement, has engaged in no other business activities and has conducted its
operations only as contemplated by this Agreement.
ARTICLE IV
CONDUCT PRIOR TO THE EFFECTIVE TIME
Section 4.1 Conduct of Business of Company. During the period from the
date of this Agreement and continuing until the earlier of the termination of
this Agreement or the Effective Time, Company agrees (except to the extent
expressly contemplated by this Agreement or as consented to in writing by
Parent), to carry on its business in the usual regular and ordinary course in
substantially the same manner as heretofore conducted, and in compliance in all
material respects with all applicable laws, statutes, orders, rules and
regulations and the requirements of all material Contracts, to pay or perform
its obligations when due and to use all reasonable efforts to preserve intact
its present business organizations, keep available (subject to Section 5.11 and
the other terms and conditions hereof) the services of its present officers and
key employees and preserve its relationships with customers, suppliers,
distributors, licensors, licensees and others having business dealings with it
to the end that its goodwill and ongoing businesses shall be unimpaired at the
Effective Time. Without limiting the foregoing, except as expressly contemplated
by this Agreement or the Company Disclosure Schedule, Company shall not do,
cause or permit any of the following, without the prior written consent of
Parent:
(a) Charter Documents. Cause or permit any amendments to its
articles of incorporation or bylaws;
(b) Dividends; Changes in Capital Stock. (i) Declare or pay any
dividends on or make any other distributions (whether in cash, stock or
property) in respect of any of its capital stock provided that
notwithstanding the foregoing it is understood that Company may declare
or pay cash dividends in respect of any of its capital stock, to the
extent that, taking into account any such dividends, the Net Assets as
of the Closing Date are reasonably expected to equal or exceed
29
THE SYMBOL "[***]" IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS
BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
$1,000,000 in cash, (ii) split, combine or reclassify any of its capital
stock, (iii) issue or authorize the issuance of any other securities in
respect of, in lieu of or in substitution for shares of its capital
stock, or repurchase or otherwise acquire, directly or indirectly, any
shares of its capital stock except from former employees, directors and
consultants in accordance with agreements providing for the repurchase
of shares in connection with any termination of service to it or (iv)
adopt a plan or agreement of complete or partial liquidation,
dissolution, merger, consolidation, restructuring, recapitalization or
other reorganization of Company;
(c) Stock Option Plans, Etc. Accelerate, amend or change the
period of exercisability or vesting of options or other rights granted
under its stock plans or authorize cash payments in exchange for any
options or other rights granted under any of such plans;
(d) Material Contracts. Enter into any contract or commitment,
or violate, amend, terminate or otherwise modify or waive any of the
terms of any of its Contracts, other than in the ordinary course of
business consistent with past practice;
(e) Issuance of Securities. Issue, deliver or sell, or authorize
or propose the issuance, delivery or sale of, or purchase or propose the
purchase of, any shares of its capital stock or securities convertible
into or exchangeable for, or subscriptions, rights, warrants or options
to acquire, or other agreements or commitments of any character
obligating it to issue any such shares or other convertible or
exchangeable securities other than the issuance of shares of Company
Common Stock pursuant to the exercise of stock options, warrants or
other rights therefore outstanding as of the date of this Agreement;
(f) Intellectual Property. Transfer to any Person any rights to
Company Intellectual Property other than in the ordinary course of
business consistent with past practice;
(g) Exclusive Rights. Enter into or amend any agreements
pursuant to which any other party is granted marketing or other rights
of any type or scope with respect to any of the products produced by
Company ("Company Products") or Company Intellectual Property;
(h) Dispositions. Sell, lease or otherwise dispose of or
encumber any of its properties or assets except in the ordinary course
of business consistent with past practice;
(i) Indebtedness. Incur any indebtedness for borrowed money or
guarantee any such indebtedness, issue or sell any debt securities or
warrants or other rights to acquire any debt securities of Company,
guarantee any debt securities of another Person, enter into any "keep
well" or other agreement to maintain any financial statement condition
of another Person or enter into any arrangement having the economic
effect of any of the foregoing, provided that Founder will loan money to
Company, in the amount so that Company will have $1,000,000 in cash at
the Effective Time, in return for a promissory note secured by the
assets of the Company and otherwise with terms no less favorable to
Company than that certain promissory note, dated June 29, 2001, of
Company to Founder except that the amount owed on such promissory note
shall be payable upon the earlier of (x) receipt by Parent or Company of
amounts paid in respect of Company receivables outstanding as of the
date hereof or as of the Effective Time (such payment to be made
promptly upon any such receipt in an amount equal to the amount received
up to the amount owed on the promissory note) or (y) three months after
the Effective Time;
(j) Agreements. Except in the ordinary course of business or
with the prior written consent of Parent, which consent shall not be
unreasonably withheld, enter into, terminate or
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THE SYMBOL "[***]" IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS
BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
amend, in a manner which will adversely affect the business of Company,
(i) any agreement involving an obligation to pay $10,000 or more, (ii)
any agreement relating to the license, transfer or other disposition or
acquisition of Intellectual Property rights or rights to market or sell
Company Products or (iii) any other agreement which is material to the
business or prospects of Company or would be required to be disclosed
pursuant to Section 2.13 hereunder; or terminate or amend in a manner
which will adversely affect the business of Company, an agreement
involving the right to receive $10,000 or more;
(k) Payment of Obligations. Pay, discharge or satisfy, in an
amount in excess of $25,000 in the aggregate, any claim, liability or
obligation (absolute, accrued, asserted or unasserted, contingent or
otherwise) arising other than in the ordinary course of business, other
than the payment, discharge or satisfaction of liabilities reflected or
reserved against in the Interim Financials and the payment to Founder in
an amount of $500,000 plus interest accrued at a rate of 10% per annum
on that certain promissory note, dated June 29, 2001, issued to Founder;
(l) Capital Expenditures. Except as set forth in Company's
capital plan heretofore furnished to Parent, make any capital
expenditures, capital additions or capital improvements exceeding
$25,000 individually or $50,000 in the aggregate;
(m) Insurance. Materially reduce the amount of any insurance
coverage provided by existing insurance policies;
(n) Termination or Waiver. Terminate or waive any right of
substantial value, other than in the ordinary course of business;
(o) Employee Benefit Plans; New Hires; Pay Increase. Amend any
Company Employee Plan except to the extent required by applicable law,
adopt any plan, contract or arrangement that would constitute a Company
Employee Plan, take any action to fund or in any other way secure the
payment of compensation or benefits under any Company Employee Plan,
hire any new employee, promote any employee, engage any consultant or
independent contractor for a period exceeding thirty (30) days, fire any
employee, pay any special bonus, special remuneration or special noncash
benefit (except payments and benefits made pursuant to written
agreements outstanding on the date hereof), or increase the benefits,
salaries or wage rates of its employees, except in each case in the
ordinary course of business consistent with past practice;
(p) Severance Arrangements. (i) Grant any severance or
termination pay or benefits (A) to any current or former director or
officer or (B) to any other employee, except payments and benefits made
pursuant to written agreements outstanding on the date hereof and
disclosed to Parent, or (ii) increase in any manner the severance or
termination pay of any current or former director, officer or employee;
(q) Lawsuits. Commence or settle a lawsuit other than (i) for
the routine collection of bills, (ii) in such cases where it in good
faith determines that failure to commence or settle the suit would
result in the material impairment of a valuable aspect of its business,
provided that it consults with Parent prior to the filing or settlement
of such a suit, or (iii) for a breach of this Agreement;
(r) Acquisitions. Acquire or agree to acquire by merging or
consolidating with, or by purchasing a substantial portion of the assets
of, or by any other manner, any business or any corporation,
partnership, association or other business organization or division
thereof, make any
31
THE SYMBOL "[***]" IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS
BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
investment in any other Person or otherwise acquire or agree to acquire,
lease or license any assets or other rights which are material,
individually or in the aggregate, to its business;
(s) Taxes. Make or change any election in respect of Taxes,
adopt or change any material accounting method in respect of Taxes, file
any amendment to a Return, enter into any closing agreement, settle any
claim or assessment in respect of Taxes, or consent to any extension or
waiver of the limitation period applicable to any material claim or
assessment in respect of Taxes;
(t) Accounting Matters. Except as required by GAAP, (i) make any
change in accounting methods, practices or principles or (ii) accelerate
any income, postpone any expense or reverse any reserve, except on a
basis consistent with past practice;
(u) Revaluation. Revalue any of its assets, including without
limitation writing down the value of inventory or writing off notes or
accounts receivable other than in the ordinary course of business, or as
required by GAAP;
(v) Board of Directors. Change the number of directors on
Company's Board of Directors; or
(w) Other. Agree or commit to take any of the actions described
in Sections 4.1(a) through (u) above, or take or agree or commit to take
any action that would (i) make any representation and warranty of
Company hereunder inaccurate in any respect at, or as of any time prior
to, the Effective Time (or, in the case of representations and
warranties that are not qualified by reference to the term "Material
Adverse Effect" and/or taken as a whole, or derivatives or variations of
such terms, inaccurate in any material respect at, or as of any time
prior to, the Effective Time) or (ii) reasonably be expected to prevent,
impair or materially delay the ability of Company or Parent to
consummate the transactions contemplated by this Agreement.
Section 4.2 No Solicitation.
(a) From and after the date of this Agreement until the
Effective Time, Company shall not, directly or indirectly through any
officer, director, employee, representative or agent of Company or
otherwise, (i) solicit, initiate or encourage any inquiries or proposals
that constitute, or could reasonably be expected to lead to, any offer
or proposal for, or any indication of interest in, (A) a merger or other
business combination involving Company, (B) the acquisition of any
equity interest in, or a substantial portion of the assets of, Company
or (c) any similar transaction the effect of which would be reasonably
likely to prohibit, restrict or delay consummation of the Merger or
which would reasonably be expected to materially dilute the benefits to
Parent of the transactions contemplated hereby (any of the foregoing
being referred to in this Agreement as an "Acquisition Proposal"), (ii)
engage or participate in negotiations or discussions concerning, or
provide any non-public information to any Person or entity relating to,
any Acquisition Proposal, or (iii) agree to, enter into, accept, approve
or recommend any Acquisition Proposal. Company represents and warrants
that it has the legal right to terminate any pending discussions or
negotiations relating to an Acquisition Proposal without payment of any
fee or other penalty. Company will, and will cause the other Persons
listed in the first sentence of this Section 4.2 to, immediately cease
and cause to be terminated all discussions and negotiations, if any,
that have taken place prior to the date hereof with any parties with
respect to any Acquisition Proposal and, to the extent within its power,
to recover or cause to be destroyed all information concerning Company
in the possession of such Persons and their affiliates, representatives
and advisors.
32
THE SYMBOL "[***]" IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS
BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
Without limiting the generality of the foregoing, the parties hereto
understand and agree that any violation of the restrictions of this
Section 4.2 by any officer, director, employee, investment banker,
consultant or other agent of Company shall be deemed to be a breach of
this Section 4.2 by Company.
(b) Company shall notify Parent immediately (and no later than
twenty-four (24) hours) after receipt by Company (or its advisors) of
any Acquisition Proposal or any request for nonpublic information in
connection with an Acquisition Proposal or for access to the properties,
books or records of Company by any Person or entity that informs Company
that it is considering making, or has made, an Acquisition Proposal.
Such notice shall be made orally and in writing and shall indicate in
reasonable detail the identity of the offeror and the terms and
conditions of such proposal, inquiry or contact.
ARTICLE V
ADDITIONAL AGREEMENTS
Section 5.1 Preparation of Information Statement.
(a) As soon as practicable after the execution of this
Agreement, Parent shall prepare, with the cooperation of Company, an
information statement (the "Information Statement") describing this
Agreement and the transactions contemplated hereby and thereby. Company
shall provide such information about Company as Parent shall reasonably
request. The information supplied by Company for inclusion in the
Information Statement to be sent to the Company Shareholders shall not,
on the date the Information Statement is first mailed to the Company
Shareholders or at the Effective Time, contain any untrue statement of a
material fact, or omit to state any material fact necessary in order to
make the statements made therein, in light of the circumstances under
which they are made, not false or misleading, or omit to state any
material fact necessary to correct any statement in any earlier
communication which has become false or misleading. Notwithstanding the
foregoing, Company makes no representation, warranty or covenant with
respect to any information supplied by Parent or Merger Sub which is
contained in the Information Statement. The information supplied by
Parent for inclusion in the Information Statement shall not, on the date
the Information Statement is first mailed to the Company Shareholders,
or at the Effective Time, contain any untrue statement of a material
fact, or omit to state any material fact necessary in order to make the
statements therein, in light of the circumstances under which it is
made, not false or misleading or omit to state any material fact
necessary to correct any statement in any earlier communication which
has become false or misleading. Notwithstanding the foregoing, Parent
and Merger Sub make no representation, warranty or covenant with respect
to any information supplied by Company which is contained in the
Information Statement. The Information Statement shall comply in all
material respects with applicable federal and state securities laws
requirements.
(b) The Information Statement shall constitute a disclosure
document for the offer and issuance of shares of Parent Common Stock to
be received by the holders of Company Capital Stock in the Merger. Each
of Parent and Company agrees to provide promptly to the other such
information concerning its business and financial statements and affairs
as, in the reasonable judgment of the providing party or its counsel,
may be required or appropriate for inclusion in the Information
Statement or in any amendments or supplements thereto, and to cause its
counsel and auditors to cooperate with the other's counsel and auditors
in the preparation of the Information Statement. Company will promptly
advise Parent, and Parent will promptly advise Company, in writing if at
any time prior to the Effective Time either Company or Parent shall
obtain
33
THE SYMBOL "[***]" IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS
BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
knowledge of any facts that might make it necessary or appropriate to
amend or supplement the Information Statement in order to make the
statements contained or incorporated by reference therein not misleading
or to comply with applicable law. Anything to the contrary contained
herein notwithstanding, Parent shall not include in the Information
Statement any information with respect to Company or its affiliates or
associates, the form and content of which information shall not have
been approved by Parent prior to such inclusion.
Section 5.2 Approval of the Company Shareholders. Company shall promptly
after the date hereof take all action necessary in accordance with California
Law and its articles of incorporation and bylaws to obtain the written consent
of a majority of the Company Shareholders approving the Merger as soon as
practicable.
Section 5.3 Sale of Shares Pursuant to Regulation D. The parties hereto
acknowledge and agree that the shares of Parent Common Stock issuable to the
Company Shareholders pursuant to Section 1.6 hereof shall constitute "restricted
securities" under the Securities Act. The certificates of Parent Common Stock
shall bear the legends set forth in Section 1.6(h). It is acknowledged and
understood that Parent is relying on certain written representations made by
each Company Shareholder. Company will use its best efforts to cause each
Company Shareholder to execute and deliver to Parent an Investor Representation
Statement in the form attached hereto as Exhibit 5.3 (the "Investor
Representation Statement") prior to the Closing Date.
Section 5.4 Access to Information.
(a) Each of Parent and Company shall afford the other party and
its accountants, counsel and other representatives, reasonable access
during normal business hours during the period prior to the Effective
Time to (i) all of its properties, contracts, commitments, books and
records and (ii) all other information concerning its business,
properties, technology, intellectual property and personnel as the other
party may reasonably request, provided that it is understood that access
by Company to Parent's employees, customers and shareholders shall be
subject to prior consent of Parent, which consent shall not be
unreasonably withheld or denied.
(b) Subject to compliance with applicable law, from the date
hereof until the Effective Time, each of Parent and Company shall confer
on a regular and frequent basis with one or more representatives of the
other party to report operational matters of materiality and the general
status of ongoing operations.
(c) No information or knowledge obtained in any investigation
pursuant to this Section 5.4 shall affect or be deemed to modify any
representation or warranty contained herein or the conditions to the
obligations of the parties to consummate the Merger.
(d) After the Effective Time, Parent and Company, on the one
hand, and the Company Shareholders, on the other hand, will make
available to the other, as reasonably requested, all information,
records or documents relating to the liability for Taxes of Company for
all periods ending on or prior to the Effective Time and will preserve
such information, records or documents until the expiration of any
applicable statute of limitations or extensions thereof.
Section 5.5 Confidentiality. The parties acknowledge that Parent and
Company have previously executed a non-disclosure agreement dated March 1, 2002
(the "Confidentiality Agreement"), which Confidentiality Agreement is hereby
incorporated herein by reference and shall continue in full force and effect in
accordance with its terms.
34
THE SYMBOL "[***]" IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS
BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
Section 5.6 Public Disclosure. Company shall not make any public
announcement of any kind regarding the terms of this Agreement and the
transactions contemplated hereby. Parent shall not make any public announcement
of any kind regarding the terms of this Agreement and the transactions
contemplated hereby except as required by the Exchange Act, the rules and
regulations thereunder, and the rules of the Nasdaq National Market, provided
that prior to making such announcement Parent shall afford Company a reasonable
opportunity to review and comment upon such proposed announcement.
Section 5.7 Reasonable Best Efforts.
(a) Subject to the terms and conditions of this Agreement, each
party shall use its reasonable best efforts in good faith to take, or
cause to be taken, all actions and to do, or cause to be done, and to
assist and cooperate with the other parties in doing, all things
necessary, proper or advisable to consummate the Merger and the other
transactions contemplated by this Agreement, including using reasonable
best efforts to accomplish the following: (i) the taking of all
reasonable acts necessary to cause the conditions to Closing to be
satisfied, (ii) the obtaining of all necessary actions or nonactions,
waivers, consents and approvals from Governmental Entities and the
making of all necessary registrations and filings (including filings
with Governmental Entities, if any) and the taking of all reasonable
steps as may be necessary to obtain an approval or waiver from, or to
avoid an action or Proceeding by, any Governmental Entity, (iii) the
obtaining of all necessary consents, approvals or waivers from third
parties (provided that if obtaining any such consent, approval or waiver
would require any action other than the payment of a nominal amount,
such action shall be subject to the consent of Company and/or Parent, as
applicable, not to be unreasonably withheld), (iv) the execution and
delivery of any additional instruments necessary to consummate the
transactions contemplated by, and to fully carry out the purposes of,
this Agreement. Company shall give Parent the opportunity to participate
in the defense of any shareholder litigation against Company and/or its
directors relating to the transactions contemplated by this Agreement.
Each party shall also refrain from taking, directly or indirectly, any
action contrary or inconsistent with the provisions of this Agreement,
including action that would impair such party's ability to consummate
the Merger and the other transactions contemplated hereby.
(b) Notwithstanding anything to the contrary contained in this
Agreement, Parent shall not have any obligation under this Agreement:
(i) to dispose or transfer, or cause any of its Subsidiaries to dispose
of or transfer, any assets, or to commit to cause Company to dispose of
any assets; (ii) to discontinue or to cause any of its Subsidiaries to
discontinue offering any product or service, or to commit to cause
Company to discontinue offering any product or service; (iii) to license
or otherwise make available, or cause any of its Subsidiaries to license
or otherwise make available, to any Person, any technology or other
Intellectual Property, or to commit to cause Company to license or
otherwise make available to any Person any technology or other
Intellectual Property; (iv) to hold separate or cause any of its
Subsidiaries to hold separate any assets or operations (either before or
after the Closing Date), or to commit to cause Company to hold separate
any assets or operations; (v) to make or cause any of its Subsidiaries
to make any commitment (to any Governmental Entity or otherwise)
regarding its future operations or the future operations of Company; or
(vi) to defend any Proceeding, whether judicial or administrative,
challenging the Agreement or the consummation of the transactions
contemplated hereby, including seeking to have any stay or temporary
restraining order entered by any court or other Governmental Entity
vacated or reversed.
(c) Without limiting the generality of this Section 5.7, Parent
and Company shall together, or pursuant to an allocation of
responsibility to be agreed between them, coordinate and
35
THE SYMBOL "[***]" IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS
BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
cooperate (i) in connection with the preparation of the Information
Statement, (ii) in determining whether any action by or in respect of,
or filing with, any Governmental Entity is required, or any actions,
consents, approvals or waivers are required to be obtained from parties
to any material contracts, in connection with the consummation of the
transactions contemplated by this Agreement, and (iii) in seeking any
such actions, consents, approvals or waivers or making any such filings,
furnishing information required in connection therewith or with the
Information Statement and seeking timely to obtain any such actions,
consents, approvals or waivers.
Section 5.8 Notice of Certain Events.
(a) Company and Parent shall promptly notify each other of:
(i) any notice or other communication from any Person
alleging that the consent of such Person is or may be required
in connection with the transactions contemplated by this
Agreement;
(ii) any notice or other communication from any
Governmental Entity in connection with the transactions
contemplated by this Agreement;
(iii) any Proceedings commenced or, to its knowledge,
threatened against, relating to or involving or otherwise
affecting it which relate to the consummation of the
transactions contemplated by this Agreement;
(iv) any event or occurrence not in the ordinary course
of business of its business or which could reasonably be
expected to have a Material Adverse Effect;
(v) its obtaining knowledge of the occurrence, or
failure to occur, of any event which occurrence or failure to
occur would reasonably be expected to cause (A) any
representation or warranty made by it (and, in the case of
Parent, made by Merger Sub) contained in this Agreement that is
qualified as to materiality becoming untrue or inaccurate in any
respect or any such representation of warranty that is not so
qualified becoming untrue or inaccurate in any material respect,
(B) the failure of it (and, in the case of Parent, by Merger
Sub) to comply with or satisfy in any material respect any
covenant, condition or agreement to be complied with or
satisfied by it under this Agreement and (c) any fact or
development which would result in the failure of any condition
hereto not to be satisfied;
(vi) the failure by it to perform, or comply with, in
any material respect any of its obligations, covenants, or
agreements contained in this Agreement; or
(vii) Company obtaining knowledge of a material breach
by Parent, or Parent obtaining knowledge of a material breach by
Company, of their respective representations, warranties or
covenants hereunder of which the breaching party has not already
given notice pursuant to clauses (v) or (vi) above.
(b) Company shall promptly notify Parent of any notice of, or
other communications relating to, a default or event that, with notice
or lapse of time or both, would become a default, received by it
subsequent to the date of this Agreement, under any Company Agreement.
36
THE SYMBOL "[***]" IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS
BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
(c) No notification under this Section 5.8 shall affect the
representations, warranties or obligations of the parties or the
conditions to the obligations of the parties hereunder, or limit or
otherwise affect the remedies available hereunder to the party receiving
such notice.
Section 5.9 Blue Sky Laws. Parent shall take such steps as may be
necessary to comply with the securities and blue sky laws of all jurisdictions
which are applicable to the issuance of the Parent Common Stock in connection
with the Merger. Company shall take such steps as may be necessary to assist
Parent as may be necessary to comply with the securities and blue sky laws of
all jurisdictions which are applicable in connection with the issuance of Parent
Common Stock in connection with the Merger.
Section 5.10 Nonaccredited Shareholders. Prior to the Closing, Company
shall not take any action, including the granting of employee stock options,
that would cause the number of the Company Shareholders who are not "accredited
investors" pursuant to Regulation D promulgated under the Securities Act to
increase to more than thirty-five (35) during the term of this Agreement.
Section 5.11 Employees. Parent shall offer, conditioned on the Closing,
continued employment opportunities after the Effective Time, on terms and
conditions applicable to existing employees of Parent with similar positions and
responsibilities as in effect as of the date hereof, for existing employees of
Company through the Effective Time. Company shall cooperate with Parent to
affect the transfer of the employees of Company, including but not limited to
using all reasonable efforts to retain existing employees of Company through the
Effective Time, subject to compliance with the covenants of Company hereunder
and except that Company shall have no obligation to take any action which would
breach any representation and warranty of Company hereunder. Parent and Company
have identified as the key shareholders and employees of Company (the "Key
Shareholders") those Persons identified on Exhibit 5.11(a) attached hereto.
Company shall use its reasonable efforts (i) to cause each of the Key
Shareholders to execute a Retention Agreement in the form attached hereto as
Exhibit 5.11(b) ("Retention Agreement") and (ii) to cause Founder to execute a
Retention Agreement in the form attached hereto as Exhibit 5.11(c).
Section 5.12 Expenses. Whether or not the Merger is consummated, all
costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such
expense, provided that, Parent shall pay up to a total of $125,000 of the third
party expenses of Company related to this transaction, including expenses for
Company's investment bankers, lawyers and accountants. All costs and expenses
incurred by Company in connection with this Agreement and the transactions
contemplated hereby in excess of $125,000 shall be deducted from the Cash Merger
Consideration.
Section 5.13 Registration of Shares of Parent Common Stock Issued in the
Merger.
(a) Parent shall use all commercially reasonable efforts to
cause 210,000 shares of Parent Common Stock issued in the Merger (the
"Registrable Securities") to be registered under the Securities Act so
as to permit the resale thereof, and in connection therewith shall use
all commercially reasonable efforts to prepare and file a registration
statement under the Securities Act (the "Registration Statement") with
the SEC and use all commercially reasonable efforts to cause the
Registration Statement to become effective as soon as possible after the
filing thereof, and in any event shall cause the Registration Statement
to become effective within four (4) months after the Effective Time.
Parent shall determine which Company Shareholder's Parent Common Stock
will be registered pursuant to this Section 5.13 and how many shares of
such Company Shareholder's Parent Common Stock will be registered
pursuant to this Section 5.13 in
37
THE SYMBOL "[***]" IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS
BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
accordance with the list provided to Parent by Company prior to the date
hereof. Each holder of Registrable Securities ("Holder") shall provide
all such information and materials to Parent and take all such action as
may be required in order to permit Parent to comply with all applicable
requirements of the SEC and to obtain any desired acceleration of the
effective date of such Registration Statement. Such provision of
information and materials is a condition precedent to the obligations of
Parent with respect to such Holder pursuant to this Section 5.13. The
offering made pursuant to such registration shall not be underwritten.
(b) Parent shall (i) prepare and file with the SEC the
Registration Statement in accordance with Section 5.13(a) hereof with
respect to the shares of Registrable Securities and shall use all
commercially reasonable efforts to cause the Registration Statement to
remain effective for a period ending on the first to occur of (A) the
date all of the shares registered thereunder and not previously sold by
the Holders may be sold under Rule 144 in one three-month period
(assuming compliance by the Holders with the provisions thereof) or (B)
two (2) years after the Effective Time; (ii) prepare and file with the
SEC such amendments and supplements to the Registration Statement and
the prospectus used in connection therewith as may be necessary to
comply with the provisions of the Securities Act with respect to the
sale or other disposition of all securities proposed to be registered in
the Registration Statement until the termination of effectiveness of the
Registration Statement; and (iii) furnish to each Holder such number of
copies of any prospectus (including any amended or supplemented
prospectus) in conformity with the requirements of the Securities Act,
and such other documents, as each Holder may reasonably request in order
to effect the offering and sale of the Registrable Securities to be
offered and sold, but only while Parent shall be required under the
provisions hereof to cause the Registration Statement to remain current.
(c) Notwithstanding any other provision of this Section 5.13,
Parent shall have the right at any time to require that all Holders
suspend further open market offers and sales of Registrable Securities
for a period not to exceed [***], if, in the reasonable judgment of
Parent after consultation with counsel, there is in existence material
undisclosed information or events with respect to Parent the disclosure
of which would be seriously detrimental to Parent (the "Suspension
Right"); provided, however, that Parent shall not exercise this
Suspension Right more than [***] in any [***] period, and further
provided that at least [***] have lapsed from the effective date of the
Resumption Notice to the effective date of the subsequent Suspension
Notice. In the event Parent exercises the Suspension Right, such
suspension will continue for the period of time reasonably necessary for
disclosure to occur at a time that is not materially detrimental to
Parent or until such time as the information or event is no longer
material, each as determined in good faith by Parent after consultation
with counsel, but in no event shall any single suspension continue for
more than [***]. Parent will promptly give the Shareholders' Agent
notice, in a writing signed by an executive officer of Parent of any
such suspension (the "Suspension Notice"). Parent agrees to notify the
Shareholders' Agent promptly upon termination of the suspension (the
"Resumption Notice"). Upon receipt of either a Suspension Notice or
Resumption Notice, the Shareholders' Agent shall immediately notify each
Holder concerning the status of the Registration Statement. In addition,
each Holder shall agree in the Investor Representation Statement that if
such Holder intends to sell Registrable Securities pursuant to the
Registration Statement, such Holder will give at least [***] prior
written notice to Parent of any such proposed sale of Registrable
Securities pursuant to the Registration Statement (which notice may
cover sales to be made within a [***] period following the date of
Parent's response) and not to make such sale (i) unless such [***]
elapses without response from Parent, or (ii) in the event Parent
responds by stating that an amendment to the Registration Statement or
supplement to the prospectus must be filed in order to cause the
prospectus included in such
38
THE SYMBOL "[***]" IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS
BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
Registration Statement, as then in effect, not to include an untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing, until Parent
notifies the Holder that the Registration Statement has been amended or
the prospectus supplemented as required, which Parent shall do as soon
as reasonably practicable subject to the first two sentences of this
Section 5.13(c). Parent shall use all commercially reasonable efforts to
respond to Holder as soon as practicable after receiving such notice of
proposed sale. No prior notice of sale shall be required to the extent
such Holder is selling Registrable Securities other than pursuant to the
Registration Statement. For purposes of this Section 5.13(c), (i) the
term "business day" means any day that the Nasdaq National Market is
open for trading and (ii) in determining the [***] prior notice
requirement, such period shall commence on the business day the notice
is received by Parent if such notice is received by Parent by 12:00 noon
New York City time or on the next business day if received by Parent
after such time.
(d) Parent shall pay all of the out-of-pocket expenses, other
than underwriting discounts and commissions and fees and expenses of
counsel for the Holders, if any, incurred in connection with any
registration of Registrable Securities pursuant to this Section 5.13,
including, without limitation, all registration and filing fees,
printing expenses, transfer agents' and registrars' fees and the fees
and disbursements of Parent's outside counsel and independent
accountants.
(e) To the fullest extent permitted by law, Parent will
indemnify, defend, protect and hold harmless each selling Holder, each
underwriter of Parent Common Stock being sold by such Holders pursuant
to this Section 5.13, each Person, if any, who controls any such Holder
or underwriter within the meaning of the Securities Act or the Exchange
Act and their respective affiliates, officers, directors, partners,
successors and assigns (each a "Holder Indemnitee") against all actions,
claims, losses, damages, liabilities and expenses to which they or any
of them become subject under the Securities Act, the Exchange Act or
under any other statute or at common law or otherwise and, except as
hereinafter provided, will promptly reimburse each such Holder
Indemnitee for any legal or other expenses reasonably incurred by them
or any of them in connection with investigating or defending any
actions, whether or not resulting in any liability, insofar as such
losses, claims, damages, expenses, liabilities or actions arise out of
or are based upon any untrue statement or alleged untrue statement of
material fact in any Registration Statement and any prospectus filed
pursuant to Section 5.13 or any post-effective amendment thereto or
arise out of or are based upon any omission or alleged omission to state
a material fact required to be stated therein or necessary to make the
statements therein not misleading or any violation by the Parent of any
rule or regulation promulgated under the Securities Act, the Exchange
Act, or under any other statute or at common law or otherwise and
relating to action or inaction required of the Parent in connection with
such registration; provided, however, that the Parent shall not be
liable to any such Holder Indemnitee in respect of any claims, losses,
damages, liabilities and expenses resulting from any untrue statement or
alleged untrue statement, or omission or alleged omission, made in
reliance upon and in conformity with information furnished to the Parent
by such Holder Indemnitee specifically for use in connection with such
registration statement and prospectus or post-effective amendment.
(f) To the fullest extent permitted by law, each selling Holder
of Registrable Securities registered in accordance with Section 5.13
will indemnify the Parent, each Person, if any, who controls the Parent
within the meaning of the Securities Act or the Exchange Act, each
underwriter of Parent Common Stock and their respective affiliates,
officers, directors, partners, successors and assigns (each a "Parent
Indemnitee") against any actions, claims, losses, damages, liabilities
and expenses to which they or any of them become subject under the
Securities Act, the
39
THE SYMBOL "[***]" IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS
BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
Exchange Act or under any other statute or at common law or otherwise,
and, except as hereinafter provided, will promptly reimburse each Parent
Indemnitee for any legal or other expenses reasonably incurred by them
or any of them in connection with investigating or defending any
actions, whether or not resulting in any liability, insofar as such
losses, claims, damages, expenses, liabilities or actions arise out of
or are based upon any untrue statement or alleged untrue statement of a
material fact in any Registration Statement and any prospectus filed
pursuant to Section 5.13 or any post-effective amendment thereto or
arise out of or are based upon any omission or alleged omission to state
a material fact required to be stated therein or necessary to make the
statements therein not misleading, which untrue statement or alleged
untrue statement or omission or alleged omission was made in reliance
upon and in conformity with information furnished in writing to the
Parent by such Holder specifically for use in connection with such
registration statement, prospectus or post-effective amendment;
provided, however, that the obligations of each such selling Holder
hereunder shall be limited to an amount equal to the proceeds to such
Holder from the sale of such Holder's Registrable Securities as
contemplated herein.
(g) Each Person entitled to indemnification under this Section
5.13 (a "Registration Indemnified Person") shall give notice to the
party required to provide indemnification (the "Registration
Indemnifying Person") promptly after such Registration Indemnified
Person has actual knowledge of any claim as to which indemnity may be
sought and shall permit the Registration Indemnifying Person to assume
the defense of any such claim and any litigation resulting therefrom,
provided that counsel for the Registration Indemnifying Person who
conducts the defense of such claim or any litigation resulting therefrom
shall be approved by the Registration Indemnified Person (whose approval
shall not unreasonably be withheld), and the Registration Indemnified
Person may participate in such defense at such party's expense (unless
the Registration Indemnified Person has reasonably concluded that there
may be a conflict of interest between the Registration Indemnifying
Person and the Registration Indemnified Person in such action, in which
case the fees and expenses of one counsel for such Registration
Indemnified Person(s) shall be at the expense of the Registration
Indemnifying Person), and provided further that the failure of any
Registration Indemnified Person to give notice as provided herein shall
not relieve the Registration Indemnifying Person of its obligations
under this Section 5.13 except to the extent the Registration
Indemnifying Person is materially prejudiced thereby. No Registration
Indemnifying Person, in the defense of any such claim or litigation,
shall (except with the consent of each Registration Indemnified Person)
consent to entry of any judgment or enter into any settlement that does
not include as an unconditional term thereof the giving by the claimant
or plaintiff to such Registration Indemnified Person of a release from
all liability in respect to such claim or litigation. Each Registration
Indemnified Person shall furnish such information regarding itself or
the claim in question as a Registration Indemnifying Person may
reasonably request in writing and as shall be reasonably required in
connection with the defense of such claim and litigation resulting
therefrom.
(h) In order to provide for just and equitable contribution to
joint liability under the Securities Act in any case in which the Parent
or any Holder makes a claim for indemnification pursuant to this Section
5.13 but it is judicially determined (by the entry of a final judgment
or decree by a court of competent jurisdiction and the expiration of
time to appeal or the denial of the last right of appeal) that such
indemnification may not be enforced in such case notwithstanding that
this Section 5.13 provides for indemnification, in such case, then the
Parent and such Holder will contribute to the aggregate losses, claims,
damages or liabilities to which they may be subject (after contribution
from others) in such proportion as is appropriate to reflect the
relative fault of the Parent on the one hand and of the Holder on the
other in connection with
40
THE SYMBOL "[***]" IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS
BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
the statements or omissions which resulted in such losses, claims,
damages or liabilities, as well as any other relevant equitable
considerations or, if the allocation provided herein is not permitted by
applicable law, in such proportion as shall be permitted by applicable
law and reflect as nearly as possible the allocation provided herein.
The relative fault of the Parent on the one hand and of the Holder on
the other shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or
omission or alleged omission to state a material fact relates to
information supplied by the Parent on the one hand or by the Holder on
the other, and each party's relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or
omission; provided, however, that in any such case (i) no Holder will be
required to contribute any amount in excess of the proceeds received by
such Holder from the sale of Registrable Securities pursuant to the
Registration Statement; and (ii) no Person guilty of fraudulent
misrepresentation within the meaning of Section 11(f) of the Securities
Act will be entitled to contribution from any Person or entity who was
not guilty of such fraudulent misrepresentation.
(i) Within 10 days after the first anniversary of the Closing
Date, Parent shall file or otherwise make available a registration
statement on Form S-8 with respect to the Assumed Options unexercised on
the first anniversary of the Effective Time, and maintain the
effectiveness of such registration statement or registration statements
for so long as such Assumed Options for which shares of Parent Common
Stock were registered remain unexercised.
Section 5.14 Employee Benefits.
(a) Subject to Section 5.11, Parent agrees that individuals who
are employed by Company immediately prior to the Effective Time shall
become employees of Parent upon the Effective Time (each such employee,
a "Company Employee"); provided, however, that this Section 5.14 shall
not be construed to limit the ability of Company or any of its
Subsidiaries to terminate the employment of any Company Employee at any
time.
(b) [***]
Section 5.15 Incentive Bonus Pool. Subject to Section 8.1(b) and to the
Retention Agreement of Founder, Parent shall pay to such Company Employees as
Parent determines, after consultation with Founder, are eligible an aggregate of
[***] (the "Incentive Bonus Pool"), [***], in three installments of [***] each
on [***], or such earlier dates as Parent shall determine in its sole discretion
(each an "Installment"); provided, however, that Parent may pay (i) up to [***]
of the first Installment to employees who were not employees of Company prior to
the Effective Time but who are employed at the time of payment of such
Installment in connection with the business conducted by Company prior to the
Effective Time (the "New Company Employees"), (ii) up to [***] of the second
Installment to New Company Employees and (iii) up to [***] of the third
Installment to New Company Employees. Subject to the Retention Agreement of
Founder, Parent shall determine, after consultation with Founder, the actual
amount of each Installment payable to Company Employees selected for payment in
accordance with this Section 5.16. If Parent determines to pay an Installment in
shares of Parent Common Stock, the number of shares to be issued shall be
determined by dividing the dollar amount to be paid to Company Employees in
Parent Common Stock by the average of the closing prices of Parent Common Stock
as reported on the Nasdaq National Market during the five (5) trading days
ending two (2) days prior to the date of issuance.
41
THE SYMBOL "[***]" IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS
BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
Section 5.16 Option Grants. [***], Parent shall issue options to
purchase an aggregate of [***] shares of Parent Common Stock pursuant to the
terms of the 2001 Plan to Company Employees employed by Parent on the date of
grant, allocated in such proportions and among such employees as Parent shall
determine, subject to the Retention Agreement of and after consultation with
Founder. The options shall have an exercise price equal to the fair market value
of a share of Parent Common Stock on the date of grant calculated pursuant to
the terms of the 2001 Plan and shall become exercisable with respect to [***] of
the shares on the third anniversary of the date of grant if such optionee is an
employee of Parent on such date and with respect to [***] of the shares on the
fourth anniversary of the date of grant if such optionee is an employee of
Parent on such date.
Section 5.17 Repurchase Right. Parent shall have the right, at its sole
discretion, to repurchase 60% (the "Repurchasable Shares") of the shares of
Parent Common Stock issued to Founder (the "Founder Shares") pursuant to Article
I in exchange for the 8,685,434 shares of Company Common Stock held by Founder
at an aggregate price equal to the aggregate price Founder originally paid for
the Founder Shares if Founder's employment with Parent is terminated by Parent
with Cause or by Founder without Good Reason (as such terms are defined in the
Retention Agreement), which right shall lapse if not exercised within 90 days
following such termination. This right of repurchase shall lapse as to 50% of
the Repurchasable Shares if Founder is employed by Company, Parent or any
affiliate of Parent on the first anniversary of the Closing, as to an additional
33% of the Repurchasable Shares if Founder is employed by Company, Parent or any
affiliate of Parent on the second anniversary of the Closing and as to the
remaining 17% of the Repurchasable Shares if Founder is employed by Company,
Parent or any affiliate of Parent on the third anniversary of the Closing.
Parent's right of repurchase shall terminate with respect to shares for which
the repurchase right has not already lapsed as of the death or Disability (as
that term is defined in the Retention Agreement) of Founder.
In the event of a Change of Control (as defined in the Retention
Agreement), Founder will be deemed to have been employed by Parent for one full
year in addition to Founder's actual service for purposes of determining the
number of Repurchasable Shares for which the repurchase right has lapsed.
Section 5.18 Amendment to Articles of Incorporation. Company shall
promptly after the date hereof take all action necessary, including but not
limited to obtaining the required approval of Company's Board of Directors and
the Company Stockholders, in accordance with California Law and the Company's
articles of incorporation and bylaws to amend Company's articles of
incorporation to increase the number of authorized shares of Company Common
Stock by 4,000,000 shares to a total of 19,000,000 shares of Company Common
Stock.
Section 5.19 Amendment to 2001 Plan. Company shall promptly after the
date hereof take all action necessary, including but not limited to obtaining
the required approval of Company's Board of Directors and the Company
Stockholders, in accordance with California Law and the Company's articles of
incorporation, bylaws and the 2001 Plan to amend the 2001 Plan to increase the
number of shares of Company Common Stock authorized for issuance under the 2001
Plan by 5,000,000 shares to a total of 8,000,000 shares of Company Common Stock.
Section 5.20 Purchase Price Adjustment.
(a) Within sixty (60) days following the Closing Date, Parent
shall cause to be prepared and delivered to the Shareholders' Agent an
unaudited balance sheet of Company as of the Effective Time (the
"Effective Time Balance Sheet"). The Effective Time Balance Sheet will
be prepared in accordance with GAAP on a basis consistent with the most
recent regularly prepared financial statements of Company.
42
THE SYMBOL "[***]" IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS
BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
(b) In the event that Company's Net Assets at the Effective Time
as set forth in the Effective Time Balance Sheet are (A) less than
$1,000,000 by an amount less than $25,000, Parent will send an invoice
to the Shareholders' Agent for the amount equal to such difference and
the Shareholders' Agent shall pay such invoice within twenty (20) days
of receipt, (B) less than $1,000,000 by an amount more than $25,000, the
amount of the first installment of Installment Cash Merger Consideration
will be reduced by the amount of such difference or (C) more than
$1,000,000, Parent shall promptly pay the excess amount as additional
Initial Cash Merger Consideration, provided, however, that if the
Shareholders' Agent shall make an objection to the Effective Time
Balance Sheet within twenty (20) days of receipt of the Effective Time
Balance Sheet, Parent and the Shareholders' Agent shall attempt to
resolve any such objections within ten (10) days of the receipt by
Parent of such objection. If Parent and the Shareholders' Agent are
unable to resolve any such objection within ten (10) days, Parent and
the Shareholders' Agent shall promptly retain a mutually acceptable
independent nationally recognized accounting firm to audit such
Effective Time Balance Sheet, which audit shall be conclusive and
binding upon Parent, Surviving Corporation, the Shareholders' Agent and
the Company Shareholders, and none of Parent, Surviving Corporation, the
Shareholders' Agent or any Company Shareholder shall have any further
right to challenge the calculations, and the cost of such accounting
firm's audit shall be borne by the Company Shareholders and be deducted
from the value of the first installment of Installment Cash Merger
Consideration if the amount of Net Assets at the Effective Time as
calculated by such firm does not exceed the amount of Net Assets at the
Effective Time as set forth in the Signing Date Balance Sheet or the
Effective Time Balance Sheet by at least $25,000, otherwise Parent shall
bear the cost of such audit.
(c) Any payments made pursuant to Section 5.20(b) shall be
treated as adjustments to the Cash Merger Consideration. Any payment by
Parent under Section 5.20(b) shall increase the Initial Cash
Consideration. Any payment to Parent under Section 5.20(b) shall reduce
the Initial Cash Consideration or the Installment Cash Merger
Consideration, as applicable.
Section 5.21 Tax Matters.
(a) Reorganization. Parent or Merger Sub shall use its
reasonable best efforts (including the provision of customary
representations and covenants) to permit counsel to render the opinion
described in Section 6.3(f) and to ensure that its representations and
covenants are true and correct. None of Company, Parent or Merger Sub
shall take or cause to be taken any action which would cause to be
untrue (or fail to take or cause not to be taken any action which would
cause to be untrue) any of the representations or covenants set forth in
certificates delivered to such counsel in connection with such opinion.
(b) Tax Filings and Audits. The Company Shareholders shall
include the income of Company on their state and federal income Returns
for all periods ending at or prior to the Effective Time (each an "S
Corporation Period" and collectively, the "S Corporation Periods"). The
taxable income of Company for its final S Corporation Period shall be
computed using the "closing-of-the-books" method. Shareholders' Agent
shall be responsible for timely filing all federal and state income
Returns of Company for the final S Corporation Period. Such Returns will
be prepared and filed in accordance with applicable law, in a manner
consistent with past practices and in a manner that would have satisfied
the representations in Section 2.9 if such Return had been filed at the
Closing Date. Shareholders' Agent shall present such Returns to Parent
for its review and approval, which shall not be unreasonably refused or
delayed, at least ten days prior to the filing dates for such Returns.
Shareholders' Agent shall control all audits, contests, or other
proceedings with respect to the federal and state income Returns of the
43
THE SYMBOL "[***]" IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS
BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
Company for all S Corporation Periods, provided that Shareholders' Agent
shall provide copies of all written materials relating to such audits,
contests, or other proceedings to Parent or its designee and shall not
settle any such proceeding in a manner that would adversely affect
Parent or the Surviving Corporation without the prior written consent of
Parent, which shall not be unreasonably refused or delayed. Parent shall
not settle any audit of a federal or state income Return of Company,
Parent or the Surviving Corporation in a manner that would increase the
income or decrease the losses, credits or deductions allocated to the
Company Shareholders by reason of their ownership of Company Shares
during the S Corporation Periods the prior written consent of Buyer,
which consent shall not be unreasonably refused or delayed.
(c) Except as contemplated by this Agreement, Parent shall not
permit the Surviving Corporation, and the Surviving Corporation shall
not, take any action on the Closing Date other than in the course of the
Surviving Corporation's business that would result in an increase in the
income tax liability of any Company Shareholder by reason of any income
of the S Corporation that might be passed through to the Company
Shareholders by reason of Company's status as an S corporation for
purposes of federal and state law.
(d) Section 83(b) Election. Founder shall timely make a
protective Section 83(b) election in a form reasonably acceptable to
Parent.
Section 5.22 Indemnification of Company Officers and Directors. Parent
and the Surviving Corporation shall cause to be maintained in effect for a
period of six (6) years after the Effective Time, subject to any limitation
imposed from time to time under applicable law, the current provisions regarding
indemnification of current or former officers and directors of Company (each a
"Company Indemnified Officer or Director") contained in the articles of
incorporation, bylaws or the organizational documents of Company, provided that
in the event any claim or claims are asserted or made within such six (6) year
period, all rights to indemnification in respect of any claim or claims shall be
continue until final disposition of any and all such claims for a period of two
(2) years. This covenant is intended to be for the benefit of, and shall be
enforceable by, each Company Indemnified Officer or Director and their
respective heirs and legal representatives.
Section 5.23 Consents. Company shall use reasonable efforts to obtain
the consents, waivers and approvals of parties to any Contract as are required
thereunder in connection with the Merger, as set forth in Schedule 2.5 of the
Company Disclosure Schedule prior to the Closing Date.
ARTICLE VI
CONDITIONS TO THE MERGER
Section 6.1 Conditions to Obligations of Each Party to Effect the
Merger. The respective obligations of each party to this Agreement to consummate
and effect this Agreement and the transactions contemplated hereby shall be
subject to the satisfaction at or prior to the Effective Time of each of the
following conditions, any of which may be waived, in writing, by agreement of
all the parties hereto:
(a) Shareholder Approval. This Agreement and the Merger shall be
approved and adopted by Company Shareholders holding not less than 95%
of the Company Common Stock Outstanding.
(b) No Injunctions or Restraints: Illegality. No temporary
restraining order, preliminary or permanent injunction or other order
issued by any court of competent jurisdiction or other legal or
regulatory restraint or prohibition preventing the consummation of the
Merger shall be and
44
THE SYMBOL "[***]" IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS
BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
remain in effect, nor shall any Proceeding brought by an administrative
agency or commission or other Governmental Entity, domestic or foreign,
seeking any of the foregoing be pending, which would have a Material
Adverse Effect on either Parent or on Parent combined with the Surviving
Corporation after the Effective Time, nor shall there be any action
taken, or any statute, rule, regulation or order enacted, entered,
enforced or deemed applicable to the Merger, which makes the
consummation of the Merger illegal.
(c) Governmental Approval. Parent, Company and Merger Sub and
their respective Subsidiaries shall have timely obtained from each
Governmental Entity all other approvals, waivers and consents, if any,
necessary for consummation of or in connection with the Merger and the
several transactions contemplated hereby, including such approvals,
waivers and consents as may be required under the Securities Act and
under state securities or "blue sky" laws, other than filings and
approvals relating to the Merger or affecting Parent's ownership of
Company or any of its properties if failure to obtain such approval,
waiver or consent would not have a Material Adverse Effect on Parent
after the Effective Time.
Section 6.2 Additional Conditions to the Obligations of Parent and
Merger Sub. The obligations of Parent and Merger Sub to consummate and effect
this Agreement and the transactions contemplated hereby shall be subject to the
satisfaction at or prior to the Effective Time of each of the following
conditions, any of which may be waived, in writing, by Parent:
(a) Accuracy of Representations and Warranties. Each of the
representations and warranties of Company in Sections 2.1 and 2.3 of
this Agreement shall be true and correct in all respects, each as of the
date when made and at and as of the Closing, except to the extent a
representation or warranty speaks only as of an earlier date, and except
for any changes as are permitted by this Agreement. Each of the
representations and warranties of Company in Section 2.2 of this
Agreement shall be true and correct in all material respects, each as of
the date when made and at and as of the Closing, except to the extent a
representation or warranty speaks only as of an earlier date, and except
for any changes as are permitted by this Agreement. Each of the
representations and warranties of Company in Sections 2.4 through 2.24
of this Agreement shall be true and correct in all respects
(disregarding any materiality qualifiers, including without limitation,
Material Adverse Effect), each as of the date when made and at and as of
the Closing, except to the extent a representation or warranty speaks
only as of an earlier date, except for any changes as are permitted by
this Agreement, and except for any failure of such representations and
warranties to be true and correct as would not have, individually or in
the aggregate, a Material Adverse Effect on Company.
(b) Performance of Obligations. Company shall have performed and
complied in all material respects with all covenants, obligations and
conditions of this Agreement required to be performed and complied with
by it as of the Closing.
(c) Certificate of Officers. Parent and Merger Sub shall have
received a certificate executed on behalf of Company by the chief
executive officer of Company certifying that the conditions set forth in
Section 6.2(a), (b) and (f) have been satisfied.
(d) No Litigation. There shall not be pending or threatened any
suit, action or proceeding against Company by any Person (i) challenging
the acquisition by Parent or Merger Sub of any shares of Company Common
Stock, seeking to restrain or prohibit the consummation of the Merger,
or seeking to place limitations on the ownership of shares of Company
Common Stock (or shares of common stock of the Surviving Corporation) by
Parent or Merger Sub or seeking to
45
THE SYMBOL "[***]" IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS
BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
obtain from Company, Parent or Merger Sub any damages that are material
in relation to Company, (ii) seeking to prohibit or materially limit the
ownership or operation by Company, Parent or any of Parent's
Subsidiaries of any material portion of any business or of any assets of
Company, Parent or any of Parent's Subsidiaries, or to compel Company,
Parent or any of Parent's Subsidiaries to divest or hold separate any
material portion of any business or of any assets of Company, Parent or
any of Parent's Subsidiaries, as a result of the Merger or (iii) seeking
to prohibit Parent or any of its Subsidiaries from effectively
controlling in any material respect the business or operations of
Company.
(e) No Material Adverse Change. No change, effect, event,
occurrence, development or state of facts shall have occurred since the
date of this Agreement and be continuing which, individually or in the
aggregate, has had or would reasonably be expected to have a Material
Adverse Effect on Company.
(f) Investor Representation Statement; Number of Shareholders.
There shall be no more than thirty-five (35) Company Shareholders who
are not "accredited investors" as defined in Rule 501 under the
Securities Act.
(g) Purchaser Representative. There shall be a Purchaser
Representative (as defined in Regulation D under the Securities Act),
reasonably satisfactory to Parent, representing each holder of Company
Common Stock who is a Person and not an "accredited investor" as defined
in Rule 501 under the Securities Act, and such Purchaser Representative
shall have executed and delivered documentation reasonably satisfactory
to Parent.
(h) Retention Agreements and Non-Competition and
Non-Solicitation Agreements. Each of the Key Shareholders of Company
shall have entered into a Retention Agreement with Parent substantially
in the form attached hereto as Exhibit 5.11(b), and Founder shall have
entered into a Retention Agreement substantially in the form attached
hereto as Exhibit 5.11(c).
(i) Opinion. Counsel for Company shall have delivered to Parent
an opinion in substantially the form attached hereto as Exhibit 6.2(i).
(j) Withholding Certificate. Parent and Merger Sub shall have
received a certificate executed on behalf of Company by the chief
executive officer certifying that Company is not a United States real
property holding corporation.
(k) Section 83(b) Election. Founder shall have made appropriate
preparation to make a protective Section 83(b) election promptly after
the Effective Time.
Section 6.3 Additional Conditions to Obligations of Company. The
obligations of Company to consummate and effect this Agreement and the
transactions contemplated hereby shall be subject to the satisfaction at or
prior to the Effective Time of each of the following conditions, any of which
may be waived, in writing, by Company:
(a) Accuracy of Representations and Warranties. Each of the
representations and warranties of Parent and Merger Sub in Sections 3.1
through 3.2 of this Agreement shall be true
46
THE SYMBOL "[***]" IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS
BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
and correct in all respects, each as of the date when made and at and as
of the Closing, except to the extent a representation or warranty speaks
only as of an earlier date, and except for any changes as are permitted
by this Agreement. Each of the representations and warranties of Parent
and Merger Sub in Section 3.4 of this Agreement shall be true and
correct in all material respects, each as of the date when made and at
and as of the Closing, except to the extent a representation or warranty
speaks only as of an earlier date, and except for any changes as are
permitted by this Agreement. Each of the representations and warranties
of Parent and Merger Sub in Sections 3.3 and 3.5 through 3.8 of this
Agreement shall be true and correct in all respects (disregarding any
materiality qualifiers, including without limitation, Material Adverse
Effect), each as of the date when made and at and as of the Closing,
except to the extent a representation or warranty speaks only as of an
earlier date, except for any changes as are permitted by this Agreement,
and except for any failure of such representations and warranties to be
true and correct as would not have, individually or in the aggregate, a
Material Adverse Effect on Parent or Merger Sub.
(b) Performance of Obligations. Parent and Merger Sub shall have
performed and complied in all material respects with all covenants,
obligations and conditions of this Agreement required to be performed
and complied with by them as of the Closing.
(c) Certificate of Officers. Company shall have received a
certificate executed on behalf of Parent and Merger Sub by the chief
executive officer and chief financial officer of Parent and Merger Sub,
respectively, certifying that the conditions set forth in Sections
6.3(a), (b) and (d) have been satisfied.
(d) No Material Adverse Change. No change, effect, event,
occurrence, development or state of facts shall have occurred since the
date of this Agreement and be continuing which, individually or in the
aggregate, has had or would reasonably be expected to have a Material
Adverse Effect on Parent.
(e) Opinion of Counsel. Counsel for Parent shall have delivered
to Company an opinion in substantially the form of Exhibit 6.3(e) .
(f) Tax Opinion. Company shall have received an opinion of Davis
Polk & Wardwell in form and substance reasonably satisfactory to
Company, on the basis of certain facts, representations and assumptions
set forth in such opinion, dated the Effective Time, to the effect that
the Merger will be treated for federal income tax purposes as a
reorganization qualifying under the provisions of Section 368(a) of the
Code, and that each of Company, Parent and Merger Sub will be a party to
the reorganization within the meaning of Section 368(b) of the Code. In
rendering such opinion, such counsel shall be entitled to rely upon
customary representations of officers of Company, Parent and Merger Sub.
(g) No Litigation. There shall not be pending or threatened any
suit, action or proceeding against Parent or Merger Sub by any Person
(i) challenging the acquisition by Parent or Merger Sub of any shares of
Company Common Stock, seeking to restrain or prohibit the consummation
of the Merger, or seeking to place limitations on the ownership of
shares of Company Common Stock (or shares of common stock of the
Surviving Corporation) by Parent or Merger Sub or seeking to obtain from
Company, Parent or Merger Sub any damages that are material in relation
to Company, (ii) seeking to prohibit or materially limit the ownership
or operation by Company, Parent or any of Parent's Subsidiaries of any
material portion of any business or of any assets of Company, Parent or
any of Parent's Subsidiaries, or to compel
47
THE SYMBOL "[***]" IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS
BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
Company, Parent or any of Parent's Subsidiaries to divest or hold
separate any material portion of any business or of any assets of
Company, Parent or any of Parent's Subsidiaries, as a result of the
Merger or (iii) seeking to prohibit Parent or any of its Subsidiaries
from effectively controlling in any material respect the business or
operations of Company.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
Section 7.1 Termination. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after approval of the matters
presented in connection with the Merger by the Company Shareholders (with
respect to Sections 7.1(b), (c) and (d), by written notice by the terminating
party to the other party):
(a) by the mutual written consent of Parent and Company;
(b) by Parent or Company if the Merger shall not have been
consummated by June 1, 2002, unless extended by mutual agreement of
Parent and Company, provided, however, that the right to terminate this
Agreement under this Section 7.1(b) shall not be available if such
party's failure to fulfill any obligation under this Agreement has been
the cause of or resulted in the failure of the Merger to occur on or
before such date; or
(c) by either Parent or Company if a court of competent
jurisdiction or other Governmental Entity shall have issued a
nonappealable final order, decree or ruling or taken any other action,
in each case having the effect of permanently restraining, enjoining or
otherwise prohibiting the Merger, except if the party relying on such
order, decree or ruling or other action has not complied with its
obligations under this Agreement;
(d) by either Parent or Company if they are not in material
breach of their obligations under this Agreement and if there has been a
breach of any representation, warranty, covenant or agreement on the
part of the other party set forth in this Agreement, which breach (i)
causes the conditions set forth in Section 6.1 or 6.2 (in the case of
termination by Parent) or Section 6.1 or 6.3 (in the case of termination
by Company) not to be satisfied and (ii) shall not have been cured
within twenty (20) business days following receipt by the breaching
party of written notice of such breach from the other party.
Section 7.2 Effect of Termination. In the event of termination of this
Agreement as provided in Section 7.1, there shall be no liability or obligation
on the part of Parent, Company, Merger Sub or their respective officers,
directors or stockholders, except to the extent that such termination results
from the breach by a party of any of its representations, warranties or
covenants set forth in this Agreement; provided that the provisions of Section
7.1 and Article VIII shall remain in full force and effect and survive any
termination of this Agreement.
Section 7.3 Amendment. This Agreement may be amended by the parties
hereto, by action taken or authorized by their respective Boards of Directors,
at any time before or after approval of the matters presented in connection with
the Merger to the Company Shareholders. The Company Shareholders agree that any
amendment of this Agreement signed by the Shareholders' Agent shall be binding
upon and effective against the Company Shareholders whether or not they have
signed such amendment. This Agreement may not be amended except by an instrument
in writing signed on behalf of each of the parties hereto.
48
THE SYMBOL "[***]" IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS
BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
Section 7.4 Extension, Waiver. At any time prior to the Effective Time,
the parties hereto, to the extent legally allowed, may (i) extend the time for
the performance of any of the obligations or other acts of the other parties
hereto, (ii) waive any inaccuracies in the representations and warranties
contained herein or in any document delivered pursuant hereto and (iii) waive,
to the extent permitted by applicable law, compliance with any of the agreements
or conditions contained herein. Any agreement on the part of a party hereto to
any such extension or waiver shall be valid only if set forth in a written
instrument signed on behalf of such party. For purposes of this Section 7.4, the
Company Shareholders agree that any extension or waiver signed by the
Shareholders' Agent shall be binding upon and effective against all Company
Shareholders whether or not they have signed such extension or waiver.
ARTICLE VIII
INDEMNIFICATION
Section 8.1 Indemnification.
(a) Survival of Representations and Warranties. All
representations and warranties made by Company, Parent or Merger Sub
herein, or in any certificate, schedule or exhibit delivered pursuant
hereto, shall survive the Closing and continue in full force and effect
for a period of [***] after the Closing Date; provided, however, that
(i) the representations and warranties contained in Sections [***] shall
survive for a period of [***] after the Closing Date and (ii) claims, if
any, asserted in writing prior to the applicable expiration date set
forth above and identified as claims for indemnification pursuant to
this Article VIII shall survive until finally resolved and satisfied in
full if the party entitled to indemnification prevails in establishing
its right to indemnification.
(b) Indemnification by the Company Shareholders.
(i) Subject to the limitations set forth in this Article
VIII, each of the Company Shareholders will [***], in the same
proportion that each Company Shareholder's number of shares of
Company Common Stock held just prior to the Effective Time bears
to the Fully Diluted Company Common Stock Outstanding (the
"Company Shareholder's Pro Rata Share"), indemnify and hold
harmless Parent and the Surviving Corporation and their
respective officers, directors, agents, attorneys and employees,
and each Person, if any, who controls or may control Parent or
the Surviving Corporation within the meaning of the Securities
Act (hereinafter "Parent Indemnified Persons") from and against
such Company Shareholder's Pro Rata Share of any and all losses,
costs, damages, liabilities and expenses arising from claims,
demands, actions, causes of action, including, without
limitation, legal fees (collectively, "Damages") incurred or
sustained by Parent Indemnified Persons as a result of:
(1) [***];
or
(2) [***].
(ii) The maximum liability of each Company Shareholder
for Damages from breaches of representations and warranties
contained in Sections [***] (excluding [***] shall be, that
Indemnifying Shareholder's Pro Rata Share of $[***]. The maximum
liability of each Company Shareholder for Damages under this
Article VIII (including
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THE SYMBOL "[***]" IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS
BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
pursuant to the foregoing sentence) shall be that Indemnify
Shareholder's Pro Rata Share of $[***]. In the event any
Indemnifying Shareholder forfeits unvested Merger Consideration
(including without limitation, pursuant to any repurchase right)
the amount of unvested Merger Consideration so forfeited shall
count towards the maximum liability of that Indemnifying
Shareholder for Damages set forth above.
(iii) In the event a Company Shareholder is required to
make any payments to Parent to cover indemnification obligations
under this Article VIII, such Company Shareholder shall be
entitled to make some or all of such payment in cash, and to the
extent not so paid in cash, Parent shall (A) withhold any unpaid
amount from such Company Shareholder's allocation of the
Installment Cash Merger Consideration; (B) to the extent not
paid pursuant to the foregoing, require return of shares of
Parent Common Stock issued to such Company Shareholder in the
Merger in the amount of such Company Shareholder's unpaid
indemnification obligation, such shares valued at the Average
Closing Price; (C) to the extent not paid pursuant to the
foregoing, cancel outstanding options to purchase Parent Common
Stock held by such Company Shareholder in the amount of such
Company Shareholder's unpaid indemnification obligation, such
shares valued at the difference equal to the Average Closing
Price minus the per share exercise price of the option, provided
that the Average Closing Price exceeds the exercise price; and
(D) to the extent not paid pursuant to the foregoing, to
withhold any unpaid amount from such Company Shareholder's
allocation, if any, of the Incentive Bonus Pool.
(iv) Nothing in this Agreement shall limit the liability
in amount or otherwise (A) of any Company Shareholder in
connection with any breach by such shareholder of any
representation or covenant in the Investor Representation
Statement delivered pursuant hereto or (B) of Company or any
Company Shareholder with respect to fraud, criminal activity or
intentional breach of any covenant contained in this Agreement.
(c) Indemnification by Parent and Merger Sub. Subject to the
limitations set forth in this Article VIII, Parent hereby agrees to
indemnify, defend and hold harmless the Company Shareholders and their
respective officers, directors, agents, attorneys and employees
(hereinafter "Company Indemnified Persons") from and against any and all
Damages incurred or sustained by Company Indemnified Persons as a result
of:
(i) any inaccuracy or breach of any representation or
warranty Parent or Merger Sub contained herein or under any
other agreement executed and delivered by the parties in
furtherance of the transactions described herein; or
(ii) a breach by Parent or Merger Sub of any covenant or
other agreement contained herein (other than the covenants and
agreements set forth in Section 5.13, which are specifically
covered in Section 5.13) or under any other agreement executed
and delivered by the parties in furtherance of the transactions
described herein.
(d) Deductible for Claims. No claim for Damages arising out of
any misrepresentation or breach of the representations and warranties
shall be made under Article VIII unless the aggregate of Damages for
which claims are made hereunder by Company Indemnified Persons or Parent
Indemnified Persons, as the case may be, exceeds $[***], in which case
Company Indemnified Person or Parent Indemnified Person, as the case may
be, shall be entitled to seek compensation for all Damages without
regard to the limitation set forth in this Section 8.1(d).
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THE SYMBOL "[***]" IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS
BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
Section 8.2 Claims by Company or Parent Indemnitees.
(a) Whenever a claim shall arise for which indemnification may
be sought, each party entitled to indemnification (each, an "Indemnified
Party") shall promptly give written notice (the "Indemnification
Notice") to the Shareholders' Agent and each party obligated to provide
the indemnity (each, an "Indemnifying Party") that with respect to the
indemnification obligations set forth in Section 8.1, Damages exist and
specifying in reasonable detail the individual items of Damages included
in the amount so stated, the date each item was paid or properly accrued
or arose, and the nature of the misrepresentation, breach of warranty or
covenant or other claim to which such item is related; provided,
however, that the failure to give timely notice shall not relieve the
Indemnifying Party from any obligation under this Agreement, except to
the extent, if any, that the Shareholders' Agent or Indemnifying Party
is prejudiced thereby.
(b) Each Indemnifying Party and/or the Shareholders' Agent shall
have thirty (30) days after delivery of the Indemnification Notice to
object to any claim or claims made by such Indemnification Notice in a
written statement delivered to the Shareholders' Agent, each
Indemnifying Party and each Indemnified Party, which objection shall
state in reasonable detail the basis for such objection. In the event no
Indemnifying Party objects and the Shareholders' Agent does not object
within such thirty (30) day period, the amount set forth in such
Indemnification Notice with respect to that Indemnifying Party shall be
paid as set forth in 8.2(b)(ii). In the event the Indemnifying Party
and/or the Shareholders' Agent objects in writing to any claim or claims
made in the Indemnification Notice, the Indemnified Party shall have
thirty (30) days to respond in a written statement to the objection of
the Indemnifying Party and/or the Shareholders' Agent. If after such
thirty (30) day period there remains a dispute as to any claims, the
Shareholders' Agent and Parent shall attempt in good faith for sixty
(60) days to agree upon the rights of the respective parties with
respect to each of such claims. If the Shareholders' Agent and Parent
should so agree, a memorandum setting forth such agreement shall be
prepared and signed by both parties. The Indemnifying Party shall, as
agreed in such memorandum, make payment for claims or other disposition
as agreed in such memorandum and such payment or performance shall
satisfy all of the Indemnifying Party obligations as to such claim.
(c) The Shareholders' Agent, on behalf of the Indemnifying
Shareholders, shall have the right, but not the obligation, exercisable
by written notice to the Indemnified Party within thirty (30) days of
receipt of notice from the Indemnified Party of the commencement of or
assertion of any claim, action, suit or proceeding by a third party in
respect of which indemnity may be sought hereunder against the
Indemnifying Shareholders (a "Third Party Claim"), to assume, at its own
expense, the defense and control the settlement of such Third-Party
Claim that (i) involves (and continues to involve) solely money damages
or (ii) involves (and continues to involve) claims for both money
damages and equitable relief against the Indemnified Party that cannot
be severed, where the claims for money damages are the primary claims
asserted by the third party and the claims for equitable relief are
incidental to the claims for money damages. The Shareholders' Agent on
behalf of the Indemnifying Shareholders shall have the right to
participate in, at its own expense, the defense of any Third-Party Claim
that the Indemnified Party is defending, as provided in this Agreement.
The Shareholders' Agent, if it has assumed the defense of any
Third-Party Claim as provided in this Agreement, shall not consent to a
settlement of, or the entry of any judgment arising from, any such
Third-Party Claim without the Indemnified Party's prior written consent
(which consent shall not be unreasonably withheld) unless such
settlement or judgment relates solely to monetary damages. The
Shareholders' Agent shall not, without the Indemnified Party's prior
written consent, enter into any compromise or settlement that (i)
commits the Indemnified Party to take, or to forbear to take, any action
or (ii) does not provide
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THE SYMBOL "[***]" IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS
BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
for a complete release by such third party of the Indemnified Party. The
Indemnified Party shall have the sole and exclusive right to settle any
Third-Party Claim, on such terms and conditions as it deems reasonably
appropriate, to the extent such Third-Party Claim involves equitable or
other non-monetary relief against the Indemnified Party, and shall have
the right to settle any Third-Party Claim involving money damages for
which the Shareholders' Agent has not assumed the defense pursuant to
this Section 8.2(c) with the written consent of the Shareholders' Agent,
which consent shall not be unreasonably withheld or delayed.
Section 8.3 Resolution of Conflicts and Arbitration.
(a) If no agreement can be reached after good faith negotiation
between the parties pursuant to Sections 8.2, either Parent or the
Shareholders' Agent may, by written notice to the other, demand
arbitration of the matter unless the amount of the Damages is at issue
in pending litigation with a third party, in which event arbitration
shall not be commenced until such amount is ascertained or both parties
agree to arbitration; and in either such event the matter shall be
settled by arbitration conducted by one arbitrator. Parent and the
Shareholders' Agent shall agree on the arbitrator; provided, however,
that if Parent and the Shareholders' Agent cannot agree on the
arbitrator, either Parent or the Shareholders' Agent can request that
the American Arbitration Association select the arbitrator. The
arbitrator shall set a limited time period and establish procedures
designed to reduce the cost and time for discovery while allowing the
parties an opportunity, adequate in the sole judgment of the arbitrator,
to discover relevant information from the opposing parties about the
subject matter of the dispute. The arbitrator shall rule upon motions to
compel or limit discovery and shall have the authority to impose
sanctions, including attorneys' fees and costs, to the same extent as a
court of law or equity, should the arbitrator determine that discovery
was sought without substantial justification or that discovery was
refused or objected to without substantial justification. The decision
of the arbitrator shall be written, shall be in accordance with
applicable law and with this Agreement, and shall be supported by
written findings of fact and conclusions of law which shall set forth
the basis for the decision of the arbitrator. Subject to the foregoing
sentence, the decision of the arbitrator as to the validity and amount
of any claim in the Indemnification Notice shall be binding and
conclusive upon the parties to this Agreement, and notwithstanding
anything in Article VIII hereof, the parties shall be entitled to act in
accordance with such decision and the parties shall be entitled to make
or withhold payments in accordance therewith.
(b) Judgment upon any award rendered by the arbitrator may be
entered in any court having jurisdiction. Any such arbitration shall be
held in Menlo Park, California under the commercial rules then in effect
of the American Arbitration Association. For purposes of this Section
8.3(b), in any arbitration hereunder in which any claim or the amount
thereof stated in the Indemnification Notice is at issue, the
Indemnified Party shall be deemed to be the non-prevailing party unless
the arbitrator awards the Indemnified Party more than one-half (1/2) of
the amount in dispute, in which case the Indemnifying Party shall be
deemed to be the non-prevailing party. The non-prevailing party to an
arbitration shall pay its own expenses, the fees of the arbitrator and
the expenses, including attorneys' fees and costs, reasonably incurred
by the other party to the arbitration.
Section 8.4 Shareholders' Agent.
(a) Founder shall be constituted and appointed as agent
("Shareholders' Agent") for and on behalf of the Company Shareholders to
give and receive notices and communications, to make any determinations
or take any actions, including to resolve any disputes, in connection
with the
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THE SYMBOL "[***]" IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS
BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
determination of Net Assets and purchase price adjustment provided in
Section 5.20, to make claims on behalf of the Company Shareholders
pursuant to Section 8.2, or to respond to claims against the
Indemnifying Shareholders pursuant to Section 8.1, including to
authorize withholding of cash from the Installment Cash Merger
Consideration and the Incentive Bonus Pool in satisfaction of claims by
Parent, to object to such claims or withholdings, or to agree to,
negotiate, enter into settlements and compromises of, and demand
arbitration and comply with orders of courts and awards of arbitrators
with respect to, such claims under Section 8.1 or Section 8.2, and to
take all actions necessary or appropriate in the judgment of the
Shareholders' Agent for the accomplishment of the foregoing. No bond
shall be required of the Shareholders' Agent, and the Shareholders'
Agent shall receive no compensation for his services.
(b) The Shareholders' Agent shall not be liable for any act done
or omitted hereunder as Shareholders' Agent while acting in good faith
and in the exercise of reasonable judgment and any act done or omitted
pursuant to the advice of counsel shall be conclusive evidence of such
good faith. The Company Shareholders shall severally indemnify the
Shareholders' Agent and hold the Shareholders' Agent harmless against
any loss, liability or expense incurred without gross negligence or bad
faith on the part of the Shareholders' Agent and arising out of or in
connection with the acceptance or administration of his duties
hereunder, as the same may be modified, amended or supplemented.
(c) The Shareholders' Agent may rely on and shall be protected
in relying on or refraining from acting on any instrument reasonably
believed to be genuine and to have been signed or presented by the
proper party or parties. The Shareholders' Agent shall not be liable for
other parties' forgeries, fraud or false representations.
(d) The Shareholders' Agent shall have reasonable access to
information about Parent and the reasonable assistance of Parent's
officers and employees for purposes of performing his duties and
exercising his rights hereunder, provided that the Shareholders' Agent
shall treat confidentially and not disclose any nonpublic information
from or about Parent and its Subsidiaries to anyone (except on a need to
know basis to individuals who agree to treat such information
confidentially)
(e) The Shareholders' Agent shall be responsible for timely
filing all federal and state income tax returns of Company for taxable
periods (or portions thereof) ending on or before the Effective Time of
the Merger and shall control all audits, controversies or other
proceedings with respect thereof.
(f) Each Company Shareholder shall be responsible for its pro
rata share (determined by the proportion that such Company Shareholder's
Merger Consideration bears to the total Merger Consideration) of any
expenses of or incurred by Shareholders' Agent, and Parent is authorized
to and agrees to pay such expenses of or incurred by Shareholders' Agent
out of Installment Cash Merger Consideration or other Merger
Consideration at the time such amount would otherwise be payable to such
Company Shareholder.
Section 8.5 Actions of the Shareholders' Agent. A decision, act, consent
or instruction of the Shareholders' Agent shall constitute a decision of all
Company Shareholders and shall be final, binding and conclusive upon each such
Company Shareholder, and Parent may rely upon any decision, act, consent or
instruction of the Shareholders' Agent as being the decision, act, consent or
instruction of each and every such Company Shareholder. Parent is hereby
relieved from any liability to any Person for any acts done by it in accordance
with such decision, act, consent or instruction of the Shareholders' Agent.
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THE SYMBOL "[***]" IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS
BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
ARTICLE IX
GENERAL PROVISIONS
Section 9.1 Notices. All notices and other communications hereunder
shall be in writing and shall be deemed duly delivered if delivered personally
(upon receipt), or three (3) business days after being mailed by registered or
certified mail, postage prepaid (return receipt requested), or one (1) business
day after it is sent by commercial overnight courier service, or upon
transmission, if sent via facsimile (with confirmation of receipt) to the
parties at the following address (or at such other address for a party as shall
be specified by like notice):
(a) if to Parent or Merger Sub, to:
Virage Logic Corporation
46501 Landing Parkway
Fremont, CA 94538
Attention: James R. Pekarsky, Chief Financial Officer
Fax: (510) 360-8099
Tel: (510) 360-8000
with a copy to (which shall not constitute notice):
Heller Ehrman White & McAuliffe LLP
275 Middlefield Road
Menlo Park, CA 94025
Attention: Sarah A. O'Dowd, Esq.
Fax: (650) 324-0638
Tel: (650) 324-7000
(b) if to Company, to:
In-Chip Systems, Inc.
111 W. Evelyn, Suite 202
Sunnyvale, CA 94086
Attention: Tushar Gheewala, President
and Chief Executive Officer
Fax: (408) 732-1702
Tel: (408) 732-1094
with a copy to (which shall not constitute notice):
Davis Polk & Wardwell
1600 El Camino Real
Menlo Park, CA 94025
Attention: David W. Ferguson, Esq.
Fax: (650) 752-2111
Tel: (650) 752-2000
(c) if to Shareholders' Agent, to:
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THE SYMBOL "[***]" IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS
BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
Tushar Gheewala
c/o In-Chip Systems, Inc.
111 W. Evelyn Avenue
Sunnyvale, CA 94086
Fax: (408) 732-1702
Tel: (408) 732-1094 ext. 307
with a copy to (which shall not constitute notice):
Davis Polk & Wardwell
1600 El Camino Real
Menlo Park, CA 94025
Attention: David W. Ferguson, Esq.
Fax: (650) 752-2111
Tel: (650) 752-2000
Section 9.2 Definitions. For purposes of this Agreement:
(a) an "Affiliate" of any Person means another Person that
directly or indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with, such first Person;
(b) any reference to a party's "knowledge" means
(i) for purposes of the matters covered by Section 2.12
hereof, such party's actual knowledge after due inquiry of (A)
officers, (B) directors and (C) employees of such party with
substantive responsibility for the applicable business functions,
including without limitation with respect to Company Registered
Intellectual Property after due inquiry of the law firm with
patent attorneys who prosecuted each application for Company
Registered Intellectual Property and were responsible for
conducting a search for applicable U.S. patents and other prior
art in connection therewith.
(ii) for all purposes other than the matters covered by
Section 2.12 hereof, such party's actual knowledge after due
inquiry of (A) officers, (B) directors and (C) employees of such
party with substantive responsibility for the applicable business
functions.
(c) any reference to any event, change, condition or effect
being "material" with respect to any entity or group of entities means
any material event, change, condition or effect related to the financial
condition, properties, assets (including intangible assets),
liabilities, business, operations, results of operations or prospects of
such entity or group of entities;
(d) "Material Adverse Effect" means, with respect to any Person,
any change, effect, event, occurrence or state of facts (or any
development that had or could reasonably be expected to have any change
or effect) that had or would reasonably be expected to have a material
adverse effect on the [***] of such Person and its Subsidiaries, if any,
taken as a whole, or the ability to consummate the transactions
contemplated hereby; provided, however, none of the following shall be
deemed in themselves, either alone or in combination, to constitute, and
none of the following shall be taken into account in determining whether
there has been a Material Adverse Effect: (i) [***];
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THE SYMBOL "[***]" IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS
BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
(e) "Person" means an individual, corporation, partnership,
limited liability company, joint venture, association, trust,
unincorporated organization or other entity; and
(f) "Subsidiary" of any Person means, with respect to such
Person, any corporation, partnership, joint venture or other legal
entity of which such Person (either alone or through or together with
any other subsidiary), owns, directly or indirectly, 50% or more of the
stock or other equity interests the holders of which are generally
entitled to vote for the election of the Board of Directors or other
governing body of such corporation or other legal entity.
Section 9.3 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
Section 9.4 Entire Agreement; Nonassignability; Parties in Interest.
This Agreement and the documents and instruments and other agreements
specifically referred to herein or delivered pursuant hereto, including the
Exhibits, the Schedules, including the Company Disclosure Schedule and the
Parent Disclosure Schedule, (a) constitute the entire agreement among the
parties with respect to the subject matter hereof and supersede all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof except for the Confidentiality Agreement,
which shall continue in full force and effect, and shall survive any termination
of this Agreement or the Closing, in accordance with its terms, (b) except as
set forth in Section 9.9, are not intended to confer upon any other Person any
rights or remedies hereunder, and (c) shall not be assigned by operation of law
or otherwise without the written consent of the other party.
Section 9.5 Severability. In the event that any provision of this
Agreement, or the application thereof becomes or is declared by a court of
competent jurisdiction to be illegal, void or unenforceable, the remainder of
this Agreement will continue in full force and effect and the application of
such provision to other Persons or circumstances will be interpreted so as
reasonably to effect the intent of the parties hereto. The parties further agree
to replace such void or unenforceable provision of this Agreement with a valid
and enforceable provision that will achieve, to the extent possible, the
economic, business and other purposes of such void or unenforceable provision.
Section 9.6 Remedies Cumulative. Except as otherwise provided herein,
any and all remedies herein expressly conferred upon a party will be deemed
cumulative with and not exclusive of any other remedy conferred hereby, or by
law or equity upon such party, and the exercise by a party of any one remedy
will not preclude the exercise of any other remedy.
Section 9.7 Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of California
applicable to parties residing in California, without regard applicable
principles of conflicts of law.
Section 9.8 Waiver of Jury Trial.
(a) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY
WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED
AND DIFFICULT ISSUES, AND THEREFORE IT HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN
RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY
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THE SYMBOL "[***]" IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS
BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY.
(b) EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (i) NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (ii) IT UNDERSTANDS
AND HAS CONSIDERED THE IMPLICATIONS OF SUCH WAIVER, (iii) IT MAKES SUCH
WAIVER VOLUNTARILY, AND (iv) IT HAS BEEN INDUCED TO ENTER INTO THIS
AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVER AND CERTIFICATIONS
IN THIS SECTION 9.8.
Section 9.9 Rules of Construction. The captions in this Agreement,
including but not limited to specific section number references included in the
Company Disclosure Schedule, are for convenience of reference only and shall not
limit or otherwise affect any of the terms or provisions hereof. Any reference
to any federal, state, local or foreign statute or law shall be deemed also to
refer to all rules and regulations promulgated thereunder, unless the context
requires otherwise. The word "including" shall mean including without
limitation. Any reference in this Agreement to a "day" or number of "days"
(without the explicit qualification of "business") shall be interpreted as a
reference to a calendar day or number of calendar days. If any action or notice
is to be taken or given on or by a particular calendar day, and such calendar
day is not a business day, then such action or notice shall be deferred until,
or may be taken or given on, the next business day. References to the term
"business day" shall mean any day which is not a Saturday, Sunday or day on
which banks in San Francisco, California are authorized or required by law to
close. The disclosure of any matter in the Company Disclosure Schedule hereto
shall expressly not be deemed to constitute an admission by Company, Parent or
Merger Sub, or to otherwise imply, that any such matter is material for the
purposes of this Agreement. The mere listing (or inclusion of a copy) of a
document or other item shall not be deemed adequate to disclose an exception to
a representation or warranty made herein (unless the representation or warranty
has to do with the existence or terms of the document or other item itself). The
parties have participated jointly, and have been represented by counsel, in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties and no presumption or burden of proof shall
arise favoring or disfavoring any party by virtue of the authorship of any of
the provisions of this Agreement. The parties intend that each representation,
warranty and covenant contained herein shall have independent significance. If
any party has breached any representation, warranty or covenant contained herein
in any respect, the fact that there exists another representation, warranty or
covenant relating to the same subject matter (regardless of the relative levels
of specificity) which the party has not breached shall not detract from or
mitigate the fact that the party is in breach of the first representation,
warranty or covenant.
Section 9.10 No Third Party Beneficiaries. This Agreement shall not
confer any rights or remedies upon any Person other than the parties and their
respective successors and permitted assigns; provided that the directors and
officers of Company and the Company Shareholders shall be third party
beneficiaries as to provisions herein (Sections 5.13 and 5.22, as applicable)
intended to benefit them.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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THE SYMBOL "[***]" IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS
BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
IN WITNESS WHEREOF, Company, Parent and Merger Sub have caused this
Agreement to be executed and delivered by each of them or their respective
officers thereunto duly authorized, all as of the date first written above.
IN-CHIP SYSTEMS, INC.
By: /s/ Tushar Gheewala
-------------------------------------
Name: Tushar Gheewala
Title: President and Chief
Executive Officer
VIRAGE LOGIC CORPORATION
By: /s/Adam Kablanian
-------------------------------------
Name: Adam Kablanian
Title: President and Chief Executive
Officer
IN-CHIP ACQUISITION, INC.
By: /s/ Alexander Shubat
-------------------------------------
Name: Alexander Shubat
Title: President
58
THE SYMBOL "[***]" IS USED TO INDICATE THAT A PORTION OF THE EXHIBIT HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS
BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.