Exhibit 2.1
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
BY AND AMONG
CREDENCE SYSTEMS CORPORATION,
IGUANA ACQUISITION CORPORATION
AND
INTEGRATED MEASUREMENT SYSTEMS, INC.
May 16, 2001
TABLE OF CONTENTS
Page
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ARTICLE I THE MERGER.......................................................................................... 2
1.1 The Merger.................................................................................. 2
1.2 Closing; Effective Time..................................................................... 2
1.3 Effect of the Merger........................................................................ 2
1.4 Articles of Incorporation; Bylaws........................................................... 2
1.5 Directors and Officers...................................................................... 2
1.6 Effect on Capital Stock..................................................................... 3
1.7 Surrender of Certificates................................................................... 4
1.8 Termination of Exchange Agent Funding....................................................... 5
1.9 No Further Ownership Rights in Company Common Stock......................................... 5
1.10 Lost, Stolen or Destroyed Certificates...................................................... 6
1.11 Tax and Accounting Consequences............................................................. 6
1.12 Withholding Rights.......................................................................... 6
1.13 Taking of Necessary Action; Further Action.................................................. 6
ARTICLE II REPRESENTATIONS AND WARRANTIES OF COMPANY.......................................................... 6
2.1 Organization, Standing and Power............................................................ 7
2.2 Capital Structure........................................................................... 8
2.3 Authority................................................................................... 9
2.4 SEC Documents; Financial Statements......................................................... 10
2.5 Absence of Certain Changes.................................................................. 10
2.6 Absence of Undisclosed Liabilities.......................................................... 11
2.7 Litigation.................................................................................. 11
2.8 Restrictions on Business Activities......................................................... 11
2.9 Governmental Authorization.................................................................. 12
2.10 Title to Property........................................................................... 12
2.11 Intellectual Property....................................................................... 12
2.12 Environmental Matters....................................................................... 14
2.13 Taxes....................................................................................... 15
2.14 Employee Benefit Plans...................................................................... 16
2.15 Certain Agreements Affected by the Merger................................................... 18
2.16 Employee Matters............................................................................ 19
2.17 Interested Party Transactions............................................................... 20
2.18 Insurance................................................................................... 21
2.19 Compliance With Laws........................................................................ 21
2.20 Brokers' and Finders' Fees.................................................................. 21
2.21 Registration Statement; Proxy Statement/Prospectus.......................................... 21
2.22 Opinion of Financial Advisor................................................................ 22
2.23 Vote Required............................................................................... 22
2.24 Board Approval.............................................................................. 22
2.25 Shareholder Agreements; Irrevocable Proxies................................................. 22
2.26 Sections 60.835 and 60.801 - 60.816 of the Oregon Law Not Applicable........................ 22
i.
2.27 Customers and Suppliers..................................................................... 22
2.28 No Default.................................................................................. 22
2.29 Export Control Laws......................................................................... 23
2.30 Tax Matters................................................................................. 23
2.31 Affiliates.................................................................................. 23
2.32 Representations Complete.................................................................... 23
2.33 Rights Agreement............................................................................ 23
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB........................................... 24
3.1 Organization, Standing and Power............................................................ 24
3.2 Capital Structure........................................................................... 24
3.3 Authority................................................................................... 25
3.4 SEC Documents; Financial Statements......................................................... 25
3.5 Absence of Undisclosed Liabilities.......................................................... 26
3.6 Litigation.................................................................................. 26
3.7 Broker's and Finders' Fees.................................................................. 26
3.8 Registration Statement; Proxy Statement/Prospectus.......................................... 27
3.9 Board Approval.............................................................................. 27
3.10 Tax Matters................................................................................. 27
3.11 Absence of Certain Changes.................................................................. 27
3.12 Compliance With Laws........................................................................ 27
ARTICLE IV CONDUCT PRIOR TO THE EFFECTIVE TIME................................................................ 28
4.1 Conduct of Business of Company.............................................................. 28
4.2 Restrictions on Conduct of Business of Company.............................................. 28
4.3 No Solicitation............................................................................. 31
ARTICLE V ADDITIONAL AGREEMENTS............................................................................... 32
5.1 Proxy Statement/Prospectus; Registration Statement.......................................... 32
5.2 Meeting of Shareholders..................................................................... 33
5.3 Access to Information....................................................................... 33
5.4 Confidentiality............................................................................. 34
5.5 Public Disclosure........................................................................... 34
5.6 Consents; Cooperation....................................................................... 34
5.7 Legal Requirements.......................................................................... 36
5.8 Blue Sky Laws............................................................................... 36
5.9 Employee Benefit Plans...................................................................... 36
5.10 Forms S-8................................................................................... 38
5.11 Listing of Additional Shares................................................................ 38
5.12 Nasdaq Quotation............................................................................ 38
5.13 Tax Treatment............................................................................... 38
5.14 Pooling Accounting.......................................................................... 39
5.15 Pooling Letter.............................................................................. 39
5.16 Shareholder Litigation...................................................................... 39
5.17 Further Assurances.......................................................................... 39
ii.
5.18 Affiliates.................................................................................. 39
5.19 Operation of Surviving Corporation.......................................................... 40
5.20 Indemnification of Officers and Directors................................................... 41
ARTICLE VI CONDITIONS TO THE MERGER........................................................................... 42
6.1 Conditions to Obligations of Each Party to Effect the Merger................................ 42
6.2 Additional Conditions to Obligations of Company............................................. 43
6.3 Additional Conditions to the Obligations of Parent and Merger Sub........................... 44
ARTICLE VII TERMINATION, AMENDMENT AND WAIVER................................................................. 45
7.1 Termination................................................................................. 45
7.2 Effect of Termination....................................................................... 46
7.3 Expenses and Termination Fees............................................................... 46
7.4 Amendment................................................................................... 48
7.5 Extension; Waiver........................................................................... 48
ARTICLE VIII GENERAL PROVISIONS............................................................................... 48
8.1 Non-Survival at Effective Time.............................................................. 48
8.2 Notices..................................................................................... 48
8.3 Interpretation.............................................................................. 49
8.4 Counterparts................................................................................ 50
8.5 Entire Agreement; Nonassignability; Parties in Interest..................................... 50
8.6 Severability................................................................................ 50
8.7 Remedies Cumulative......................................................................... 50
8.8 Governing Law............................................................................... 50
8.9 Rules of Construction....................................................................... 50
iii.
SCHEDULES
Company Disclosure Schedule
Parent Disclosure Schedule
EXHIBITS
Exhibit A - Shareholder Agreement
Exhibit B - Articles of Merger
Exhibit C - Affiliate Agreement
iv.
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
This AGREEMENT AND PLAN OF MERGER AND REORGANIZATION (this
"Agreement") is made and entered into as of May 16, 2001, by and among Credence
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Systems Corporation, a Delaware corporation ("Parent"), Iguana Acquisition
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Corporation, an Oregon corporation ("Merger Sub") and wholly owned subsidiary of
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Parent, and Integrated Measurement Systems, Inc., an Oregon corporation
("Company").
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RECITALS:
A. The Boards of Directors 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 Merger Sub with and into Company (the
"Merger") and, in furtherance thereof, have approved the Merger.
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B. Pursuant to the Merger, among other things, the outstanding
shares of Company Common Stock, $0.01 par value ("Company Common Stock"), shall
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be converted into shares of Parent Common Stock, $0.001 par value ("Parent
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Common Stock"), at the rate set forth herein.
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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 Section 368 of the Internal Revenue Code
of 1986, as amended (the "Code"), and to cause the Merger to qualify as a
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reorganization within the meaning of Section 368(a) of the Code and use
reasonable best efforts to qualify as a pooling of interests for financial
accounting purposes.
E. Concurrently with the execution of this Agreement and as an
inducement to Parent and Merger Sub to enter into this Agreement, certain
shareholders of Company have on the date hereof entered into shareholder
agreements in the form attached hereto as Exhibit A (each a "Shareholder
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Agreement") to vote the shares of Company Common Stock owned by such persons to
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approve the Merger.
AGREEMENT:
NOW, THEREFORE, in consideration of the covenants and representations
set forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
ARTICLE I
THE MERGER
1.1 The Merger. At the Effective Time (as defined in Section 1.2) and
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subject to and upon the terms and conditions of this Agreement, the Articles of
Merger attached hereto as Exhibit B (the "Articles of Merger") and the
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applicable provisions of the Business Corporation Act of the State of Oregon
("Oregon Law"), Merger Sub shall be merged with and into Company, the separate
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corporate existence of Merger Sub shall cease and Company shall continue as the
surviving corporation. Company as the surviving corporation after the Merger is
hereinafter sometimes referred to as the "Surviving Corporation."
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1.2 Closing; Effective Time. The closing of the transactions
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contemplated hereby (the "Closing") shall take place as soon as practicable (and
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in any event not later than two business days) after the satisfaction or waiver
of each of the conditions set forth in Article VI hereof or at such other time
as the parties hereto agree (the "Closing Date"). The Closing shall take place
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at the offices of Ater Wynne LLP, 222 S.W. Columbia Street, Suite 1800,
Portland, OR 97201-6018, 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 Articles of Merger with the Secretary of State of the
State of Oregon, in accordance with the relevant provisions of Oregon Law (the
time of the filing of such document, or such later time as may be agreed to by
the parties and set forth in the Articles of Merger, being the "Effective
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Time").
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1.3 Effect of the Merger. At the Effective Time, the effect of the
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Merger shall be as provided in this Agreement, the Articles of Merger and the
applicable provisions of Oregon Law. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time, all title to all real
estate and other property owned Company and Merger Sub shall vest in the
Surviving Corporation, without reversion or impairment, and all obligations,
including contractual, tortious, statutory and administrative obligations, shall
be the obligations of the Surviving Corporation.
1.4 Articles of Incorporation; Bylaws.
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(a) At the Effective Time, the Articles of Incorporation of
Company shall be amended so as to read in its entirety as set forth in the Plan
of Merger attached to the Articles of Merger and as so amended shall be the
Articles of Incorporation of the Surviving Corporation until thereafter amended
as provided by Oregon Law and such Articles of Incorporation.
(b) The Bylaws of Merger Sub, as in effect immediately
prior to the Effective Time, shall be the Bylaws of the Surviving Corporation
until thereafter amended.
1.5 Directors and Officers. At the Effective Time, the directors of
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the Surviving Corporation shall be the directors of Merger Sub immediately prior
to the Effective Time and Keith L. Barnes, in each case until their successors
are elected or appointed and qualified or until their earlier resignation or
removal. The officers of the Surviving Corporation shall be Keith L. Barnes,
(President) Fred Hall (Vice President, Chief Financial Officer and Secretary)
and John Detwiler (Vice President and Assistant Secretary) until their
respective successors are duly elected or appointed and qualified or until their
earlier resignation or removal.
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1.6 Effect on Capital Stock. By virtue of the Merger and without any
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action on the part of Merger Sub, Company or the holders of any of the following
securities:
(a) Conversion of Company Common Stock. At the Effective
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Time, subject to Section 1.6(f), each share of Company Common Stock issued and
outstanding immediately prior to the Effective Time (other than any shares of
Company Common Stock to be canceled pursuant to Section 1.6(b)) will be canceled
and extinguished and be converted automatically into the right to receive 0.9
shares of Parent Common Stock (the "Exchange Ratio"). All references in this
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Agreement to Parent Common Stock to be issued pursuant to the Merger shall be
deemed to include the corresponding rights to purchase stock of Parent pursuant
to the Rights Agreement dated as of June 2, 1998 between Parent and BankBoston,
N.A. (as Rights Agent).
(b) Cancellation of Company Common Stock Owned by Parent or
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Company. At the Effective Time, all shares of Company Common Stock that are
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owned by Company as treasury stock and each share of Company Common Stock owned
by Parent or any direct or indirect wholly owned subsidiary of Parent or of
Company immediately prior to the Effective Time shall be canceled and
extinguished without any conversion thereof.
(c) Company Stock Option Plans. At the Effective Time,
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Company's 1995 Stock Incentive Plan, 1995 Stock Option Plan for Non-Employee
Directors and 2000 Nonqualified Stock Option Plan (collectively the "Company
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Stock Option Plans") and all options to purchase Company Common Stock then
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outstanding under the Company Stock Option Plans shall be assumed by Parent in
accordance with Section 5.9. The Company ESPP (as defined below) shall terminate
prior to the Effective Time, in accordance with Section 5.9.
(d) Capital Stock of Merger Sub. At the Effective Time,
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each share of common stock, $0.001 par value, of Merger Sub ("Merger Sub Common
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Stock") issued and outstanding immediately prior to the Effective Time shall be
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converted into and exchanged for one validly issued, fully paid and
nonassessable share of common stock of the Surviving Corporation, and the
Surviving Corporation shall be a wholly owned subsidiary of Parent. 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.
(e) Adjustments to Exchange Ratio. The Exchange Ratio shall
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be adjusted to reflect fully the effect of any stock split, reverse split, stock
dividend (including any dividend or distribution of securities convertible into
Parent Common Stock or Company Common Stock), reorganization, recapitalization
or other like change with respect to Parent Common Stock or Company Common Stock
occurring after the date hereof and prior to the Effective Time and of any
increase in the number of shares of Company Common Stock, or securities
convertible into or exchangeable for shares of Company Common Stock, issued and
outstanding after the date hereof relative to such number as derived from
Section 2.2 hereof (except to the extent of stock options granted in accordance
with Section 4.2(e)), so as to provide holders of Company Common Stock and
Parent the same economic effect as contemplated by this Agreement prior to such
stock split, reverse split, stock dividend, reorganization, recapitalization,
like change or increase.
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(f) Fractional Shares. No fraction of a share of Parent
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Common Stock will be issued, but in lieu thereof each holder of shares of
Company Common Stock 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 of a share of Parent Common Stock
as quoted on The Nasdaq National Market for the ten (10) trading days ending on
the third full trading day prior to the Effective Time.
1.7 Surrender of Certificates.
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(a) Exchange Agent. Parent's transfer agent shall act as
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exchange agent (the "Exchange Agent") in the Merger.
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(b) Parent to Provide Common Stock and Cash. Promptly after
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the Effective Time, Parent shall make available to the Exchange Agent for
exchange in accordance with this Article I, through such reasonable procedures
as Parent may adopt, (i) 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 (provided that delivery of any shares
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that are subject to vesting and/or repurchase rights in favor of Company shall
be in book entry form until such vesting and/or repurchase rights lapse) and
(ii) cash in an amount sufficient to permit payment of cash in lieu of
fractional shares pursuant to Section 1.6(f).
(c) Exchange Procedures. As soon as reasonably practicable
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after the Effective Time, the Surviving Corporation shall cause to be mailed to
each holder of record of a certificate or certificates (the "Certificates")
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which immediately prior to the Effective Time represented outstanding shares of
Company Common Stock, whose shares were converted into the right to receive
shares of Parent Common Stock (and cash in lieu of fractional shares) 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 shall be in
such form and have such other provisions as Parent may reasonably specify) and
(ii) instructions for use in effecting the surrender of the Certificates in
exchange for certificates (or book entries in the case of shares that are
subject to vesting and/or repurchase rights in favor of Company) representing
shares of Parent Common Stock (and cash in lieu of fractional shares). 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, duly completed and validly executed in accordance with the
instructions thereto, the holder of such Certificate shall be sent in exchange
therefor a certificate (or book entry in the case of shares that are subject to
vesting and/or repurchase rights) representing the number of whole shares of
Parent Common Stock and payment in lieu of fractional shares which such holder
has the right to receive pursuant to Section 1.6, and the Certificate so
surrendered shall forthwith be canceled. Until so surrendered, each outstanding
Certificate that, prior to the Effective Time, represented shares of Company
Common Stock will be deemed from and after the Effective Time to represent only
the right to receive upon surrender of such Certificate the merger consideration
contemplated by Section 1.6. Notwithstanding any other provision of this
Agreement, no interest will be paid or will accrue on any cash payable to
holders of Certificates pursuant to the provisions of this Article I.
4
(d) Distributions With Respect to Unexchanged Shares. No
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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.
(e) Transfers of Ownership. If any certificate for shares of
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Parent Common Stock is to be issued in a name other than that in which 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 established to the satisfaction of
Parent or any agent designated by it that such tax has been paid or is not
payable.
(f) No Liability. Notwithstanding anything to the contrary in
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this Section 1.7, none of the Exchange Agent, the Surviving Corporation, Parent
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.
1.8 Termination of Exchange Agent Funding. Any portion of funds
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(including any interest earned thereon) or certificates for shares of Parent
Common Stock held by the Exchange Agent which have not been delivered to holders
of Certificates pursuant to this Article I within six months after the Effective
Time shall promptly be paid or delivered, as appropriate, to Parent, and
thereafter holders of Certificates who have not theretofore complied with the
exchange procedures set forth in and contemplated by Section 1.7 shall
thereafter look only to Parent (subject to abandoned property, escheat and
similar laws) for their claim for shares of Parent Common Stock and, only as
general creditors thereof, any cash in lieu of fractional shares of Parent
Common Stock and any dividends or distributions (with a record date after the
Effective Time) with respect to Parent Common Stock to which they are entitled.
1.9 No Further Ownership Rights in Company Common Stock. All shares
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of Parent Common Stock issued upon the surrender for exchange of shares of
Company Common Stock in accordance with the terms hereof (including any 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.
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1.10 Lost, Stolen or Destroyed Certificates. In the event any
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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 shares of Parent
Common Stock (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
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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.
1.11 Tax and Accounting Consequences. It is intended by the parties
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hereto that the Merger shall (a) constitute a reorganization within the meaning
of Section 368(a) of the Code and (b) qualify for accounting treatment as a
pooling of interests.
1.12 Withholding Rights. Parent and the Surviving Corporation shall be
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entitled to deduct and withhold from the number of shares of Parent Common Stock
otherwise deliverable under this Agreement, and from any other payments made
pursuant to this Agreement, such amounts as Parent and the Surviving Corporation
are required to deduct and withhold with respect to such delivery and payment
under the Code or any provision of federal, national, state, local, provincial
or foreign tax law. To the extent that amounts are so withheld, such withheld
amounts shall be treated for all purposes of this Agreement as having been
delivered and paid to the holder of shares of Company Common Stock in respect of
which such deduction and withholding was made by Parent and the Surviving
Corporation.
1.13 Taking of Necessary Action; Further Action. If, at any time after
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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.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF COMPANY
In this Agreement, any reference to any event, matter, change,
condition, circumstance or effect being "material" with respect to any person
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means any material event, matter, change, condition, circumstance or effect
related to the condition and prospects (financial or otherwise), properties,
assets (including intangible assets), liabilities, business, operations or
results of operations of such person and its subsidiaries, taken as a whole. In
this Agreement, any reference to a "Material Adverse Effect" with respect to any
-----------------------
person means any event, matter, change, condition, circumstance or effect that
is materially adverse to the condition or prospects (financial or otherwise),
properties, assets (including intangible assets), liabilities, business,
operations or results of operations of such person and its subsidiaries, taken
as a whole, provided, however, that a "Material Adverse Effect" shall not
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include: (a) a decrease, in and of itself, in the
6
trading price or volume of Company Common Stock or Parent Common Stock; or (b)
general changes in the automatic test equipment or integrated circuit validation
systems markets or general changes in economic conditions that affect such
person or its subsidiaries, taken as a whole; or (c) to the extent occurring
after the date of this Agreement with respect to Parent or Company or any of
their respective subsidiaries, the loss of customers or suppliers, or loss or
reduction of orders or shipments from customers or suppliers, to the extent that
such losses or reductions are primarily attributable to the announcement or
pendency of the Merger.
In this Agreement, any reference to a party's "knowledge" means such
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party's actual knowledge after reasonable inquiry of officers, directors and
other employees of such party charged with senior administrative or operational
responsibility for such matters.
As used in this Agreement, the words "subsidiary" or "subsidiaries"
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means, with respect to any person, any corporation or other organization,
whether incorporated or unincorporated, of which (i) such person or any other
subsidiary of such person is a general partner (excluding partnerships, the
general partnership interests of which held by such person or any subsidiary of
such person do not have a majority of the voting interest in such partnership)
or (ii) at least a majority of the securities or other interests having by their
terms ordinary voting power to elect a majority of the board of directors, or
others performing similar functions with respect to such corporation or other
organization, is directly or indirectly owned or controlled by such person or by
one or more of its subsidiaries.
Except as expressly disclosed in that section of the document of even
date herewith delivered by Company to Parent prior to the execution and delivery
of this Agreement (the "Company Disclosure Schedule") corresponding to the
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Section of this Agreement to which any of the following representations and
warranties specifically relate, Company represents and warrants to Parent and
Merger Sub as follows:
2.1 Organization, Standing and Power. Each of Company and its
--------------------------------
subsidiaries is a corporation duly organized and validly existing under the laws
of its jurisdiction of organization. Each of Company and its subsidiaries has
the corporate power to own its properties and to carry on its business as now
being conducted and as presently proposed to be conducted and is duly qualified
to do business and is in good standing in each jurisdiction in which the failure
to be so qualified and in good standing could reasonably be expected to have a
Material Adverse Effect on Company. Company has delivered to Parent a true and
correct copy of the Restated Articles of Incorporation (the "Articles of
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Incorporation"), and Second Restated Bylaws or other charter documents, as
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applicable, of Company and each of its subsidiaries, each as amended to date.
Neither Company nor any of its subsidiaries is in violation of any of the
provisions of its respective charter or bylaws or equivalent organizational
documents. Company is the owner of all outstanding shares of capital stock of
each of its subsidiaries and all such shares are duly authorized, validly
issued, fully paid and nonassessable. All of the outstanding shares of capital
stock of each such subsidiary are owned by Company free and clear of all liens,
charges, claims or encumbrances or rights of others. There are no outstanding
subscriptions, options, warrants, puts, calls, rights, exchangeable or
convertible securities or other commitments or agreements of any character
relating to the issued or unissued capital stock or other securities of any such
subsidiary, or otherwise obligating Company or any such subsidiary to issue,
transfer, sell, purchase, redeem or otherwise acquire any such securities.
Company does not directly or
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indirectly own any equity or similar interest in, or any interest convertible or
exchangeable or exercisable for, any equity or similar interest in, any
corporation, partnership, limited liability company, joint venture or other
business association or entity (excluding securities in publicly traded
companies held for passive investment and comprising less than 1% of the
outstanding stock of such company).
2.2 Capital Structure. The authorized capital stock of Company
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consists of 15,000,000 shares of Common stock, $0.01 par value, of which there
were issued and outstanding as of the close of business on May 15, 2001,
7,889,987 shares, and 10,000,000 shares of Preferred Stock $0.01 par value of
which 150,000 shares have been designated as Series A Participating Preferred
Stock. As of the date of this Agreement there were no shares of Preferred Stock
issued and outstanding. No shares of Company Common Stock are held in treasury
of Company or by its subsidiaries. There are no other outstanding shares of
capital stock or voting securities and no outstanding commitments to issue any
shares of capital stock or voting securities, except pursuant to the exercise of
options outstanding as of such date under the Company Stock Option Plans or
pursuant to the Company's 1995 Employee Stock Purchase Plan (the "Company
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ESPP"). All outstanding shares of Company Common Stock are duly authorized,
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validly issued, fully paid and non-assessable and are free of any liens or
encumbrances, other than any liens or encumbrances created by or imposed upon
the holders thereof, and are 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. Company
has reserved (i) 3,537,000 shares of Common Stock for issuance to employees,
consultants and directors pursuant to the Company Stock Option Plans, of which ,
as of the date of this Agreement, 558,160 shares have been issued pursuant to
option exercises or direct stock purchases, 2,397,305 shares are subject to
outstanding, unexercised options, none are subject to outstanding stock purchase
rights, and 581,535 shares are available for issuance thereunder and (ii)
450,000 shares of Common Stock for issuance to employees pursuant to the Company
ESPP, of which, as of the date of this Agreement, 207,732 shares have been
issued. Between May 15, 2001 and the date hereof, Company has not (i) issued or
granted additional options under the Company Stock Option Plans, or (ii)
accepted enrollments in the Company ESPP. Except for (i) the rights created
pursuant to this Agreement, the Company Stock Option Plans and the Company ESPP
and (ii) Company's rights to repurchase any unvested shares under the Company
Stock Option Plans, there are no other options, warrants, calls, rights,
commitments or agreements of any character 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 capital stock of Company or obligating Company to grant, extend,
accelerate the vesting of, change the price of, or otherwise amend or enter into
any such option, warrant, call, right, commitment or agreement. There are no
contracts, commitments or agreements relating to voting, purchase or sale of
Company's capital stock (other than those granting Company the right to purchase
unvested shares upon employment or service termination, and the Shareholder
Agreement) (i) between or among Company and any of its shareholders and (ii) to
the best of Company's knowledge, between or among any of Company's shareholders.
The terms of the Company Stock Option Plans permit the assumption of options to
purchase Parent Common Stock as provided in this Agreement, without the consent
or approval of the holders of such securities, shareholders, or otherwise. The
current "Offering Period" (as defined in the Company ESPP) commenced under the
---------------
Company ESPP on February 1, 2000 and will end on the date provided for in
Section 5.9(c), and except for
8
the purchase rights granted on such commencement date to participants in the
current Offering Period, there are no other purchase rights or options
outstanding under the Company ESPP. The terms of the Company ESPP permit the
Company to shorten and terminate Offering Periods without the consent or
approval of participants in the ESPP, shareholders, or otherwise. True and
complete copies of all agreements and instruments relating to or issued under
the Company Stock Option Plans or Company ESPP (or form, in the case of
instruments in standard form) have been made available to Parent and such
agreements and instruments have not been amended, modified or supplemented since
being made available to Parent, and there are no agreements to amend, modify or
supplement such agreements or instruments in any case from the form made
available to Parent. The shares of Company Common Stock issued under the Company
Stock Option Plans, as amended and under all prior versions thereof, have either
been registered under the Securities Act or were issued in transactions which
qualified for exemptions pursuant to Rule 701 under the Securities Act for stock
issuances under compensatory benefit plans.
2.3 Authority. Company has all requisite corporate power and
---------
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of Company, subject only to the
approval of the Merger by Company's shareholders holding 67% of the outstanding
shares of Company Common Stock as contemplated by Section 6.1(a). This Agreement
has been duly executed and delivered by Company and constitutes the valid and
binding obligation of Company enforceable against Company in accordance with its
terms, except as enforceability may be limited by bankruptcy and other similar
laws affecting the rights and remedies of creditors generally and general
principles of equity. Except as set forth on Schedule 2.3, the execution and
------------
delivery of this Agreement by Company does not, and the consummation of the
transactions contemplated hereby 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 or acceleration of
any obligation or loss of any benefit under, or require the consent or approval
of any person in respect of: (i) any provision of the Articles of Incorporation
or Bylaws of Company 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 Company or any of its subsidiaries
or any of their properties or assets. No consent, approval, order or
authorization of, or registration, declaration or filing with, any court,
arbitrator, tribunal, administrative agency or commission or other governmental
authority or instrumentality, stock exchange or The Nasdaq National Market, in
each case whether domestic or foreign, (each a "Governmental Entity") is
-------------------
required by or with respect to Company or any of its subsidiaries in connection
with the execution and delivery of this Agreement, or the consummation of the
transactions contemplated hereby, except for (i) the filing of the Articles of
Merger as provided in Section 1.2; (ii) the filing with the Securities and
Exchange Commission (the "SEC") and the National Association of Securities
---
Dealers, Inc. (the "NASD") of the Proxy Statement (as defined in Section 2.21)
----
relating to the Company Shareholders Meeting (as defined in Section 2.21); (iii)
such consents, approvals, orders, authorizations, registrations, declarations
and filings as may be required under applicable state securities laws and the
securities laws of any foreign country; (iv) such filings as may be required
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended
("HSR"); (v) the filing of a Form S-4 Registration
---
9
Statement with the SEC in accordance with the Securities Act of 1933, as
amended; (vi) the filing of a Current Report on Form 8-K with the SEC; and (vii)
such other consents, authorizations, filings, approvals and registrations which,
if not obtained or made, would not have a Material Adverse Effect on Company and
would not prevent, or materially alter or delay any of the transactions
contemplated by this Agreement.
2.4 SEC Documents; Financial Statements. Company has made available
-----------------------------------
to Parent 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 of 1933, as amended (the Securities Act")), definitive proxy
--------------
statement and other filings made with the SEC by Company since March 1, 2001
and, prior to the Effective Time, Company will have furnished to Parent true and
complete copies of any additional documents filed with the SEC by Company prior
to the Effective Time (collectively, the "Company SEC Documents"). Company has
---------------------
timely filed all forms, statements and documents required to be filed by it with
the SEC and The Nasdaq National Market since March 1, 2001. In addition, Company
has made available to Parent true and complete copies of all exhibits to the
Company SEC Documents filed prior to the date hereof, and will promptly make
available to Parent true and complete copies of all exhibits to any additional
Company SEC Documents filed prior to the Effective Time. All documents required
to be filed as exhibits to the Company SEC Documents have been so filed, and all
material contracts so filed as exhibits are in full force and effect, except
those which have expired in accordance with their terms. As of their respective
filing dates, the Company SEC Documents complied in all material respects with
the requirements of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and the Securities Act, and none of the Company 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 Company SEC Document. The
financial statements of Company, including the notes thereto, included in the
Company SEC Documents (the "Company Financial Statements") were complete and
----------------------------
correct in all material respects as of their respective dates, 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 United States
generally accepted accounting principles ("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-Q, as permitted by Form 10-Q of the
SEC). The Company Financial Statements fairly present the consolidated financial
condition and operating results of Company 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 none of which
individually, or in the aggregate, are material). There has been no material
change in Company accounting policies since December 31, 2000.
2.5 Absence of Certain Changes. Since March 31, 2001 (the "Company
-------------------------- -------
Balance Sheet Date"), Company has conducted its business in the ordinary course
- ------------------
consistent with past practice and there has not occurred: (i) any change, event
or condition (whether or not covered by insurance) that has resulted in, or
could reasonably be expected to result in, a Material Adverse Effect to Company;
(ii) any acquisition, sale or transfer of any material asset of Company or any
of its subsidiaries other than in the ordinary course of business and consistent
10
with past practice; (iii) any change in accounting methods or practices
(including any change in depreciation or amortization policies or rates) by
Company or any revaluation by Company of any of its or any of its subsidiaries'
assets; (iv) any declaration, setting aside, or payment of a dividend or other
distribution with respect to the shares of Company, or any direct or indirect
redemption, purchase or other acquisition by Company of any of its shares of
capital stock; (v) any material contract entered into by Company or any of its
subsidiaries, other than in the ordinary course of business, or any material
amendment or termination of, or default under, any material contract to which
Company or any of its subsidiaries is a party or by which it is bound and Parent
has been provided with true and complete copies of all such material amendments
and agreements; (vi) any amendment or change to the Articles of Incorporation or
Bylaws, except to the extent provided for in Section 1.4; or (vii) any increase
in or modification of the compensation or benefits payable, or to become
payable, by Company to any of its directors, consultants or employees, other
than pursuant to scheduled annual performance reviews, provided that any
--------
resulting modifications are in the ordinary course of business and consistent
with Company's past practices. Company has not agreed since March 31, 2001 to do
any of the things described in the preceding clauses (i) through (vii) and is
not currently involved in any negotiations to do any of the things described in
the preceding clauses (i) through (vii) (other than negotiations with Parent and
its representatives regarding the transactions contemplated by this Agreement).
2.6 Absence of Undisclosed Liabilities. Company 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
Consolidated Balance Sheets or in the related Notes to Consolidated Financial
Statements included in Company's Quarterly Report on Form 10-Q for the quarter
ended March 31, 2001 (the "Company Balance Sheet"), (ii) those incurred in the
---------------------
ordinary course of business since the Company Balance Sheet Date which could not
reasonably be expected to have a Material Adverse Effect on Company; and (iii)
those incurred in connection with the execution of this Agreement.
2.7 Litigation. There is no litigation, arbitration or investigation
----------
pending before any Governmental Entity, or, to the knowledge of Company or any
of its subsidiaries, threatened against Company 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 a Material Adverse Effect on Company or on
the ability of Company to consummate the transactions contemplated by this
Agreement. There is no judgment, decree or order against Company or any of its
subsidiaries, or, to the knowledge of Company and its subsidiaries, any of their
respective directors or officers (in their capacities as such), that could
prevent, enjoin, alter or materially delay any of the transactions contemplated
by this Agreement, or that could reasonably be expected to have a Material
Adverse Effect on Company.
2.8 Restrictions on Business Activities. There is no agreement,
-----------------------------------
judgment, injunction, order or decree binding upon Company or any of its
subsidiaries which has or reasonably could be expected to have the effect of
prohibiting or materially impairing any current business practice of Company or
any of its subsidiaries, any contemplated acquisition of property by Company or
any of its subsidiaries or the conduct by Company or any of its subsidiaries of
its business as currently conducted or as currently contemplated to be
conducted.
11
2.9 Governmental Authorization. Company and each of its subsidiaries
--------------------------
have obtained each federal, state, county, local or foreign governmental
consent, license, permit, grant, or other authorization of a Governmental Entity
(i) pursuant to which Company or any of its subsidiaries currently operates or
holds any interest in any of its properties or (ii) that is required for the
operation of Company's or any of its subsidiaries' business or the holding of
any such interest ((i) and (ii) herein collectively called "Company
-------
Authorizations"), and all of such Company Authorizations are in full force and
- --------------
effect, except where the failure to obtain or have any of such Company
Authorizations could not reasonably be expected to have a Material Adverse
Effect on Company.
2.10 Title to Property. Company and its subsidiaries have good and
-----------------
valid title to all of their respective properties, interests in properties and
assets, real and personal, reflected in the Company Balance Sheet or acquired
after the Company Balance Sheet Date (except properties, interests in properties
and assets sold or otherwise disposed of since the Company Balance Sheet Date in
the ordinary course of business), or in the case of leased properties and
assets, valid leasehold interests in, in each case free and clear of all
mortgages, liens, pledges, charges or encumbrances of any kind or character,
except (i) the lien of current taxes not yet due and payable, (ii) such
imperfections of title, liens and easements as do not and will not materially
detract from or interfere with the use of the properties subject thereto or
affected thereby, or otherwise materially impair business operations involving
such properties, and (iii) purchase money liens incurred in the ordinary course
of business and liens securing debt which is reflected on the Company Balance
Sheet. The plants, property and equipment of Company and its subsidiaries that
are used in the operations of their businesses are in good operating condition
and repair, ordinary wear and tear excepted, and except where the failure to be
in good condition or repair would not have a Material Adverse Effect. Schedule
--------
2.10 identifies each parcel of real property owned or leased by Company or any
- ----
of its subsidiaries. No lease relating to a foreign parcel contains any
extraordinary payment obligation.
2.11 Intellectual Property.
---------------------
(a) Company and its subsidiaries own, or are licensed or
otherwise possess legally enforceable and unencumbered rights to use all
patents, trademarks, trade names, service marks, domain names, database rights,
copyrights, and any other similar intellectual property rights or applications
therefor, maskworks, net lists, schematics, technology, know-how, trade secrets,
inventions, ideas, algorithms, processes, computer software programs or
applications (in both source code and/or object code form), and tangible or
intangible proprietary information or material ("Intellectual Property") that
---------------------
are used, or proposed to be used, in the business of the Company and its
subsidiaries as currently conducted, or proposed to be conducted, Company has
not (i) licensed any of its Intellectual Property in source code form to any
person or (ii) entered into any exclusive agreements relating to its
Intellectual Property to with any person.
(b) Schedule 2.11(b) lists (i) all patents and patent
----------------
applications and all registered trademarks, trade names and service marks,
registered copyrights, registered domain names, and maskworks included in the
Intellectual Property owned by Company, including the jurisdictions in which
each such Intellectual Property right has been issued or registered or in which
any application for such issuance and registration has been filed, (ii) all
material licenses,
12
sublicenses and other agreements as to which Company is a party and pursuant to
which any person is authorized to use any Intellectual Property, and (iii) all
licenses, sublicenses and other agreements (other than licenses for standard
commercially available off-the-shelf software) as to which Company is a party
and pursuant to which Company is authorized to use any third party patents,
trademarks or copyrights, including software ("Third Party Intellectual Property
---------------------------------
Rights") which are incorporated in, are, or form a part of any Company product.
- ------
(c) To the Company's knowledge there is no unauthorized use,
disclosure, infringement or misappropriation of any Intellectual Property rights
of Company or any of its subsidiaries, or any Third Party Intellectual Property
Rights by any third party, including any employee or former employee of Company
or any of its subsidiaries. Neither Company nor any of its subsidiaries has
entered into any agreement to indemnify any other person against any charge of
infringement of any Intellectual Property, other than indemnification provisions
contained in purchase orders or license agreements arising in the ordinary
course of business. No royalties or other continuing payment obligations are due
in respect of Third Party Intellectual Property Rights.
(d) Company is not, nor will it be as a result of the execution and
delivery of this Agreement or the performance of its obligations under this
Agreement, in breach of any material license, sublicense or other agreement
relating to the Intellectual Property or Third Party Intellectual Property
Rights.
(e) All patents, trademarks, service marks and copyrights held by
Company are valid and subsisting. Company (i) has not been sued in any suit,
action or proceeding (or received any notice or, to Company's knowledge, threat)
which involves a claim of infringement of any patents, trademarks, service
marks, copyrights or violation of any trade secret or other proprietary right of
any third party and (ii) has not brought any action, suit or proceeding for
infringement of Intellectual Property or breach of any license or agreement
involving Intellectual Property against any third party. To the Company's
knowledge, the manufacture, marketing, licensing or sale of Company's products
does not infringe any patent, trademark, service mark, copyright, trade secret
or other proprietary right of any third party.
(f) Company has secured valid written assignments from all
consultants and employees who contributed to the creation or development of
Intellectual Property of the rights to such contributions that Company does not
already own by operation of law.
(g) Company has taken all necessary and appropriate steps to protect
and preserve the confidentiality of all Intellectual Property not otherwise
protected by patents or patent applications or copyright ("Confidential
------------
Information"). All use, disclosure or appropriation of Confidential Information
- -----------
owned by Company by or to a third party has been pursuant to the terms of a
written agreement between Company and such third party. All use, disclosure or
appropriation of Confidential Information not owned by Company has been pursuant
to the terms of a written agreement between Company and the owner of such
Confidential Information, or is otherwise lawful.
(h) There are no actions that must be taken by Company or any
subsidiary within ninety (90) days of the Closing Date that, if not taken, will
result in the loss of any
13
Intellectual Property, including the payment of any registration, maintenance or
renewal fees or the filing of any responses to the U.S. Patent and Trademark
Office actions, documents, applications or certificates for the purposes of
obtaining, maintaining, perfecting or preserving or renewing any Intellectual
Property.
(i) Company has not received any opinion of counsel that any
third party patents apply to Company's products.
2.12 Environmental Matters.
---------------------
(a) The following terms shall be defined as follows:
(i) "Environmental and Safety Laws" shall mean any
federal, state or local laws, ordinances, codes, regulations, rules, policies
and orders that are intended to assure the protection of the environment, or
that classify, regulate, call for the remediation of, require reporting with
respect to, or list or define air, water, groundwater, solid waste, hazardous or
toxic substances, materials, wastes, pollutants or contaminants, or which are
intended to assure the safety of employees, workers or other persons, including
the public.
(ii) "Hazardous Materials" shall mean any toxic or
hazardous substance, material or waste or any pollutant or contaminant, or
infectious or radioactive substance or material, including those substances,
materials and wastes defined in or regulated under any Environmental and Safety
Laws.
(iii) "Property" shall mean all real property leased or
owned by Company or its subsidiaries either currently or in the past.
(iv) "Facilities" shall mean all buildings and
improvements on the Property of Company or its subsidiaries.
(b) Company represents and warrants that, except in all cases
as, in the aggregate, would not have a Material Adverse Effect on Company, as
follows: (i) no methylene chloride or asbestos is contained in or has been used
at or released from the Facilities; (ii) all Hazardous Materials and wastes have
been disposed of in accordance with all Environmental and Safety Laws; (iii)
Company and its subsidiaries have received no notice (verbal or written) of any
noncompliance of the Facilities or its past or present operations with
Environmental and Safety Laws; (iv) no notices, administrative actions or suits
are pending or, to Company's knowledge, threatened relating to a violation of
any Environmental and Safety Laws; (v) to Company's knowledge, neither Company
nor its subsidiaries are a potentially responsible party under the federal
Comprehensive Environmental Response, Compensation and Liability Act (CERCLA),
or state analog statute, arising out of events occurring prior to the Closing
Date; (vi) there have not been in the past, and are not now, any Hazardous
Materials on, under or migrating to or from the Facilities or Property; (vii)
there have not been in the past, and are not now, any underground tanks or
underground improvements at, on or under the Property including treatment or
storage tanks, sumps, or water, gas or oil wells; (viii) there are no
polychlorinated biphenyls (PCBs) deposited, stored, disposed of or located on
the Property or Facilities or any equipment on the Property containing PCBs at
levels in excess of 50 parts per million; (ix) there is no formaldehyde on the
Property or in the Facilities, nor any insulating material containing
14
urea formaldehyde in the Facilities; (x) the Facilities and Company's and its
subsidiaries uses and activities therein have at all times complied with all
Environmental and Safety Laws; and (xi) Company and its subsidiaries have all
the permits and licenses required to be issued and are in full compliance with
the terms and conditions of those permits.
2.13 Taxes. Company and each of its subsidiaries, and any
-----
consolidated, combined, unitary or aggregate group for Tax (as defined below)
purposes of which Company or any of its subsidiaries is or has been a member,
have properly completed and timely filed all Tax Returns required to be filed by
them and have paid all Taxes shown thereon to be due. All unpaid taxes of
Company and its subsidiaries for periods through the Company Balance Sheet Date
are reflected on the Company Balance Sheet. Company has no liability for unpaid
Taxes accruing after the Company Balance Sheet Date other than Taxes arising in
the ordinary course of its business subsequent to the Company Balance Sheet
Date. There is (i) no material claim for Taxes that is a lien against the
property of Company or any of its subsidiaries or is being asserted against
Company or any of its subsidiaries other than liens for Taxes not yet due and
payable; (ii) no audit of any Tax Return of Company or any of its subsidiaries
that is being conducted by a Tax authority; and (iii) no extension of the
statute of limitations on the assessment of any Taxes that has been granted by
Company or any of its subsidiaries and that is currently in effect. Neither
Company nor any of its subsidiaries has been or will be required to include any
material adjustment in Taxable income for any Tax period (or portion thereof)
pursuant to Section 481 or 263A of the Code or any comparable provision under
state or foreign Tax laws solely as a result of transactions, events or
accounting methods employed prior to the Merger. Neither Company nor any of its
subsidiaries has filed or will file any consent to have the provisions of
paragraph 341(f)(2) of the Code (or comparable provisions of any state Tax laws)
apply to Company or any of its subsidiaries. All Tax sharing or Tax allocation
agreements to which Company or any of its subsidiaries is a party are listed on
Schedule 2.13 together with any liability of Company or its subsidiaries to
- -------------
another party under any such agreement which is either currently owing or which
would result from assertions currently being made by Tax Authorities from audits
or proceedings in progress. Neither Company nor any of its subsidiaries has
filed any disclosures under Section 6662 or comparable provisions of state,
local or foreign law to prevent the imposition of penalties with respect to any
Tax reporting position taken on any Tax Return. Neither Company nor any of its
subsidiaries has ever been a United States real property holding corporation
within the meaning of Section 897 of the Code. Except as set forth on Schedule
--------
2.13, neither Company nor any of its subsidiaries has ever been a member of a
- ----
consolidated, combined or unitary group of which Company was not the ultimate
parent corporation. Company and each of its subsidiaries have in their
possession receipts for any Taxes paid to foreign Tax authorities.
For purposes of this Agreement, the following terms have the following
meanings: "Tax" (and, with correlative meaning, "Taxes" and "Taxable") means (i)
--- ----- -------
any net income, alternative or add-on minimum tax, gross income, gross receipts,
sales, use, ad valorem, transfer, franchise, profits, license, withholding,
payroll, employment, excise, severance, stamp, occupation, premium, property,
environmental or windfall profit tax, custom, duty or other tax, governmental
fee or other like assessment or charge of any kind whatsoever, together with any
interest or any penalty, addition to tax or additional amount imposed by any
Governmental Entity (a "Tax authority") responsible for the imposition of any
-------------
such tax (domestic or foreign); (ii) any liability for the payment of any
amounts of the type described in (i) as a result of being a member of an
affiliated, consolidated, combined or unitary group for any Taxable period; and
15
(iii) any liability for the payment of any amounts of the type described in (i)
or (ii) as a result of being a transferee of or successor to any person or as a
result of any express or implied obligation to indemnify any other person,
including pursuant to any Tax sharing or Tax allocation agreement. As used
herein, "Tax Return" shall mean any return, statement, report or form (including
----------
estimated Tax returns and reports, withholding Tax returns and reports and
information reports and returns) required to be filed with respect to Taxes.
2.14 Employee Benefit Plans.
----------------------
(a) Schedule 2.14(a) lists, with respect to Company, any
----------------
subsidiary of Company and any trade or business (whether or not incorporated)
which is treated as a single employer with Company (an "ERISA Affiliate") within
---------------
the meaning of Section 414(b), (c), (m) or (o) of the Code, (i) all material
employee benefit plans (as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")); (ii) each loan to a non-
-----
officer employee in excess of $50,000, loans to officers and directors and any
stock option, stock purchase, phantom stock, stock appreciation right,
supplemental retirement, severance, sabbatical, medical, dental, vision care,
disability, employee relocation, cafeteria benefit (Code Section 125) or
dependent care (Code Section 129), life insurance or accident insurance plans,
programs or arrangements; (iii) all bonus, pension, profit sharing, savings,
deferred compensation or incentive plans, programs or arrangements; (iv) other
fringe or employee benefit plans, programs or arrangements that apply to senior
management of Company and that do not generally apply to all employees; and (v)
any current or former employment or executive compensation or severance
agreements, written or otherwise, as to which unsatisfied obligations of Company
of greater than $50,000 remain for the benefit of, or relating to, any present
or former employee, consultant or director of Company (collectively, the
"Company Employee Plans").
(b) Company has furnished or made available to Parent a copy of
each of the Company Employee Plans and related plan documents (including trust
documents, insurance policies or contracts, employee booklets, summary plan
descriptions and other authorizing documents, and any material employee
communications relating thereto) and has, with respect to each Company Employee
Plan which is subject to ERISA reporting requirements, provided copies of the
Form 5500 reports filed for the last three plan years. Any Company Employee Plan
intended to be qualified under Section 401(a) of the Code either (i) has
obtained from the Internal Revenue Service a favorable determination letter 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 other than the
Uruguay Round Agreements Act of 1994, the Uniformed Services Employment and
Reemployment Rights Act of 1994, the Small Business Job Protection Act of 1996,
and the Taxpayer Relief Act of 1997, or (ii) has applied to the Internal Revenue
Service for such a determination letter prior to the expiration of the requisite
period under applicable Treasury Regulations or Internal Revenue Service
pronouncements in which to apply for such determination letter and to make any
amendments necessary to obtain a favorable determination or (iii) the requisite
period for application has not expired. Company has also furnished Parent with
the most recent Internal Revenue Service determination letter issued with
respect to each such Company Employee Plan, and nothing has occurred since the
issuance of each such letter which would reasonably be expected to cause the
loss of the tax-qualified status of any Company Employee Plan subject to Code
Section 401(a). Company has also furnished to
16
Parent all registration statements and prospectuses prepared in connection with
each Company Employee Plan.
(c) (i) None of the Company Employee Plans promises or provides
retiree medical or other retiree welfare benefits to any person, except as
required by applicable law; (ii) there has been no "prohibited transaction," as
such term is defined in Section 406 of ERISA and Section 4975 of the Code, with
respect to any Company Employee Plan, which would reasonably be expected to
have, in the aggregate, a Material Adverse Effect on Company; (iii) each Company
Employee Plan has been administered in accordance with its terms and in
compliance with the requirements prescribed by any and all statutes, rules and
regulations (including ERISA and the Code), except as would not have, in the
aggregate, a Material Adverse Effect on Company, and Company and each subsidiary
or ERISA Affiliate have performed in all material respects all obligations
required to be performed by them under, are not in default in any material
respect under or violation of, and have no knowledge of any material default or
violation by any other party to, any of the Company Employee Plans; (iv) neither
Company nor any subsidiary or ERISA Affiliate is subject to any material
liability or material penalty under Sections 4976 through 4980 of the Code or
Title I of ERISA with respect to any of the Company Employee Plans; (v) all
material contributions required to be made by Company or any subsidiary or ERISA
Affiliate to any Company Employee Plan have been made on or before their due
dates and a reasonable amount has been accrued for contributions to each Company
Employee Plan for the current plan years; (vi) with respect to each Company
Employee Plan, no "reportable event" within the meaning of Section 4043 of ERISA
(excluding any such event for which the thirty (30) day notice requirement has
been waived under the regulations to Section 4043 of ERISA) nor any event
described in Section 4062, 4063 or 4041 or ERISA has occurred; (vii) no Company
Employee Plan is covered by, and neither Company nor any subsidiary or ERISA
Affiliate has incurred or expects to incur any liability under Title IV of ERISA
or Section 412 of the Code; and (viii) each Company Employee Plan can be
amended, terminated or otherwise discontinued after the Effective Time in
accordance with its terms, without liability to Parent (other than for benefits
accrued through the date of termination and ordinary administrative expenses
typically incurred in a termination event). With respect to each Company
Employee Plan subject to ERISA as either an employee pension plan within the
meaning of Section 3(2) of ERISA or an employee welfare benefit plan within the
meaning of Section 3(1) of ERISA, Company has prepared in good faith and timely
filed all requisite governmental reports (which were true and correct as of the
date filed) and has properly and timely filed and distributed or posted all
notices and reports to employees required to be filed, distributed or posted
with respect to each such Company Employee Plan, except where the failure to do
so would not have a Material Adverse Effect. No suit, administrative proceeding,
action or other litigation has been brought, or to the knowledge of Company is
threatened, against or with respect to any such Company Employee Plan, including
any audit or inquiry by the IRS or United States Department of Labor. No payment
or benefit which will or may be made by Company to any employee will be
characterized as an "excess parachute payment" within the meaning of Section
280G(b)(1) of the Code.
(d) With respect to each Company Employee Plan, Company and each
of its United States subsidiaries have complied except to the extent that such
failure to comply would not, individually or in the aggregate, have a Material
Adverse Effect on Company, with (i) the applicable health care continuation and
notice provisions of the Consolidated Omnibus
17
Budget Reconciliation Act of 1985 ("COBRA") and the regulations (including
-----
proposed regulations) thereunder, (ii) the applicable requirements of the Family
Medical and Leave Act of 1993 and the regulations thereunder, and (iii) the
applicable requirements of the Health Insurance Portability and Accountability
Act of 1996 and the regulations (including proposed regulations) thereunder.
(e) The consummation of the transactions contemplated by this
Agreement will not (i) entitle any current or former employee or other service
provider of Company, any Company subsidiary or any other ERISA Affiliate to
severance benefits or any other payment, except as expressly provided in this
Agreement, or (ii) accelerate the time of payment or vesting, or increase the
amount of compensation due any such employee or service provider.
(f) There has been no amendment to, written interpretation or
announcement (whether or not written) by Company, any Company subsidiary or
other ERISA Affiliate relating to, or change in participation or coverage under,
any Company Employee Plan which would materially increase the expense of
maintaining such Plan above the level of expense incurred with respect to that
Plan for the most recent fiscal quarter included in Company's financial
statements.
(g) Company does not currently maintain, sponsor, participate in
or contribute to, nor has it ever maintained, established, sponsored,
participated in, or contributed to, any pension plan (within the meaning of
Section 3(2) of ERISA) which is subject to Part 3 of Subtitle B of Title I of
ERISA, Title IV of ERISA or Section 412 of the Code.
(h) Neither Company nor any Company subsidiary or other ERISA
Affiliate is a party to, or has made any contribution to or otherwise incurred
any obligation under, any "multiemployer plan" as defined in Section 3(37) of
ERISA.
(i) Except as set forth in Schedule 2.14(i) of the Company
----------------
Disclosure Schedules, there is no agreement, contract or arrangement to which
Company or any of its subsidiaries is a party that may result in the payment of
any amount that would not be deductible by reason of Section 280G or Section 404
of the Code.
(j) As of the Effective Time, the Company will have given,
within the applicable time periods, all appropriate notices to the participants
in the Company ESPP in connection with the reduction of the Offering Period in
accordance with Section 5.9(c) and terminated the Company ESPP.
2.15 Certain Agreements Affected by the Merger. Except as provided in
-----------------------------------------
the employment agreements referenced in Section 5.9(f), at the Closing neither
the execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will: (i) result in any payment (including
severance, unemployment compensation, golden parachute, bonus or otherwise)
becoming due to any, current or former, director or employee or service provider
of Company or any of its subsidiaries; (ii) materially increase any benefits
otherwise payable by Company or its Subsidiaries; or (iii) result in the
acceleration of the time of payment or vesting of any such benefits.
18
2.16 Employee Matters.
----------------
(a) Neither the Company nor any of its subsidiaries is a party
to any collective bargaining or other labor union contract applicable to
employees of the Company or any of its subsidiaries, no collective bargaining
agreement is being negotiated by the Company or any of its subsidiaries and
neither Company nor any of its subsidiaries have any duty to bargain with any
labor organization with respect to any such persons. There is no pending demand
for recognition or any other request or demand from a labor organization for
representative status with respect to any persons employed by the Company or any
of its subsidiaries. As of the date of this Agreement, there is no labor
dispute, strike or work stoppage against the Company or any of its subsidiaries
pending or, to the knowledge of the Company, threatened which may interfere with
the respective business activities of the Company or any of its subsidiaries. As
of the date of this Agreement, neither the Company nor any of its subsidiaries,
or, to the knowledge of Company, any of their respective representatives or
employees, has committed any unfair labor practices in connection with the
operation of the respective businesses of the Company or any of its
subsidiaries, and there is no charge or complaint against the Company or any
Company subsidiaries by the National Labor Relations Board or any comparable
Governmental Entity pending or threatened. Neither Company nor any of its
subsidiaries have any pending contract grievances under any collective
bargaining agreements, other administrative charges, claims, grievances or
lawsuits before any Governmental Entity or arbiter or arbitrator arising under
any laws govern employment and, to the knowledge of Company and its
subsidiaries, there exist no facts that could reasonably be expected to give
rise to such a claim.
(b) Company and each of its subsidiaries are in compliance in
all material respects with all currently applicable laws and regulations
respecting employment, discrimination in employment, terms and conditions of
employment, wages, hours and occupational safety and health and employment
practices. Company has in all material respects withheld all amounts required by
law or by agreement to be withheld from the wages, salaries, and other payments
to employees; and is not liable for any material arrears of wages or any
material taxes or any material penalty for failure to comply with any of the
foregoing. Company is not liable for any material payment to any trust or other
fund or to any Governmental Entity, with respect to unemployment compensation
benefits, social security or other benefits or obligations for employees (other
than routine payments to be made in the normal course of business and consistent
with past practice). There are no pending claims against Company or any of its
subsidiaries for any material amounts under any workers compensation plan or
policy or for long term disability. Neither Company nor any of its subsidiaries
has any obligations under COBRA with respect to any former employees or
qualifying beneficiaries thereunder, except for obligations that are not
material in amount. There are no material controversies pending or, to the
knowledge of Company or any of its subsidiaries, threatened, between Company or
any of its subsidiaries and any of their respective employees, which
controversies have or could reasonably be expected to result in an action, suit,
proceeding, claim, arbitration or investigation before any Governmental Entity.
(c) To Company's knowledge, no employees of Company or any of
its subsidiaries are in violation of any term of any employment contract, patent
disclosure agreement, noncompetition agreement, or any restrictive covenant to a
former employer relating
19
to the right of any such employee to be employed by Company or its subsidiaries
because of the nature of the business conducted or presently proposed to be
conducted by Company or any of its subsidiaries, or to the use of trade secrets
or proprietary information of others. As of the date of this Agreement, no
employees of Company or any of its subsidiaries material to the conduct of their
respective businesses (including the employees listed on Schedule 2.16(c)) have
-----------------
given notice to Company, nor is Company otherwise aware, that any such employee
intends to terminate his or her employment with Company or any of its
subsidiaries. As of the Effective Time, none of the employees set forth on part
(a) of Schedule 2.16(c) will have terminated, or given notice to that such
----------------
employee intends to terminate, his or her employment with Company or any of its
subsidiaries and no more then three (3) of the employees set forth on part (b)
of Schedule 2.16(c) will have terminated, or given notice to that such employee
----------------
intends to terminate his or her employment, with Company or any of its
subsidiaries.
(d) Company and its subsidiaries have made available to Parent a
list of the names, positions, rates and elements of compensation for all
officers, directors, employees, advisory board members and consultants of
Company and its subsidiaries, as of the date hereof, showing each such person's
name, positions, an annual remuneration, bonuses and fringe benefits for the
current fiscal year and the most recently completed fiscal year.
(e) With respect to any persons employed by Company and its
subsidiaries, (i) Company and Company's subsidiaries have not violated any legal
requirement prohibiting discrimination on the basis of race, color, national
origin, sex, religion, age, marital status, or handicap in its employment
conditions or practices; and (ii) there are no pending or, to the knowledge of
Company and company subsidiaries, threatened discrimination complaints relating
to race, color, national origin, sex, religion, age, marital status, or handicap
against Company or its subsidiaries, before any governmental entity nor, to the
knowledge of Company and its subsidiaries, does any basis therefor exist.
(f) Company and its subsidiaries have complied, in all material
respects, with all laws governing the employment of personnel by U.S. companies
and the employment of non-U.S. nationals in the United States, including, but
not limited to, the Immigration and Nationality Act 8 U.S.C. Sections 1101 et
seq. and its implementing regulations.
(g) Company represents that none of its employees or the
employees of its subsidiaries have experienced or will experience an employment
loss (as defined in the Worker Adjustment and Retraining Notification Act of
1988, as amended, and any rules and regulations promulgated thereunder ("WARN")
----
during the 90 calendar day period immediately preceding the Closing. Company
and/or its subsidiaries will timely give all notices required to be given to
employees under, or otherwise comply with, WARN or similar statutes or
regulations of any jurisdiction relating to any plant closing or mass layoff (or
similar triggering event) caused by or relating to the Merger.
2.17 Interested Party Transactions. Except as disclosed in the Company
-----------------------------
SEC Documents, neither Company nor any of its subsidiaries is indebted to any
director or officer of Company or any of its subsidiaries (except for amounts
due as normal salaries and bonuses and
20
in reimbursement of ordinary expenses), and no such person is indebted to
Company or any of its subsidiaries, and there are no other transactions of the
type required to be disclosed pursuant to Item 404 of Regulation S-K under the
Securities Act and the Exchange Act.
2.18 Insurance. Company and each of its subsidiaries have policies of
---------
insurance and bonds of the type and in amounts customarily carried by persons
conducting businesses or owning assets similar to those of Company and its
subsidiaries. There is no material claim pending under any of such policies or
bonds as to which coverage has been questioned, denied or disputed by the
underwriters of such policies or bonds. All premiums due and payable under all
such policies and bonds have been paid and Company and its subsidiaries are
otherwise in compliance in all material respects with the terms of such policies
and bonds. Company has no knowledge of any threatened termination of, or
material premium increase with respect to, any of such policies.
2.19 Compliance With Laws. Each of Company and its subsidiaries has
--------------------
complied in all material respects with, are not in violation of, and have not
received any notices of violation with respect to, any federal, state, local or
foreign statute, law or regulation with respect to the conduct of its business,
or the ownership or operation of its business or with respect to the granting of
options, restricted stock, other stock-based awards or the stock purchase rights
granted under the Company ESPP to their employees, consultants or other service
providers.
2.20 Brokers' and Finders' Fees. Except with respect to S.G. Cowen,
--------------------------
Company has not incurred, nor will it incur, directly or indirectly, any
liability for brokerage or finders' fees or agents' commissions or investment
bankers' fees or any similar charges in connection with this Agreement or any
transaction contemplated hereby.
2.21 Registration Statement; Proxy Statement/Prospectus. The
--------------------------------------------------
information supplied by Company for inclusion in the registration statement on
Form S-4 (or such other or successor form as shall be appropriate) pursuant to
which the shares of Parent Common Stock to be issued in the Merger will be
registered with the SEC (the "Registration Statement") shall not at the time the
----------------------
Registration Statement (including any amendments or supplements thereto) is
declared effective by the SEC contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. The information supplied by Company for
inclusion in the proxy statement/prospectus to be sent to the shareholders of
Company in connection with the meeting of Company's shareholders to consider the
Merger (the "Company Shareholders Meeting") (such proxy statement/prospectus as
----------------------------
amended or supplemented is referred to herein as the "Proxy Statement") shall
---------------
not, on the date the Proxy Statement is first mailed to Company's shareholders,
at the time of the Company Shareholders Meeting and at the Effective Time,
contain any statement which, at such time, is false or misleading with respect
to any 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 with respect to the
solicitation of proxies for the Company Shareholders Meeting which has become
false or misleading. If at any time prior to the Effective Time any event or
information should be discovered by Company which should be
21
set forth in an amendment to the Registration Statement or a supplement to the
Proxy Statement, Company shall promptly inform Parent and Merger Sub.
Notwithstanding the foregoing, Company makes no representation, warranty or
covenant with respect to any information supplied by Parent or Merger Sub or any
other third party which is contained in any of the foregoing documents.
2.22 Opinion of Financial Advisor. Company has been advised by its
----------------------------
financial advisor, S.G. Cowen, that in such advisor's opinion, as of the date
hereof, the Exchange Ratio is fair, from a financial point of view, to the
shareholders of Company.
2.23 Vote Required. The affirmative vote of the holders of 67% of the
-------------
shares of Company Common Stock outstanding on the record date set for the
Company Shareholders Meeting is the only vote of the holders of any of Company's
capital stock necessary to adopt this Agreement.
2.24 Board Approval. The Board of Directors of Company has (i) adopted
--------------
this Agreement and approved the Merger, (ii) determined that this Agreement and
the Merger are advisable and in the best interests of the shareholders of
Company and are on terms that are fair to such shareholders, and (iii)
determined and resolved to unanimously and unconditionally recommend that the
shareholders of Company adopt this Agreement and approve the consummation of the
Merger.
2.25 Shareholder Agreements; Irrevocable Proxies. All of the persons
----------------------
listed on Schedule 2.25 have agreed in writing to vote for approval of the
-------------
Merger pursuant to a Shareholder Agreement, and pursuant to an Irrevocable Proxy
attached thereto as Exhibit A.
---------
2.26 Sections 60.835 and 60.801 - 60.816 of the Oregon Law Not
---------------------------------------------------------
Applicable. The Board of Directors of Company has taken all actions so that the
- ----------
restrictions contained in (i) Section 60.835 of the Oregon Law applicable to a
"business combination" (as defined in Section 60.825) and (ii) Sections 60.801
to 60.816 of the Oregon Law, will not apply to the execution, delivery or
performance of this Agreement, the Shareholder Agreements or the consummation of
the Merger or the other transactions contemplated by this Agreement or by the
Shareholder Agreements. No other state takeover statute is applicable to this
Agreement, the Shareholder Agreements, or the transactions contemplated hereby
or thereby.
2.27 Customers and Suppliers. As of the date of this Agreement, the
-----------------------
Company has not been informed by (i) any customer, which accounted for more than
5% of Company's gross revenues during the preceding 12-month period, that it
intends to terminate or materially reduce its business or dealings with the
Company or its subsidiaries, or (ii) any sole source supplier that it intends to
terminate the supply of any material components, or to terminate or materially
reduce its business or dealings with the Company or its subsidiaries.
2.28 No Default. Neither the Company nor any of its subsidiaries is,
----------
and has not received notice that it is or would be with the passage of time, (a)
in violation of any provision of its Articles of Incorporation or Bylaws or
other organizational documents, or (b) in default or violation with any term,
condition or provisions of (i) any judgment, decree, order, injunction or
stipulation applicable to the Company or its subsidiaries or (ii) any agreement,
note,
22
mortgage, indenture, contract, lease, instrument, permit, concession, franchise
or license to which the Company or its subsidiaries are party or by which their
assets or properties are bound, except where such default or violation could not
reasonably be expected to result in Material Adverse Effect to the Company.
2.29 Export Control Laws. Company has conducted its export
-------------------
transactions in accordance with applicable provisions of United States export
control laws and regulations, including but not limited to the Export
Administration Act and implementing Export Administration Regulations, except
for such violations which would not have a Material Adverse Effect on Company.
Without limiting the foregoing, Company represents and warrants that, except as
would not have a Material Adverse Effect on Company:
(a) Company has obtained all export licenses and other approvals
required for its exports of products, software and technologies from the United
States;
(b) Company is in compliance with the terms of all applicable
export licenses or other approvals;
(c) There are no pending or threatened claims against Company
with respect to such export licenses or other approvals;
(d) There are no actions, conditions or circumstances pertaining
to Company's export transactions that may give rise to any future claims; and
(e) No consents or approvals for the transfer of export licenses
to Parent are required, or such consents and approvals can be obtained
expeditiously without material cost.
2.30 Tax Matters. Neither Company nor any of its affiliates has taken
-----------
or agreed to take any action, nor does Company have knowledge of any fact or
circumstance, that would prevent the Merger from qualifying as a reorganization
within the meaning of Section 368(a) of the Code. As of the date of this
Agreement, Company has no knowledge of any fact or circumstance that would
prevent Parent from accounting for the business combination to be effected by
the Merger as a pooling of interests.
2.31 Affiliates. Schedule 2.31 sets forth the names and addresses of
---------- -------------
each person who is, in Company's reasonable judgment, an affiliate (as that term
is used in Rule 145 under the Securities Act or under applicable SEC accounting
releases with respect to pooling-of-interest accounting treatment) of Company.
2.32 Representations Complete. None of the representations or
------------------------
warranties made by Company herein or in any Schedule hereto, including the
Company Disclosure Schedule, or certificate furnished by Company pursuant to
this Agreement, or the Company SEC Documents, when all such documents are read
together in their entirety, contains or will contain at the Effective Time any
untrue statement of a material fact, or omits or will omit at the Effective Time
to state any material fact necessary in order to make the statements contained
herein or therein, in the light of the circumstances under which made, not
misleading.
2.33 Rights Agreement.
----------------
23
(a) The Company has taken all steps necessary to ensure that
neither Merger Sub nor Parent nor any of their affiliates will be an "Acquiring
Person" as such term is defined in the Rights Agreement dated as of March 25,
1998 between Company and ChaseMellon Shareholder Services, LLC (as amended, the
"Rights Agreement") as a result of entering into this Agreement and/or the
------ ---------
Shareholder Agreements, or consummating the transactions contemplated hereby and
thereby.
(b) No "Distribution Date" as defined in the Rights Agreement
has occurred and the execution delivery and performance of this Agreement and/or
the Shareholder Agreements and the transactions contemplated hereby and thereby
will not result in the occurrence of a Distribution Date.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Except as expressly disclosed in that section of the document of even
date herewith delivered by Parent to Company prior to the execution and delivery
of this Agreement (the "Parent Disclosure Schedule") corresponding to the
--------------------------
Section of this Agreement to which any of the following representations and
warranties specifically relate, Parent represents and warrants to Company as
follows:
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 proposed to be conducted and is duly qualified to do business
and is in good standing in each jurisdiction in which the failure to be so
qualified and in good standing could reasonably be expected to have a Material
Adverse Effect on Parent. Neither Parent nor Merger Sub is in violation of any
of the provisions of its Articles of Incorporation or Bylaws or equivalent
organizational documents.
3.2 Capital Structure. The authorized capital stock of Parent
-----------------
consists of 150,000,000 shares of Common Stock, $0.001 par value per share, of
which there were issued and outstanding as of the close of business on May 11,
2001, 52,621,165 shares and 1,000,000 shares of Preferred Stock, $0.001 par
value, of which none were outstanding as of close of business on May 11, 2001.
The shares of Parent Common Stock to be issued pursuant to the Merger (including
pursuant to the exercise of any options assumed pursuant to Section 5.9) will be
duly authorized, validly issued, fully paid, and non-assessable, free of any
liens or encumbrances imposed by Parent or Merger Sub. Except as disclosed in
parent SEC Documents (as defined in Section 3.4) and except for options or
shares issued pursuant to the Parent's option plans and employee stock purchase
plans disclosed therein, there are no options, warrants or other rights,
agreements, arrangements or commitments of any character relating to the issued
or unissued capital stock of Parent or conditionally or absolutely obligating
Parent to issue or sell any shares of capital stock of, or other equity interest
in, Parent. There are no outstanding obligations of Parent to repurchase, redeem
or otherwise acquire any shares of Parent Common Stock.
24
3.3 Authority. Parent and Merger Sub have all requisite corporate
---------
power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of Parent and Merger
Sub. This Agreement has been duly executed and delivered by Parent and Merger
Sub and constitutes the valid and binding obligation of Parent and Merger Sub
enforceable against Parent and Merger Sub in accordance with its terms, except
as enforceability may be limited by bankruptcy and other similar laws affecting
the rights and remedies of creditors generally and general principles of equity.
The execution and delivery of this Agreement do not, and the consummation of the
transactions contemplated hereby 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 or acceleration of
any obligation or loss of a benefit 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 Articles of Merger
provided in Section 1.2; (ii) the filing with the SEC and NASD of the
Registration Statement; (iii) the filing of a Schedule 13D with the SEC with
respect to the Shareholder Agreements; (iv) the filing of a Form 8-K and
Schedule 13D with the SEC and NASD within 15 days after the Closing Date; (v)
any filings as may be required under applicable state securities laws and the
securities laws of any foreign country; (vi) such filings as may be required
under HSR; (vii) the filing with The Nasdaq National Market of a Notification
Form for Listing of Additional Shares with respect to the shares of Parent
Common Stock issuable upon conversion of the Company Common Stock in the Merger
and upon exercise of the options under the Company Stock Option Plans assumed by
Parent; (viii) the filing of a registration statement on Form S-8 with the SEC,
or other applicable form covering the shares of Parent Common Stock issuable
pursuant to outstanding options under the Company Stock Option Plans assumed by
Parent; and (ix) such other consents, authorizations, filings, approvals and
registrations which, if not obtained or made, would not have a Material Adverse
Effect on Parent and would not prevent or materially alter or delay any of the
transactions contemplated by this Agreement.
3.4 SEC Documents; Financial Statements. Parent has made available to
-----------------------------------
Company 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 filings filed with the SEC by Parent since January 1, 2001,
and, prior to the Effective Time, Parent will have furnished or made available
to Company true and complete copies of any additional documents filed with the
SEC by Parent prior to the Effective Time (collectively, the "Parent SEC
----------
Documents"). Parent has timely filed all forms, statements and documents
- ---------
required to be filed by it with the SEC and The Nasdaq National Market since
January 1, 2001. In addition, Parent has made available to Company true and
complete copies of all exhibits to the Parent SEC Documents filed prior to the
date hereof, and will promptly make available to Company true and complete
copies of all exhibits to any additional Parent SEC Documents filed prior to the
25
Effective Time. All documents required to be filed as exhibits to the Parent SEC
Documents have been so filed, and all material contracts so filed as exhibits
are in full force and effect, except those which have expired in accordance with
their terms. As of their respective filing dates, the Parent SEC Documents
complied in all material respects with the requirements of 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. The financial statements
of Parent, including the notes thereto, included in the Parent SEC Documents
(the "Parent Financial Statements") were complete and correct in all material
---------------------------
respects as of their respective dates, 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-Q, 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 none of which
individually, or in the aggregate, are material). There has been no material
change in Parent accounting policies since October 31, 2000 (other than to the
extent of changes related to the adoption of Staff Accounting Bulletin 101
issued by the Securities and Exchange Commission).
3.5 Absence of Undisclosed Liabilities. 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 Form 10-Q for the period ended January 31,
2001 (the "Parent Balance Sheet"), (ii) those incurred in the ordinary course of
--------------------
business since the January 31, 2001, which could not reasonably be expected to
have a Material Adverse Effect; and (iii) those incurred in connection with the
execution of this Agreement.
3.6 Litigation. There is no litigation, arbitration or investigation
----------
pending against Parent or any of its subsidiaries before Governmental Entity,
or, to the knowledge of Parent, threatened against Parent or any of its
subsidiaries that could reasonably be expected to have a Material Adverse Effect
on Parent or on the ability of Parent or its subsidiaries to consummate 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 would prevent, enjoin, alter or materially delay any of the transactions
contemplated by this Agreement, or that could reasonably be expected to have a
Material Adverse Effect on Parent or on the ability of Parent to consummate the
transactions contemplated by this Agreement.
3.7 Broker's and Finders' Fees. Except with respect to Goldman Sachs
--------------------------
& Co., Parent has not incurred, nor will it incur, directly or indirectly, any
liability for brokerage or finders' fees or agents' commissions or investment
bankers' fees or any similar charges in connection with this Agreement or any
transaction contemplated hereby.
26
3.8 Registration Statement; Proxy Statement/Prospectus. The
--------------------------------------------------
information supplied by Parent and Merger Sub for inclusion in the Registration
Statement shall not, at the time the Registration Statement (including any
amendments or supplements thereto) is declared effective by the SEC, 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 they were made, not misleading. The information supplied by Parent for
inclusion in the Proxy Statement shall not, on the date the Proxy Statement is
first mailed to Company's shareholders, at the time of the Company Shareholders
Meeting and at the Effective Time, contain any statement which, at such time, is
false or misleading with respect to any 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 with respect to the solicitation of proxies for the Company
Shareholders Meeting which has become false or misleading. If at any time prior
to the Effective Time any event or information should be discovered by Parent or
Merger Sub which should be set forth in an amendment to the Registration
Statement or a supplement to the Proxy Statement, Parent or Merger Sub will
promptly inform Company. Notwithstanding the foregoing, Parent and Merger Sub
make no representation, warranty or covenant with respect to any information
supplied by Company or any third party which is contained in any of the
foregoing documents.
3.9 Board Approval. The Boards of Directors of Parent and Merger Sub
--------------
have (i) approved this Agreement and the Merger, (ii) determined that the Merger
is advisable and in the best interests of their respective shareholders and is
on terms that are fair to such shareholders and (iii) recommended that the
shareholder of Merger Sub adopt this Agreement and approve the consummation of
the Merger. The shareholder of Merger Sub has adopted this Agreement and
approved the consummation of the Merger. No vote of the holders of Parent Common
Stock is required under applicable law or Nasdaq Stock Market rules in
connection with this Agreement or the Merger.
3.10 Tax Matters. Neither Parent nor any of its affiliates has taken
-----------
or agreed to take any action, nor does Parent have knowledge of any fact or
circumstance, that would prevent the Merger from qualifying as a reorganization
within the meaning of Section 368(a) of the Code. As of the date of this
Agreement, Parent has no knowledge of any fact or circumstance that would
prevent Parent from accounting for the business combination to be effected by
the Merger as a pooling of interests.
3.11 Absence of Certain Changes. Since January 31, 2001, Parent has
--------------------------
conducted its business in the ordinary course consistent with past practice and
there has not occurred any change, event or condition (whether or not covered by
insurance) that has resulted in, or could reasonably be expected to result in, a
Material Adverse Effect to Parent.
3.12 Compliance With Laws. Each of Parent and its subsidiaries has
--------------------
complied in all material respects with, are not in violation of, and have not
received any notices of violation with respect to, any federal, state, local or
foreign statute, law or regulation with respect to the conduct of its business,
or the ownership or operation of its business.
27
ARTICLE IV
CONDUCT PRIOR TO THE EFFECTIVE TIME
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
required by this Agreement or as consented to in writing by Parent), to carry on
its and its subsidiaries' business in the ordinary course in substantially the
same manner as heretofore conducted, to pay and to cause its subsidiaries to pay
debts and Taxes when due subject to good faith disputes over such debts or
taxes, to pay or perform other material obligations when due, and to use its
commercially reasonable best efforts consistent with past practice and policies
to preserve intact its and its subsidiaries' present business organizations, use
its commercially reasonable best efforts consistent with past practice to keep
available the services of its and its subsidiaries' present officers and key
employees and use its commercially reasonable best efforts consistent with past
practice to preserve its and its subsidiaries' relationships with customers,
suppliers, distributors, licensors, licensees, and others having business
dealings with it or its subsidiaries, to the end that its and its subsidiaries'
goodwill and ongoing businesses shall be unimpaired at the Effective Time.
Company agrees to promptly notify Parent of any material event or occurrence not
in the ordinary course of its or its subsidiaries' business, and of any event
which could reasonably be expected to have a Material Adverse Effect on Company.
4.2 Restrictions on 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 shall not do, cause
or permit any of the following, or allow, cause or permit any of its
subsidiaries to 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 Certificate of Incorporation or Bylaws;
(b) Dividends; Changes in Capital Stock. 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, or split, combine or
reclassify any of its capital stock or issue or authorize the issuance of any
other securities in respect of, in lieu of or in substitution for shares of 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 the Company's standard or usual (as at the date
hereof) agreements providing for the repurchase of shares in connection with any
termination of service to it or its subsidiaries;
(c) Stock Option Plans, Etc. Except to the extent provided
-----------------------
in Section 5.9(c), take any action to accelerate, amend or change the period of
exercisability or vesting, or waive any repurchase rights in respect, 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 or with
respect to any restricted stock.
(d) Material Contracts. Except as permitted pursuant to
------------------
Section 4.2(j), enter into any contract or commitment involving payments by
Company or its subsidiaries in
28
excess of $150,000 individually or $400,000 in the aggregate or which are
otherwise material (including any non-competition agreement or other agreement
restricting the geographic scope or nature of business activities) to the
Company and its subsidiaries (excluding sales of products or purchases of
inventories in the ordinary course of business and consistent with past practice
and capitalizations of inventory consistent with past practice), or violate,
amend or otherwise modify or waive any of the terms of any of its material
contracts;
(e) Issuance of Securities. Issue, deliver, encumber or,
----------------------
sell, authorize or propose the issuance, delivery, encumbrance, or sale of, or
purchase or propose the purchase of, any shares of its or its subsidiaries'
capital stock or securities convertible into, 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 securities, other
than (i) the issuance of shares of its Common Stock pursuant to the exercise of
stock options, warrants or other rights therefor outstanding as of the date of
this Agreement, (ii) the grant of stock options under Company Stock Option Plans
(not to exceed in the aggregate 150,000 shares issuable thereunder and subject
to Section 5.14) to newly hired directors, officers or employees or to existing
employees pursuant to scheduled annual performance reviews or other compensation
reviews, in each case in the ordinary course of business and consistent with
Company's past practices, with an exercise price equal to the fair market value
of the Company Common Stock on the date of grant and otherwise on Company's
standard terms (including vesting schedule) and (iii) the repurchase of Company
Common Stock from former employees, directors and consultants in accordance with
the Company's standard or usual (as at the date hereof) agreements providing for
the repurchase of shares in connection with any termination of service;
(f) Intellectual Property. Transfer or license to any
---------------------
person or entity any rights to its Intellectual Property other than the license
of non-exclusive rights to its Intellectual Property 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 exclusive marketing or other
exclusive rights of any type or scope with respect to any of its products or
technology;
(h) Dispositions. Sell, lease, license or otherwise dispose
------------
of or encumber any of its properties or assets which are material, individually
or in the aggregate, to its and its subsidiaries' business, taken as a whole;
(i) Indebtedness. Incur any indebtedness for borrowed money
------------
or guarantee any such indebtedness or issue or sell any debt securities or
guarantee any debt securities of others;
(j) Leases. Enter into any operating lease in excess of
------
$250,000 individually or $1,000,000 in the aggregate;
(k) Payment of Obligations. Pay, discharge or satisfy in an
----------------------
amount in excess of $150,000 individually or $400,000 in the aggregate, any
claim, liability or obligation (absolute, accrued, asserted or unasserted,
contingent or otherwise) arising other than in the
29
ordinary course of business, other than the payment, discharge or satisfaction
of liabilities reflected or reserved against in the Company Financial
Statements;
(l) Capital Expenditures. Make any capital expenditures,
--------------------
capital additions or capital improvements except for expenditures, additions or
improvements made in the ordinary course of business and consistent with past
practice that do not exceed $200,000 individually or $1,000,000 in the aggregate
and except for capitalizations of inventory consistent with past practice;
(m) Insurance. Reduce the amount or scope of any material
---------
insurance coverage provided by existing insurance policies;
(n) Termination or Waiver. Terminate or waive or assign any
---------------------
right or claim with a value in excess of $100,000 or which is otherwise material
to the Company.
(o) Employee Benefit Plans; New Hires; Pay Increases. Adopt
------------------------------------------------
or amend any employee benefit or stock purchase or option plan or hire any new
director level or officer level employee, pay any special bonus or special
remuneration to any employees or consultants or directors, or increase the
salaries or wage rates or fringe benefits or otherwise increase the benefits of
its employees or consultants or directors other than pursuant to scheduled
annual performance reviews, provided that any resulting modifications are in the
--------
ordinary course of business and consistent with Company's past practices.
(p) Labor Agreements. Enter into any employment contract
----------------
or, except if required by applicable law, any collective bargaining agreement.
(q) Severance Arrangements. Grant any severance or
----------------------
termination pay, or any additional notice of termination, to, or grant any
acceleration or extension of the exercisability or vesting of any equity
securities held by, (i) any director or officer, or (ii) any other employee
except, payments made pursuant to standard written agreements outstanding on the
date hereof;
(r) Lawsuits. Commence 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 suit would result in the material impairment
of a valuable aspect of its business, provided that it consults with Parent
--------
prior to the filing of such a suit, or (iii) for a breach of this Agreement;
(s) 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, limited liability company,
partnership, association, entity, or other business organization or division
thereof, or otherwise acquire or agree to acquire any assets which are material,
individually or in the aggregate, to its and its subsidiaries' business, taken
as a whole (except for purchases of supplies and components in the ordinary
course of business consistent with past practice), or acquire or agree to
acquire any equity securities of any corporation, partnership, limited liability
company, association, entity, or business organization, or enter into any
material strategic relationships or alliances;
30
(t) Taxes. Make or change any material election in respect
-----
of Taxes, adopt or change any accounting method in respect of Taxes, file any
material Tax Return or any amendment to a material Tax 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
claim or assessment in respect of Taxes;
(u) Revaluation. Revalue any of its assets, including
-----------
writing down the value of inventory or writing off notes or accounts receivable
other than in the ordinary course of business;
(v) Accounting Policies and Procedures. Make any change to
----------------------------------
its accounting methods, principles, policies, procedures or practices, except as
may be required by GAAP, Regulation S-X promulgated by the SEC or applicable
statutory accounting principles; or
(w) Other. Take or agree in writing or otherwise to take
-----
any of the actions described in Sections 4.2(a) through (v) above.
4.3 No Solicitation. From and after the date hereof until the earlier
---------------
of the Effective Time or the termination of this Agreement in accordance with
Article VII, Company and each of its subsidiaries and the officers, directors,
employees or other agents, representatives and advisors (including any
investment bankers, attorneys or accountants) of Company and any of its
subsidiaries (collectively, "Company Representatives") will not, directly or
-----------------------
indirectly, (i) take any action to solicit, initiate, encourage, facilitate, or
enter into any agreement (including any letter of intent or similar arrangement)
in respect of any Takeover Proposal (as defined in Section 7.3(f)), or (ii)
subject to the terms of the immediately following sentence, engage in any
discussions or negotiations with, or disclose any nonpublic information relating
to Company or any of it subsidiaries to, or afford access to the properties,
books or records of Company or any of its subsidiaries to, any person that has
advised Company that it is seeking to make, or that the Board of Directors in
good faith understands is seeking to make, or that since the date of this
Agreement has made, a Takeover Proposal, or endorse, approve or recommend any
such Takeover Proposal; provided that nothing herein shall prohibit the Board of
--------
Directors of Company from complying with Rules 14d-9 and 14e-2 promulgated under
the Exchange Act. If, prior to approval of the Merger by Company's shareholders,
an unsolicited written Takeover Proposal shall be received by the Company: (i)
to the extent the Board of Directors of Company believes in good faith in the
proper exercise of their fiduciary duties to Company's shareholders (after
receipt of advice from its financial advisor), and after considering all terms
and conditions of such Takeover Proposal, including the likelihood and timing of
its consummation, that such Takeover Proposal would result in a transaction more
favorable to Company's shareholders from a financial point of view than the
transaction contemplated by this Agreement (any such more favorable Takeover
Proposal being referred to in this Agreement as a "Superior Proposal"), and (ii)
-----------------
to the extent that the Board of Directors of Company determines in good faith,
after consultation with outside legal counsel, that it is necessary in order for
the Board of Directors of Company to comply with its fiduciary duties to
shareholders under applicable law; then Company Representatives may furnish in
connection therewith information to the person making such Superior Proposal
and, subject to the provisions hereof, engage in negotiations with such person,
disclose nonpublic information relating to Company and its subsidiaries, or
afford access to the properties, books or records of Company and its
subsidiaries to such person, and endorse,
31
approve or recommend such Superior Proposal or withdraw or condition or modify
its recommendation with respect to approval of the Merger by the Company's
shareholders, and such actions shall not be considered a breach of this Section
4.3; provided, further, that: (A) in each such event Company notifies Parent of
-------- -------
such determination by the Board of Directors of Company and provides Parent with
a true and complete copy of the Superior Proposal received from such third
party, and provides (or has provided) to Parent all documents containing or
referring to non-public information of Company that are supplied to such third
party; provided, however, that Company provides such non-public information
-------- -------
subject to terms at least as restrictive on such third party as the
Confidentiality Agreement (as defined in Section 5.4) is on Parent; and (B) that
Company shall not, and shall not permit any of the Company Representatives to
endorse or recommend any such Takeover Proposal or withdraw or condition or
modify its recommendation of the approval of the Merger unless Company has
provided Parent at least three (3) days prior notice thereof. Company will
immediately notify Parent after receipt of any Takeover Proposal or any notice
that any person is considering making a Takeover Proposal or any request for
non-public information relating to Company or any of its subsidiaries or for
access to the properties, books or records of Company or any of its subsidiaries
by any person that has advised Company that it may be considering making, or
that has made, a Takeover Proposal, or whose efforts to formulate a Takeover
Proposal would be assisted thereby (such notice to include the identity of such
person or persons), and will keep Parent fully informed of the status and
details of any such Takeover Proposal (including all terms and conditions and
modifications thereto), notice, request or correspondence or communications
related thereto, and shall provide Parent with a true and complete copy of such
Takeover Proposal, notice or any amendment thereto, if it is in writing, or a
complete written summary thereof, if it is not in writing. Company shall
immediately cease and cause to be terminated all existing discussions or
negotiations with any persons (other than Parent) conducted heretofore with
respect to a Takeover Proposal. Nothing in this Section shall prohibit the
Company from filing a copy of this Agreement pursuant to a Form 8-K, Form 10-Q
or other schedule or form under the Exchange Act.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Proxy Statement/Prospectus; Registration Statement.
--------------------------------------------------
(a) As promptly as practicable after the execution of this
Agreement, Company and Parent shall prepare, and (i) Company shall file with the
SEC (if necessary), preliminary proxy materials relating to the approval of the
Merger by the shareholders of Company, and (ii) Parent shall file with the SEC,
a Registration Statement on Form S-4 (or such other or successor form as shall
be appropriate). As promptly as practicable following receipt of SEC comments
thereon, Company shall file with the SEC definitive proxy materials and Parent
shall file with the SEC amendments to its Registration Statement on Form S-4 (or
such other or successor form as shall be appropriate), in each case which
complies in form with applicable SEC requirements and Parent shall use its
reasonable best efforts to cause the Registration Statement to become effective
as soon thereafter as practicable. Company and Parent will notify each other
promptly of the receipt of any comments from the SEC or its staff and of any
request by the SEC or its staff or any other government officials for amendments
or supplements to the
32
Proxy Statement or any other filing or for additional information and will
supply each other with copies of all correspondence between such party or any of
its representatives, on the one hand, and the SEC, or its staff or any other
government officials, on the other hand, with respect to the Proxy Statement or
other filing. Whenever any event occurs that is required to be set forth in an
amendment or supplement to the Proxy Statement or any other filing, Company
shall promptly inform Parent of such occurrence and cooperate in filing with the
SEC or its staff or any other government officials, and/or mailing to
shareholders of Company, such amendment or supplement. The Proxy Statement shall
solicit the approval of the Merger and this Agreement by the shareholders of
Company and shall include the adoption of this Agreement and the approval of the
Merger by the Board of Directors of Company and the unanimous and unconditional
recommendation of the Board of Directors of Company to Company's shareholders
that they vote in favor of the approval of this Agreement (provided that the
--------
Board of Directors of Company may exclude such recommendation if, pursuant to
Section 4.3, it is permitted to endorse or recommend a Superior Proposal) and
shall include the opinion of Company's financial advisors as described in
Section 2.22 (unless subsequently withdrawn).
(b) Each of Parent and the Company shall provide promptly to the other
such information concerning its business and financial statements and affairs
as, in the reasonable judgement of the providing party or its counsel, may be
required or appropriate for inclusion in the Proxy Statement and the
Registration Statement, or in any amendments or supplements thereto, and to
cause its counsel and auditors to cooperate with the other and with the other's
counsel and auditors in the preparation of the Proxy Statement and the
Registration Statement. Each of Company and Parent will respond to any comments
of the SEC and, will use its respective reasonable best efforts to have the
Registration Statement declared effective under the Securities Act as promptly
as practicable after such filing and Company will cause the Proxy Statement to
be mailed to its shareholders at the earliest practicable time after the
Registration Statement is declared effective by the SEC.
5.2 Meeting of Shareholders. Company shall take all action necessary in
-----------------------
accordance with Oregon Law and its Articles of Incorporation and Bylaws to
convene the Company Shareholders Meeting on a date no later than 45 days after
the Registration Statement is declared effective by the SEC. Company shall
consult with Parent regarding the date of the Company Shareholders Meeting and
shall not postpone or adjourn (other than for the absence of a quorum) the
Company Shareholders Meeting without the consent of Parent. Subject to Section
5.1, Company shall use its reasonable best efforts to solicit from shareholders
of Company proxies in favor of approval of this Agreement and shall take all
other action reasonably necessary or advisable to secure the vote or consent of
shareholders required to effect the Merger (provided that the Company shall not
be required to so solicit shareholder proxies or otherwise secure such
shareholder votes or consents if Company shall have withdrawn its recommendation
of the Merger in accordance with Section 4.3).
5.3 Access to Information.
---------------------
(a) Company shall afford Parent 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 Company's and its subsidiaries'
properties, books, contracts, commitments and records, and (ii) all other
information concerning the business, properties and
33
personnel of Company and its subsidiaries as Parent may reasonably request.
Company agrees to provide to Parent and its accountants, counsel and other
representatives copies of internal financial statements promptly upon request.
(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 5.3 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) Company shall provide Parent and its accountants, counsel and
other representatives reasonable access, during normal business hours during the
period prior to the Effective Time, to all of Company's and subsidiaries Tax
Returns and other records and workpapers relating to Taxes, and shall also
provide the following information upon the request of Parent or its
subsidiaries: (i) a schedule of the types of Tax Returns being filed by Company
and each of its subsidiaries in each taxing jurisdiction, (ii) a schedule of the
year of the commencement of the filing of each such type of Tax Return, (iii) a
schedule of all closed years with respect to each such type of Tax Return filed
in each jurisdiction, (iv) a schedule of all material Tax elections filed in
each jurisdiction by Company and each of its subsidiaries, (v) a schedule of any
deferred intercompany gain with respect to transactions to which Company or any
of its subsidiaries has been a party, and (vi) receipts for any Taxes paid to
foreign Tax authorities.
5.4 Confidentiality. The parties acknowledge that each of Parent and
---------------
Company have previously executed a non-disclosure agreement dated April 12, 2001
(the "Confidentiality Agreement"), which agreement shall continue in full force
-------------------------
and effect in accordance with its terms.
5.5 Public Disclosure. Unless otherwise permitted by this Agreement,
-----------------
Parent and Company shall consult with each other before issuing any press
release or otherwise making any public statement or making any other public (or
non-confidential) disclosure (whether or not in response to an inquiry)
regarding the terms of this Agreement and the transactions contemplated hereby,
and neither shall issue any such press release or make any such statement or
disclosure without the prior approval of the other (which approval shall not be
unreasonably withheld), except as may be required by law or by obligations
pursuant to any listing agreement with any national securities exchange or with
the NASD, in which case the party proposing to issue such press release or make
such public statement or disclosure shall use its reasonable best efforts to
consult with the other party before issuing such press release or making such
public statement or disclosure.
5.6 Consents; Cooperation.
---------------------
(a) Each of Parent and Company shall promptly apply for or
otherwise seek, and use its reasonable best efforts to obtain, all consents and
approvals required to be
34
obtained by it for the consummation of the Merger, including those required
under HSR. Company shall use its reasonable best efforts to obtain all necessary
consents, waivers and approvals under any of its material contracts in
connection with the Merger for the assignment thereof or otherwise. The parties
hereto will consult and cooperate with one another, and consider in good faith
the views of one another, in connection with any analyses, appearances,
presentations, memoranda, briefs, arguments, opinions and proposals made or
submitted by or on behalf of any party hereto in connection with proceedings
under or relating to HSR or any other federal or state antitrust or fair trade
law.
(b) Each of Parent and Company shall use its reasonable best
efforts to resolve such objections, if any, as may be asserted by any
Governmental Entity with respect to the transactions contemplated by this
Agreement under HSR, the Sherman Act, as amended, the Clayton Act, as amended,
the Federal Trade Commission Act, as amended, and any other Federal, state or
foreign statutes, rules, regulations, orders or decrees that are designed to
prohibit, restrict or regulate actions having the purpose or effect of
monopolization or restraint of trade (collectively, "Antitrust Laws"). In
--------------
connection therewith, if any administrative or judicial action or proceeding is
instituted (or threatened to be instituted) challenging any transaction
contemplated by this Agreement as violative of any Antitrust Law, each of Parent
and Company shall cooperate and use its reasonable best efforts vigorously to
contest and resist any such action or proceeding and to have vacated, lifted,
reversed, or overturned any decree, judgment, injunction or other order, whether
temporary, preliminary or permanent (each, an "Order"), that is in effect and
-----
that prohibits, prevents, or restricts consummation of the Merger or any such
other transactions, unless by mutual agreement Parent and Company decide that
litigation is not in their respective best interests. Notwithstanding the
provisions of the immediately preceding sentence, it is expressly understood and
agreed that neither Parent nor Company shall have any obligation to litigate or
contest any administrative or judicial action or proceeding or any Order beyond
the Final Date (as defined in Section 7.1(b)). Each of Parent and Company shall
use its reasonable best efforts to take such action as may be required to cause
the expiration of the notice periods under the HSR or other Antitrust Laws with
respect to such transactions as promptly as possible after the execution of this
Agreement; provided, however, in no event shall either Parent or the Company
-------- -------
agree to the divestiture of any assets or business units, unless Parent and
Company mutually agree it is in their respective best interests to do so. Parent
and Company also agree to take any and all of the following actions to the
extent necessary to obtain the approval of any Governmental Entity with
jurisdiction over the enforcement of any applicable laws regarding the
transactions contemplated hereby: entering into negotiations; providing
information required by law or governmental regulation; and substantially
complying with any second request for information pursuant to the Antitrust
Laws.
(c) Notwithstanding anything to the contrary in this Agreement,
(i) neither Parent nor any of it subsidiaries shall be required to divest any of
their respective businesses, product lines or assets, or to qualify to do
business in any jurisdiction in which it is not now so qualified, or to file a
general consent to service of process under any applicable state laws, and (ii)
without the prior written consent of Parent, neither Company nor its
subsidiaries shall, or shall be required to, divest any of their respective
businesses, product lines or assets, or to take or agree to take any other
action or agree to any limitation that would reasonably be expected to have a
Material Adverse Effect on Parent, Surviving Corporation or Company.
35
5.7 Legal Requirements. Subject to Section 5.6(c), each of Parent,
------------------
Merger Sub and Company will, and will cause their respective subsidiaries to,
take all reasonable actions necessary to comply promptly with all legal
requirements which may be imposed on them with respect to the consummation of
the transactions contemplated by this Agreement and will promptly cooperate with
and furnish information to any party hereto necessary in connection with any
such requirements imposed upon such other party in connection with the
consummation of the transactions contemplated by this Agreement and will take
all reasonable actions necessary to obtain (and will cooperate with the other
parties hereto in obtaining) any consent, approval, order or authorization of,
or any registration, declaration or filing with, any Governmental Entity or
other person, required to be obtained or made in connection with the taking of
any action contemplated by this Agreement.
5.8 Blue Sky Laws. Parent shall take all commercially reasonable steps
-------------
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 use its reasonable best efforts 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.
5.9 Employee Benefit Plans.
----------------------
(a) At the Effective Time, the Company Stock Option Plans and
each outstanding option to purchase shares of Company Common Stock under the
Company Stock Option Plans, whether vested or unvested, will be assumed by
Parent. Company represents and warrants to Parent that Schedule 5.9(a) hereto
---------------
sets forth a true and complete list as of the date hereof of all holders of
outstanding options under the Company Stock Option Plans, including the number
of shares of Company capital stock subject to each such option, the exercise or
vesting schedule, the exercise price per share and the term of each such option.
On the Closing Date, Company shall deliver to Parent an updated Schedule 5.9(a)
---------------
hereto current as of such date. Each such option so assumed by Parent under this
Agreement shall continue to have, and be subject to, the same terms and
conditions set forth in the Company Stock Option Plans and the applicable stock
option agreements, immediately prior to the Effective Time, except that (i) such
option will be exercisable for that number of whole shares of Parent Common
Stock equal to the product of the number of shares of Company Common Stock that
were issuable upon exercise of such option immediately prior to the Effective
Time multiplied by the Exchange Ratio and rounded down to the nearest whole
number of shares of Parent Common Stock, and (ii) the per share exercise price
for the shares of Parent Common Stock issuable upon exercise of such assumed
option will be equal to the quotient determined by dividing the exercise price
per share of Company Common Stock at which such option was exercisable
immediately prior to the Effective Time by the Exchange Ratio, rounded up to the
nearest whole cent. Except as set forth in Schedule 2.15 of the Company
-------------
Disclosure Schedule, the Merger will not terminate any of the outstanding
options under the Company Stock Option Plans or accelerate the exercisability or
vesting of such options or the shares of Parent Common Stock which will be
subject to those options upon Parent's assumption of the options in the Merger.
It is the intention of the parties that the options so assumed by Parent
qualify, to the maximum extent permissible, following the Effective Time as
incentive stock options as defined in Section 422 of the Code to the extent such
options qualified as incentive stock options prior to the Effective Time.
Within 30 business
36
days after the Effective Time, Parent will issue to each person who, immediately
prior to the Effective Time was a holder of an outstanding option under the
Company Stock Option Plans a document evidencing the foregoing assumption of
such option by Parent.
(b) All outstanding rights of Company which it may hold immediately
prior to the Effective Time to repurchase unvested shares of Company Common
Stock (the "Repurchase Options") shall continue in effect following the Merger
------------------
and shall thereafter continue to be exercisable by Parent upon the same terms
and conditions in effect immediately prior to the Effective Time, except that
the shares purchasable pursuant to the Repurchase Options and the purchase price
per share shall be adjusted to reflect the Exchange Ratio.
(c) The Offering Period for the Company ESPP which commenced on February
1, 2000 shall terminate at close of business on the third business day preceding
the Closing Date and all outstanding purchase rights relative to that Offering
Period will automatically be exercised on such date. The Company shall cause
the Company ESPP to terminate with such termination date, and thereafter no
Offering Periods shall commence and no purchase rights shall thereafter be
granted or exercised under the Company ESPP. The Company employees who meet the
eligibility requirements for participation in the Parent Employee Stock Purchase
Plan shall be eligible to begin payroll deductions under that plan as of the
start date of the first offering period thereunder beginning after the Effective
Time.
(d) On or as soon as practicable following the Effective Time,
continuing employees of Company and its subsidiaries ("Continuing Employees")
--------------------
shall be eligible to participate in those benefit plans and programs maintained
for similarly situated employees of Parent (or in substantially similar
programs), on the same terms applicable to similarly situated employees of
Parent and to the extent that such plans and programs provide the following
benefits: medical/dental/vision care, life insurance, disability income, sick
pay, holiday and vacation pay, 401(k) plan coverage, Internal Revenue Code
Section 125 benefit arrangements, bonus, profit-sharing or other incentive
plans, pension or retirement programs, dependent care assistance and severance
benefits. Each Continuing Employee shall be given credit, for purposes of any
service requirements for participation or vesting, for his or her period of
service with Company or any of its subsidiaries credited under a similar plan
prior to the Effective Time, subject to appropriate break in service rules.
Each such employee shall, with respect to any Parent plans or programs which
have co-payment, deductible or other co-insurance features, receive credit for
any amounts such individual has paid to date in the plan year of the Effective
Time under comparable plans or programs maintained by Company or any of its
subsidiaries prior to the Effective Time. Each Continuing Employee and eligible
dependent who, at the Effective Time, was participating in an employee group
health plan maintained by Company or any of its subsidiaries shall not be
excluded from Parent's employee group health plan or limited in coverage
thereunder by reason of any waiting period restriction or pre-existing condition
limitation.
(e) Unless Parent consents otherwise in writing, Company shall take all
action necessary to terminate, or cause to terminate, before the Effective Time,
any Company Benefit Plan that is a 401(k) plan or other defined contribution
retirement plan or employee stock purchase plan.
37
(f) Parent and Company shall use their respective reasonable best
efforts to ensure that as of the Effective Time the employees listed on part (a)
of Schedule 2.16(c) shall have revised their existing employment agreements with
----------------
Company so as to conform to changes required by the Merger and consistent with
the changes agreed between Parent and Company prior to the date hereof
(including providing that change of control provisions will not apply to options
granted by Parent).
(g) Within 10 business days following the date of this Agreement,
Company shall set forth on Schedule 5.9(g) a list of all persons who Company
---------------
reasonably believes are, with respect to Company and as of the date of this
Agreement, "disqualified individuals" (within the meaning of Section 280G of the
Code and the regulations promulgated thereunder). For this purpose, Company
shall assume that the fair market value of Company Common Stock is approximately
$ 13.27 per share. Within a reasonable period of time after the last business
day of each month after the date of this Agreement (other than May 2001) and on
or about the date five business days prior to the expected Closing Date, Company
shall revise Schedule 5.9(g) to reflect the most recently available closing
---------------
price of Company Common Stock as of the last business day of such month and to
reflect any additional information which Company reasonably believes would
impact the determination of persons who are, with respect to Company and as of
the each such date, "disqualified individuals" (within the meaning of Section
280G of the Code and the regulations promulgated thereunder). Any payments
required to be made pursuant to Section 280G of the Code will be treated as
transaction expenses and reserved for accordingly by Company.
5.10 Forms S-8. Parent agrees to file, no later than 30 business days
---------
after the Closing (provided, that, Parent has received within 10 business days
--------
after the Closing all option documentation it requires relating to the
outstanding options), a registration statement on Form S-8 under the Securities
Act covering the shares of Parent Common Stock issuable pursuant to outstanding
options granted to individuals, for which a Form S-8 registration statement is
available hereto, under the Company Stock Option Plans. Company shall cooperate
and assist Parent with the preparation of such registration statements.
5.11 Listing of Additional Shares. Prior to the Effective Time, Parent
----------------------------
shall file with The Nasdaq National Market a Notification Form for Listing of
Additional Shares with respect to the shares referred to in Section 6.1(f).
5.12 Nasdaq Quotation. Company and Parent agree to continue the quotation
----------------
of Company Common Stock and Parent Common Stock, respectively, on The Nasdaq
National Market during the term of the Agreement so that dissenters rights will
not be available to shareholders of Company under Section 60.554 of the Oregon
Law.
5.13 Tax Treatment. The parties each intend that the Merger will
-------------
qualify as a reorganization within the meaning of Section 368(a) of the Code and
shall use their respective reasonable best efforts to cause the Merger to so
qualify. Each of Parent and Company shall execute and deliver a certificate in
form reasonably acceptable to the other party setting forth factual
representations and covenants that will serve as a basis for the tax opinions
described in Section 6.1(e).
38
5.14 Pooling Accounting. Parent and Company shall each use its
------------------
reasonable best efforts to cause the business combination to be effected by the
Merger to be accounted for as a pooling of interests. Company shall use its
reasonable best efforts, if the transactions represented by the Merger are
'poolable', to cause its "affiliates" (as defined in Section 5.18) not to take
any action that would adversely affect the ability of Parent to account for the
business combination to be effected by the Merger as a pooling of interests.
5.15 Pooling Letter. Company shall use all reasonable best efforts to
--------------
cause to be delivered to Ernst & Young LLP, Parent's independent accountants, as
promptly as practicable but in any event prior to the Effective Time, a letter
from Arthur Andersen, Company's independent accountants, addressed to Company
and dated the Closing Date to the effect that Company qualifies as a combining
company in accordance with the provisions of Accounting Principles Board Opinion
No. 16, Business Combinations. Such letter shall be in a form reasonably
satisfactory to Parent and customary in scope and substance for letters
delivered by independent public accountants in connection with transactions of
this type and shall permit Ernst & Young LLP to use such letter. Company shall
provide appropriate representations as reasonably requested by Arthur Andersen
that are customary in scope and substance for such letters.
5.16 Shareholder Litigation. Unless and until the Board of Directors of
----------------------
Company has withdrawn its recommendation of the adoption of this Agreement,
Company shall give Parent the opportunity to participate at its own expense in
the defense of any shareholder litigation against Company and/or its directors
relating to the transactions contemplated by this Agreement.
5.17 Further Assurances. Subject to Sections 4.3 and 5.1, (a) each of the
------------------
parties to this Agreement shall use its reasonable best efforts to effectuate
the transactions contemplated hereby and to fulfill and cause to be fulfilled
the conditions to closing under this Agreement, and (b) each party hereto, at
the reasonable request of another party hereto, shall execute and deliver such
other instruments and do and perform such other acts and things as may be
necessary or reasonably desirable for effecting completely the consummation of
this Agreement and the transactions contemplated hereby.
5.18 Affiliates. Company will use reasonable best efforts to obtain and
----------
deliver to Parent an executed Company Affiliate Agreement substantially in the
form of Exhibit C hereto (the "Affiliate Agreement") from (a) each person
--------- -------------------
identified in Schedule 2.31 of the Company Disclosure Schedule within 15 days
-------------
following the execution and delivery of this Agreement and (b) from any person
who, to the knowledge of Company, may be deemed to have become an affiliate of
Company after the date of this Agreement and prior to the Effective Time as soon
as practicable after attaining such status. The foregoing notwithstanding,
Parent shall be entitled to place legends as specified in the Affiliate
Agreement on the certificates evidencing any of the Parent Common Stock to be
received by (i) any affiliate of Company or (ii) any person Parent reasonably
identifies (by written notice to Company) as being a person who may be deemed an
"affiliate" within the meaning of Rule 145 promulgated under the Securities Act,
and to issue appropriate stop transfer instructions to the transfer agent for
such Parent Common Stock, consistent with the terms of the Company Affiliate
Agreement, regardless of whether such
39
person has executed Affiliate Agreement and regardless of whether such person's
name and address appear on Schedule 2.31 of the Company Disclosure Schedule.
-------------
5.19 Operation of Surviving Corporation.
-------------------------------------
(a) Parent confirms that it has no intention to merge or
otherwise consolidate the Surviving Corporation with Parent, although Parent may
transfer businesses of Parent or its affiliates (including by way of merger or
other consolidation) with Surviving Corporation to be operated by Surviving
Corporation and does envision following the Effective Time to transfer the
operations of the Parent's subsidiary Fluence Technology, Incorporated. to the
Surviving Corporation.
(b) Surviving Corporation will, during the one year period
following the Effective Time (the "Post Closing Period"), maintain separate
-------------------
company accounts in accordance with GAAP and the Board of Surviving Corporation
will be responsible for the day to day management of the Surviving Corporation
(including the setting of headcount levels and capital expenditures).
(c) Provided that the revenues of the Surviving Corporation, for
each fiscal quarter, meet or exceed the target revenues for such quarter set
forth below (each a "Quarterly Target"), Parent agrees that it shall not,
----------------
without unanimous approval of the Board of Directors of Surviving Corporation,
make any material reduction in the overall headcount and/or compensation levels
for employees of Surviving Corporation (employed by Company as of the Effective
Time). Should the target revenues of Surviving Corporation be less than any
given Quarterly Target, Surviving Corporation shall, if required by Parent, take
steps to correct such deficiency, including (if required by Parent) through
reduction of headcount and/or compensation levels. Parent and Surviving
Corporation will, during the Post Closing Period, continue to offer benefits to
the employees of Surviving Corporation (employed by Company as of the Effective
Time) which are substantially equivalent overall to those offered by Company as
of the Effective Time.
Fiscal Quarter Quarterly Target ($ millions)
-------------- -----------------------------
Third Quarter 2001 11.2
Fourth Quarter 2001 14.4
First Quarter 2002 15.2
Second Quarter 2002 15.2
Should there be a transfer of any operations by Parent or its subsidiaries,
after the Effective Time, to Surviving Corporation, Parent and Surviving Company
will seek to agree upon appropriate adjustments to the Quarterly Targets.
(d) It is the current intent of Parent and Company that the
existing headoffice of Company at Gemini Drive, Beaverton, Oregon will be
maintained as the headoffice of Surviving Corporation through the end of the
current term of the lease of such premises and that headoffice employees of
Surviving Corporation (employed by Company as of
40
the Effective Time) will not, during such period, be relocated from such
location without either (i) the unanimous approval of the Board of Directors of
Surviving Corporation, or (ii) the consent of the affected employees.
(e) The Company's brand will continue to be used on the existing
Company products listed on Schedule 5.19(e) throughout the Post Closing Period,
----------------
unless otherwise unanimously agreed by the Board of Directors of Surviving
Corporation; provided that nothing shall require the use of such brands if such
--------
use would expose the Parent or Surviving Corporation to any exposure to a third
party for claims of infringement of tradename, trademarks or other infringement
of any Third Party Intellectual Property as a consequence of such continued use.
(f) Subject to the confidentiality policies established by the by
the Board of Directors of Surviving Corporation, Surviving Corporation shall
have the authority, after the Effective Time, to enter into agreements which
require Surviving Corporation to maintain the business confidentiality of its
customers and suppliers separate, and where appropriate confidential from,
Parent.
(g) Nothing in this Section is intended to be, nor shall they be,
enforceable by, or otherwise provide a benefit to any customer, supplier,
employee, director, officer or consultant of Company or Surviving Corporation.
5.20 Indemnification of Officers and Directors.
-----------------------------------------
(a) (i) All rights to indemnification existing in favor of those
persons who are directors and officers of the Company as of the date of this
Agreement (the "Indemnified Persons") for their acts and omissions occurring
prior to the Effective Time, as provided in the indemnification agreements
between the Company and said Indemnified Persons (as in effect as of the date of
this Agreement) in the forms disclosed by the Company to Parent prior to the
date of this Agreement, shall survive the Merger and shall be observed by the
Surviving Corporation to the fullest extent available under Oregon law for a
period of six years from the Effective Time and (ii) the Articles of
Incorporation and Bylaws of Surviving Corporation will contain provisions with
respect to exculpation and indemnification at least as favorable overall to the
Indemnified Persons as those in the Company's Articles of Incorporation and
Bylaws (as at the date of this Agreement), which provisions will not be amended
or otherwise modified for a period of six years from the Effective Time in a
manner that would adversely affect such Indemnified Persons (except to the
extent required by applicable law).
(b) From the Effective Time until the sixth anniversary of the
Effective Time, the Surviving Corporation shall maintain in effect, for the
benefit of the Indemnified Persons with respect to their acts and omissions in
their capacities as directors and officers of the Acquired Corporations
occurring prior to the Effective time, directors' and officers' liability
insurance on terms (if available) comparable to those maintained by the Company
as of the date of this Agreement in the form disclosed by the Company to Parent
prior to the date of this Agreement (the "Existing Policy").
41
(c) The covenant set forth in this Section 5.20 is intended to be
for the benefit of, and shall be enforceable by, each of the Indemnified Persons
and their respective heirs and successors. The indemnification provided for
herein shall not be deemed exclusive of any other rights to which an Indemnified
Party is entitled, whether pursuant to law, contract or otherwise.
(d) In the event that the Surviving Corporation or any of its
successors of assigns (i) consolidates with or merges into any other person and
shall not be the continuing or surviving corporation or entity of such
consolidation or merger or (ii) transfers or conveys all or substantially all of
its properties and assets to any person, then, and in each such case to the
extent necessary to effectuate the purpose of this Section 5.20, Surviving
Corporation and Parent shall cause to be made proper provision so that the
successors and assigns of the Surviving Corporation shall succeed to the
obligations set forth in this Section 5.20.
ARTICLE VI
CONDITIONS TO THE MERGER
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
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 have
--------------------
been approved by the requisite vote of the shareholders of Company under Oregon
Law and the Articles of Incorporation of the Company.
(b) Registration Statement Effective. The SEC shall have declared
--------------------------------
the Registration Statement effective. No stop order suspending the effectiveness
of the Registration Statement or any part thereof shall have been issued and no
proceeding for that purpose, and no similar proceeding in respect of the Proxy
Statement, shall have been initiated or threatened by the SEC; and all requests
for additional information on the part of the SEC shall have been complied with
to the reasonable satisfaction of the parties hereto.
(c) 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 in effect, nor
shall any proceeding brought by an administrative agency or commission or other
Governmental Entity seeking any of the foregoing be pending; 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. In the event an injunction or other order shall have been
issued, each party agrees to use its reasonable best efforts to have such
injunction or other order lifted.
(d) Governmental Approvals. Parent, Company and Merger Sub and
----------------------
their respective subsidiaries shall have timely obtained from each Governmental
Entity: (i) all approvals, waivers and consents as may be required under the
Securities Act and under state
42
Blue Sky laws, (ii) all other approvals, waivers and consents, if any, necessary
for consummation of or in connection with the Merger and the several
transactions contemplated hereby, the failure to obtain which would have a
Material Adverse Effect on the Surviving Corporation or Parent following the
Effective Time, and (iii) the waiting period applicable to the consummation of
the Merger and the HSR shall have elapsed or been terminated.
(e) Tax Opinion. Parent and Company shall have received substantially
-----------
similar written opinions of Brobeck, Phleger and Harrison LLP and Ater Wynne
LLP, respectively, in form and substance reasonably satisfactory to them, dated
on or about the date of Closing to the effect that the Merger will constitute a
reorganization within the meaning of Section 368(a) of the Code, and such
opinions shall not have been withdrawn. In rendering such opinions, counsel
shall be entitled to rely upon, among other things, reasonable assumptions as
well as representations of Parent, Merger Sub and Company. In addition, Parent
and Company shall have received from such respective firms such tax opinions as
may be required by the SEC in connection with the filing of the Registration
Statement.
(f) Listing of Additional Shares. The shares of Parent Common Stock
----------------------------
issuable upon conversion of the Company Common Stock in the Merger and upon
exercise of the options under the Company Stock Option Plans assumed by Parent
shall have been approved for listing on The Nasdaq National Market.
6.2 Additional Conditions to Obligations of Company. The obligations of
-----------------------------------------------
Company to consummate and effect the transactions contemplated hereby shall be
subject to the satisfaction at or prior to the Effective Time of each of the
following additional conditions, any of which may be waived, in writing, by
Company:
(a) Representations, Warranties and Covenants. (i) The representations
-----------------------------------------
and warranties of Parent and Merger Sub in this Agreement shall be true and
correct in all material respects (except for such representations and warranties
that are qualified by their terms by a reference to materiality which
representations and warranties as so qualified shall be true and correct in all
respects) both when made and on and as of the Effective Time as though such
representations and warranties were made on and as of such time, except (A) for
those representations and warranties which address matters only as of a
particular date, which shall be true and correct as of such date and (B) where
the failure to be so true and correct, without regard to any materiality
qualifications contained therein, individually or in the aggregate does not
constitute a Material Adverse Effect on Parent (it being understood that, for
the purposes of determining the accuracy of such representations and warranties,
any change or purported update of the Parent Disclosure Schedule after the date
of this Agreement, shall be disregarded) and (ii) 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 Effective Time.
(b) Material Adverse Effect. No Material Adverse Effect with respect
-----------------------
to the Parent, or event of circumstance that could reasonably be expected to
result in such a Material Adverse Effect, shall have occurred and it or its
effects not have been cured.
43
(c) Certificate of Parent. Company shall have been provided with a
---------------------
certificate executed on behalf of Parent by an authorized officer certifying
that the conditions set forth in Section 6.2(a) and (b) shall have been
fulfilled.
6.3 Additional Conditions to the Obligations of Parent and Merger Sub. The
-----------------------------------------------------------------
obligations of Parent and Merger Sub to consummate and effect the transactions
contemplated hereby shall be subject to the satisfaction at or prior to the
Effective Time of each of the following additional conditions, any of which may
be waived, in writing, by Parent:
(a) Representations, Warranties and Covenants. (i) The representations
-----------------------------------------
and warranties of Company in this Agreement shall be true and correct in all
material respects (except for such representations and warranties that are
qualified by their terms by a reference to materiality which representations and
warranties as so qualified shall be true and correct in all respects) both when
made and on and as of the Effective Time as though such representations and
warranties were made on and as of such time, except (A) for those
representations and warranties which address matters only as of a particular
date, which shall be true and correct as of such date) and (B) where the failure
to be so true and correct, without regard to any materiality qualifications
contained therein, individually or in the aggregate does not constitute a
Material Adverse Effect on Company or Surviving Corporation, or in the case of
Sections 2.26 and 2.33 an adverse effect in any material respect on the
consummation of the Merger (it being understood that, for the purposes of
determining the accuracy of such representations and warranties, any change or
purported update of the Company Disclosure Schedule after the date of this
Agreement, shall be disregarded) and (ii) 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
Effective Time.
(b) Material Adverse Effect. No Material Adverse Effect with respect
-----------------------
to the Company, or event or circumstance that could reasonably be expected to
result in such a Material Adverse Effect, shall have occurred and it or its
effects not have been cured.
(c) Certificate of Company. Parent shall have been provided with a
----------------------
certificate executed on behalf of Company by its President and Chief Financial
Officer certifying that the conditions set forth in Section 6.3(a) and (b) shall
have been fulfilled.
(d) Third Party Consents. Parent shall have been furnished with
--------------------
evidence satisfactory to it of the consent or approval of those persons whose
consent or approval shall be required in connection with the Merger under any
material contract of Company or any of its subsidiaries or otherwise set forth
on Schedule 2.3 of the Company Disclosure Schedule.
------------
(e) Injunctions or Restraints on Conduct of Business. No temporary
------------------------------------------------
restraining order, preliminary or permanent injunction or other order issued by
any court of competent jurisdiction or other legal or regulatory restraint
provision limiting or restricting Parent's conduct or operation of the business
of Company and its subsidiaries, following the Merger shall be in effect, nor
shall any proceeding brought by an administrative agency or commission or other
Governmental Entity, seeking the foregoing be pending or threatened.
44
(f) Employment Agreements. The employment agreements referenced in
---------------------
Section 5.9(f) shall have executed and delivered to Parent and shall be in full
force and effect.
(g) Other Agreements. Each of the: (i) shareholders listed on Schedule
---------------- --------
2.25 shall have delivered to Parent an executed Shareholders Agreement, each of
- ----
which shall be in full force and effect; (ii) affiliates of Company shall have
executed and delivered to Parent Affiliate Agreements, each of which shall be in
full force and effect; and (iii) directors of Company, other than Keith L.
Barnes, shall have executed and delivered to Parent resignation letters in form
and substance satisfactory to Parent, each of which shall be in full force and
effect.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
7.1 Termination. At any time prior to the Effective Time, whether before or
-----------
after approval of the matters presented in connection with the Merger by the
shareholders of Company, this Agreement may be terminated and the Merger
abandoned:
(a) by mutual consent of the Boards of Directors of Parent and
Company;
(b) by either Parent or Company, if, the Closing shall not have
occurred on or before November 16, 2001 or such later date as may be agreed upon
in writing by the parties hereto (the "Final Date"); provided, however, that the
---------- -------- -------
Final Date may, at the request of either party, be extended to December 31, 2001
in the event that the only reason the Closing shall not have occurred by
November 16, 2001 is the failure of the conditions set forth in Section 6.1(b)
and/or Section 6.1(d) (although such extension shall not occur if the failure of
such conditions has principally been caused or resulted from the action or
failure to act constituting a breach, in any material respect, of this
Agreement, of the party seeking such extension and the party not seeking the
extension does not consent to such extension); and; provided further that the
----------------
right to terminate this Agreement under this Section 7.1(b) shall not be
available to any party whose action or failure to act has principally been the
cause of or resulted in the failure of the Merger to occur on or before such
date and such action or failure to act constitutes a breach, in any material
respect, of this Agreement;
(c) by Parent, if Company shall breach any of its representations,
warranties or obligations hereunder to an extent that would cause the condition
set forth in Section 6.3(a) not to be satisfied and such breach shall not have
been cured within ten (10) business days of receipt by Company of written notice
of such breach;
(d) by Parent, if the condition in Section 6.3(b) shall not have been
satisfied and such condition shall not have been cured within ten (10) business
days of receipt by Company of written notice of such Material Adverse Effect;
(e) by Company, if Parent shall breach any of its representations,
warranties or obligations hereunder to an extent that would cause the condition
set forth in Section 6.2(a) not to be satisfied and such breach shall not have
been cured within ten (10) business days following receipt by Parent of written
notice of such breach;
45
(f) by Company, if the condition set forth in Section 6.2(b) shall not
have been satisfied and such condition shall not have been cured within ten (10)
business days following receipt by Parent of written notice of such Material
Adverse Effect;
(g) by Parent, if: (i) a Trigger Event (as defined in Section 7.3(e))
or Takeover Proposal (as defined in Section 7.3(f)) shall have occurred and the
Board of Directors of Company, if so requested by Parent, does not within ten
(10) business days of such occurrence, (A) reconfirm its recommendation (without
conditions) of the approval of this Agreement and the transactions contemplated
hereby, and (B) reject such Takeover Proposal or Trigger Event (in the case of a
Takeover Proposal or Trigger Event involving a tender or exchange offer); (ii)
the Board of Directors of Company shall have failed to recommend (without
conditions) that the Company's shareholders vote to approve the Merger and this
Agreement (a "Recommendation"), or shall have withdrawn or modified its
--------------
Recommendation in a manner adverse to Parent (including by failing to include
such Recommendation in the Proxy Statement or by imposing conditions upon such
Recommendation), or shall have resolved to do any of the foregoing, or shall
have failed to reaffirm its Recommendation within ten business days of a written
request to do so by Parent; (iii) the Board of Directors of Company shall have
recommended, endorsed, approved, accepted, or agreed to a Takeover Proposal or
shall have entered into any letter of intent or similar document or agreement
relating to any Takeover Proposal, or shall have resolved to do any of the
foregoing; or (iv) any Company Representative shall have failed to comply in any
material respect with Section 4.3; or (v) the Company shall have breached its
obligations under Section 5.2.
(h) by either Parent or Company, if: (i) any permanent injunction or
other order of a court or other competent authority preventing the consummation
of the Merger shall have become final and nonappealable, or (ii) any required
approval of the shareholders of Company shall not have been obtained by reason
of the failure to obtain the required vote upon a vote held at a duly held
meeting of shareholders or at any adjournment thereof (provided that the right
--------
to terminate this Agreement under this subsection (ii) shall not be available to
Company where the failure to obtain such shareholder approval shall have been
caused by the action or failure to act of Company and such action or failure
constitutes a breach of this Agreement).
7.2 Effect of Termination. In the event of termination of this Agreement
---------------------
as provided in Section 7.1, this Agreement shall forthwith become void and there
shall be no liability or obligation on the part of Parent, Merger Sub or Company
or their respective officers, directors, shareholders or affiliates; provided
--------
that (a) the provisions of Section 5.4, Section 7.3, this Section 7.2 and
Article VIII shall remain in full force and effect and survive any termination
of this Agreement and (b) nothing herein shall relieve any party from liability
in connection with a breach of the representations or warranties of such party
to this Agreement or the breach of any covenant or agreement set forth in this
Agreement.
7.3 Expenses and Termination Fees.
-----------------------------
(a) Subject to subsections (b), (c) and (d) of this Section 7.3,
whether or not the Merger is consummated, all costs and expenses incurred in
connection with this Agreement and the transactions contemplated hereby
(including the fees and expenses of its advisers, accountants and legal counsel)
shall be paid by the party incurring such expense, except
46
that expenses incurred in connection with printing the Proxy Materials and the
Registration Statement, registration, and filing fees incurred in connection
with the Registration Statement, the Proxy Materials and the listing of
additional shares pursuant to Section 6.1(f), and fees, costs and expenses
associated with compliance with applicable Blue Sky securities laws in
connection with the Merger and HSR filing fees shall be shared equally by
Company and Parent.
(b) If: (i) Parent terminates this Agreement pursuant Section 7.1(g); or
(ii) Parent or Company terminates this Agreement pursuant to Sections 7.1(b) or
7.1(h)(ii) and, prior to such termination pursuant to this Section 7.3(b)(ii),
there shall have been a Trigger Event or Takeover Proposal which, at the time of
such termination, shall not have been withdrawn by the other party thereto
(provided, that, such withdrawal has been made early enough as to no longer
--------
prejudice the Company's shareholders consideration of the Merger), then Company
shall promptly pay to Parent (1) in the case of a termination described in
Section 7.3(b)(i), the sum of $8,000,000 and (2) in the case of a termination
described in Section 7.3(b)(ii), the sum of $1,000,000, provided, that, if
-------- ----
within 12 months of a termination described in Section 7.3(b)(ii) any Takeover
Proposal or any Trigger Event shall be consummated, the Company will promptly
pay to Parent an additional $7,000,000. provided, further, that any such
-----------------
payments shall be without prejudice to any other remedies that Parent may have
for a willful breach of this Agreement by the Company or its subsidiaries (or in
the case of Section 4.3 any Company Representative).
(c) In the event that Parent shall terminate this Agreement pursuant to
Section 7.1(c), Company shall promptly reimburse Parent for all of the out-of-
pocket costs and expenses (not to exceed $1,000,000) incurred by Parent in
connection with this Agreement and the transactions contemplated hereby
(including the fees and expenses of its advisors, accountants and legal
counsel). The payments pursuant to this Section 7.3(c) shall be without
prejudice to any other remedies that Parent may have for a willful breach of
this Agreement by the Company or its subsidiaries (or in the case of Section 4.3
any Company Representative). Any amounts payable pursuant to this Section
7.3(c) shall be reduced by any amounts to Parent pursuant to Section 7.3(b)
(d) In the event that Company shall terminate this Agreement pursuant to
Section 7.1(e), Parent shall promptly reimburse Company for all of the out-of-
pocket costs and expenses (not to exceed $1,000,000) incurred by Company in
connection with this Agreement and the transactions contemplated hereby
(including the fees and expenses of its advisors, accountants and legal
counsel). The payments pursuant to this Section 7.3(d) shall be without
prejudice to any other remedies that Company may have for a willful breach of
this Agreement by the Parent or its subsidiaries.
(e) As used herein, a "Trigger Event" shall occur if any Person (as that
-------------
term is defined in Section 13(d) of the Exchange Act and the regulations
promulgated thereunder), except a shareholder party to an enforceable
Shareholder Agreement, acquires securities representing 15% or more, or
commences a tender or exchange offer, open market purchase program or other
publicly announced initiative following the successful consummation of which the
offeror and its affiliates would beneficially own securities representing 15% or
more, of the voting power of Company.
47
(f) For purposes of this Agreement, "Takeover Proposal" means any
-----------------
agreement, offer or proposal, written or oral, for (A) a merger, reorganization,
share exchange, consolidation, or other business combination involving Company
or any of its subsidiaries, or (B) a tender offer for the Company, or (C) the
acquisition of 15% or more of the outstanding shares of any class of capital
stock of Company, or (D) the acquisition of a significant portion of the assets
of Company or any of its subsidiaries, other than, in each case, the
transactions contemplated by this Agreement.
(g) For purposes of Section 7.3(b) above, (A) "consummation" of a
Takeover Proposal shall occur on the date a definitive written agreement is
entered into with respect to a merger or other business combination involving
Company or the acquisition of 15% or more of the outstanding shares of any class
of capital stock of Company, or sale or transfer of any material assets
(excluding the sale or disposition of assets in the ordinary course of business)
of Company or any of its subsidiaries and (B) "consummation" of a Trigger Event
shall occur on the date any Person (other than any shareholder which currently
owns 15% or more of the outstanding shares of capital stock of Company, provided
--------
that such shareholder does not increase its ownership) or any of its affiliates
or associates would beneficially own securities representing 15% or more of the
voting power of Company, following a tender or exchange offer.
7.4 Amendment. The boards of directors of the parties hereto may cause this
---------
this Agreement to be amended at any time by execution of an instrument in
writing signed on behalf of each of the parties hereto.
7.5 Extension; Waiver. At any time prior to the Effective Time any party
-----------------
hereto may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties made to such
party contained herein or in any document delivered pursuant hereto and (iii)
waive compliance with any of the agreements or conditions for the benefit of
such party contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party.
ARTICLE VIII
GENERAL PROVISIONS
8.1 Non-Survival at Effective Time. The representations, warranties,
------------------------------
covenants and agreements set forth in this Agreement shall terminate at the
Effective Time, except that the agreements set forth in Article I, Sections 5.4,
5.9, 5.10, 5.14, 5.17, 5.20, 7.3, 7.4, and this Article VIII shall survive the
Effective Time.
8.2 Notices. All notices and other communications hereunder shall be in
-------
writing and shall be deemed given if delivered personally or by commercial
delivery service, or mailed by registered or certified mail (return receipt
requested) or 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):
48
(a) if to Parent or Merger Sub, to:
Credence Systems Corporation
215 Fourier Avenue
Fremont, California 94539
Attention: General Counsel
Facsimile No.: (510) 623-4860
Telephone No.: (510) 623-2591
with a copy to:
Brobeck, Phleger & Harrison LLP
Two Embarcadero Place
2200 Geng Road
Palo Alto, California 94303
Attention: Warren Lazarow, Esq.
Kerry T. Smith, Esq.
Facsimile No.: (650) 424-0160
Telephone No.: (212) 496-2885
(b) if to Company, to:
Integrated Measurement Systems, Inc.
9525 S.W. Gemini Drive
Beaverton, Oregon 97008
Attention: Chief Financial Officer
Facsimile No: (503) 644-6969
Telephone No.: (503) 626-7117
with a copy to:
Ater Wynne LLP
222 S.W. Columbia Street, Suite 1800,
Portland, Oregon 97201
Attention: Gregory Struxness, Esq.
William Campbell, Esq.
Facsimile No: (503) 226-0079
Telephone No.: (503) 226-1191
8.3 Interpretation. When a reference is made in this Agreement to Exhibits
--------------
or Schedules, such reference shall be to an Exhibit or Schedule to this
Agreement unless otherwise indicated. The words "include," "includes" and
"including" when used herein shall be deemed in each case to be followed by the
words "without limitation." The phrase "made available" in this Agreement shall
mean that the information referred to has been made available if requested by
the party to whom such information is to be made available. The phrases "the
date of this
49
Agreement", "the date hereof", and terms of similar import, unless the context
otherwise requires, shall be deemed to refer to the date of this Agreement. The
table of contents and headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
8.4 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.
8.5 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) shall not be assigned by operation of law or
otherwise except as otherwise specifically provided; and (c) are not intended
to, and shall not be construed as, conferring upon any person other than the
parties hereto any rights or remedies.
8.6 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.
8.7 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.
8.8 Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of California, without regard to the laws
that might otherwise govern under applicable principles of conflicts of law
(except for matters required to be governed by, and construed in accordance
with, the corporate law of Delaware or Oregon (as applicable)).
8.9 Rules of Construction. The parties hereto agree that they have been
---------------------
represented by counsel during the negotiation, preparation and execution of this
Agreement and, therefore, waive the application of any law, regulation, holding
or rule of construction providing that ambiguities in an agreement or other
document will be construed against the party drafting such agreement or
document.
50
[Signature page follows.]
51
IN WITNESS WHEREOF, Company, Parent and Merger Sub have caused this
Agreement and Plan of Merger and Reorganization to be executed and delivered by
their respective officers thereunto duly authorized, all as of the date first
written above.
CREDENCE SYSTEMS CORPORATION
By: /s/ Graham J. Siddall
---------------------
Name: Graham J. Siddall
-----------------
Title: President & CEO
---------------
INTEGRATED MEASUREMENT SYSTEMS, INC.
By: /s/ Keith L. Barnes
-------------------
Name: Keith L. Barnes
---------------
Title: Chairman & CEO
--------------
IGUANA ACQUISITION CORPORATION
By: /s/ Graham J. Siddall
---------------------
Name: Graham J. Siddall
-----------------
Title: President & CEO
---------------
SIGNATURE PAGE TO AGREEMENT AND
PLAN OF MERGER AND REORGANIZATION
52
Form of
-------
EXHIBIT A
---------
SHAREHOLDER AGREEMENT
THIS SHAREHOLDER AGREEMENT (this "Agreement") is entered into as of
---------
May 16, 2001, by and among Credence Systems Corporation, a Delaware corporation
("Parent"), Iguana Acquisition Corporation, an Oregon corporation and wholly
------
owned subsidiary of Parent ("Merger Sub"), and the undersigned shareholder
----------
("Shareholder") of Integrated Measurement Systems, Inc., a Oregon corporation
- -------------
("Company").
- ---------
RECITALS:
WHEREAS, Parent has agreed to acquire the outstanding securities of
Company pursuant to a statutory merger of Merger Sub with and into Company (the
"Merger") effected in part through the conversion of each outstanding share of
------
capital stock of Company (the "Company Capital Stock"), into shares of common
---------------------
stock of Parent (the "Parent Shares") at the rate set forth in the Agreement and
-------------
Plan of Merger and Reorganization dated as of May 16, 2001 by and among Parent,
Merger Sub and Company (such agreement as it may be amended or restated is
hereinafter referred to as the "Reorganization Agreement") (the "Transaction");
------------------------ -----------
WHEREAS, Shareholder is the registered and beneficial owner of such
number of shares of the outstanding Company Capital Stock as is indicated on the
signature page of this Agreement (the "Shares"); and
------
WHEREAS, in order to induce Parent to enter into the Transaction,
certain shareholders of Company have agreed not to transfer or otherwise dispose
of any of the Shares, or any other shares of Company Capital Stock acquired by
such shareholder hereafter and prior to the Expiration Date (as defined in
Section 1.1 below), and have agreed to vote the Shares and any other such shares
of Company Capital Stock so as to facilitate consummation of the Transaction.
NOW, THEREFORE, in consideration of the promises and mutual
agreements, provisions and covenants set forth in the Reorganization Agreement,
the parties hereto agree as follows:
1. Share Ownership and Agreement to Retain Shares.
----------------------------------------------
1.1 Transfer and Encumbrance.
------------------------
(a) Shareholder represents, warrants and, in subclause (v)
below, covenants to Parent that (i) Shareholder is the beneficial owner of that
number of Shares of Company Capital Stock set forth on the signature page
hereto; (ii) except as otherwise set forth on the signature page hereto,
Shareholder has held such Company Capital Stock at all times since the date set
forth on such signature page; (iii) the Shares constitute the Shareholder's
entire equity interest in the outstanding Company Capital Stock; (iv) no other
person or entity not a signatory to this Agreement has a beneficial interest in
or a right to acquire the Shares or any
portion of the Shares; and (v) the Shares are and will be at all times up until
the Expiration Date free and clear of any liens, claims, rights of first
refusal, options, charges or other encumbrances. For the avoidance of doubt,
nothing in this Agreement shall deem shares of outstanding Company Capital Stock
or options to acquire Company Capital Stock held by an officer, director or
employee of Shareholder to be beneficially owned by Shareholder.
(b) Shareholder agrees not to transfer (except as may be
specifically required by court order or applicable law), sell, exchange, pledge
or otherwise dispose of or encumber the Shares or any New Shares (as defined in
Section 1.2 below), or to make any offer or agreement relating thereto, at any
time prior to the Expiration Date. As used herein, the term "Expiration Date"
---------------
shall mean the earlier to occur of (A) the Effective Time (as defined in the
Reorganization Agreement) of the Transaction, and (B) the termination of the
Reorganization Agreement pursuant to its terms.
1.2 New Shares. Shareholder agrees that any shares of Company
----------
Capital Stock that Shareholder purchases or with respect to which Shareholder
otherwise acquires beneficial ownership after the date of this Agreement and
prior to the Expiration Date ("New Shares") shall be subject to the terms and
----------
conditions of this Agreement to the same extent as if they constituted Shares.
2. Agreement to Vote Shares. Prior to the Expiration Date, at every
------------------------
meeting of the shareholders of Company called with respect to any of the
following, and at every adjournment thereof, and on every action or approval by
written resolution of the shareholders of Company with respect to any of the
following, Shareholder shall vote the Shares and any New Shares in favor of
approval of the Transaction and any matter or actions required to facilitate the
Transaction.
3. Irrevocable Proxy. Shareholder is hereby delivering to Parent a duly
-----------------
executed proxy in the form attached hereto as Exhibit A (the "Proxy") with
--------- ----------
respect to each meeting of shareholders of Company, such Proxy to cover the
total number of Shares and New Shares in respect of which Shareholder is
entitled to vote at any such meeting. Upon the execution of this Agreement by
the Shareholder, the Shareholder hereby revokes any and all prior proxies given
by the Shareholder with respect to the Shares and agrees not to grant any
subsequent proxies with respect to the Shares or any New Shares until after the
Expiration Date.
4. Representations, Warranties and Covenants of Shareholder. Shareholder
--------------------------------------------------------
hereby represents, warrants and/or covenants to Parent as follows:
(a) Until the Expiration Date, the Shareholder will not (and
will use such Shareholder's commercially reasonable efforts to cause the
Company, its affiliates, officers, directors and employees and any investment
banker, attorney, accountant or other agent retained by such Shareholder, not
to): (i) initiate or solicit, directly or indirectly, any proposal, plan of
offer to acquire all or any substantial part of the business or properties or
Company Capital Stock, whether by merger, purchase of assets, tender offer or
otherwise, or to liquidate Company or otherwise distribute to the Shareholders
of Company all or any substantial part of the business, properties or Company
Capital Stock (each, an "Acquisition Proposal"); (ii) initiate, directly or
--------------------
indirectly, any contact with any person in an effort to or with a view towards
2
soliciting any Acquisition Proposal; (iii) furnish information concerning
Company's business, properties or assets to any corporation, partnership,
limited liability company, limited partnership, person or other entity or group
(other than Parent or Merger Sub, or any associate, agent or representative of
Parent or Merger Sub), under any circumstances that would reasonably be expected
to relate to an actual or potential Acquisition Proposal; or (iv) negotiate or
enter into discussions or an agreement, directly or indirectly, with any entity
or group with respect of any potential Acquisition Proposal provided that, in
the case of clauses (iii) and (iv), the foregoing shall not prevent Shareholder,
in Shareholder's capacity as a director or officer (as the case may be) of
Company, from taking any actions permitted under Section 4.3 of the
Reorganization Agreement. In the event the Shareholder shall receive or become
aware of any Acquisition Proposal subsequent to the date hereof, such
Shareholder shall promptly inform Parent as to any such matter and the details
thereof to the extent possible without breaching any other agreement to which
such Shareholder is a party or violating its fiduciary duties.
(b) Shareholder is competent to execute and deliver this
Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by Shareholder and, assuming the due authorization,
execution and delivery by Parent and Merger Sub, constitutes a legal, valid and
binding obligation of Shareholder, enforceable against Shareholder in accordance
with its terms except that (i) the enforceability thereof may be subject to
applicable bankruptcy, insolvency or other similar laws, now or hereinafter in
effect affecting creditors' rights generally and (ii) the availability of the
remedy of specific performance or injunctive or other forms of equitable relief
may be subject to equitable defenses and would be subject to the discretion of
the court before which any proceeding therefor may be brought.
(c) The execution and delivery of this Agreement by Shareholder
does not, and the performance of this Agreement by Shareholder shall not, result
in any breach of or constitute a default (or an event that with notice or lapse
of time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of a lien or encumbrance, on any of the Shares or New Shares pursuant
to, any note, bond, mortgage, indenture, contract, agreement, commitment, lease,
license, permit, franchise or other instrument or obligation to which
Shareholder is a party or by which Shareholder or the Shares or New Shares are
or will be bound or affected.
5. Additional Documents. Shareholder hereby covenants and agrees to
--------------------
execute and deliver any additional documents necessary, in the reasonable
opinion of Parent, to carry out the purpose and intent of this Agreement.
6. [Reserved].
----------
7. Termination. This Agreement and the Proxy delivered in
-----------
connection herewith shall terminate and shall have no further force or effect as
of the Expiration Date.
8. Confidentiality. Shareholder agrees (i) to hold any information
---------------
regarding this Agreement and the Transaction in strict confidence, and (ii) not
to divulge any such information to any third person not subject to
confidentiality obligations, until such time as the Transaction has been
publicly disclosed by Parent, except as may otherwise be required by law.
3
9. Miscellaneous.
-------------
9.1 Severability. If any term, provision, covenant or
------------
restriction of this Agreement or the Proxy is held by a court of competent
jurisdiction to be invalid, void or unenforceable, then the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated.
9.2 Binding Effect and Assignment. This Agreement and all of the
-----------------------------
provisions hereof shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns, but, except as
otherwise specifically provided herein, neither this Agreement nor any of the
rights, interests or obligations of the parties hereto may be assigned by either
of the parties hereto without the prior written consent of the other. This
Agreement is binding upon Shareholder in Shareholder's capacity as a shareholder
of Company (and not in Shareholder's capacity as a director or officer, as the
case may be, of Company) and only with respect to the specific matters set forth
herein.
9.3 Amendment and Modification. This Agreement may not be
--------------------------
modified, amended, altered or supplemented except by the execution and delivery
of a written agreement executed by the parties hereto.
9.4 Specific Performance; Injunctive Relief. The parties hereto
---------------------------------------
acknowledge that Parent will be irreparably harmed and that there will be no
adequate remedy at law for a violation of any of the covenants or agreements of
Shareholder set forth herein. Therefore, it is agreed that, in addition to any
other remedies that may be available to Parent or Merger Sub upon any such
violation, Parent and Merger Sub shall have the right to seek to enforce such
covenants and agreements by specific performance, injunctive relief or by any
other means available to Parent or Merger Sub at law or in equity, in connection
with such enforcement and waives any requirement for the security or posting of
any bond in connection with such enforcement.
9.5 Notices. All notices, requests, demands or other
-------
communications that are required or may be given pursuant to the terms of this
Agreement shall be in writing and shall be deemed to have been duly given if
delivered by hand or mailed by registered or certified mail, postage prepaid, as
follows:
(a) If to the Shareholder, at the address set forth below
the Shareholder's signature at the end hereof.
(b) if to Parent or Merger Sub, to:
Credence Systems Corporation
215 Fourier Avenue
Fremont, California 94539
Attention: General Counsel
Telephone: (510) 657-7400
Facsimile: (510) 623-2591
4
with a copy to:
Brobeck, Phleger & Harrison LLP
Two Embarcadero Place
2200 Geng Road
Palo Alto, California 94303
Attention: Warren T. Lazarow, Esq.
Facsimile No.: (650) 496-2885
Telephone No.: (650) 496-2887
(c) if to Shareholder, to its address set forth on the
signature page
with a copy to:
or to such other address as any party hereto may designate for itself by notice
given as herein provided.
9.6 Governing Law. This Agreement shall be governed by,
-------------
construed and enforced in accordance with the laws of the State of Oregon
without regard to any applicable conflicts of laws rules.
9.7 Entire Agreement. This Agreement and the Proxy contain the
----------------
entire understanding of the parties hereto in respect of the subject matter
hereof, and supersede all prior negotiations and understandings among the
parties hereto with respect to such subject matter.
9.8 Counterpart. This Agreement may be executed in several
-----------
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same agreement.
9.9 Effect of Headings. The section headings herein are for
------------------
convenience only and shall not affect the construction or interpretation of this
Agreement.
[Signature page follows.]
5
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the date first above written.
CREDENCE SYSTEMS CORPORATION
By: _____________________________ By: ____________________________
Name: _________________________ Name: ________________________
Title: _________________________ Title: ________________________
Address:
IGUANA ACQUISITION CORPORATION
By: ___________________________
Name: _______________________
Title: _______________________
Total Number of Shares of Company Capital Stock owned on the date hereof:
Common Stock:
[SIGNATURE PAGE TO SHAREHOLDER AGREEMENT]
Exhibit A
---------
IRREVOCABLE PROXY
TO VOTE STOCK OF
INTEGRATED MEASUREMENT SYSTEMS, INC.
The undersigned shareholder of Integrated Measurement Systems, Inc., a
Oregon corporation ("Company"), hereby irrevocably (to the full extent permitted
-------
by the Oregon Business Corporation Act) appoints the members of the Board of
Directors of Credence Systems Corporation, a Delaware corporation ("Parent"),
------
and each of them, or any other designee of Parent, as the sole and exclusive
attorneys and proxies of the undersigned, with full power of substitution and
resubstitution, to vote and exercise all voting and related rights (to the full
extent that the undersigned is entitled to do so) with respect to all of the
shares of capital stock of Company that now are or hereafter may be beneficially
owned by the undersigned, and any and all other shares or securities of Company
issued or issuable in respect thereof on or after the date hereof (collectively,
the "Shares") in accordance with the terms of this Irrevocable Proxy. The
------
Shares beneficially owned by the undersigned shareholder of Company as of the
date of this Irrevocable Proxy are listed on the final page of this Irrevocable
Proxy. Upon the undersigned's execution of this Irrevocable Proxy, any and all
prior proxies given by the undersigned with respect to any Shares are hereby
revoked and the undersigned agrees not to grant any subsequent proxies with
respect to the Shares until after the Expiration Date (as defined below).
This Irrevocable Proxy is irrevocable (to the extent provided in the
Oregon Business Corporation Act), is coupled with an interest, including, but
not limited to, that certain Shareholder Agreement dated as of even date
herewith by and among Parent, Iguana Acquisition Corporation ("Merger Sub") and
----------
the undersigned, and is granted in consideration of Parent's entering into that
certain Agreement and Plan of Merger and Reorganization by and among Company,
Parent and Merger Sub (the "Reorganization Agreement"), which agreement provides
------------------------
for the merger of Merger Sub with and into Company (the "Merger"). As used
------
herein, the term "Expiration Date" shall mean the earlier to occur of (i) such
---------------
date and time as the Merger shall become effective in accordance with the terms
and provisions of the Reorganization Agreement, and (ii) the date of termination
of the Reorganization Agreement pursuant to its terms. This Irrevocable Proxy
shall terminate on the Expiration Date.
The attorneys and proxies named above, and each of them are hereby
authorized and empowered by the undersigned, at any time prior to the Expiration
Date, to act as the undersigned's attorney and proxy to vote the Shares, and to
exercise all voting and other rights of the undersigned with respect to the
Shares (including, without limitation, the power to execute and deliver written
consents pursuant to the Oregon Business Corporation Act), at every annual,
special or adjourned meeting of the shareholders of Company and in every written
consent in lieu of such meeting as follows:
[X] In favor of approval of the Merger and the Reorganization Agreement,
in favor of any matter or actions required to facilitate the Merger
and against any proposal for any recapitalization, merger, sale of
assets or other business combination relating to the Company (other
than the Merger).
The attorneys and proxies named above may not exercise this Irrevocable
Proxy on any other matter except as provided above. The undersigned shareholder
may vote the Shares on all other matters.
All authority herein conferred shall survive the death or incapacity
of the undersigned and any obligation of the undersigned hereunder shall be
binding upon the heirs, personal representatives, successors and assigns of the
undersigned.
This Irrevocable Proxy is coupled with an interest as aforesaid and is
irrevocable.
Dated: May , 2001
By:____________________________
Name:
Title:
Shares beneficially owned:
Form of
-------
EXHIBIT B
---------
PLAN OF MERGER adopted by Iguana Acquisition Corporation, a business
corporation organized under the laws of the State of Oregon, by resolution of
its Board of Directors on May 10, 2001 and by Integrated Measurement Systems,
Inc., a business corporation organized under the laws of the State of Oregon, by
resolution of its Board of Directors on May 15, 2001. The names of the
corporations planning to merge are Iguana Acquisition Corporation, a business
corporation organized under the laws of the State of Oregon, and Integrated
Measurement Systems, Inc., a business corporation organized under the laws of
the State of Oregon. The name of the surviving corporation into which Iguana
Acquisition Corporation plans to merge is Integrated Measurement Systems, Inc.
1. Iguana Acquisition Corporation and Integrated Measurement Systems,
Inc., shall, pursuant to the provisions of the Oregon Business Corporation Act,
be merged with and into a single corporation, to wit, Integrated Measurement
Systems, Inc., which shall be the surviving corporation at the effective time
and date of the merger (the "Effective Time") and which is sometimes hereinafter
referred to as the "surviving corporation," and which shall continue to exist as
said surviving corporation under its present name pursuant to provisions of the
Oregon Business Corporation Act. The separate existence of Iguana Acquisition
Corporation, which is sometimes hereinafter referred to as the "non-surviving
corporation," shall cease at the Effective Time in accordance with the
provisions of the Oregon Business Corporation Act.
2. The Articles of Incorporation of the surviving corporation at the
Effective Time shall be the Articles of Incorporation of said surviving
corporation as amended to read as follows:
"
I.
The name of the corporation is Integrated Measurement Systems,
Inc.
II.
The aggregate number of shares which the corporation shall have
authority to issue is 1,000 shares of common stock. The shares
of common stock have unlimited voting rights and are entitled to
receive the net assets of the corporation. The par value of the
common stock is $0.001 per share.
III.
The address of the initial registered office of the corporation
is 601 S.W. Second Avenue, Suite 2050, Portland, Oregon 97204 and
the name of the initial registered agent of the corporation at
such address is CT Corporation System. The mailing address of
the corporation for notices is c/o CT Corporation System, 601
S.W. Second Avenue, Suite 2050, Portland, Oregon 97204.
IV.
The corporation is authorized to purchase shares of common stock
from present and former employees, consultants and directors
pursuant to the arrangements approved by the Board of Directors
when applying the provisions of the Oregon Business Corporation
Act to determine the lawfulness of any such purchase.
V.
No director of the corporation shall be personally liable to the
corporation or its shareholders for monetary damages for conduct
as a director; provided that this Article shall not eliminate the
liability of a director for any act or omission for which such
elimination of liability is not permitted under the Oregon
Business Corporation Act. No amendment to the Oregon Business
Corporation Act that further limits the acts or omissions for
which elimination of liability is permitted shall affect the
liability of a director for any act or omission that occurs prior
to the effective date of such amendment.
VI.
A. Indemnification. The corporation shall indemnify to the
---------------
fullest extent not prohibited by law any Person who was or is
a party or is threatened to be made a party to any Proceeding
against all expenses (including attorneys' fees), judgments,
fines, and amounts paid in settlement actually and reasonably
incurred by the Person in connection with such Proceeding.
Notwithstanding the foregoing, the corporation shall not
indemnify any Person from or on account of acts or omissions
of such Person of a type for which liability could not be
eliminated for a director under ORS 60.047(2)(d).
B. Advancement of Expenses. Expenses incurred by a Person in
-----------------------
defending a Proceeding shall in all cases be paid by the
corporation in advance of the final disposition of such
Proceeding at the written request of such Person, if the
Person:
1. furnishes the corporation a written affirmation of the
Person's good faith belief that such Person has met the
standard of conduct described in the Oregon Business
Corporation Act or is entitled to be indemnified by the
corporation under any other indemnification rights
granted by the corporation to such Person; and
2. furnishes the corporation a written undertaking to repay
such advance to the extent it is ultimately determined by
a court that such Person is not entitled to be
indemnified by the corporation under this Article or
under any other indemnification rights granted by the
corporation to such Person.
2
Such advances shall be made without regard to the
Person's ability to repay such advances and without
regard to the Person's ultimate entitlement to
indemnification under this Article or otherwise.
C. Definition of "Proceeding" and "Person". The term
--------------------------------------
"Proceeding" means any threatened, pending, or completed
action, suit, or proceeding, whether brought in the right of
the corporation or otherwise and whether of a civil,
criminal, administrative, or investigative nature, in which
an individual may be or may have been involved as a party or
otherwise by reason of the fact that the individual is or
was a director or officer of the corporation or a fiduciary
within the meaning of the Employee Retirement Income
Security Act of 1974 with respect to any employee benefit
plan of the corporation, or is or was serving at the request
of the corporation as a director, officer, or fiduciary of
an employee benefit plan of another corporation,
partnership, joint venture, trust, or other enterprise,
whether or not serving in such capacity at the time any
liability or expense is incurred for which indemnification
or advancement of expenses can be provided under this
Article. The term "Person" means any individual serving in a
capacity described in this Paragraph.
D. Non-Exclusivity and Continuity of Rights. This Article: (i)
----------------------------------------
shall not be deemed exclusive of any other rights to which
those indemnified may be entitled under any statute,
agreement, general or specific action of the board of
directors, vote of shareholders or otherwise, both as to
action in the official capacity of the Person indemnified
and as to action in another capacity while holding office,
(ii) shall continue as to a Person who has ceased to be a
director or officer, (iii) shall inure to the benefit of the
heirs, executors, and administrators of such Person, and
(iv) shall extend to all claims for indemnification or
advancement of expenses made after the adoption of this
Article.
E. Amendments. Any repeal of this Article shall only be
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prospective and no repeal or modification hereof shall
adversely affect the rights under this Article in effect at
the time of the alleged occurrence of any action or omission
to act that is the cause of any Proceeding."
said Articles of Incorporation shall continue in full force and effect until
amended and changed in the manner prescribed by the provisions of the Oregon
Business Corporation Act.
3. The Bylaws of the non-surviving corporation, as in effect immediately
prior to the Effective Time, shall be the Bylaws of the Surviving Corporation
until thereafter amended in the manner prescribed by the provisions of the
Oregon Business Corporation Act.
4. At the Effective Time, the directors of the surviving corporation shall
be Graham J. Siddall and John R. Detwiler, the directors of the non-surviving
corporation immediately prior to
3
the Effective Time, and Keith L. Barnes, in each case until their successors are
elected or appointed and qualified or until their earlier resignation or
removal. The officers of the surviving corporation shall be Keith L. Barnes
(President), Fred Hall (Vice President, Chief Financial Officer and Secretary)
and John R. Detwiler (Vice President and Assistant Secretary) until their
respective successors are duly elected or appointed and qualified or until their
earlier resignation or removal
5. At the Effective Time of the merger, each share of the issued and
outstanding common stock of the non-surviving corporation shall be canceled
without any consideration being issued or paid therefore. At the Effective Time
of the Merger, each share of surviving corporation's common stock issued and
outstanding immediately prior to the Effective Time of the merger will be
converted automatically into the right to receive 0.9 shares of Credence Systems
Corporation's, the parent of the non-surviving corporation, common stock.
6. The Plan of Merger has been approved by the surviving corporation
by vote of a number of shares which exceeded the vote required. The only class
entitled to vote was Common Stock. The percentage vote required was more than
67% of the outstanding shares of Common Stock. The Plan of Merger has been
approved by the non-surviving corporation by vote of a 100% of the shares
entitled to vote.
7. The non-surviving corporation and the surviving corporation
hereby stipulate that they will cause to be executed and filed and/or recorded
any document or documents prescribed by the laws of the State of Oregon, and
that they will cause to be performed all necessary acts therein and elsewhere to
effectuate the merger.
8. The Board of Directors and the proper officers of the surviving
corporation and of the non-surviving corporation, respectively, are hereby
authorized, empowered, and directed to do any and all acts and things, and to
make, execute, deliver, file and/or record any and all instruments, papers and
documents which shall be or become necessary, proper, or convenient to carry out
or put into effect any of the provisions of this Plan of Merger or of the merger
herein provided for.
SIGNATURE PAGE TO FOLLOW
4
IN WITNESS WHEREOF, this Plan of Merger has been executed as of the day and
year first above written.
Integrated Measurement Systems, Inc. Iguana Acquisition Corporation
By: ____________________________ By: __________________________
Name: ___________________________ Name: ________________________
Title: __________________________ Title: _______________________
5
Form of
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EXHIBIT C
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COMPANY AFFILIATE'S AGREEMENT
-----------------------------
May 16, 2001
Credence Systems Corporation
215 Fourier Avenue
Fremont, California 94539
Ladies and Gentlemen:
The undersigned is a holder of shares of common stock (the "Company Common
Stock") of Integrated Measurement Systems, Inc., an Oregon corporation (the
"Company"). Pursuant to the terms of that certain Agreement and Plan of Merger
and Reorganization, dated as of May 16, 2001, among the Company, Credence
Systems Corporation, a Delaware corporation (the "Parent"), and Iguana
Acquisition Corporation, an Oregon corporation and a wholly owned subsidiary of
Parent ("Merger Sub"), Merger Sub will be merged with and into the Company and
the Company will become a wholly owned subsidiary of Parent (the "Merger"). In
connection with the Merger, the undersigned, as a holder of Company Common
Stock, will be entitled to receive shares of common stock of Parent (the
"Securities") in exchange for the shares of Company Common Stock held by the
undersigned at the effective time of the Merger.
The undersigned acknowledges that the undersigned may be deemed an
"affiliate" of Company within the meaning of Rule 145 ("Rule 145") promulgated
under the Securities Act of 1933, as amended (the "Act"), and/or as such term is
used in and for purposes of Accounting Series Release Nos. 130 and 135, as
amended, of the Securities and Exchange Commission (the "Commission"), although
nothing contained herein shall be construed as an admission of such status.
If in fact the undersigned were an affiliate of the Company under the Act,
the undersigned's ability to sell, assign or transfer any Securities received by
the undersigned in exchange for any shares of Company Common Stock pursuant to
the Merger may be restricted unless such sale, assignment or transfer is
registered under the Act or an exemption from such registration is available.
The undersigned understands that such exemptions are limited and the undersigned
has obtained advice of counsel as to the nature and conditions of such
exemptions, including information with respect to the applicability to the sale
of such Securities of Rules 144 and 145(d) promulgated under the Act.
The undersigned hereby represents to and covenants with Parent that it will
not sell, assign or transfer any Securities received by the undersigned in
exchange for shares of Company Common Stock pursuant to the Merger except (i)
pursuant to an effective registration statement under the Act, (ii) by a sale
made in conformity with the volume and other limitations of Rule 145 (and
otherwise in accordance with Rule 144 under the Act, if the undersigned is an
affiliate of Parent and if so required at the time) or (iii) in a transaction
which, in the opinion of
independent counsel reasonably satisfactory to the Company or as described in a
"no-action" or interpretive letter from the staff of the Commission reasonably
satisfactory to Parent, is not required to be registered under the Act.
The undersigned understands that Parent is under no obligation to register
the sale, assignment, transfer or other disposition of the Securities by the
undersigned or on behalf of the undersigned under the Act or to take any other
action necessary in order to make compliance with an exemption from such
registration available solely as a result of the Merger.
In the event of a sale of Securities pursuant to Rule 145, upon the request
of Parent, the undersigned will supply Parent with evidence of compliance with
such Rule, in the form of customary seller's and broker's Rule 145
representation letters or as Parent may otherwise reasonably request. The
undersigned understands that Parent may instruct its transfer agent to withhold
the transfer of any Securities disposed of by the undersigned in a manner
inconsistent with this letter.
The undersigned acknowledges and agrees that appropriate legends will be
placed on certificates representing Securities received by the undersigned in
the Merger or held by a transferee thereof, which legends will be removed (i) by
delivery of substitute certificates upon receipt of a letter from the Staff of
the Commission, or an opinion of counsel in form and substance reasonably
satisfactory to Parent, to the effect that such legends are no longer required
for the purposes of the Act and the rules and regulations of the Commission
promulgated thereunder, (ii) in the event of a sale of the Securities which has
been registered under the Act or made in conformity with the provisions of Rule
145.
Parent covenants that, for so long as and to the extent necessary to permit
the undersigned to sell the shares of Parent Common Stock pursuant to Rule 145
and, to the extent applicable, Rule 144, Parent shall use all commercially
reasonable efforts to (i) file, on a timely basis, all reports and data required
to be filed with the Commission by it pursuant to Section 13 of the Securities
Exchange Act of 1934, as amended (the "1934 Act") and (ii) furnish to the
undersigned upon request a written statement as to whether Parent has complied
with such reporting requirements during the twelve (12) months preceding any
proposed sale of the shares of Parent Common Stock by the undersigned under Rule
145.
Parent represents that it has filed all reports required with the
Commission under Section 13 of the 1934 Act during the preceding twelve (12)
months.
The undersigned further represents to and convenants with Parent that, in
the event that the Merger may be accounted for as a pooling of interests, (i)
the undersigned has not and will not, during the 30 days prior to the effective
time of the Merger sell, transfer or otherwise dispose of, or reduce any risk
relative to, any securities of the Company or Parent and (ii) the undersigned
will not, after the effective time of the Merger, sell, transfer or otherwise
dispose of, or reduce any risk relative to, the Securities, whether received by
the undersigned in the Merger or otherwise, until after such time as financial
results covering at least 30 days of post-Merger operations of Parent (including
the combined operations of the Company and Parent) have been published by Parent
in the form of a quarterly earnings report, an effective registration statement
filed with the Commission, a report to the Commission on Form 10-K, 10-Q or 8-K,
or any other public filing or announcement which includes such results of
operations, except in the cases of
clauses (i) and (ii) of this paragraph to the extent permitted by, and in
accordance with, SEC Accounting Series Release 135 and SEC Staff Accounting
Bulletins 65 and 76 if and to the extent that such release and bulletins remain
in full force and effect at the relevant time. Notwithstanding the foregoing, in
the event that the Merger may not be eligible to be accounted for as a pooling
of interests, the covenants of the undersigned in this paragraph shall cease and
terminate.
The undersigned further understand and agree that this letter agreement
shall apply to all shares of Company Common Stock and Securities that it is
deemed to beneficially own pursuant to applicable federal securities law.
The undersigned acknowledges that it has carefully reviewed this letter and
understands the requirements hereof and the limitations imposed upon the
distribution, sale, transfer or other disposition of Securities.
Sincerely,
[AFFILIATE]
__________________________
Name:
Title:
Acknowledged and Agreed:
CREDENCE SYSTEMS CORPORATION
__________________________
Name:
Title: